SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ______________________

                                    FORM 10-Q

[  X  ]     QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE  ACT  OF  1934

                  For the quarterly period ended March 31, 2003
                                                 --------------

[      ]     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 000-27267


                              I/OMAGIC CORPORATION
     (Exact  name  of  small  business  issuer  as  specified  in  its  charter)


          Nevada                                         88-0290623
     ----------------                                   -------------
(State  or  other  jurisdiction  of            (IRS Employer Identification No.)
 incorporation  or  organization)


                        1300 Wakeham, Santa Ana, CA 92705
                       ----------------------------------
                    (Address of principal executive offices)

                                 (714) 953-3000
                                 --------------
              (Registrant's telephone number, including area code)


Indicate  by  check  mark  whether  the  registrant  has  (1)  filed all reports
required  to  be  filed  by  Section  13 or 15(d) of the Securities Exchange Act
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  by  check  mark  whether  the  registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act).   Yes  [   ]    No  [  X  ]

As of May 19, 2003, the number of shares of the issuer's common stock issued and
outstanding  was  4,529,672.

<PAGE>


                      I/OMAGIC CORPORATION AND SUBSIDIARY

                                TABLE OF CONTENTS

                                                                            Page
                                                                          Number
                                                                          ------
PART  I  -  FINANCIAL  INFORMATION

Item  1.  Financial  Statements

     Balance  Sheets  -  December  31, 2002 and March 31, 2003 (unaudited)     3

     Statements  of  Income  -  For  the  three  months  ended
     March  31,  2002  and  2003  (unaudited)                                  5

     Statements of Cash  Flows  -  For the three months ended
     March  31,  2002  and  2003  (unaudited)                                  6

     Notes  to  Financial  Statements                                          7

Item  2.  Management's  Discussion and Analysis of Financial Conditions
and  Results  of  Operations                                                  12

Item  3.  Quantitative and Qualitative Disclosures About Market Risk          22

Item  4.  Controls  and  Procedures                                           22


PART  II  -  OTHER  INFORMATION

Item  1.     Legal  Proceedings                                               23

Item  2.     Changes  in  Securities  and  Use  of  Proceeds                  23

Item  3.     Defaults  Upon  Senior  Securities                               23

Item  4.     Submission  of  Matters  to  a  Vote  of  Security  Holders      23

Item  5.     Other  Information                                               23

Item  6.     Exhibits  and  Reports  on  Form  8-K                            23

SIGNATURES                                                                    24

CERTIFICATIONS                                                                25

<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1.           FINANCIAL STATEMENTS


                              I/OMAGIC CORPORATION
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                DECEMBER 31, 2002 AND MARCH 31, 2003  (UNAUDITED)


                                     ASSETS

<TABLE>
<CAPTION>

                                                                    DECEMBER 31,  MARCH 31,
                                                                       2002         2003
                                                                    -----------  -----------
                                                                                 (unaudited)

<S>                                                                 <C>          <C>
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . .  $ 7,320,143  $ 5,604,707
Accounts receivable, net of allowance for doubtful
      accounts of $2,135,660 and $1,608,254 (unaudited). . . . . .   19,055,201   16,940,064
Inventory, net of allowance for obsolete inventory of $1,046,812
      and $871,534 (unaudited) . . . . . . . . . . . . . . . . . .    8,240,280   11,021,368
Inventory in transit . . . . . . . . . . . . . . . . . . . . . . .      675,000            -
Prepaid expenses and other current assets. . . . . . . . . . . . .       28,955      166,074
                                                                    -----------  -----------
     Total current assets. . . . . . . . . . . . . . . . . . . . .   35,319,579   33,732,213
PROPERTY AND EQUIPMENT, net. . . . . . . . . . . . . . . . . . . .    1,059,067      871,670
TRADEMARK, net of accumulated amortization
       of $4,292,308 and $4,436,992 (unaudited). . . . . . . . . .    5,353,371    5,208,687
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . .       25,952       25,952
                                                                    -----------  -----------
     TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . .  $41,757,969  $39,838,522
                                                                    ===========  ===========
</TABLE>


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

                                        3
<PAGE>


<TABLE>
<CAPTION>

                                         I/OMAGIC CORPORATION
                                            AND SUBSIDIARY
                                     CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2002 AND MARCH 31, 2003 (UNAUDITED)

                                 LIABILITIES AND STOCKHOLDERS' EQUITY


                                                                          DECEMBER 31,     MARCH 31,
                                                                              2002           2003
                                                                         -------------  -------------
                                                                                         (unaudited)
<S>                                                                      <C>            <C>
CURRENT LIABILITIES
Line of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 10,372,827   $  7,777,827
 Accounts payable and accrued expenses. . . . . . . . . . . . . . . . .     7,285,246      6,439,380
 Accounts payable - related parties . . . . . . . . . . . . . . . . . .     2,607,278      7,292,961
 Reserves for customer returns and allowances . . . . . . . . . . . . .       765,898        476,050
 Current portion of settlement payable. . . . . . . . . . . . . . . . .     3,000,000      1,000,000
                                                                         -------------  -------------
   Total current liabilities. . . . . . . . . . . . . . . . . . . . . .    24,031,249     22,986,218
 SETTLEMENT PAYABLE, net of current portion . . . . . . . . . . . . . .     1,000,000              -
   Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .    25,031,249     22,986,218
                                                                         -------------  -------------
STOCKHOLDERS' EQUITY
Preferred Stock
  10,000,000 shares authorized, $0.001 par value
  0 and 0 (unaudited) shares issued and outstanding . . . . . . . . . .             -              -
Class A common stock, $0.001 par value
  100,000,000 shares authorized
  4,529,672 and 4,529,672 (unaudited) shares issued and outstanding . .         4,530          4,530
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . .    31,557,988     31,557,988
Treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (42,330)      (126,014)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . .   (14,793,468)   (14,584,200)
                                                                         -------------  -------------
   Total stockholders' equity . . . . . . . . . . . . . . . . . . . . .    16,726,720     16,852,304
                                                                         -------------  -------------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . .  $ 41,757,969   $ 39,838,522
                                                                         =============  =============
</TABLE>

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

                                        4
<PAGE>

<TABLE>
<CAPTION>


                                   I/OMAGIC CORPORATION
                                      AND SUBSIDIARY
                             CONSOLIDATED STATEMENTS OF INCOME
                           FOR THE THREE MONTHS ENDED MARCH 31,
                                        (UNAUDITED)


                                                              THREE MONTHS ENDED MARCH 31,
                                                                     2002          2003
                                                               -------------  ------------
                                                                (unaudited)    (unaudited)
<S>                                                             <C>            <C>

NET SALES. . . . . . . . . . . . . . . . . .                   $ 26,719,632   $17,064,203
COST OF SALES. . . . . . . . . . . . . . . .                     22,674,409    14,627,397
                                                               -------------  ------------
GROSS PROFIT . . . . . . . . . . . . . . . .                      4,045,223     2,436,806
                                                               -------------  ------------
OPERATING EXPENSES
Selling, marketing, and advertising. . . . .                        397,200       335,917
General and administrative . . . . . . . . .                      1,998,507     1,456,839
Depreciation and amortization. . . . . . . .                        559,504       357,298
                                                               -------------  ------------
   Total operating expenses. . . . . . . . .                      2,955,211     2,150,054
                                                               -------------  ------------
INCOME FROM OPERATIONS . . . . . . . . . . .                      1,090,012       286,752
                                                               -------------  ------------
OTHER INCOME (EXPENSE)
Interest income. . . . . . . . . . . . . . .                              -           166
Interest expense . . . . . . . . . . . . . .                        (74,771)     (103,567)

Other income (expense) . . . . . . . . . . .                              -        23,263
                                                               -------------  ------------

          Total other income (expense) . . .                        (74,771)      (80,138)
                                                               -------------  ------------
INCOME BEFORE BENEFIT FROM INCOME TAXES. . .                      1,015,241       206,614
BENEFIT FROM INCOME TAXES. . . . . . . . . .                              -        (2,654)
                                                               -------------  ------------
NET INCOME . . . . . . . . . . . . . . . . .                   $  1,015,241   $   209,268
                                                               =============  ============
BASIC EARNINGS PER SHARE . . . . . . . . . .                   $       0.22   $      0.05
                                                               =============  ============
DILUTED EARNINGS PER SHARE . . . . . . . . .                   $       0.21   $      0.05
                                                               =============  ============
BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING. .                      4,528,686     4,529,672
                                                               -------------  ------------
DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING.                      4,768,686     4,529,672
                                                               =============  ============
</TABLE>

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


                                        5
<PAGE>


<TABLE>
<CAPTION>

                                        I/OMAGIC CORPORATION
                                           AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                FOR THE THREE MONTHS ENDED MARCH 31,
                                            (UNAUDITED)

                                                                       THREE MONTHS ENDED MARCH 31,
                                                                             2002         2003
                                                                         -------------------------
                                                                        (unaudited)    (unaudited)
<S>                                                                      <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . .. . .                     $ 1,015,241   $   209,268
Adjustments to reconcile net income to net cash
    provided by (used in) operating activities
Depreciation and amortization . . . . . . . . . . . .                         77,223       212,614
Amortization of trademarks. . . . . . . . . . . . . .                        482,280       144,684
Allowance for doubtful accounts . . . . . . . . . . .                       (237,868)          611
Reserve for customer returns and allowances . . . . .                       (377,089)     (289,848)
Reserve for obsolete inventory. . . . . . . . . . . .                        621,814             -
(Increase) decrease in
Accounts receivable . . . . . . . . . . . . . . . . .                      2,120,775     2,323,425
Inventory . . . . . . . . . . . . . . . . . . . . . .                     (3,186,630)   (2,781,088)
Inventory in transit. . . . . . . . . . . . . . . . .                       (716,540)      675,000
Prepaid expenses and other current assets . . . . . .                        627,976      (137,119)
Increase (decrease) in
Accounts payable and accrued expenses . . . . . . . .                     (1,288,211)   (1,054,765)
Accounts payable - related parties. . . . . . . . . .                     (1,612,667)    4,685,683
Settlement payable. . . . . . . . . . . . . . . . . .                              -    (3,000,000)
                                                                         ------------  ------------
Net cash provided by (used in) operating activities .                     (2,473,696)      988,465
                                                                         ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of property and equipment . . . . . . . .                         (6,140)      (25,217)
                                                                         ------------  ------------
   Net cash used in investing activities. . . . . . .                         (6,140)      (25,217)
                                                                         ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on line of credit . . . . .                      3,372,493    (2,595,000)
Purchase of treasury shares . . . . . . . . . . . . .                              -       (83,684)
Payments on capital lease obligations . . . . . . . .                         (4,068)            -
                                                                         ------------  ------------
Net cash provided by (used in) financing activities .                      3,368,425    (2,678,684)
                                                                         ------------  ------------
Net increase (decrease) in cash and cash equivalents.                        888,589    (1,715,436)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD. . . .                      4,423,623     7,320,143
                                                                         ------------  ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD. . . . . . .                    $ 5,312,212   $ 5,604,707
                                                                         ============  ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 INTEREST PAID. . . . . . . . . . . . . . . . . . . .                    $    65,438   $   111,352
                                                                         ============  ============
 INCOME TAXES REFUNDED. . . . . . . . . . . . . . . .                    $         -   $    (2,654)
                                                                         ============  ============
</TABLE>

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

                                        6
<PAGE>


                              I/OMAGIC CORPORATION
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND BUSINESS

I/OMagic  Corporation  ("I/OMagic"),  a  Nevada  corporation, and its subsidiary
(collectively,  the  "Company")  develop,  manufacture  through  subcontractors,
market,  and  distribute  optical  storage  and  media, multimedia, input-output
peripheral  products and solutions for the desktop and mobile computing markets,
and  digital  entertainment  products  for the consumer electronics market.  The
Company  sells  its products in the United States and Canada to distributors and
retail  customers.

In  March  1996,  I/OMagic  Corporation,  a  California  corporation, originally
incorporated  on  September  30,  1993,  entered  into  a  Plan  of Exchange and
Acquisition  Agreement  with  Silvercrest International, Inc. ("Silvercrest"), a
Nevada  corporation.  Silvercrest  subsequently  changed  its  name  to I/OMagic
Corporation,  a  Nevada  corporation.

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

BASIS  OF  PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared  in accordance with the instructions to Form 10-Q and therefore, do not
include all information and notes necessary for a fair presentation of financial
position,  results  of  operations,  and cash flows in conformity with generally
accepted  accounting  principles.  The  unaudited condensed financial statements
include  the  accounts  of  I/OMagic  and  subsidiary. The operating results for
interim  periods  are  unaudited  and  are  not necessarily an indication of the
results  to  be expected for the full fiscal year. In the opinion of management,
the  results  of  operations  as  reported  for  the interim periods reflect all
adjustments  which  are  necessary for a fair presentation of operating results.

USE  OF  ESTIMATES

The  preparation  of  financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets and liabilities and the disclosures of
contingent  assets  and  liabilities at the date of the financial statements, as
well  as  the  reported  amounts  of  revenues and expenses during the reporting
period.

Significant  estimates  made  by management include, but are not limited to, the
provisions  for  allowance of doubtful accounts and price protection on accounts
receivable,  the  net  realizability  of  inventory, the evaluation of potential
impairment  of  furniture and equipment, and the provision for sales returns and
warranties.  Actual  results  could  materially  differ  from  those  estimates.

STOCK  BASED  COMPENSATION

SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation,"  establishes  and
encourages  the use of the fair value based method of accounting for stock-based
compensation  arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized  over  the  periods  in  which the related services are rendered. The
statement also permits companies to elect to continue using the current implicit
value  accounting  method  specified  in  Accounting Principles Bulletin ("APB")
Opinion  No.  25,  "Accounting  for  Stock  Issued to Employees," to account for
stock-based compensation issued to employees. The Company has elected to use the
implicit  value based method and has disclosed the pro forma effect of using the
fair  value  based  method  to  account  for  its  stock-based compensation. For
stock-based  compensation  issued  to  non-employees,  the Company uses the fair
value  method  of  accounting  under  the  provisions  of  SFAS  No.  123.


                                        7
<PAGE>

EARNINGS  PER  SHARE

The  Company  calculates  earnings  per  share  in accordance with SFAS No. 128,
"Earnings  Per  Share."  SFAS  No.  128 replaced the presentation of primary and
fully  diluted  earnings  per  share  with the presentation of basic and diluted
earnings  per  share.  Basic  earnings  per  share  excludes  dilution  and  is
calculated  by  dividing  income  available  to  common  stockholders  by  the
weighted-average  number  of  common shares outstanding for the period.  Diluted
earnings  per  share includes the potential dilutive effects that could occur if
securities  or other contracts to issue common stock were exercised or converted
into  common  stock  ("potential  common  stock")  that  would then share in the
earnings  of  the  Company.

As of March 31, 2003 (unaudited) and 2002 (unaudited), the Company had potential
common  stock  as  follows:

                                                  2002         2003
                                               ---------     ----------
Weighted-average  common  shares
    Outstanding  during  the  period           4,528,686     4,529,672

Incremental  shares  assumed  to  be
    outstanding  since  the  beginning
    of  the period  related  to  stock
    options  and  warrants
    outstanding  (unaudited)                     240,000             -
                                             ------------   -----------

FULLY  DILUTED  WEIGHTED-AVERAGE  COMMON
   SHARES  AND  POTENTIAL  COMMON  STOCK
   UNAUDITED)                                  4,768,686     4,529,672
                                             ------------   -----------

The following potential common shares have been excluded from the computation of
diluted  earnings  per  share  as of March 31, 2003 and 2002 due to the exercise
price  being  higher  than  the  market  value.

                                                  2002         2003
                                               ---------     ----------
     Stock  Options                             296,167        146,167
     Warrants                                     8,000              -
     Redeemable convertible preferred stock     240,000              -
                                               ---------     ----------
                                                544,167        146,167
                                               =========     ==========


                                        8
<PAGE>

NOTE  3  -  ACCOUNTS  PAYABLE  AND  ACCRUED  EXPENSES

Accounts  payable  and  accrued  liabilities  consisted  of  the  following:

                                                         March  31,
                                                            2003
                                                        -----------
                                                        (unaudited)

Accounts  payable                                       $ 1,105,437
Accrued  rebates  and  marketing                          4,307,058
Accrued  compensation  and  related  benefits               208,067
Other                                                       818,818
                                                        -----------
                         TOTAL                          $ 6,439,380
                                                        ===========

NOTE  4  -  INVENTORY

Inventory consisted  of  the  following:

                                                         March  31,
                                                            2003
                                                        -----------
                                                        (unaudited)

Component parts                                         $ 4,573,624
Finished goods                                            7,319,278
Reserves for obsolete and slow moving inventory            (871,534)
                                                        -----------
                         TOTAL                          $11,021,368
                                                        ===========

NOTE  5  -  LINE  OF  CREDIT

The  Company  maintains  a revolving line of credit with a financial institution
that allows it to borrow a maximum of $9,000,000 with a sub-limit of $8,000,000.
The  line  of credit expires December 31, 2003 and is secured by a UCC filing on
substantially  all  of  the  Company's  assets.  Within  the  sub-limit,  up  to
$8,000,000  is  available  for  issuance of sight letters of credit, refinancing
letters  of  credit,  local  purchase  financing against invoice(s), and working
capital loans with maturities up to 150 days.  Letters of credit have maturities
of  up  to  60  days.  Each  advance  over  a  total outstanding line balance of
$4,000,000  is  subject  to  the  above  maturity  periods.

Within the line of credit, a sub-line of $1,000,000 is available for uncollected
funds.  The availability of the line of credit is subject to the borrowing base,
which  is  65%  of  eligible  receivables.  Advances  on the line of credit bear
interest  at  the  Wall  Street Journal prime rate (4.25% as of March 31, 2003),
plus  0.75%,  subject to a minimum interest rate of 5.5%.  As of March 31, 2003,
the  outstanding balance under the revolving line of credit was $7,777,827.  The
Company  is  required  to  maintain a minimum, quarterly, combined average, cash
compensating  balance  of  $750,000.

The  line  of  credit  is  included  in  current liabilities in the accompanying
consolidated  balance sheet.  The line of credit provides for the maintenance of
certain  financial  covenants.  As of December 31, 2002, we were in violation of
certain covenants.  On April 11, 2003, we obtained a waiver, effective April 15,
2003,  from  ChinaTrust  Bank  (USA) as to our violation of the covenants.  This
waiver  also  modified  the  original expiration date on the line of credit from
December  31,  2003  to  October  15,  2003.  The  waiver stipulates that if the
defaults  are  not  cured  within  15  days, the bank is willing to forbear from
enforcing  the  defaults, provided that the Company pays in full the outstanding
amounts  under  the  line of credit by October 15, 2003.  This agreement will be
subject  to  the  Company entering into a forbearance agreement with the bank on

                                        9
<PAGE>

terms  and  conditions  satisfactory to the bank, at its sole discretion.  As of
March  31, 2003, we were in violation of certain covenants.  On May 15, 2003, we
obtained  a  waiver  from  ChinaTrust  Bank  (USA)  as  to  our violation of the
covenants.  The  expiration  date  remains  October  15, 2003.  We are currently
engaged  in discussions with financial institutions regarding a replacement line
of  credit.

NOTE  6  -  CREDIT  LINES  FROM  RELATED  PARTIES

In  connection  with  a  1997  Strategic  Alliance  Agreement,  the  Company has
available  a  trade  line  of  credit  through  a  stockholder  and supplier for
purchases  up  to  $2,000,000. Purchases are non-interest bearing and are due 75
days  from  the  date  of  receipt.  The  credit  agreement can be terminated or
changed  at  any  time.  As of December 31, 2002 and March 31, 2003 (unaudited),
there  were  $0  and  $0, respectively, in trade payables outstanding under this
arrangement.

In  connection with a December 2000 subscription agreement, the Company also has
available  an  additional  trade line of credit through a stockholder and vendor
that  provides  a  trade credit facility of up to $3,000,000 carrying net 60 day
terms, as defined. As of December 31, 2002 and March 31, 2003 (unaudited), there
were  $0  and  $0,  respectively,  in  trade  payables  outstanding  under  this
arrangement.

In January 2003, the Company entered into a trade credit facility with a related
party,  whereby  the related party has agreed to purchase inventory on behalf of
the  Company.  The  agreement  allows the Company to purchase up to $10,000,000,
with  payment  terms  of 120 days following the date of invoice by the supplier.
The  third  party will charge the Company a 5% handling charge on the supplier's
unit  price.  A  2%  discount to the handling fee will be applied if the Company
reaches  an  average  running  monthly  purchasing  volume  of $750,000 a month.
Returns  made by the Company, which are agreed by the supplier, will result in a
credit  to  the  Company  for  the  handling  charge.

As  security  for  the  trade  facility,  the  Company  paid the related party a
security  deposit  of $1,500,000, which may be applied against outstanding trade
payables after six months.   This deposit has been offset by Accounts Payables -
Related Parties in the accompanying financial statements.   The agreement is for
12  months.  At  the  end of the 12-month period, either party may terminate the
agreement  upon  30  days'  written notice. Otherwise, the agreement will remain
continuously  valid  without  effecting  a newly signed agreement.  Both parties
have  the right to terminate the agreement one year following the inception date
by  giving  the  other party 30 days written notice of termination.  As of March
31, 2003 (unaudited), there were $4,331,207 in trade payables net of the deposit
outstanding  under  this  arrangement.

In  February  2003,  the Company entered into an agreement with a related party,
whereby the related party will supply and store at the Company's warehouse up to
$10,000,000  of  inventory  on  a  consignment  basis.  Under the agreement, the
Company  will  insure the consignment inventory, store the consignment inventory
for  no  charge, and furnish the related party with weekly statements indicating
all products received and sold and the current consignment inventory level.  The
agreement  may  be terminated by either party with 60 days written notice.  Also
in  February  2003, the Company entered into an agreement with the related party
for  a  trade  line  of credit of up to $10,000,000 with payment terms of net 30
days,  non-interest  bearing.  As  of  March  31,  2003  (unaudited), there were
$2,961,754  in trade payable outstanding under this arrangement.  As of December
31,  2002,  there  were  $2,607,278  in trade payables outstanding under a prior
arrangement  with  this  related  party.

NOTE  7  -  COMMITMENTS  AND  CONTINGENCIES

LEASES

The  Company  leases  its facilities and certain equipment under non-cancelable,
operating  lease  agreements,  expiring  through  October  2005.

Rent  expense was $96,290 and $146,267 for the three months ended March 31, 2003
and  2002,  respectively, and is included in general and administrative expenses
in  the  accompanying  statements  of  income.


                                       10
<PAGE>

LITIGATION

Effective  on or about March 28, 2003, the Company, among others, entered into a
settlement agreement and general release with Mark Vakili, Mitra Vakili, Hi-Val,
and  others,  in  connection with a complaint filed in the Superior Court of the
State  of  California  for  the County of Orange (Case No. 01CC09894). Under the
terms  of  the  settlement  agreement  and  general  release,  the  Company paid
$3,000,000 on March 31, 2003 and is obligated to pay an additional $1,000,000 on
March 15, 2004. The settlement agreement also provides, among other things, that
Mr. Shahbaz and Mr. Su, each a director of the Company, will each relinquish any
claims  held  by either of them to any interest in Alex Properties, a California
general partnership that holds title to the Company's corporate headquarters and
warehouse.

Pursuant to the settlement agreement and general release, Mr. Shahbaz and Mr. Su
will  also transfer to parties designated by Mark and Mitra Vakili, an aggregate
of  13,333  shares  of  the Company's common stock from the 66,667 shares of the
Company's  common  stock  being returned by Mark and Mitra Vakili to Mr. Shahbaz
and  Mr. Su. Mr. Shahbaz and Mr. Su had previously transferred the 66,667 shares
to  Mark  and  Mitra  Vakili.

In  addition,  the  Company  is involved in certain legal proceedings and claims
which  arise in the normal course of business.  Management does not believe that
the  outcome  of  these  matters  will  have  a material effect on the Company's
financial  position  or  results  of  operations.

EMPLOYMENT  CONTRACT

The  Company  entered  into  an  employment contract with one of its officers on
October  15,  2002,  which expires on October 15, 2007.  The agreement, which is
effective  as  of  January 1, 2002, calls for a minimum base salary and provides
for  certain  expense  allowances.  In  addition,  the  agreement provides for a
quarterly  bonus  equal to 7% of the Company's quarterly net income.  No bonuses
were  paid during the three months ended March 31, 2003.  $18,000 bonus was paid
during  the three months ended March 31, 2002 under a prior employment contract.

RETAIL  AGREEMENTS

In  connection with certain retail agreements, the Company has agreed to pay for
certain  marketing  development  and  advertising on an ongoing basis. Marketing
development  and  advertising costs are generally agreed upon at the time of the
event.  The  Company  also  records  a  liability  for  co-op marketing based on
management's  evaluation  of  historical  experience  and  current  industry and
Company  trends.  During  the  three  months  ended March 31, 2003 and 2002, the
Company  incurred  $724,827  (unaudited) and $921,329 (unaudited), respectively,
related  to  these  agreements.  Such  is  netted  against  sales revenue in the
accompanying  statements  of  income.

NOTE  8  -  RELATED  PARTY  TRANSACTIONS

During the three months ended March 31, 2003 and 2002, the Company had purchases
from  related  parties  totaling  approximately  $8,039,904  (unaudited)  and
$6,642,945  (unaudited),  respectively.

During  the three months ended March 31, 2003 and 2002, the Company had accounts
payable  to  related  parties  totaling approximately $7,292,961 (unaudited) and
$3,909,053  (unaudited),  respectively.

Until  March  28, 2003, the Company leased its warehouse and office space from a
related  party  under  the  control  of an officer of the Company which required
minimum  monthly  payments  of  $28,673.  As part of the settlement agreement in
Note  7  above,  the Company's lease with the related party expired on March 28,
2003.  For  the  three  months  ended  March 31, 2003 and 2002, rent expense was
$86,018  and $86,018 respectively, and is included in general and administrative
expenses  in  the  accompanying  statements  of  operations.


                                       11
<PAGE>

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

     The following discussion and analysis should be read in conjunction with
our unaudited consolidated financial statements and notes to financial
statements included elsewhere in this document. This report and our audited
consolidated financial statements and notes to financial statements contain
forward-looking statements, which generally include the plans and objectives of
management for future operations, including plans and objectives relating to our
future economic performance and our current beliefs regarding revenues we might
earn if we are successful in implementing our business strategies. The
forward-looking statements and associated risks may include, relate to or be
qualified by other important factors, including, without limitation:

   -  the projected growth or contraction in the computer peripherals and
      consumer electronics markets in which we operate;
   -  our business strategy for expanding, maintaining or contracting our
      presence in these markets;
   -  anticipated trends in our financial condition and results of operations;
      and
   -  our ability to distinguish ourselves from our current and future
      competitors.

     We do not undertake to update, revise or correct any forward-looking
statements.

     The information contained in this report is not a complete description of
our business or the risks associated with an investment in our common stock.
Before deciding to buy or maintain a position in our common stock, you should
carefully review and consider the various disclosures we made in this report,
and in our other materials filed with the Securities and Exchange Commission
that discuss our business in greater detail and that disclose various risks,
uncertainties and other factors that may affect our business, results of
operations or financial condition. In particular, you should review the "Risk
Factors" section of this report.

     Any of the factors described above or in the "Risk Factors" section of this
report could cause our financial results, including our net income (loss) or
growth in net income (loss) to differ materially from prior results, which in
turn could, among other things, cause the price of our common stock to fluctuate

OVERVIEW

     We offer products in both the personal computer and the consumer
electronics marketplace.  These products include a variety of peripheral
upgrades for desktop and portable applications.  Our sales are to national North
America retail chains and major regional North America retail chains.  We
experienced a 36.1% decrease in net sales in 2003 over 2002.  While the current
economic climate makes it difficult for us to look forward into the balance of
2003, we believe that our potential sales have been strengthened by the addition
of new customers in 2002 and the possibility of additional new customers in the
latter half of 2003.

     Our net income decreased by 79.4%, primarily due to the 36.1% decrease in
net sales, offset by a 27.3% decrease in operating expenses.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principals generally accepted in the United
States.  The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities.  On an on-going basis, we evaluate our estimates, including those
related to customer programs and incentives, product returns, bad debts,
inventories, intangible assets, income taxes, and contingencies and litigation.
We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and


                                       12
<PAGE>

liabilities that are not readily apparent from other sources.  Actual results
may differ from these estimates under different assumptions or conditions.

     We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.  We record estimated reductions to revenue for customer
programs and incentive offerings including special pricing agreements, price
protection, promotions and other volume-based incentives.  If market conditions
were to decline, we may take actions to increase customer incentive offerings
possibly resulting in an incremental reduction of revenue at the time the
incentive is offered.  We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required
payments.  If the financial condition of our customers were to deteriorate,
resulting in the impairment of their ability to make payments, additional
allowances may be required.

     We write down our inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions.  If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.  We record a
valuation allowance to reduce our deferred tax assets to the amount that is more
likely than not to be realized.  While we have considered future taxable income
and ongoing prudent and feasible tax planning strategies in assessing the need
for the valuation allowance, in the event we were to determine that we would be
able to realize our deferred tax assets in the future in excess of our net
recorded amount, an adjustment to the deferred tax asset would increase income
in the period such determination was made.  Likewise, should we determine that
we would not be able to realize all or part of our net deferred tax asset in the
future, an adjustment to the deferred tax asset would be charged to income in
the period such determination was made.

RESULTS  OF  OPERATIONS

THREE MONTHS ENDED MARCH 31, 2003 (UNAUDITED) COMPARED TO THREE MONTHS ENDED
MARCH 31, 2002 (UNAUDITED)

     Net sales decreased 36.1% from $26,719,632 for the three months ended March
31, 2002 ("2002") to $17,064,203 for the three months ended March 31, 2003
("2003").  The decrease in net sales is attributable to a significant decrease
in sales to two of our major customers due to a reduction in current products
carried in the optical storage category.  We believe that the recent
introduction of new products such as our digital photo library, duplicator and
media station products will result in a reverse of the decrease in revenues.

     Cost of sales as a percentage of net sales increased from 84.9%
($22,674,409) in 2002 to 85.7% ($14,627,397) in 2003.  Cost of units increased
from 76.5% in 2002 to 81.0% in 2003 of net sales.  Freight in/out decreased from
6.0% in 2002 to 4.7% in 2003 of net sales.  Inventory shrink/adjustments
decreased from 2.4% in 2002 to 0.0% in 2003 of net sales. We wrote down to lower
of cost or market $650,000 in inventory in 2002 and $0 in 2003.

     Operating expenses as a percentage of net sales increased from 11.1%
($2,955,211) in 2002 to 12.6% ($2,150,054) in 2003.  This percentage increase is
primarily due to total operating expenses decreasing 27.3% in 2003 while net
sales decreased 36.1% in 2003.  Selling, marketing and advertising expenses
decreased by $61,283 (15.4%) in 2003. General and administrative expenses
decreased by $541,668 (27.1%) in 2003.  Depreciation and amortization expenses
decreased by $202,206 (36.1%) in 2003.

     Selling, marketing and advertising expenses in 2003 were $335,917 (2.0% of
net sales) and in 2002 were $397,200 (1.5% of net sales). Selling, marketing and
advertising expenses decreased by $61,283 primarily due to $77,419 less outside
commissions as a result of lower sales in 2003.



                                       13
<PAGE>

     General and administrative expenses in 2003 were $1,456,839 (8.5% of net
sales) and in 2002 were $1,998,507 (7.5% of net sales). General and
administrative expenses decreased $541,668 primarily due to $499,389 less bad
debt expense (2002 writedown of Hi-Val accounts receivable acquired in 2000),
$42,863 less rent due to moving out of one facility in May 2002, $33,976 less
temporary help due to less sales, $31,396 less bank fees due to no letters of
credit fees, offset by $65,724 more product design costs.

     Depreciation and amortization expenses in 2003 were $357,298 (2.1% of net
sales) and in 2002 were $559,504 (2.1% of net sales). The decrease of $202,206
was primarily due to $337,600 decreased amortization of trademarks offset by
$133,040 increased amortization of leasehold improvements. In 2002 we had an
outside valuation service review the value of the trademarks and their useful
lives for us. Based upon the valuation, we determined (with concurrence of our
independent auditors) that there had been no impairment to the value of the
trademarks and that the useful lives of the trademarks should be increased by
ten years due to additional historical information of their value. Therefore,
the amount of annual trademark amortization was decreased beginning in the
second quarter 2002. The amortization of the leasehold improvements at the
current Santa Ana location were accelerated due to an anticipated move to a
larger facility later this year.

     Other income (expenses) increased to $80,138 (0.5% of net sales) expense in
2003 from $74,771 expense (0.3% of net sales) in 2002. This increase of $5,367
was primarily due to $28,796 more interest expense offset by $23,235 gain on
currency exchange in relation to sales to Canadian retailers.

LIQUIDITY AND CAPITAL RESOURCES

     During the three months ended March 31, 2003 we had a net decrease in cash
relative to December 31, 2002 in the amount of $1,715,436. This was due to cash
provided by operating activities of $988,465 offset by cash used in financing
activities of $2,678,684 and cash used in investing activities of $25,217. Cash
provided by operations was from an increase in accounts payable to related
parties of $4,685,683, a decrease in accounts receivable of $2,323,425, a
decrease in inventory in transit of $675,000, net income of $209,268, an
increase in non-cash entries of $68,061, offset by a decrease in reserve for
settlements of $3,000,000, an increase in inventory of $2,781,088, an increase
in other current assets of $137,119, and a decrease in accounts payable and
accrued expenses of $1,054,765.  Cash used for financing activities was for net
payments on the line of credit of $2,595,000 and purchase of treasury stock of
$83,684. Cash used for investing activities was for leasehold improvements,
furniture and computer equipment.

     Effective January 1, 2003, we obtained a $9 million asset based line of
credit (with a sub-limit of $8 million) with ChinaTrust Bank (USA) which was to
expire December 31, 2003.  ChinaTrust Bank (USA) renewed our prior $14 million
line of credit, but reduced the amount to $9 million due to our history of
losses the past three years.  Within the sub-limit, up to $8,000,000 is
available for issuance of sight letters of credit, refinancing letters of
credit, local purchase financing against invoice(s), and working capital loans
with maturities up to 150 days.  Letters of credit have maturities of up to 60
days. Each advance over a total outstanding line balance of $4,000,000 is
subject to the above maturity periods.

     Within the line of credit, a sub-line of $1,000,000 is available for
uncollected funds.  The availability of the line of credit is subject to the
borrowing base, which is 65% of eligible receivables.  Advances on the line of
credit bear interest at the Wall Street Journal prime rate (4.25% as of March
31, 2003), plus 0.75%, subject to a minimum interest rate of 5.5%.  As of March
31, 2003, the outstanding balance under the revolving line of credit was
$7,777,827.  We are required to maintain a minimum, quarterly, combined average,
cash compensating balance of $750,000.

     The line of credit provides for the maintenance of certain financial
covenants.  As of December 31, 2002, we were in violation of certain covenants.
On April 11, 2003, we obtained a waiver, effective April 15, 2003, from
ChinaTrust Bank (USA) as to our violation of the covenants.  This waiver
stipulates that if the defaults are not cured within 15 days, the bank is


                                       14
<PAGE>

willing to forbear from enforcing the defaults, provided that the Company pays
in full the outstanding amounts under the line of credit by October 15, 2003.
This waiver will be subject to the Company entering into a forbearance agreement
with the bank on terms and conditions satisfactory to the bank at its sole
discretion.  As of March 31, 2003, we were in violation of certain covenants.
On May 15, 2003, we obtained a waiver from ChinaTrust Bank (USA) as to our
violation of the covenants.  The expiration date remains October 15, 2003.  We
are currently engaged in discussions with financial institutions regarding a
replacement line of credit.

     We believe that our failure to either obtain a new bank line of credit or
increased trade  credit  facilities  will  require us to reduce our purchase of
products  and  thus  our  sales  significantly;  however, we believe that we can
continue operations at a greatly reduced sales volume. We believe if we are able
to either obtain a new line of credit or increased trade credit facilities, such
lines of credit and our current cash flow from operations will be sufficient to
meet our working capital and capital expenditure requirements at the current
sales volumes for the next 12 months.

     In January 2003, we entered into a trade credit facility with Lung Hwa
Electronics Co., Ltd. ("Lung Hwa"), whereby Lung Hwa has agreed to purchase
inventory on our behalf.  The agreement allows us to purchase up to $10,000,000,
with payment terms of 120 days following the date of invoice by the supplier.
Lung Hwa will charge us a 5% handling charge on the supplier's unit price.  A 2%
discount to the handling fee will be applied if we reach an average running
monthly purchasing volume of $750,000 a month. Returns made by us, which are
agreed to by the supplier, will result in a credit to us for the handling
charge. As security for the trade facility, we paid Lung Hwa a security deposit
of $1,500,000 in 2003.  This deposit has been offset against Accounts Payables
-Related Parties in the accompanying financial statements, as the agreement
allows us the right to offset against outstanding trade payables after six
months.  The agreement will remain in force continuously. Both parties have the
right to terminate the agreement one year following the inception date by giving
the other party 30 days' written notice. Otherwise, the agreement will remain in
force without effecting a new signed agreement.  As of March 31, 2003, we owed
Lung Hwa $4,331,207.

     In February 2003, we entered into an agreement with Behavior Tech Computer
(USA) Corp. ("BTC USA") whereby BTC USA will supply and store at our warehouse
up to $10,000,000 of inventory on a consignment basis.  Under the agreement, we
will insure the consignment inventory, store the consignment inventory for no
charge, and furnish BTC USA with weekly statements indicating all products
received and sold and the current consignment inventory level.  The agreement
may be terminated by either party upon 60 days' prior written notice.  Also in
February 2003, we entered into an agreement with the related party for a trade
line of credit of up to $10,000,000 with payment terms of net 30 days,
non-interest bearing.  As of March 31, 2002, we owed BTC $2,961,754.

     In the event the last three quarters of 2003 continue with the revenue
growth we have experienced between 2001 and 2002, we may experience net negative
cash flows from operations, pending an increase in gross margins, and may be
required to obtain additional financing to fund operations through proceeds from
offerings, to the extent available, or to obtain additional financing to the
extent necessary to augment our working capital through public or private
issuance of equity or debt securities or increased trade credit facilities with
vendors. In the event we are unsuccessful in securing such financing, we may be
required to curtail our sales growth.

     We have no firm long-term sales commitments from any of our customers and
enter into individual purchase orders with our customers. We have experienced
cancellations of orders and fluctuations in order levels from period to period
and expect we will continue to experience such cancellations and fluctuations in
the future. In addition, customer purchase orders may be canceled and order
volume levels can be changed, canceled or delayed with limited or no penalties.
The replacement of canceled, delayed or reduced purchase orders with new
business cannot be assured. Moreover, our business, financial condition and
results of operations will depend upon our ability to obtain orders from new
customers, as well as the financial condition and success of our customers, our
customers products and the general economy.


                                       15
<PAGE>

     Our  backlog  at  March 31, 2003 was $3,171,302 as compared to a backlog at
March  31, 2002 of $6,239,326. Based upon the history of the past twelve months,
the  March  31,  2003  backlog  may  be  reduced  by  $475,695  (15%)  when
recognized  as  sales,  due  to  returns  and  price  protections.

RISK  FACTORS
-------------

     An investment in our common stock involves a high degree of risk. In
addition to the other information in this report, you should carefully consider
the following risk factors before deciding to invest or maintain an investment
in shares of our common stock. If any of the following risks actually occurs, it
is likely that our business, financial condition and operating results would be
harmed. As a result, the trading price of our common stock could decline, and
you could lose part or all of your investment.

WE HAVE INCURRED SIGNIFICANT LOSSES AND MAY CONTINUE TO INCUR LOSSES.  IF WE
CONTINUE TO INCUR LOSSES, WE MAY HAVE TO CURTAIL OUR OPERATIONS.

     Although we were profitable in the first quarter 2003, we have not been
profitable the last three years and may not be profitable in the foreseeable
future. Historically, we have relied upon cash from operations and financing
activities to fund all of the cash requirements of our business and have
incurred significant losses. As of March 31, 2003, we had an accumulated deficit
of $14,584,200.  During 2002, 2001, and 2000, we incurred net losses in the
amount of $8,347,231, $5,547,645, and $6,410,849, respectively.  We cannot
predict if we will be profitable in future quarters and we may continue to incur
losses for an indeterminate period of time and may never achieve or sustain
annual profitability. An extended period of losses may result in negative cash
flow and may prevent us from operating or expanding our business.  We cannot
assure you that our business will ever become continuously profitable or that we
will ever generate sufficient revenues to meet our expenses and support our
operations. Even if we are able to achieve profitability, we may be unable to
sustain or increase our profitability on a quarterly or annual basis.

OUR CURRENT BANK LINE OF CREDIT WILL EXPIRE ON OCTOBER 15, 2003.  IF WE ARE
UNABLE TO OBTAIN ANOTHER BANK LINE OF CREDIT, OUR ABILITY TO PURCHASE ADDITIONAL
INVENTORY MAY BE ADVERSELY AFFECTED, WHICH WOULD ADVERSELY AFFECT OUR SALES AND
NET INCOME.

     We are in violation of certain financial covenants in our agreement for our
banking line of credit due to the loss incurred in 2002.  ChinaTrust Bank (USA)
has the ability to call our line of credit immediately, which could result in
impairment of the purchase of inventory.  However, the bank has provided us a
waiver for violation of such financial covenants and has provided us with six
months to either find another banking facility or to pay off the outstanding
balance.  We are currently in discussions with financial institutions for a new
line of credit.  If we are unable to obtain a new line of credit then our
ability to expand or sustain our current sales volume will be adversely
affected.

OUR  CONCENTRATION  OF  SALES  TO THREE MAJOR CUSTOMERS MAY ADVERSELY AFFECT OUR
BUSINESS  IF  ANY  ONE  OR  MORE  OF  THEM DECIDES TO DISCONTINUE PURCHASING OUR
PRODUCTS.

     During the first quarter 2003, net sales to our three largest customers
represented 34%, 33% and 11%, respectively, of total net sales.  Our sales and
our profitability would be adversely affected if any one or more of these
customers ceased purchasing from us.  We have no guarantee that we would be able
to replace the loss of such sales with existing or new customers or in a timely
manner to avoid an adverse financial impact to our business.


                                       16
<PAGE>

FIERCE  COMPETITION  IN  THE  COMPUTER  PERIPHERAL  AND  CONSUMER  ELECTRONICS
MARKETPLACE  MAY  CAUSE  A DECLINE IN OUR REVENUES AND FORCE US TO REDUCE PRICES
FOR  OUR  PRODUCTS.

     The market for our products is highly competitive. Our competitors for our
hardware products include Hewlett-Packard, Iomega, Memorex, Phillips, Samsung,
Sony, TDK and Yamaha. Our competitors for our media products include
Fuji,Imation, Maxell, Memorex, PNY, TDK and Verbatim. We also indirectly compete
against original equipment manufacturers such as Dell Computer and
Hewlett-Packard to the extent that they manufacture their own computer
peripheral products or incorporate on personal computer motherboards the
functionalities provided by our products. We believe that the strategy of
certain of our current and potential competitors is to compete largely on the
basis of price, which may result in lower prices and lower margins for our
products or otherwise adversely affect the market for our products. There can be
no assurance that we will be able to continue to compete successfully in the
marketplace.

MANY  OF  OUR  COMPETITORS  HAVE  GREATER RESOURCES THAN US. IN ORDER TO COMPETE
SUCCESSFULLY,  WE  MUST  KEEP  PACE  WITH  OUR  COMPETITORS  IN ANTICIPATING AND
RESPONDING  TO RAPID CHANGES IN THE COMPUTER PERIPHERAL AND CONSUMER ELECTRONICS
INDUSTRIES.

     Our future success will depend upon our ability to enhance our current
products and services and to develop and introduce new products and services
that keep pace with technological developments, respond to the growth in the
computer peripheral and consumer electronics markets in which we compete,
encompass evolving consumer requirements, provide a broad range of products and
achieve market acceptance of our products. Many of our existing and potential
competitors have larger technical staffs, more established and larger marketing
and sales organizations and significantly greater financial resources than we
do. Our lack of resources relative to our competitors may cause us to fail to
anticipate or respond adequately to technological developments and consumer
requirements or may cause us to experience significant delays in developing or
introducing new products and services. These failures or delays could reduce our
competitiveness, revenues, profit margins and market share.

OUR  LACK  OF  LONG-TERM PURCHASE ORDERS OR COMMITMENTS MAY ADVERSELY AFFECT OUR
BUSINESS  IF  DEMAND  DECLINES.

     During the quarter ended March 31, 2003, sales of our computer peripheral
products accounted for 94.7% of our total net sales, and sales of our consumer
electronics products accounted for 5.3% of our total net sales. In many cases we
have long-term contracts with our computer peripheral and consumer electronics
retailers that cover the general terms and conditions of our relationships with
them but that do not include long-term purchase orders or commitments. Rather,
our retailers issue purchase orders requesting the quantities of computer
peripheral or consumer electronics products that they desire to purchase from
us, and if we are able and willing to fill those orders, then we fill them under
the terms of the contracts. Accordingly, we cannot rely on long-term purchase
orders or commitments to protect us from the negative financial effects of a
decline in demand for our products that could result from a general economic
downturn, from changes in the computer peripheral and consumer electronics
marketplaces, including the entry of new competitors into the market, from the
introduction by others of new or improved technology, from an unanticipated
shift in the needs of our retailers, or from other causes.

OUR  BUSINESS  COULD  SUFFER  IF  WE  ARE UNABLE TO OBTAIN OUR PRODUCTS FROM OUR
SUPPLIERS.

     Most of our products are available from multiple sources. However, we
currently obtain most of our products from single or limited sources. We have,
from time to time, experienced difficulty in obtaining some products. We do not
have guaranteed supply arrangements with any of our suppliers, and there can be
no assurance that our suppliers will continue to meet our requirements. If our
existing suppliers are unable to meet our requirements, we could be required to


                                       17
<PAGE>

find other suppliers or even eliminate products from our product line.  Product
shortages could limit our sales capacity and also could result in lower margins
due to higher product costs resulting from limited supply or the need to obtain
substitute products which are available only at higher costs. Significant
increases in the prices of our products could adversely affect our results of
operations because our products compete on price and, therefore, we may not be
able to pass along price increases to our retailers. Also, an extended
interruption in the supply of products or a reduction in their quality or
reliability would adversely affect our financial condition and results of
operations by operations by impairing our ability to timely deliver quality
products to our retailers. Delayed product deliveries due to product shortages
or other factors may result in cancellation by our retailers of all or part of
their orders. We cannot assure you that cancellations will not occur.

OUR  DEPENDENCE ON SALES OF OUR OPTICAL STORAGE AND OPTICAL MEDIA PRODUCTS COULD
HAVE  A MATERIAL ADVERSE EFFECT ON OUR BUSINESS IF THE MARKET FOR THOSE PRODUCTS
DECLINES.

     Net sales of our optical storage and related media products accounted for
approximately 82.2% of our net sales for the first quarter 2003. Although we
have introduced products in other segments of the computer peripheral market and
in the consumer electronics market, optical storage and optical media products
are expected to continue to account for a majority of our sales for at least the
next year. A decline in the demand or average selling prices for optical storage
or optical media products, whether as a result of new competitive product
introductions, price competition, excess supply, technological changes,
incorporation of the products' functionality onto personal computer motherboards
or otherwise, would have a material adverse effect on our sales and operating
results.

IF  WE  FAIL TO KEEP PACE WITH THE RAPID TECHNOLOGICAL CHANGES THAT CHARACTERIZE
THE  MARKETPLACE  FOR  OUR  PRODUCTS,  WE  WILL  LIKELY EXPERIENCE A SIGNIFICANT
DECLINE  IN  OUR COMPETITIVE ADVANTAGE RESULTING IN A MATERIALLY NEGATIVE IMPACT
ON  OUR  BUSINESS,  FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS.

     The markets for our products are characterized by rapidly changing
technology, evolving industry standards, frequent new product introductions and
rapid product obsolescence. Product life cycles in the markets for our products
often range from as few as three up to twelve months. We believe that our
success will be substantially dependent upon our ability to continue to develop
and introduce competitive products and technologies on a timely basis with
features and functions that meet changing consumer requirements in a
cost-effective manner. Even if we are successful in the development and market
introduction of new products, we still must correctly forecast consumer demand
for those products to avoid either excessive unsold inventory or excessive
unfilled orders related to our products. The task of forecasting consumer demand
is extremely difficult for new products for which there is little or no sales
history, and for indirect channels, where our customers are not the final
end-users. Moreover, whenever we offer new products, we also must successfully
manage the resulting obsolescence and price erosion of our older products, as
well as any resulting price protection charges and inventory returns from our
retailers. Accordingly, if we are unable to keep pace with the rapid
technological changes within the marketplace for our products, or unable to
manage effectively the introduction of new products, our business, financial
condition and results of operations will be negatively impacted.

OUR  FAILURE  TO FORECAST SALES IN THE VOLATILE COMPUTER PERIPHERAL AND CONSUMER
ELECTRONICS  MARKETPLACES  COULD RESULT IN LOST REVENUES AND SIGNIFICANT LOSSES.

     We develop and market products in the highly competitive computer
peripheral and consumer electronics marketplaces. Our products are very
susceptible to obsolescence and typically exhibit a high degree of volatility of
shipment volumes over relatively short product life-cycles. The timing of
introductions of new products can materially affect sales volumes. In addition,
new product releases by competitors and accompanying price adjustments to
competing products can materially and adversely affect our revenues and gross
margins.


                                       18
<PAGE>

     We sell our products to retailers such as mass merchandisers and large
electronics chains which sell products primarily off-the-shelf directly to end
users. Our reliance on indirect channels of distribution typically results in
little or no ability to predict end user demand. We rely upon sales forecasts
provided by our retailers in order to comply with order placement demands by
these retailers. If these forecasts are inaccurate, we could either have excess
inventory, resulting in significant finance costs and product obsolescence, or
insufficient inventory, resulting in lost revenues due to our inability to
promptly meet consumer demand. Accordingly, our future operating results are
largely dependent on our ability to accurately predict the demand for our
products. Our failure to accurately predict the demand for our products could
result in significant losses from inventory obsolescence and finance charges or
substantial lost revenues.

WE  RELY  HEAVILY  ON  OUR  MANAGEMENT,  AND  THE  LOSS  OF THEIR SERVICES COULD
ADVERSELY  AFFECT  OUR  BUSINESS.

     Our success is highly dependent upon the continued services of key members
of our management, including our Chairman of the Board, President, Chief
Executive Officer and Secretary, Tony Shahbaz. Mr. Shahbaz has developed
personal contacts and other skills that we rely upon in connection with our
financing, acquisition and general business strategies. Mr. Shahbaz has also
developed key personal relationships with our vendors and frequently is
extensively involved in our sales and promotional efforts with our key
customers. Although we have entered into an employment agreement with Mr.
Shahbaz, that agreement is of limited duration and is subject to early
termination  by  Mr. Shahbaz under some circumstances. Consequently, the loss of
Mr.  Shahbaz  or  one  or  more  other key members of management could adversely
affect  our  business.

OUR  FAILURE  TO  MANAGE  GROWTH  EFFECTIVELY  COULD  IMPAIR  OUR  BUSINESS.

     Our expansion into new product categories in the computer peripheral and
consumer electronics marketplaces has required and will continue to require
significant investment and management attention to improve our information
systems, product data management, control accounting, telecommunications and
networking systems, coordination of suppliers and distribution channels, and
general business processes and procedures. We are continuing to expand our
product base in the consumer electronics marketplace and expect significant
challenges in coordinating supply and distribution processes in what we hope
will be a rapidly growing product category.

     Our strategy envisions a period of rapid growth that may impose a
significant burden on our administrative and operational resources. Our ability
to effectively manage growth will require us to substantially expand the
capabilities of our administrative and operational resources and to attract,
train, manage and retain qualified marketing, technical support, customer
service, sales and other personnel. There can be no assurance that we will be
able to do so. If we are unable to successfully manage our growth, our business,
prospects, results of operations and financial condition could be materially and
adversely affected.

THE EMERGENCE OF NEW SALES CHANNELS AND THE ACCEPTANCE OF EXISTING ALTERNATIVE
SALES CHANNELS MAY RESULT IN FEWER SALES OF OUR PRODUCTS DUE TO OUR INABILITY TO
ADAPT TO THESE SALES CHANNELS.

     We are accustomed to conducting business through traditional distribution
and retail sales channels. Traditional computer peripheral and consumer
electronics distribution and retail channels have suffered from the emergence of
alternative sales channels, such as direct mail order, telephone sales by
personal computer manufacturers and Internet commerce. The emergence of
additional alternative sales channels or increased acceptance of existing
alternative sales channels by retailers or consumers may cause a rapid decline
in the sales of our products unless we are able to capitalize on those new or
more widely accepted sales channels. In addition, new products or changes in the
types of products we sell, such as our digital entertainment products, may
require specialized value-added reseller channels, which we have not yet fully
established. We may be unable to effectively compete in a marketplace that
supports numerous alternative sales channels because we do not have experience


                                       19
<PAGE>

in sales channels other than traditional distribution and retail sales channels.
As a result, in a marketplace in which alternative sales channels continue to
emerge, we may suffer from a competitive disadvantage which may have a material
and adverse effect on our business.

POLITICAL AND ECONOMIC INSTABILITY IN EAST ASIA COULD HAVE AN ADVERSE IMPACT ON
THE SUPPLY OF OUR PRODUCTS WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS.

     We  order  nearly  all  of our products from large manufacturing facilities
located  primarily  in  Taiwan, Korea and the People's Republic of China. In the
event of a severe political disruption in the governments of any country located
in  East Asia, the economic ramifications to our suppliers could be devastating.
As a result, our ability to conduct operations might be materially and adversely
affected.  In  addition,  our suppliers acquire components and raw materials for
the  manufacturing  of our products from a number of countries, many of which do
not  conduct  business  in  United States dollars. Any severe fluctuation in the
value  of  foreign  currencies  could  materially increase our costs to purchase
products.  Accordingly, as a result of political or economic instability in East
Asia,  our  operations could be materially and adversely affected.  In addition,
an  expansion  of  the  outbreak  of  SARS  could  result  in  disruption of the
manufacturing  of our suppliers, which would materially and adversely affect our
operations.

THE MIGRATION OF OUR PRODUCTS' FUNCTIONALITIES TO PERSONAL COMPUTER MOTHERBOARDS
COULD  MAKE  SOME  OF  OUR  COMPUTER  PERIPHERAL  PRODUCTS  OBSOLETE WHICH COULD
ADVERSELY  AFFECT  OUR  BUSINESS.

     Many of our products are individual computer peripheral products that
operate in conjunction with personal computers to provide additional
functionalities. Historically, as new functionalities become technologically
stable and widely accepted by personal computer users, the cost of providing
such functionalities declines dramatically by means of large-scale integration
into semiconductor chips, which can be incorporated into personal computer
motherboards. If the migration of the functionalities of our products into
personal computer motherboards occurs, demand for our products will likely
decline significantly. There can be no assurance that the incorporation of new
functionalities into personal computer motherboards will not adversely affect
the market for our products.

IF  OUR  PRODUCTS FAIL TO COMPLY WITH EVOLVING GOVERNMENT AND INDUSTRY STANDARDS
AND  REGULATIONS,  WE  MAY  HAVE  DIFFICULTY  SELLING  OUR  PRODUCTS.

     Our products are designed to comply with a significant number of industry
standards and regulations, some of which are evolving as new technologies are
deployed. In the United States, our products must comply with various
regulations defined by the United States Federal Communications Commission,
Underwriters Laboratories and the Food and Drug Administration as well as
numerous industry standards. The failure of our products to comply, or delays in
compliance, with the various existing and evolving regulations or standards
could negatively impact our ability to sell our products.

BECAUSE  WE  BELIEVE  THAT  PROPRIETARY  RIGHTS  ARE  MATERIAL  TO  OUR SUCCESS,
MISAPPROPRIATION OF THESE RIGHTS COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION.

     We are not the licensee or owner of any of the intellectual property
contained in our products other than our I/OMagic, Hi-Val and Digital Research
Technologies brand names, all of which we own. As a result, we do not have a
proprietary interest in any of the software, hardware or related technology
incorporated in our products. We rely primarily on trademark protection for our
I/OMagic, Hi-Val and Digital Research Technologies brand names. There can be no
assurance that our means of protecting our proprietary rights in these brand
names will deter or prevent their unauthorized use. Our financial condition
would be adversely affected if we were to lose our competitive position due to
our inability to adequately protect our proprietary rights in our brand names.


                                       20
<PAGE>

     We own, license or have otherwise obtained the right to use certain
technologies incorporated in our products. We may receive infringement claims
from third parties relating to our products and technologies. In those cases, we
intend to investigate the validity of the claims and, if we believe the claims
have merit, to respond through licensing or other appropriate actions. To the
extent claims relate to technology included in components purchased from
third-party vendors for incorporation into our products, we would forward those
claims to the appropriate vendor. If we or our component manufacturers are
unable to license or otherwise provide any necessary technology on a
cost-effective basis, we could be prohibited from marketing products containing
that technology, incur substantial costs in redesigning products incorporating
that technology, or incur substantial costs defending any legal action taken
against us.

OUR  STOCK PRICE HAS BEEN VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES FOR
INVESTORS  PURCHASING  SHARES  OF OUR COMMON STOCK AND IN LITIGATION AGAINST US.

     The market prices of securities of technology-based companies have
historically been highly volatile. The market price of our common stock has
fluctuated significantly in the past. In fact, during 2003, the high and low
closing sale prices of a share of our common stock were $10.00 and $3.00
respectively. The market price of our common stock may continue to fluctuate in
response to the following factors, many of which are beyond our control:

     -  changes in market valuations of similar companies and stock market price
        and  volume  fluctuations  generally;
     -  economic  conditions  specific  to  the computer peripheral and consumer
        electronics  industries;
     -  announcements  by  us  or  our  competitors of new or enhanced products,
        technologies  or  services  or  significant  contracts,  acquisitions,
        strategic relationships,  joint  ventures  or  capital  commitments;
     -  regulatory  developments;
     -  fluctuations  in  our  quarterly  or  annual  operating  results;
     -  additions  or  departures  of  key  personnel;  and
     -  future  sales  of  our  common  stock  or  other  securities.

     The price at which you purchase shares of common stock may not be
indicative of the price of our stock that will prevail in the trading market.
You may be unable to sell your shares of common stock at or above your purchase
price, which may result in substantial losses to you. Moreover, in the past,
securities class action litigation has often been brought against a company
following periods of volatility in the market price of its securities. We may in
the future be the target of similar litigation. Securities litigation could
result in substantial costs and divert management's attention and resources.

BECAUSE WE ARE SUBJECT TO THE "PENNY STOCK" RULES, THE LEVEL OF TRADING ACTIVITY
IN OUR STOCK MAY BE REDUCED.

     Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks, like shares of our common stock, generally are equity
securities with a price of less than $5.00 (other than securities registered on
some national securities exchanges or quoted on Nasdaq). The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, broker-dealers who sell these securities to persons other than
established customers and "accredited investors" must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. Consequently,
these requirements may have the effect of reducing the level of trading


                                       21
<PAGE>

activity, if any, in the secondary market for a security subject to the penny
stock rules, and investors in our common stock may find it difficult to sell
their shares.

BECAUSE OUR STOCK IS NOT LISTED ON A NATIONAL SECURITIES EXCHANGE, YOU MAY FIND
IT DIFFICULT TO DISPOSE OF OR OBTAIN QUOTATIONS FOR OUR COMMON STOCK.

     Our common stock trades under the symbol "IOMG" on the OTC Bulletin Board.
Because our stock trades on the OTC Bulletin Board rather than on a national
securities exchange, you may find it difficult to either dispose of, or to
obtain quotations as to the price of, our common stock.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our operations were not subject to commodity price risk during the three
months ended March 31, 2003. Our sales to a foreign country (Canada) were less
than 1% of our total sales, and thus we experienced negligible foreign currency
exchange rate risk. We currently have a line of credit with ChinaTrust Bank
(USA) in an amount of up to $9 million with a sub-limit of $8 million. The line
of credit provides for an interest rate equal to the prime lending rate plus
three-quarters of one percent, subject to a minimum interest rate of 5.50%. This
interest rate is adjustable upon each movement in the prime lending rate. If the
prime lending rate increases, our interest rate expense will increase on an
annualized basis by the amount of the increase multiplied by the principal
amount outstanding under the ChinaTrust Bank (USA) line of credit.

ITEM 4.  CONTROLS AND PROCEDURES

     Our Chief Executive Officer and Chief Financial Officer (our principal
executive officer and principal financial officer, respectively) have concluded,
based on their evaluation as of May 15, 2003 ("Evaluation Date"), that the
design and operation of our "disclosure controls and procedures" (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended ("Exchange Act")) are effective to ensure that information required to
be disclosed by us in the reports filed or submitted by us under the Exchange
Act is accumulated, recorded, processed, summarized and reported to our
management, including our principal executive officer and our principal
financial officer, as appropriate to allow timely decisions regarding whether or
not disclosure is required.

     There were no significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the Evaluation
Date, nor were there any significant deficiencies or material weaknesses in our
internal controls. As a result, no corrective actions were required or
undertaken.

                                       22
<PAGE>
                           PART II - OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

     Effective  on or about March 28, 2003, we, among others, entered into a
settlement agreement and general release with Mark Vakili, Mitra Vakili, Hi-Val,
and others, in  connection with a complaint filed in the Superior Court of the
State of California for the County of Orange (Case No. 01CC09894).  Under the
terms of the settlement agreement and general release, we paid $3,000,000 on
March 31, 2003 and are obligated to pay an additional $1,000,000 on March 15,
2004.  The settlement agreement also provides, among other things, that Mr.
Shahbaz and Mr. Su, each one of our director's, will each relinquish any claims
held by either of them to any interest in Alex Properties, a California general
partnership that holds title to our corporate headquarters and warehouse.

Pursuant to the settlement agreement and general release, Mr. Shahbaz and Mr. Su
will also transfer to parties designated by Mark and Mitra Vakili, an aggregate
of 13,333 shares of our common stock from the 66,667 shares of our common stock
being returned by Mark and Mitra Vakili to Mr. Shahbaz and Mr. Su.  Mr. Shahbaz
and Mr. Su had previously transferred the 66,667 shares to Mark and Mitra
Vakili.

     In addition, we are involved in certain legal proceedings and claims which
arise in the normal course of business.  Management does not believe that the
outcome of these matters will have a material effect on our financial position
or results of operations.

ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

          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:

          Number   Description
          ------   -----------

           99.1    Certifications of Chief Executive Officer and Chief
                   Financial Officer pursuant to 18 U.S.C. Section 1350,
                   as adopted pursuant to Section 906 of the Sarbanes-Oxley
                   Act of 2002

      (b) Reports  on  Form  8-K:
          ----------------------

          Form 8-K was filed on April 10, 2003 reporting Items 7 and 9 in
          compliance with Regulation  FD  Disclosure (Information Furnished
          Under Item  12) in connection with the Company's Press Release
          issued on April 8, 2003 reporting selected financial results for
          the fourth quarter 2002.

                                       23
<PAGE>

                                   SIGNATURES

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

                              I/OMAGIC  CORPORATION

DATED:   May  19,  2003       By:  /s/  Tony  Shahbaz
                                   ------------------
                                   Tony  Shahbaz, President and Chief Executive
                                   Officer (principal executive officer)

                              By:  /s/  Steve  Gillings
                                   --------------------
                                   Steve  Gillings,  Chief  Financial Officer
                                   (principal financial and accounting officer)


                                       24
<PAGE>

                                 CERTIFICATIONS
                                 --------------

I, Tony Shahbaz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of I/OMagic Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 19, 2003                        /s/ Tony Shahbaz
      ------------                        -------------------------------------
                                          Tony Shahbaz, Chief Executive Officer


                                       25
<PAGE>
                                 CERTIFICATIONS
                                 --------------

I, Steve Gillings, certify that:

1. I have reviewed this quarterly report on Form 10-Q of I/OMagic Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 19, 2003                    /s/ Steve Gillings
      ------------                    ---------------------------------------
                                      Steve Gillings, Chief Financial Officer





                                       26
<PAGE>
                         EXHIBITS FILED WITH THIS REPORT


Number   Description
------   -----------


99.1     Certifications of Chief Executive Officer and Chief Financial Officer
         pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
         of the Sarbanes-Oxley Act of 2002


                                       27
<PAGE>