SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   (Mark One)
     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934.

                For the quarterly period ended September 30, 2003
                                       OR
     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934.
             For the transition period from __________ to __________
                        Commission file number 000-25277
                       PACIFIC MAGTRON INTERNATIONAL CORP.
             (Exact Name of Registrant as Specified in Its Charter)


             Nevada                                              88-0353141
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                             Identification No.)


               1600 California Circle, Milpitas, California 95035
                    (Address of Principal Executive Offices)
                                 (408) 956-8888
              (Registrant's Telephone Number, Including Area Code)

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

                    Common Stock, $0.001 par value per share:

          10,485,062 shares issued and outstanding at October 29, 2003


<PAGE>

Part I. - Condensed Financial Information

     Item 1. - Condensed Consolidated Financial Statements
               Condensed consolidated balance sheets as of
               September 30, 2003 and December 31, 2002 (Unaudited)          1-2

               Condensed consolidated statements of operations for
               the three and nine months ended September 30, 2003
               and 2002 (Unaudited)                                            3

               Condensed consolidated statements of cash flows
               for the nine months ended September 30, 2003 and 2002
               (Unaudited)                                                     4

               Notes to condensed consolidated financial statements
               (Unaudited)                                                  5-13

     Item 2. - Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         14-30

     Item 3. - Quantitative and Qualitative Disclosures About
               Market Risk                                                    31

     Item 4. - Controls and Procedures                                        31

Part II - Other Information

     Item 1. - Legal Proceedings                                              32

     Item 6. - Exhibits and Reports on Form 8-K                               32

Signature                                                                     33


<PAGE>

                       PACIFIC MAGTRON INTERNATIONAL CORP.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                                   September 30,    December 31,
                                                       2003             2002
                                                   -------------    ------------
ASSETS
Current Assets:
  Cash and cash equivalents                          $ 2,558,400     $ 1,901,100
  Restricted cash                                        250,000         250,000
  Accounts receivable, net of allowance for
    doubtful accounts of $381,500 and
    $305,000 in 2003 and 2002, respectively            5,503,900       5,124,100
  Inventories                                          3,307,500       3,370,500
  Prepaid expenses and other current
    assets                                               363,900         459,100
  Income tax refund receivable                                --       1,472,800
                                                   -------------    ------------
Total Current Assets                                  11,983,700      12,577,600

Property and equipment, net                            4,221,300       4,495,400

Deposits and other assets                                352,200         194,000
                                                   -------------    ------------
                                                     $16,557,200     $17,267,000
                                                   =============    ============

     See accompanying notes to condensed consolidated financial statements.


                                       1
<PAGE>

                       PACIFIC MAGTRON INTERNATIONAL CORP.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                      September 30,   December 31,
                                                          2003             2002
                                                      -------------   ------------
<S>                                                     <C>            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Current portion of notes payable                      $    67,900    $    60,800
  Floor plan inventory loans                              1,305,300        901,600
  Accounts payable                                        8,704,200      7,781,800
  Accrued expenses                                          496,200        559,100
  Warrants                                                   43,200        161,600
  Series A Mandatorily Redeemable Convertible
    Preferred Stock                                         949,100             --
                                                      -------------   ------------
Total Current Liabilities                                11,565,900      9,464,900

Notes Payable, less current portion                       3,117,200      3,169,500

Preferred Stock, $0.001 par value; 5,000,000
  Shares authorized;
    4% Series A Redeemable Convertible Preferred
    Stock; 1,000 shares designated; 600 shares
    issued and outstanding                                       --        190,400

Shareholders' Equity:
    Common stock, $0.001 par value; 25,000,000
      shares authorized; 10,485,100 shares issued
      and outstanding                                        10,500         10,500
    Additional paid-in capital                            2,036,400      2,007,900
    Retained earnings (accumulated deficit)                (172,800)     2,423,800
                                                      -------------   ------------
Total Shareholders' Equity                                1,874,100      4,442,200
                                                      -------------   ------------
                                                        $16,557,200    $17,267,000
                                                      =============   ============
</TABLE>
     See accompanying notes to condensed consolidated financial statements.


                                       2
<PAGE>

                       PACIFIC MAGTRON INTERNATIONAL CORP.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                              Three Months Ended            Nine Months Ended
                                                 September 30,                September 30,
                                          --------------------------    --------------------------
                                             2003           2002           2003            2002
                                          -----------    -----------    -----------    -----------
<S>                                     <C>             <C>             <C>             <C>
Sales                                   $ 19,367,100    $ 17,502,100    $ 54,768,600    $ 48,698,100
Cost of sales                             18,256,100      16,604,300      51,495,100      45,720,100
                                        ------------    ------------    ------------    ------------
Gross profit                               1,111,000         897,800       3,273,500       2,978,000
Selling, general and
  administrative expenses                  1,569,200       1,482,600       4,560,500       4,712,900
                                        ------------    ------------    ------------    ------------
Loss from continuing operations
  before other income (expense),
  income tax benefit,
  and minority interest                     (458,200)       (584,800)     (1,287,000)     (1,734,900)
                                        ------------    ------------    ------------    ------------
Other income (expense):
  Interest income                                500           3,600           1,900          11,100
  Interest expense                           (45,300)        (41,400)       (124,300)       (125,600)
  Litigation settlement                           --              --         (95,000)             --
  Change in fair value of
   warrants issued                            11,700          34,000         118,400          50,500
  Other expense, net                          (3,400)        (15,600)        (18,000)        (37,700)
                                        ------------    ------------    ------------    ------------
Total other expense                          (36,500)        (19,400)       (117,000)       (101,700)
                                        ------------    ------------    ------------    ------------
Loss from continuing operations
  before income tax benefit
  and minority interest                     (494,700)       (604,200)     (1,404,000)     (1,836,600)
Income tax benefit                                --        (199,300)             --        (608,600)
                                        ------------    ------------    ------------    ------------
Loss from continuing operations
  before minority interest                  (494,700)       (404,900)     (1,404,000)     (1,228,000)
Minority interest                                 --              --              --           2,200
                                        ------------    ------------    ------------    ------------
Loss from continuing operations             (494,700)       (404,900)     (1,404,000)     (1,225,800)
                                        ------------    ------------    ------------    ------------
Discontinued operations:
  Loss from discontinued
   operations of:
    Frontline Network Consulting,
      Inc., net of tax benefit               (18,600)       (199,600)       (297,900)       (628,100)
    Lea Publishing Inc., net of
      tax benefit                               (300)       (111,400)       (106,300)       (413,900)
  Loss from disposal of:
    Frontline Network Consulting,
      Inc., net of tax benefit                    --              --         (13,700)             --
    Lea Publishing Inc., net of
      tax benefit                                 --              --         (16,000)             --
                                        ------------    ------------    ------------    ------------
Loss from discontinued
  operations                                 (18,900)       (311,000)       (433,900)     (1,042,000)
                                        ------------    ------------    ------------    ------------
Accretion of discount and deemed
  dividend related to beneficial
  conversion of Series A
  Convertible Preferred Stock                 (6,300)         (6,100)        (18,600)       (268,100)
Accretion of redemption value of
  Series A Convertible Preferred
  Stock                                       (3,100)             --        (740,100)             --
                                        ------------    ------------    ------------    ------------
Net Loss applicable to
  common shareholders                   $   (523,000)   $   (722,000)   $ (2,596,600)   $ (2,535,900)
                                        ============    ============    ============    ============
Basic and diluted loss per share:
  Loss from continuing operations
    applicable to common shareholders   $      (0.05)   $      (0.04)   $      (0.21)   $      (0.14)
  Loss from discontinued
    operations applicable to
    common shareholders                           --           (0.03)          (0.04)          (0.10)
                                        ------------    ------------    ------------    ------------
  Net loss applicable to common
    shareholders                        $      (0.05)   $      (0.07)   $      (0.25)   $      (0.24)
                                        ============    ============    ============    ============
Shares used in basic and diluted
   per share calculation                  10,485,100      10,485,100      10,485,100      10,485,100
                                        ============    ============    ============    ============
</TABLE>
     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                       PACIFIC MAGTRON INTERNATIONAL CORP.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        NINE MONTHS ENDED SEPTEMBER 30,
                                                           2003              2002
                                                       ------------        ------------
<S>                                                     <C>                 <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
  Net loss applicable to common shareholders            $(2,596,600)        $(2,535,900)
  Less: Loss from discontinued operations                  (433,900)         (1,042,000)
        Accretion of discount related to Series
         A Convertible Preferred Stock                      (18,600)           (268,100)
        Accretion of redemption value of Series
         A Convertible Preferred Stock                     (740,100)                 --
                                                       ------------        ------------
  Net loss used in continuing operations                 (1,404,000)         (1,225,800)
  Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:
      Deferred income taxes                                      --             420,500
      Depreciation and amortization                         238,000             177,000
      Provision for doubtful accounts                        49,600                  --
      Gain on disposal of fixed assets                           --              (8,100)
      Change in fair value of warrants                     (118,400)            (50,500)
      Minority interest in losses                                --              (2,200)
      Changes in operating assets and
        liabilities:
         Accounts receivable                               (982,000)            144,500
         Inventories                                        264,600            (953,100)
         Prepaid expenses and other
           current assets                                   (85,000)             76,800
         Income taxes receivable                          1,472,800                  --
         Accounts payable                                 1,203,200           2,513,300
         Accrued expenses                                     8,100             (34,400)
                                                       ------------        ------------
NET CASH PROVIDED BY CONTINUING OPERATIONS                  646,900           1,058,800
NET CASH USED IN DISCONTINUED OPERATIONS                   (145,700)         (1,291,600)
                                                       ------------        ------------
NET CASH PROVIDED BY (USED IN) OPERATING
  ACTIVITIES                                                501,200            (233,600)
                                                       ------------        ------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
  ACTIVITIES:
   Acquisition of property and equipment                         --             (63,100)
   Increase in deposits and other assets                         --               9,000
   Proceeds from sale of property and equipment               3,500              36,400
   Net investing activities of discontinued
     operations                                              44,100             (66,600)
                                                       ------------        ------------
NET CASH PROVIDED BY (USED IN) INVESTING
  ACTIVITIES                                                 47,600            (102,300)
                                                       ------------        ------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
  ACTIVITIES:
   Net decrease in floor plan inventory loans               403,700            (431,300)
   Principal payments on notes payable                      (45,200)            (41,600)
   Net proceeds from issuance of redeemable
     convertible preferred stock and warrants                    --             477,500
   Increase in restricted cash                             (250,000)                 --
   Net financing activities of discontinued
    operations                                                   --            (111,300)
                                                       ------------        ------------
NET CASH PROVIDED BY (USED IN) FINANCING
  ACTIVITIES                                                108,500            (106,700)
                                                       ------------        ------------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                               657,300            (422,600)

CASH AND CASH EQUIVALENTS:
  Beginning of period                                     1,901,100           3,110,000
                                                       ------------        ------------
  End of period                                         $ 2,558,400         $ 2,667,400
                                                       ============        ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                      PACIFIC MAGTRON INTERNATIONAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

The consolidated  financial  statements of Pacific Magtron  International  Corp.
(the "Company" or "PMIC") include its subsidiaries, Pacific Magtron, Inc. (PMI),
Pacific Magtron (GA) Inc. (PMIGA) and LiveWarehouse, Inc. (LW).

PMI and PMIGA's  principal  activity  consists of the  importation and wholesale
distribution  of  electronics  products,   computer  components,   and  computer
peripheral  equipment  throughout the United States.  LW sells consumer computer
products through the internet.

During  the  second  quarter  2003,  the  Company  sold  substantially  all  the
intangible assets of its majority owned subsidiary Frontline Network Consulting,
Inc. (FNC) to a third party. The Company also sold all the intangible assets and
certain  tangible  assets of its wholly owned  subsidiary Lea  Publishing,  Inc.
(Lea) to certain of Lea's employees.  PMI Capital Corporation  (PMICC), a wholly
owned subsidiary, formed for the purpose of acquiring companies or assets deemed
suitable for PMIC's organization, was dissolved in the third quarter of 2003.

The Company incurred a net loss applicable to common  shareholders of $2,596,600
and $3,110,100  for the nine months ended  September 30, 2003 and the year ended
December  31, 2002,  respectively.  During  2003,  the Company also  triggered a
redemption  provision  in  its  Series  A  mandatorily   redeemable  convertible
preferred  stock  agreement  and as a result,  has  classified  such  stock as a
current liability. In addition, the Company's common stock was delisted from the
NASDAQ Small Cap market  effective April 30, 2003 because the Company was out of
compliance  with the NASDAQ's  minimum market value and minimum common stock bid
price  requirements.  Based on anticipated  future results,  it is also probable
that the Company will be out of compliance  with certain of its real estate loan
financial  covenants as of December 31, 2003. These conditions raise doubt about
the Company's  ability to continue as a going concern.  The Company's ability to
continue  as  a  going  concern  is  dependent   upon  its  ability  to  achieve
profitability and generate sufficient cash flows to meet its obligations as they
come due. Management believes that the continued  downsizing and disposal of its
subsidiaries,  FNC, Lea and PMICC, and continued cost-cutting measures to reduce
overhead  at  all  of its  remaining  subsidiaries  will  enable  it to  achieve
profitability.   Management  is  also  pursuing   additional  capital  and  debt
financing,  and if  out of  compliance  with  its  real  estate  loan  financial
covenants  at  year-end,  will seek a waiver for such non  compliance.  However,
there is no assurance that these efforts will be successful.

FINANCIAL STATEMENT PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The financial information included herein is unaudited. The interim consolidated
financial  statements  have  been  prepared  on the  same  basis  as the  annual
financial statements and, in the opinion of management, reflect all adjustments,
which  include  only  normal  recurring   adjustments,   necessary  for  a  fair
presentation  of the Company's  consolidated  financial  position and results of
operations  for  the  periods  presented.   Certain   information  and  footnote
disclosures normally included in the financial statements prepared in accordance
with accounting  principles  generally  accepted in the United States of America
have been omitted.  These  consolidated  financial  statements should be read in
conjunction with the audited consolidated  financial statements and accompanying
notes presented in the Company's Form 10-K for the year ended December 31, 2002.
Interim  operating  results are not necessarily  indicative of operating results
expected for the entire year.

The accompanying  consolidated financial statements include the accounts of PMIC
and its wholly-owned subsidiaries, PMI, PMIGA and LW. All inter-company accounts
and  transactions  have been  eliminated  in  consolidation.  During  the second
quarter 2003, the Company sold  substantially  all the intangible  assets of FNC
and all of the intangible  assets and certain tangible assets of Lea. During the
third quarter 2003,  PMICC was  dissolved.  The activities of FNC, Lea and PMICC
have been reclassified for reporting purposes as discontinued operations for all
periods presented in the accompanying statements of operations and cash flows.


                                       5
<PAGE>

STOCK-BASED COMPENSATION

Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  ACCOUNTING  FOR
STOCK- BASED COMPENSATION, requires the Company to provide pro forma information
regarding  net income and  earnings  per share as if  compensation  cost for the
Company's  stock option plan had been  determined  in  accordance  with the fair
value method. The Company estimates the fair value of stock options at the grant
date by using the  Black-Scholes  option  pricing-model.  There  were no options
granted for the three or nine months ended  September 30, 2003 and for the three
months ended  September 30, 2002. For the nine months ended  September 30, 2002,
the Company granted  options to purchase  30,000 shares of the Company's  common
stock to certain  members of the Board of Directors at exercise  prices of $0.76
to $1.05 per share. During the nine months ended September 30, 2003 and 2002, no
outstanding  options were  exercised and options to purchase  54,000 and 271,560
shares,  respectively,  to the  Company's  common  stock were  cancelled  due to
employee  terminations  or expiration of options.  During the three months ended
September 30, 2003 and 2002, no  outstanding  options were exercised and options
to purchase 48,000 and 205,005  shares,  respectively,  to the Company's  common
stock were cancelled due to employee  terminations or expiration of options. Had
the Company  adopted the provisions of FASB Statement No. 123, the Company's net
loss would have increased as follows:

<TABLE>
<CAPTION>
                                                    Three Months Ended               Nine Months Ended
                                                       September 30,                   September 30,
                                              ----------------------------      ----------------------------
                                                   2003            2002            2003             2002
                                              -----------      -----------      -----------      -----------
<S>                                           <C>              <C>              <C>              <C>
Net loss applicable to common shareholders:
  As reported                                 $  (523,000)     $  (722,000)     $(2,596,600)     $(2,535,900)
    Add: total stock based
      employee compensation
      expense determined
      using the fair value
      method for all
      awards, net of tax                             (800)          (2,300)          (9,600)         (48,700)
                                              -----------      -----------      -----------      -----------
  Pro forma                                   $  (523,800)     $  (724,300)     $(2,606,200)     $(2,584,600)
                                              -----------      -----------      -----------      -----------
Basic and diluted loss per share:
  As reported                                 $     (0.05)     $     (0.07)     $     (0.25)     $     (0.24)
  Pro forma                                   $     (0.05)     $     (0.07)     $     (0.25)     $     (0.24)
</TABLE>
EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing income (loss)  available
to  common  stockholders  by  the  weighted  average  number  of  common  shares
outstanding  for the period.  Diluted  earnings per share reflects the potential
dilution of securities, using the treasury stock method, that could share in the
earnings of an entity. During the three and nine months ended September 30, 2003
and 2002,  options and warrants to purchase shares of the Company's common stock
and shares of common stock that could have been issued upon conversion of Series
A Preferred Stock were excluded from the calculation of diluted  earnings (loss)
per share as their effect would have been anti-dilutive.


                                       6
<PAGE>

The following is the  computation  of the  Company's  basic and diluted loss per
share:
<TABLE>
<CAPTION>
                                            Three Months Ended                  Nine Months Ended
                                              September 30,                        September 30,
                                       ------------------------------      ------------------------------
                                            2003             2002              2003              2002
                                       ------------      ------------      ------------      ------------
<S>                                    <C>               <C>              <C>                <C>
Loss from continuing operations        $   (494,700)     $   (404,900)     $ (1,404,000)     $ (1,225,800)
Accretion of discount and deemed
  dividend related to beneficial
  conversion of Series A
  Convertible Preferred Stock                (6,300)           (6,100)          (18,600)         (268,100)
Accretion of redemption value of
  Series A Convertible Preferred
  Stock                                      (3,100)               --          (740,100)               --
                                       ------------      ------------      ------------      ------------
Loss from continuing operations
  applicable to common
  shareholders                             (504,100)         (411,000)       (2,162,700)       (1,493,900)
Loss from discontinued
  operations                                (18,900)         (311,000)         (433,900)       (1,042,000)
                                       ------------      ------------      ------------      ------------
Net Loss applicable to
  common shareholders                  $   (523,000)     $   (722,000)     $ (2,596,600)     $ (2,535,900)
                                       ============      ============      ============      ============
Basic and diluted loss per share -
  Loss from continuing operations
    applicable to common
    shareholders                       $      (0.05)     $      (0.04)     $      (0.21)     $      (0.14)
  Loss from discontinued
    operations                                   --             (0.03)            (0.04)            (0.10)
                                       ------------      ------------      ------------      ------------
Net loss applicable to common
  shareholders                         $      (0.05)     $      (0.07)     $      (0.25)     $      (0.24)
                                       ============      ============      ============      ============
Shares used in basic and diluted
  per share calculation                  10,485,100        10,485,100        10,485,100        10,485,100
                                       ============      ============      ============      ============
</TABLE>

2. RECENT ACCOUNTING PRONOUNCEMENTS

In  January  2003,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Interpretation  No. 46,  CONSOLIDATION OF VARIABLE  INTEREST  ENTITIES (FIN 46).
This  interpretation  of  Accounting  Research  Bulletin  No.  51,  Consolidated
Financial  Statements,   addresses  consolidation  by  business  enterprises  of
variable interest entities.  Under current practice,  enterprises generally have
been included in the  consolidated  financial  statements of another  enterprise
because one  enterprise  controls the others through  voting  interests.  FIN 46
defines the concept of "variable interests" and requires existing unconsolidated
variable interest  entities to be consolidated into the financial  statements of
their primary beneficiaries if the variable interest entities do not effectively
disperse  risks  among  the  parties  involved.   This  interpretation   applies
immediately  to variable  interest  entities  created after January 31, 2003. It
applies in the first  fiscal  year or interim  period  beginning  after June 15,
2003,  to variable  interest  entities in which an  enterprise  holds a variable
interest that it acquired  before  February 1, 2003.  The adoption of FIN 46 did
not have an impact on the Company's consolidated financial statements.

In November  2002,  the  Emerging  Issues Task Force  (EITF)  issued No.  00-21,
"Accounting for Revenue  Arrangements  with Multiple  Deliverables."  This issue
addresses  determination  of  whether  an  arrangement  involving  more than one
deliverable  contains  more  than one  unit of  accounting  and how  arrangement
consideration  should be measured and allocated to separate units of accounting.
EITF Issue No.  00-21 was  effective  for revenue  arrangements  entered into in
fiscal  quarters  beginning  after June 15,  2003,  or the  Company may elect to
report the change in accounting as a cumulative-effect adjustment. The Company's
adoption  of EITF  Issue No.  00-21 did not impact  its  consolidated  financial
statements.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes  standards  for  classifying  and measuring as  liabilities  certain
financial   instruments   that  embody   obligations  of  the  issuer  and  have
characteristics  of both  liabilities and equity.  SFAS No. 150 is effective for
all financial  instruments  created or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period  beginning  after June
15, 2003. Restatement of financial statements for earlier years presented is not
permitted.  The Company  adopted SFAS No. 150  beginning the third quarter 2003.
The Company's adoption of SFAS No. 150 did not impact its consolidated financial
statements.


                                       7
<PAGE>

3. DISCONTINUED OPERATIONS

On June 2, 2003, the Company entered into an agreement to sell substantially all
of FNC's  intangible  assets to an  unrelated  party for  $15,000.  The  Company
recorded a loss of $13,700 on the sale of the FNC assets.

On June 30, 2003, the Company sold  substantially all of Lea's intangible assets
and  certain  equipment  to certain of the Lea's  employees.  The  Company  also
entered  into a  Proprietary  Software  License and Support  Agreement  with the
purchaser requiring the purchaser to provide certain electronic commerce support
services  to LW for a term of two years  beginning  July 1,  2003.  The  Company
received  $5,000 on the  transaction  closing date and the  electronic  commerce
support  services  contract  valued at  $48,000  which is based on the number of
service hours to be provided. The Company recorded a loss of $16,000 on the sale
of the Lea assets.

On June 6, 2003 the Board of  Directors  authorized  the  dissolution  of PMICC.
PMICC,  which was dissolved in the third quarter 2003,  had no activities  since
2002 and had no assets or liabilities.

The operating  results,  including the loss from disposal of assets,  of FNC and
Lea for the three months ended September 30, 2003 and 2002 were as follows:

                                   FNC                      Lea
                           Three Months Ended        Three Months Ended
                              September 30,             September 30,
                         ----------------------    ----------------------
                            2003         2002         2003         2002
                         ---------    ---------    ---------    ---------
Net sales                $      --    $ 650,100    $      --    $  79,000
Loss before income tax
  benefit                  (18,600)    (291,200)        (300)    (161,900)
Income tax benefit              --      (91,600)          --      (50,500)
                         ---------    ---------    ---------    ---------
Net loss                 $ (18,600)   $(199,600)   $    (300)   $(111,400)
                         ---------    ---------    ---------    ---------

The operating  results,  including the loss from disposal of assets,  of FNC and
Lea for the nine months ended September 30, 2003 and 2002 were as follows:

                                  FNC                         Lea
                             Nine Months Ended          Nine Months Ended
                                September 30,             September 30,
                        -------------------------   -------------------------
                               2003          2002          2003          2002
                        -----------   -----------   -----------   -----------
Net sales               $ 1,313,500   $ 2,131,200   $   179,700   $   412,000
Loss before income tax
  benefit                  (311,600)     (928,500)     (122,300)     (611,900)
Income tax benefit               --      (300,400)           --      (198,000)
                        -----------   -----------   -----------   -----------
Net loss                $  (311,600)  $  (628,100)  $  (122,300)  $  (413,900)
                        -----------   -----------   -----------   -----------


                                       8
<PAGE>

4. STATEMENTS OF CASH FLOWS

Cash was paid during the nine months ended September 30, 2003 and 2002 for:

NINE MONTHS ENDING SEPTEMBER 30,             2003         2002
                                           --------     --------
Income taxes                               $  6,000     $  7,400
                                           ========     ========
Interest                                   $133,200     $138,900
                                           ========     ========

The following are the non-cash  financing  activities  for the nine months ended
September 30, 2003 and 2002:

NINE MONTHS ENDING SEPTEMBER 30,               2003         2002
                                            --------     --------
Accretion of preferred stock dividend       $ 18,600     $  8,100
                                            ========     ========
Deemed dividend related to beneficial
  conversion of 4% Series A Convertible
  Preferred Stock                           $     --     $260,000
                                            ========     ========
Accretion of redemption value of
  Series A Convertible Preferred Stock      $740,100     $     --
                                            ========     ========

On June 30, 2003 the Company entered into an agreement to sell certain assets of
Lea.  In addition to $5,000 cash  consideration,  the Company  also  received an
electronic commerce support service contract as consideration from the purchaser
for two years valued at $48,000.

5. RELATED PARTY TRANSACTIONS

During the first quarter of 2002, the Company made short-term salary advances to
a shareholder/officer  totaling $30,000,  without interest.  These advances were
recorded as a salary paid to the  shareholder/officer  during the second quarter
ended June 30, 2002.

The Company sells computer  products to a company owned by a member of the Board
of Directors and Audit  Committee of the Company.  Management  believes that the
terms of these  sales  transactions  are no more  favorable  than those given to
unrelated customers. For the three and nine months ended September 30, 2003, and
2002, the Company recognized the following sales revenues from this customer:

                                  THREE MONTHS      NINE MONTHS
                                     ENDING            ENDING
                                  SEPTEMBER 30,     SEPTEMBER 30,
                                  -------------     -------------
                 Year 2003          $    500          $101,100
                                    ========          ========
                 Year 2002          $123,000          $494,400
                                    ========          ========

Included  in accounts  receivable  as of  September  30, 2003 and 2002 is $0 and
$96,300, respectively, due from this related party.

6. INCOME TAXES

In March 2002,  the Job Creation and Worker  Assistance  Act of 2002 ("the Act")
was enacted.  The Act extended the general  federal net operating loss carryback
period from 2 years to 5 years for net operating losses incurred for any taxable
year ending in 2001 and 2002. As a result,  for the year ended December 31, 2001
the Company did not record a valuation  allowance on the portion of its deferred
tax


                                       9
<PAGE>

assets relating to unutilized federal net operating loss of $1,906,800.  On June
12,  2002,  the  Company  received a federal  income  tax  refund of  $1,034,700
attributable to 2001 net operating  losses carried back. The income tax benefits
of $1,107,000  recorded for the nine months ended  September 30, 2002  primarily
reflects the federal  income tax refund  attributable  to the net operating loss
incurred for the nine months  ended  September  30,  2002.  The Company does not
expect to  receive a tax  benefit  for  losses  incurred  in 2003  which are not
covered by the Act. As a result,  no tax  benefits  were  recorded  for the nine
months ended September 30, 2003 as management does not believe it is more likely
than not that the benefit from such assets will be realized.  On March 20, 2003,
the Company  received a federal income tax refund of $1,427,400  attributable to
its 2002 net operating loss carryback.

7. FLOOR PLAN INVENTORY LOANS AND LETTER OF CREDIT

On July 13, 2001, PMI and PMIGA (the Companies)  obtained a $4 million  (subject
to credit and borrowing  base  limitations)  accounts  receivable  and inventory
financing   facility   from   Transamerica    Commercial   Finance   Corporation
(Transamerica).  This credit facility had a term of two years and was subject to
automatic  renewal from year to year  thereafter.  The credit  facility could be
terminated by Transamerica,  under certain  conditions,  and the termination was
subject to a fee of 1% of the credit  limit.  The  facility  included up to a $3
million  inventory  line  (subject to a borrowing  base of up to 85% of eligible
accounts receivable plus up to $1,500,000 of eligible inventories) that included
a sub-limit  of $600,000 for working  capital and a $1 million  letter of credit
facility  used as security  for  inventory  purchased  on terms from  vendors in
Taiwan.  Borrowings  under  the  inventory  line were  subject  to 30 to 45 days
repayment,  at which  time  interest  accrued  at the prime  rate.  Draws on the
working  capital  line also  accrued  interest  at the prime  rate.  The  credit
facility was guaranteed by both PMIC and FNC.

Under  the  accounts   receivable   and   inventory   financing   facility  from
Transamerica,   the  Companies  were  required  to  maintain  certain  financial
covenants and to achieve certain levels of  profitability.  As of June 30, 2002,
the  Companies  did  not  meet  the  revised  minimum  tangible  net  worth  and
profitability covenants.

On October 23, 2002,  Transamerica  issued a waiver of the default  occurring on
June 30, 2002 and revised the terms and  covenants  under the credit  agreement.
Under the revised  terms,  the credit  facility  included  FNC as an  additional
borrower and PMIC  continued as a guarantor.  Effective  October  2002,  the new
credit limit was $3 million in aggregate for  inventory  loans and the letter of
credit  facility.  The letter of credit facility was limited to $1 million.  The
credit limits for PMI and FNC were  $1,750,000  and $250,000,  respectively.  At
December  31,  2002 and  September  30,  2002,  the  Companies  did not meet the
covenants as revised on October 23, 2002 relating to profitability  and tangible
net worth.  This constituted a technical  default and gave  Transamerica,  among
other things,  the right to call the loan and  immediately  terminate the credit
facility.

On January 7,  2003,  Transamerica  elected  to  terminate  the credit  facility
effective April 7, 2003. However,  Transamerica agreed to continue its guarantee
of the Letter of Credit Facility through July 25, 2003 and to continue to accept
payments according to the terms of the agreement.  The Letter of Credit Facility
was discontinued in June 2003. As of June 30, 2003, the Companies had repaid the
entire outstanding balance.

In May 2003,  PMI  obtained a $3,500,000  inventory  financing  facility,  which
includes a $1 million  letter of credit  facility used as security for inventory
purchased on terms from vendors in Taiwan,  from Textron  Financial  Corporation
(Textron).  The credit facility is guaranteed by PMIC,  PMIGA,  FNC, Lea, LW and
two  shareholders/officers  of the Company.  Borrowings under the inventory line
are subject to 30 days  repayment,  at which time interest  accrues at the prime
rate plus 6% (10% at September  30,  2003).  The Company is required to maintain
collateral  coverage equal to 120% of the outstanding  balance.  A prepayment is
required  when the  outstanding  balance  exceeds the sum of 70% of the eligible
accounts receivables and 90% of the  Textron-financed  inventory and 100% of any
cash  assigned or pledged to Textron.  PMI and PMIC are required to meet certain
financial ratio covenants, including a minimum current ratio, a maximum leverage
ratio, and required


                                       10
<PAGE>

levels of  profitability.  As of  September  30,  2003,  the  Company was out of
compliance with the maximum  leverage ratio covenant for which a waiver has been
obtained.  The Company is also  required to  maintain  $250,000 in a  restricted
account as a pledge to Textron.  This amount has been  reflected  as  restricted
cash in the accompanying  consolidated financial statements. As of September 30,
2003, the outstanding balance of this loan was $1,305,300.

8. NOTES PAYABLE

In 1997,  the Company  obtained  financing of $3,498,000 for the purchase of its
office and warehouse  facility.  Of the amount  financed,  $2,500,000 was in the
form of a 10-year bank loan utilizing a 30-year  amortization  period. This loan
bears interest at the bank's 90-day LIBOR rate (1.125% as of September 30, 2003)
plus 2.5%, and is secured by a deed of trust on the property. The balance of the
financing was obtained  through a $998,000 Small Business  Administration  (SBA)
loan due in monthly installments through April 2017. The SBA loan bears interest
at 7.569% per annum, and is secured by the underlying property.

Under the bank loan for the  purchase  of the  Company's  office  and  warehouse
facility,  the Company is required,  among other  things,  to maintain a minimum
debt  service  coverage,  a  maximum  debt  to  tangible  net  worth  ratio,  no
consecutive  quarterly losses,  and net income on an annual basis.  During 2002,
the  Company was in  violation  of two of these  covenants  which is an event of
default under the loan agreement that gives the bank the right to call the loan.
While a waiver  of the  loan  covenant  violations  was  obtained  from the bank
through  December  31, 2003,  the Company is required to maintain  $250,000 in a
restricted  account  as a  reserve  for debt  servicing.  This  amount  has been
reflected  as  restricted  cash  in  the  accompanying   consolidated  financial
statements.  Based on anticipated  future results,  it is also probable that the
Company  will  be out of  compliance  with  certain  financial  covenants  as of
December 31, 2003. If this were to occur and a waiver for the  violation  cannot
be obtained, the Company would be required to classify the bank loan as current,
which could cause it to be out of compliance with financial  covenants  included
in the Company's inventory flooring facility.

9. SEGMENT INFORMATION

The Company has three reportable segments:  PMI, PMIGA and LW.

PMI  imports and  distributes  electronic  products,  computer  components,  and
computer peripheral  equipment to various  distributors and retailers throughout
the United States.  PMIGA imports and distributes  similar products  focusing on
customers  located  in the east  coast of the United  States.  LW sells  similar
products as PMI to end-users and retailers through a website.

FNC  provided   professional   services  to  mid-market   companies  focused  on
consulting, implementation and support services of Internet technology solutions
and computer technical  training services to corporate clients.  Lea was engaged
the  development  and  distribution  of software  and  e-business  products  and
services, as well as integration and hosting services. During the second quarter
2003, the Company sold substantially all the assets of FNC to a third party. The
Company also sold  substantially  all the assets of Lea, to certain of the Lea's
employees.  The activities of FNC and Lea for all periods have been reclassified
for reporting purposes as discontinued operations.

The accounting  policies of the segments are the same as those  described in the
summary of significant accounting policies presented in the Company's Form 10-K.
The Company  evaluates  performance  based on income or loss before income taxes
and minority interest, not including nonrecurring gains or losses. Inter-segment
transfers between  reportable  segments have been  insignificant.  The Company's
reportable  segments are separate  strategic  business  units.  They are managed
separately because each business requires different  technology and/or marketing
strategies.  PMI and PMIGA are comparable businesses with different locations of
operations and customers. Sales to foreign countries have been insignificant for
the Company.


                                       11
<PAGE>

The following  table  presents  information  about reported  continuing  segment
profit or loss for the three months and nine months ended September 30, 2003 and
2002:

<TABLE>
<CAPTION>
                                Three Months Ended            Nine Months Ended
                                   September 30,                September 30,
                           ----------------------------    ----------------------------
                               2003            2002            2003            2002
                           ------------    ------------    ------------    ------------
<S>                        <C>             <C>             <C>             <C>
Revenues from external
  customers:
PMI                        $ 14,991,000    $ 15,284,000    $ 44,058,100    $ 40,674,700
PMIGA                         1,849,300       1,895,800       5,501,800       7,563,400
LW                            2,526,800         322,300       5,208,700         460,000
                           ------------    ------------    ------------    ------------
TOTAL                      $ 19,367,100    $ 17,502,100    $ 54,768,600    $ 48,698,100
                           ============    ============    ============    ============

Segment loss
  before income
  taxes and minority
  interest:
    PMI                    $   (304,900)   $   (454,300)   $   (970,700)   $ (1,176,200)
    PMIGA                      (104,400)       (149,200)       (324,300)       (520,500)
    LW                          (89,100)        (26,700)       (203,400)       (182,400)
                           ------------    ------------    ------------    ------------

Loss before income taxes
  and minority interest
  for reportable segments      (498,400)       (630,200)     (1,498,400)     (1,879,100)
Change in fair value of
  warrants issued                11,700          34,000         118,400          50,500
Amortization of warrant
  issuance costs                 (8,000)         (8,000)        (24,000)         (8,000)
                           ------------    ------------    ------------    ------------
Consolidated loss from
  continuing operations
  before income taxes
  and minority interest    $   (494,700)   $   (604,200)   $ (1,404,000)   $ (1,836,600)
                           ============    ============    ============    ============
</TABLE>

10. ACCOUNTS RECEIVABLE AGREEMENTS

On April 1, 2003, the Company  purchased a credit insurance policy from American
Credit  Indemnity  covering  certain  accounts  receivable  up to  $2,000,000 of
losses.  The Company also entered into a financing  agreement with ENX, Inc. for
its  accounts  receivables  for one year  beginning  April 7,  2003.  Under  the
agreement, the Company factors its accounts receivable on pre-approved customers
with pre-approved credit limits under certain conditions. The commission is 0.5%
of the approved invoice amounts with a minimum annual commission of $50,000. For
the nine months ended September 30, 2003, accounts receivable that were approved
amounted to $2,975,000 and receivables amounted to $307,000 were factored.

During the quarter ended  September 30, 2003,  the Company  submitted a claim to
ENX, Inc. in connection with a $781,000 accounts receivable balance due from one
of its customers. Approximately one third of the outstanding balance was covered
by the insurance  policy.  The Company  subsequently  received an offer from the
customer to settle the  outstanding  balance in its  entirety  in  exchange  for
customer  inventory.  The inventory is consistent with products  included in the
Company's current product offerings. The Company accepted this offer and expects
final  settlement to occur in the fourth  quarter on 2003.  The Company does not
anticipate  any  losses  will  occur  as  a  result  of  this   settlement  and,
accordingly, no loss has been accrued.

11. LITIGATION SETTLEMENT

In April 2003, the Company settled a lawsuit relating to a counterfeit  products
claim for $95,000  which was included in other  expense in the first  quarter of
2003.

12. CAPITAL STOCK

On February  28,  2003,  Nasdaq  notified  the Company that its common stock had
failed  to  comply  with the  minimum  market  value  of  publicly  held  shares
requirement of Nasdaq  Marketplace Rules. On March 6, 2003 the Company requested
a hearing  before  the  Listing  Qualifications  Panel,  at which it would  seek
continued listing. The


                                       12
<PAGE>

hearing was held on April 24, 2003. The Company was also notified by Nasdaq that
the Company did not comply with the Marketplace Rule that requires a minimum bid
price of $1.00 per share of common stock. Subsequent to the hearing on April 24,
2003,  Nasdaq  notified the Company that its common stock would be delisted from
the Nasdaq  SmallCap Market and such delisting took place on April 30, 2003. The
Company's common stock is eligible to be traded on the Over the Counter Bulletin
Board (OCTBB). The delisting of the Company's common stock enables the holder of
the Company's  Series A Redeemable  Convertible  Preferred Shares to request the
repurchase  of such  shares 60 days after the  delisting  date.  The Company has
increased the carrying  value of the Series A Redeemable  Convertible  Preferred
Stock to its  redemption  value of $949,100 and has recorded an increase in loss
applicable to common  shareholders of $740,100 in the accompanying  consolidated
statement  of  operations.  The Company has  included its 4% Series A Redeemable
Convertible Preferred Stock in current liabilities as of September 30, 2003.

                                       13
<PAGE>

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

FORWARD-LOOKING STATEMENTS

The accompanying  discussion and analysis of financial  condition and results of
operations is based on the consolidated financial statements, which are included
elsewhere in this Quarterly Report. The following discussion and analysis should
be read in conjunction  with the accompanying  financial  statements and related
notes thereto.  This discussion contains  forward-looking  statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended. Our actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Forward-looking   statements,   by  their  very   nature,   include   risks  and
uncertainties.  Accordingly,  our actual  results could differ  materially  from
those discussed in this Report. A wide variety of factors could adversely impact
revenues,  profitability,  cash flows and capital needs.  Such factors,  many of
which are beyond our control,  include, but are not limited to, those identified
in the  Company's  Form 10-K for the fiscal  year ended  December  31,  2002 and
included  herein under the heading  "Cautionary  Factors That May Affect  Future
Results",  such as our ability to reverse our trend of  negative  earnings,  the
diminished  marketability  of inventory,  the need for additional  capital,  the
delisting  of our  common  stock  from the  Nasdaq  SmallCap  Market,  increased
warranty costs,  competition,  dependence on certain suppliers and dependence on
key personnel.

GENERAL

As used herein and unless  otherwise  indicated,  the terms "Company," "we," and
"our" refer to Pacific Magtron International Corp. and each of our subsidiaries.
We provide solutions to customers in several segments of the computer  industry.
Our  business  is  organized  into  three  divisions:  PMI,  PMIGA  and LW.  Our
subsidiaries,  PMI and PMIGA, provide for the wholesale distribution of computer
multimedia  and storage  peripheral  products and provide  value-added  packaged
solutions to a wide range of resellers,  vendors,  OEMs and systems integrators.
PMIGA  distributes  PMI's products in the southeastern  United States market. In
December  2001, LW was  incorporated  as a  wholly-owned  subsidiary of PMIC, to
provide  consumers  a  convenient  way to  purchase  computer  products  via the
internet. During the second quarter 2003, the Company sold substantially all the
assets of FNC to a third party. The Company also sold  substantially  all assets
of Lea, to certain of the Lea's employees. The activities of FNC and Lea for all
periods  have  been   reclassified   for  reporting   purposes  as  discontinued
operations.

CRITICAL ACCOUNTING POLICIES

Our significant  accounting policies are described in Note 1 to the consolidated
financial  statements  included  as Part II Item 8 to the Form 10-K for the year
ended December 31, 2002. The following are our critical accounting policies:

REVENUE RECOGNITION

The Company  recognizes  sales of computer and related products upon delivery of
goods  to  the  customer  (generally  upon  shipment)  provided  no  significant
obligations  remain and  collectibility  is probable.  A provision for estimated
product returns is established at the time of sale based upon historical  return
rates,  which have typically been  insignificant,  adjusted for current economic
conditions.  The Company  generally does not provide volume discounts or rebates
to its customers.

LONG-LIVED ASSETS

The Company  periodically  reviews its long-lived  assets for  impairment.  When
events or changes in circumstances indicate that the carrying amount of an asset
group  may not be  recoverable,  the  Company  adjusts  the  asset  group to its
estimated  fair  value.  The fair value of an asset group is  determined  by the
Company as the amount


                                       14
<PAGE>

at which  that  asset  group  could be bought  or sold in a current  transaction
between willing parties or the present value of the estimated  future cash flows
from the asset. The asset value  recoverability test is performed by the Company
on an on- going basis.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company grants credit to its customers after undertaking an investigation of
credit risk for all significant  amounts.  An allowance for doubtful accounts is
provided for estimated credit losses at a level deemed appropriate to adequately
provide for known and inherent  risks related to such amounts.  The allowance is
based on reviews of loss, adjustment history, current economic conditions, level
of credit  insurance  and other factors that deserve  recognition  in estimating
potential losses. While management uses the best information available in making
its determination, the ultimate recovery of recorded accounts receivable is also
dependent  upon  future  economic  and  other  conditions  that  may  be  beyond
management's  control.  The Company  has  purchased  a credit  insurance  policy
covering certain accounts receivable up to $2,000,000 of losses.

INVENTORY

Our inventories, consisting primarily of finished goods, are stated at the lower
of cost  (moving  weighted  average  method)  or  market.  We  regularly  review
inventory  quantities on hand and record a provision,  if necessary,  for excess
and obsolete  inventory  based  primarily on our  estimated  forecast of product
demand.  Due to a relatively  high inventory  turnover rate and the inclusion of
provisions in the vendor  agreements common to industry practice that provide us
price  protections  or credits for declines in inventory  value and the right to
return  certain  unsold  inventory,  we believe  that our risk for a decrease in
inventory value is minimized.  No assurance can be given,  however,  that we can
continue  to turn over our  inventory  as  quickly  in the future or that we can
negotiate such provisions in each of our vendor  contracts or that such industry
practice will continue.

RESULTS OF OPERATIONS

The following  table sets forth,  for the periods  indicated,  certain  selected
financial data of the continuing operations as a percentage of sales:

                                Three Months Ended      Nine Months Ended
                                   September 30,           September 30,
                               -------------------     ------------------
                                  2003       2002        2003        2002
                               -------     -------     -------     ------
Sales                           100.0%      100.0%      100.0%      100.0%
Cost of sales                    94.3        94.9        94.0        93.9
                               -------     -------     -------     ------
Gross margin                      5.7         5.1         6.0         6.1
Operating expenses                8.1         8.5         8.4         9.7
                               -------     -------     -------     ------
                                 (2.4)       (3.4)       (2.4)       (3.6)
Other expense, net               (0.2)       (0.1)       (0.2)       (0.2)
Income tax benefit                 --        (1.1)         --        (1.2)
Minority interest                 0.0         0.0         0.0         0.0
                               -------     -------     -------     ------
Loss from continuing
 operations                     (2.6)%       (2.4)%      (2.6)%      (2.6)%
                               =======     =======     =======     =======


                                       15
<PAGE>

THREE MONTHS ENDED  SEPTEMBER 30, 2003 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 2002

Sales for the three  months  ended  September  30,  2003  were  $19,367,100,  an
increase of $1,865,000,  or approximately 10.7%, compared to $17,502,100 for the
three months ended  September 30, 2002. The combined sales of PMI and PMIGA were
$16,840,300  for the three  months  ended  September  30,  2003,  a decrease  of
$339,500 or  approximately  2.0%,  compared to $17,179,800  for the three months
ended  September  30,  2002.  Sales for PMI  decreased  by $293,000 or 1.9% from
$15,284,000 for the three months ended September 30, 2002 to $14,991,000 for the
three months ended  September 30, 2003.  PMIGA's  sales  decreased by $46,500 or
2.5% from $1,895,800 for the three months ended September 30, 2002 to $1,849,300
for the three months ended September 30, 2003. Both PMI and PMIGA  experienced a
flat market for the computer  component  products for the third  quarter in 2003
compared to the same quarter in 2002.

Sales  generated by LW were  $322,300 for the three months ended  September  30,
2002,  compared to $2,526,800 for the three months ended  September 30, 2003, an
increase of $2,204,500. LW was an operating entity during the three months ended
September  30,  2003,  whereas it was in a  development  stage  during the three
months ended  September 30, 2002. For the three months ended September 30, 2003,
approximately  43% of LW sales  were  sales to  retailers  and 57% were sales to
end-users.  LW sales to retailers were  insignificant for the three months ended
September 30, 2002.

Consolidated  gross  profit for the three months  ended  September  30, 2003 was
$1,111,000,  or 5.7% of sales,  compared to  $897,800,  or 5.1% of sales for the
three months ended  September  30, 2002.  The combined  gross profit for PMI and
PMIGA was  $928,700,  or 5.5% of sales for the three months ended  September 30,
2003, compared to $832,800 or 4.8% of sales for the three months ended September
30, 2002.

PMI's  gross  profit was  $801,900 or 5.4% of sales for the three  months  ended
September  30,  2003,  compared to $726,500 or 4.8% for the three  months  ended
September  30, 2002.  The slight  increase in gross profit for PMI was due to an
increase  in sales of higher  profit  products  sold in the three  months  ended
September  30, 2003  compared to the same  period in 2002.  We are  experiencing
continuing  intense price competition in the market for products sold by PMI. We
anticipate  the intense  price  competition  will continue but stabilize at this
level in the computer component products market in the next 12 months.

PMIGA's  gross  profit was  $126,800 or 6.9% of sales for the three months ended
September  30, 2003,  compared to $106,300 or 5.6% of sales for the three months
ended  September 30, 2002.  Even though PMIGA's sales  decreased by 2.5% for the
three months ended  September 30, 2003 compared to the same period in 2002,  the
gross margin  increased by $20,500.  The increase in gross profit both in amount
and as a percent of sales for the three months ended September 30, 2003 compared
to the same  period  in 2002 was due to  management's  focus  on  higher  profit
products and an improvement in product management.

Gross  profit for LW was  $182,300 or 7.2% of sales for the three  months  ended
September 30, 2003,  compared to $65,000, or 20.2% of sales for the three months
ended September 30, 2002. For the three months ended  September 30, 2003,  gross
margin for sales to retailers was 7.3%.  Sales to retailers  were  insignificant
for the three months  ended  September  30, 2002.  Gross profit for the sales to
end-users for the three months ended  September  30, 2003 was 11.3%  compared to
20.2% for the three  months  ended  September  30,  2002.  The decrease in gross
margin for the sales to end-users was due to the increase in pricing competition
for internet sales.


                                       16
<PAGE>

Consolidated  operating  expenses,   which  consists  of  selling,  general  and
administrative  expenses,  were  $1,569,200 for the three months ended September
30, 2003, an increase of $86,600,  or 5.8%, compared to $1,482,600 for the three
months ended  September 30, 2002. The Company  experienced a higher level of bad
debts for the third quarter 2003. The consolidated  bad debt expenses  increased
by $31,700 for the three months ended  September  30, 2003  compared to the same
period in 2002.  Employee  count was 76 at September  30, 2003 compared to 82 at
September  30,  2002.  The decrease in employee  count was due to the  Company's
continuing  effort in  cutting  staff  and was  partially  offset by  additional
employees  hired by LW during  2003.  LW was in a  development  stage during the
three months ended September 30, 2002.  Consolidated  payroll expenses increased
by $17,000 for the three months ended  September 30, 2003,  compared to the same
period in 2002.  The  increase  in payroll  expenses  was  primarily  due to the
increase in  workers'  compensation  and health  insurance  costs.  Consolidated
expenses  related to  E-commerce  and bank  charges  incurred by LW increased by
$59,600 for the three  months  ended  September  30,  2003  compared to the same
period last year when LW was in a development stage. Due to intense  competition
in the market,  more products  were priced with free  shipping  during the three
months ended  September  30, 2003. As a result,  shipping and delivery  expenses
increased by $97,800 for the three months ended  September  30, 2003 compared to
the same period last year. Offsetting such increased expenses was a reduction in
consolidated promotional expenses for our Company's stock, products and services
by  $43,800,  a decrease  in  professional  service  expenses  of $77,500  and a
decrease  in  communication  expenses  of $16,800,  for the three  months  ended
September  30,  2003,  compared  to the same period in 2002.  We expect  certain
expenses,  such as  promotional  expenses,  will  continue to be reduced in 2003
compared to 2002.

PMI's  operating  expenses were  $1,071,900 for the three months ended September
30, 2003,  compared to $1,133,200 for the three months ended September 30, 2002.
The  decrease  of $61,300 or 5.4% was  mainly  due a  decrease  in  professional
service  expenses of $76,000 and promotional  expenses for our Company's  stock,
products and services of $42,700.  These  decreases were partially  offset by an
increase in bad debt  expenses of $25,300 and shipping and delivery  expenses of
$32,000.

PMIGA's  operating  expenses were $230,000 for the three months ended  September
30,  2003, a decrease of $27,500,  or 10.7%,  compared to $257,500 for the three
months ended September 30, 2002. The decrease was primarily due to a decrease in
payroll expenses,  professional  service expenses,  and promotional  expenses of
$8,800, $6,700 and $5,100, respectively.

LW's operating  expenses were $267,300 for the three months ended  September 30,
2003,  an increase  of  $175,400,  or 190.9%,  compared to $91,900 for the three
months ended September 30, 2002. LW was in a development  stage during the three
months ended  September 30, 2002. The increase was mainly due to the increase in
payroll expenses,  E-Commerce  expenses,  bank charges,  bad debt expenses,  and
shipping and  delivery  expenses of  approximately  $12,100,  $35,600,  $20,500,
$6,600 and $68,600, respectively.

Consolidated  loss from operations for the three months ended September 30, 2003
was  $458,200,  compared to $584,800 for the three months  ended  September  30,
2002,  decrease of $126,600 or 21.6%. As a percent of sales,  consolidated  loss
from operations was 2.4% for the three months ended September 30, 2003, compared
to 3.3%  for the  three  months  ended  September  30,  2002.  The  decrease  in
consolidated loss from operations was primarily due to a 23.7% increase in gross
margin,  which was partially  offset by 5.8% increase in consolidated  operating
expenses.  Loss from  operations  for the three months ended  September 30, 2003
includes PMIC corporate  expenses of $289,900,  $46,200 and $62,200 allocated to
PMI, PMIGA and LW, respectively. Loss from operations for the three months ended
September  30, 2002 includes PMIC  corporate  expenses of $505,800,  $54,200 and
$39,700 allocated to PMI, PMIGA and LW, respectively.

Consolidated  interest  expense was $45,300 for the three months ended September
30, 2003, compared to $41,400 for the three months ended September 30, 2002. The


                                       17
<PAGE>

increase  in  interest  expense  was  largely  due to a portion of the  interest
expense  related  to the  facility  was  allocation  to FNC as shared  occupancy
expenses  for the three  months  ended  September  30, 2002 but not for the same
period in 2003.  The increase  was  partially  offset by a rate  decrease on the
floating  interest rate charged on one of our mortgages for our office  building
facility located in Milpitas, California.

Other income and expenses for the three months ended September 30, 2003 included
an income of $11,700  compared to $34,000 for the same period in 2002, that were
related to the change in fair value of the warrants  issued to a preferred stock
investor and a broker on May 31, 2002.

In March 2002,  the Job Creation and Worker  Assistance  Act of 2002 ("the Act")
was enacted.  The Act extended the general  federal net operating loss carryback
period from 2 years to 5 years for net operating losses incurred for any taxable
year ending in 2001 and 2002. As a result,  for the year ended December 31, 2001
the Company did not record a valuation  allowance on the portion of its deferred
tax assets relating to unutilized  federal net operating loss of $1,906,800.  On
June 12, 2002,  the Company  received a federal  income tax refund of $1,034,700
attributable to 2001 net operating  losses carried back. The income tax benefits
of $199,300  recorded for the three months ended  September  30, 2002  primarily
reflects the federal  income tax refund  attributable  to the net operating loss
incurred  for the three months ended  September  30, 2002.  The Company does not
expect to  receive a tax  benefit  for  losses  incurred  in 2003  which are not
covered by the Act. As a result,  no tax  benefits  were  recorded for the three
months ended September 30, 2003 as management does not believe it is more likely
than not that the benefit from such assets will be realized.  On March 20, 2003,
the Company  received a federal income tax refund of $1,427,400  attributable to
its 2002 net operating loss carryback.

On February  28,  2003,  Nasdaq  notified  the Company that its common stock had
failed  to  comply  with the  minimum  market  value  of  publicly  held  shares
requirement of Nasdaq Marketplace Rule. On March 6, 2003 the Company requested a
hearing before a Listing  Qualifications Panel, at which it would seek continued
listing.  The hearing was held on April 24, 2003.  The Company was also notified
by  Nasdaq  that the  Company  did not  comply  with the  Marketplace  Rule that
requires a minimum bid price of $1.00 per share of common  stock.  Subsequent to
the hearing on April 24, 2003, Nasdaq notified the Company that its common stock
would be delisted from the Nasdaq SmallCap  Market  effective and such delisting
took place on April 30,  2003.  The  Company's  common  stock is  eligible to be
traded on the Over the Counter  Bulletin  Board  (OCTBB).  The  delisting of the
Company's  common stock enables the holder of the Company's  Series A Redeemable
Convertible  Preferred  Shares to request the  repurchase of such shares 60 days
after the delisting date. As of September 30, 2003, the redemption  value of the
Series A Preferred  Stock was  $949,100.  The Company has increased the carrying
value of the Series A Redeemable  Convertible  Preferred Stock to its redemption
value and has recorded an increase in loss applicable to common  shareholders of
$3,100 and $740,100 for the three  months and nine months  ended  September  30,
2003, respectively, in the accompanying consolidated statement of operations.

On June 2, 2003, the Company entered into an agreement to sell substantially all
of FNC's  assets to a third party for  $15,000.  The Company  recorded a loss of
$13,700 on the sale of these assets.

On June 30, 2003,  the Company  entered into an agreement to sell  substantially
all of Lea's assets to certain of the Lea's employees. The Company also obtained
a Proprietary  Software  License and Support  Agreement  from the  purchasers to
provide certain  electronic  commerce  support  services to LW for a term of two
years. The Company received $5,000 on the closing date. The electronic  commerce
support  services was valued at $48,000.  The Company recorded a loss of $16,000
on the sale of Lea assets.


                                       18
<PAGE>

The operating  results,  including the loss from disposal of assets,  of FNC and
Lea for the three months ended September 30, 2003 and 2002 were as follows:

                                 FNC                    Lea
                         Three Months Ended      Three Months Ended
                            September 30,           September 30,
                        ---------------------   ---------------------
                             2003        2002        2003        2002
                        ---------   ---------   ---------   ---------
Net sales               $      --   $ 650,100   $      --   $  79,000
Loss before income tax
  benefit                 (18,600)   (291,200)       (300)   (161,900)
Income tax benefit             --     (91,600)         --     (50,500)
                        ---------   ---------   ---------   ---------
Net loss                $ (18,600)  $(199,600)  $    (300)  $(111,400)
                        ---------   ---------   ---------   ---------

The income tax benefits  recorded for the three months ended  September 30, 2002
primarily  reflects  the  federal  income  tax  refund  attributable  to the net
operating  loss  incurred  for the three months ended  September  30, 2002.  The
Company does not expect to receive a tax benefit for losses incurred in 2003

On May 31,  2002 the  Company  issued 600  shares of its 4% Series A  Redeemable
Convertible  Preferred Stock and a warrant for 300,000 shares of common stock to
an investor.  The value of the beneficial  conversion option of these 600 shares
of 4%  Series  A  Redeemable  Convertible  Preferred  Stock  was  $260,000.  The
accretion  of the 4% Series A  Preferred  Stock was  $6,300  and  $6,100 for the
quarter  ended  September  30,  2003 and  2002,  respectively.  The value of the
beneficial  conversion  option  and the  accretion  of the  preferred  stock are
included in the loss applicable to the common shareholders in the calculation of
the loss per common share. In connection  with the sales of preferred  stock, we
recorded  the  $99,300  fair  value  of a  warrant  issued  to  the  broker  who
facilitated  the  transaction  and $298,000 fair value of the warrants issued to
the  preferred  stock  investor as a current  liability.  The fair values of the
warrants are revalued at the end of each quarter and the change in fair value of
the warrants is recorded as income or expense for the period of the change.


NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2002

Sales for the nine months ended September 30, 2003 were $54,768,600, an increase
of $6,070,500,  or  approximately  12.5%,  compared to $48,698,100  for the nine
months  ended  September  30,  2002.  The  combined  sales of PMI and PMIGA were
$49,559,900  for the nine  months  ended  September  30,  2003,  an  increase of
$1,321,800 or approximately  2.7%,  compared to $48,238,100 for the three months
ended  September  30, 2002.  Sales for PMI  increased by $3,383,400 or 8.3% from
$40,674,700  for the nine months ended September 30, 2002 to $44,058,100 for the
nine months ended  September 30, 2003.  PMIGA's sales decreased by $2,061,600 or
27.3% from $7,563,400 for the nine months ended September 30, 2002 to $5,501,800
for the nine months ended  September 30, 2003. The increase in PMI sales was due
to improved  computer  component market  conditions  compared to the same period
last year. The decrease in PMIGA's sales was due to the intense  competition and
a decrease in market share on the U.S. east coast.

Sales  generated by LW were  $460,000 for the nine months  ended  September  30,
2002,  compared to $5,208,700  for the nine months ended  September 30, 2003, an
increase of $4,748,700.  LW was an operating entity during the nine months ended
September 30, 2003, whereas it was in a development stage during the nine months
ended  September  30,  2002.  For the nine  months  ended  September  30,  2003,
approximately  39% of LW sales  were  sales to  retailers  and 61% were sales to
end-users.  LW sales to retailers were  insignificant  for the nine months ended
September 30, 2002.


                                       19
<PAGE>

Consolidated  gross  profit for the nine  months  ended  September  30, 2003 was
$3,273,500,  or 6.0% of sales, compared to $2,978,000,  or 6.1% of sales for the
nine months  ended  September  30, 2002.  The combined  gross profit for PMI and
PMIGA was  $2,832,500  or 5.7% of sales for the nine months ended  September 30,
2003,  compared  to  $2,885,700  or 6.0% of  sales  for the  nine  months  ended
September 30, 2002.

PMI's gross  profit was  $2,447,200  or 5.6% of sales for the nine months  ended
September  30, 2003,  compared to  $2,515,200  or 6.2% for the nine months ended
September 30, 2002.  With the sales  increased by 8.3% for the nine months ended
September  30,  2003  compared  to the same  period in 2002,  the  gross  profit
decreased by $68,000 for the nine months ended  September  30, 2003  compared to
2002.  The  decrease in gross  margin was due to the  continuing  intense  price
competition  in the market for products sold by PMI. We  anticipate  the intense
price  competition  will  continue  but  stabilize at this level in the computer
component products market in the next 12 months.

PMIGA's  gross  profit was  $385,300 or 7.0% of sales for the nine months  ended
September  30,  2003,  compared to $370,500 or 4.9% of sales for the nine months
ended  September 30, 2002.  Even though PMIGA's sales decreased by 27.3% for the
nine months ended  September 30, 2003  compared to the same period in 2002,  the
gross margin increased by $14,800.  The increase in gross profit as a percent of
sales for the nine months ended  September  30, 2003 compared to the same period
in  2002  was  due to  management's  focus  on  higher  profit  products  and an
improvement in product management.

Gross  profit for LW was  $441,000  or 8.5% of sales for the nine  months  ended
September 30, 2003,  compared to $92,300,  or 20.1% of sales for the nine months
ended  September 30, 2002. For the nine months ended  September 30, 2003,  gross
margin for sales to retailers was 8.5%.  Sales to retailers  were  insignificant
for the nine months  ended  September  30,  2002.  Gross profit for the sales to
end-users  for the nine months ended  September  30, 2003 was 11.3%  compared to
20.1% for the nine months ended September 30, 2002. The decrease in gross margin
for the sales to end-users  was due to the increase in pricing  competition  for
internet sales.

Consolidated  operating  expenses,   which  consists  of  selling,  general  and
administrative expenses, were $4,560,500 for the nine months ended September 30,
2003,  a decrease of  $152,400,  or 3.2%,  compared to  $4,712,900  for the nine
months ended  September  30, 2002.  The Company  continued its effort in cutting
expenses.  Consolidated  promotional expenses for our Company's stock,  products
and  services  was reduced by $205,500 and  communication  expense  decreased by
$58,800, and bad debt expenses decreased by $129,300,  for the nine months ended
September  30,  2003,  compared  to the same period in 2002.  We expect  certain
expenses,  such as  promotional  expenses,  will  continue to be reduced in 2003
compared  to 2002.  These  decreases  were  partially  offset by an  increase in
payroll  expenses  of $5,600  for the nine  months  ended  September  30,  2003,
compared to the same period in 2002. Employee count was 76 at September 30, 2003
compared to 82 at September 30, 2002.  The decrease in employee count was due to
the Company's  continuing  effort in cutting  staff and was partially  offset by
additional  employees  hired by LW during 2003.  LW was in a  development  stage
during the nine  months  ended  September  30,  2002.  The  increase  in payroll
expenses was primarily due to the increase in workers'  compensation  and health
insurance  costs and was  partially  offset by the  decrease in employee  count.
Consolidated  expenses  related to  E-commerce  and bank charges  incurred by LW
increased by $126,300 for the nine months ended  September  30, 2003 compared to
the same period  last year when LW was in a  development  stage.  Due to intense
competition in the market,  more products were priced with free shipping  during
the nine months ended  September  30, 2003.  As a result,  shipping and delivery
expenses  increased  by $106,700 for the nine months  ended  September  30, 2003
compared to the same period last year.

PMI's operating expenses were $3,223,900 for the nine months ended September 30,
2003,  compared to $3,560,700 for the nine months ended  September 30, 2002. The


                                       20
<PAGE>

decrease  of  $336,800  or 9.5% was mainly  due the  decrease  in  communication
expenses of $55,400,  payroll expenses of $65,200,  and promotional expenses for
our Company's stock, products and services of $174,300,  and bad debt expense of
$133,300.  These  decreases  were  partially  offset by an  increase in workers'
compensation and health insurance expenses of $30,900, and shipping and delivery
expenses of $48,900.

PMIGA's operating expenses were $705,800 for the nine months ended September 30,
2003, a decrease of $172,400, or 19.6%, compared to $878,200 for the nine months
ended  September  30,  2002.  The decrease  was  primarily  due to a decrease in
expenses for  accounts  receivable  collection,  payroll  expenses,  promotional
expenses,  professional service expenses, and bad debt expenses of approximately
$20,200, $31,800, $40,300, $19,200 and $30,500, respectively.

LW's  operating  expenses were $630,700 for the nine months ended  September 30,
2003,  an increase of  $356,700,  or 130.2%,  compared to $274,000  for the nine
months ended  September 30, 2002.  LW was in a development  stage during the six
months ended  September 30, 2002. The increase was mainly due to the increase in
payroll expenses,  E-Commerce  expenses,  bank charges,  bad debt expenses,  and
shipping and  delivery  expenses of  approximately  $71,800,  $73,000,  $46,300,
$34,500 and $58,900, respectively.

Consolidated loss from continuing operations for the nine months ended September
30, 2003 was  $1,287,000,  compared  to  $1,734,900  for the nine  months  ended
September  30,  2002,  a decrease of  $447,900 or 25.8%.  As a percent of sales,
consolidated  loss from  operations was 2.3% for the nine months ended September
30, 2003,  compared to 3.6% for the nine months ended  September  30, 2002.  The
decrease  in  consolidated  loss from  operations  was  primarily  due to a 9.9%
increase in gross margin and a 3.2% decrease in consolidated operating expenses.
Loss from  operations for the nine months ended September 30, 2003 includes PMIC
corporate expenses of $1,049,500,  $150,100 and $206,400 allocated to PMI, PMIGA
and LW,  respectively.  Loss from operations for the nine months ended September
30, 2002 includes PMIC corporate  expenses of $1,591,500,  $252,600 and $250,000
allocated to PMI, PMIGA and LW, respectively.

Consolidated  interest  expense was $124,300 for the nine months ended September
30, 2003, compared to $125,600 for the nine months ended September 30, 2002. The
decrease in interest  expense was largely due to a rate decrease on the floating
interest rate charged on one of our mortgages for our office  building  facility
located in Milpitas, California.

Other income and expenses for the nine months ended  September 30, 2003 included
income of $118,400  compared to $50,500 for the same period in 2002,  related to
the change in fair value of the warrants  issued to a preferred  stock  investor
and a broker on May 31, 2002.  Other expense for the nine months ended September
30,  2003  included  $95,000  for the  settlement  of a  lawsuit  relating  to a
counterfeit products claim.

In March 2002,  the Job Creation and Worker  Assistance  Act of 2002 ("the Act")
was enacted.  The Act extended the general  federal net operating loss carryback
period from 2 years to 5 years for net operating losses incurred for any taxable
year ending in 2001 and 2002. As a result,  for the year ended December 31, 2001
the Company did not record a valuation  allowance on the portion of the deferred
tax assets relating to unutilized  federal net operating loss of $1,906,800.  On
June 12, 2002,  the Company  received a federal  income tax refund of $1,034,700
attributable to 2001 net operating  losses carried back. The income tax benefits
of $608,600  recorded for the nine months  ended  September  30, 2002  primarily
reflects the federal  income tax refund  attributable  to the net operating loss
incurred for the nine months  ended  September  30,  2002.  The Company does not
expect to  receive a tax  benefit  for  losses  incurred  in 2003  which are not
covered by the Act. As a result,  no tax  benefits  were  recorded  for the nine
months ended September 30, 2003 as management does not believe it is more likely
than not that the benefit from such assets will be realized.  On March 20, 2003,
the Company  received a federal


                                       21
<PAGE>

income tax refund of  $1,427,400  attributable  to the 2002 net  operating  loss
carryback.

On February  28,  2003,  Nasdaq  notified  the Company that its common stock had
failed  to  comply  with the  minimum  market  value  of  publicly  held  shares
requirement of Nasdaq Marketplace Rule. On March 6, 2003 the Company requested a
hearing before a Listing  Qualifications Panel, at which it would seek continued
listing.  The hearing was held on April 24, 2003.  The Company was also notified
by  Nasdaq  that the  Company  did not  comply  with the  Marketplace  Rule that
requires a minimum bid price of $1.00 per share of common  stock.  Subsequent to
the hearing on April 24, 2003, Nasdaq notified the Company that its common stock
would be delisted from the Nasdaq SmallCap  Market  effective and such delisting
took place on April 30,  2003.  The  Company's  common  stock is  eligible to be
traded on the Over the Counter  Bulletin  Board  (OCTBB).  The  delisting of the
Company's  common stock enables the holder of the Company's  Series A Redeemable
Convertible  Preferred  Shares to request the  repurchase of such shares 60 days
after the delisting date. As of September 30, 2003, the redemption  value of the
Series A Preferred  Stock was  $949,100.  The Company has increased the carrying
value of the Series A Redeemable  Convertible  Preferred Stock to its redemption
value and has recorded an increase in loss applicable to common  shareholders of
$740,100  for the nine  months  ended  September  30,  2003 in the  accompanying
consolidated statement of operations.

On June 2, 2003, the Company entered into an agreement to sell substantially all
of FNC's  assets for $15,000 to a third  party.  The Company  recorded a loss of
$13,700 on the sale of these assets.

On June 30, 2003,  the Company  entered into an agreement to sell  substantially
all of Lea's assets to certain of the Lea's employees. The Company also obtained
a Proprietary  Software  License and Support  Agreement  from the  purchasers to
provide certain  electronic  commerce  support  services to LW for a term of two
years. The Company received $5,000 on the closing date. The electronic  commerce
support  services was valued at $48,000.  The Company recorded a loss of $16,000
on the sale of these assets.

The operating  results,  including the loss from disposal of assets,  of FNC and
Lea for the nine months ended September 30, 2003 and 2002 were as follows:

                                  FNC                        Lea
                            Nine Months Ended         Nine Months Ended
                               September 30,             September 30,
                        -------------------------   -------------------------
                            2003          2002          2003          2002
                        -----------   -----------   -----------   -----------
Net sales               $ 1,313,500   $ 2,131,200   $   179,700   $   412,000
Loss before income tax
  benefit                  (311,600)     (928,500)     (122,300)     (611,900)
Income tax benefit               --      (300,400)           --      (198,000)
                        -----------   -----------   -----------   -----------
Net loss                $  (311,600)  $  (628,100)  $  (122,300)  $  (413,900)
                        -----------   -----------   -----------   -----------

FNC disposed of its assets and  discontinued its operations on June 2, 2003. The
sales and operating  loss for the nine months ended  September 30, 2003 were for
the operations through June 2, 2003 (the date of the assets disposal).

Lea disposed of its assets and discontinued its operations on June 30, 2003. The
sales and operating  loss for the nine months ended  September 30, 2003 were for
the operations through June 30, 2003 (the date of the assets disposal).

The income tax benefits  recorded for the nine months ended  September  30, 2002
primarily  reflects  the  federal  income  tax  refund  attributable  to the net
operating  loss  incurred for the nine months  ended  September  30,  2002.  The
Company does not expect to receive a tax benefit for losses incurred in 2003


                                       22
<PAGE>

On May 31,  2002 the  Company  issued 600  shares of its 4% Series A  Redeemable
Convertible  Preferred Stock and a warrant for 300,000 shares of common stock to
an investor.  The value of the beneficial  conversion option of these 600 shares
of 4%  Series  A  Redeemable  Convertible  Preferred  Stock  was  $260,000.  The
accretion of the 4% Series A Preferred Stock was $18,600 and $8,100 for the nine
months ended  September  30, 2003 and from the  issuance  date (May 31, 2002) to
September 30, 2002, respectively.  The value of the beneficial conversion option
and the accretion of the preferred  stock are included in the loss applicable to
the common  shareholders  in the  calculation  of the loss per common share.  In
connection with the sales of preferred stock, we recorded the $99,300 fair value
of a warrant issued to the broker who  facilitated  the transaction and $298,000
fair value of the warrants  issued to the preferred  stock investor as a current
liability.  The fair  values of the  warrants  are  revalued  at the end of each
quarter  and the change in fair value of the  warrants  is recorded as income or
expense for the period of the change.

LIQUIDITY AND CAPITAL RESOURCES

On June 2, 2003, the Company entered into an agreement to sell substantially all
of FNC's assets to a third party for $15,000  payable in five equal  installment
payments with no interest. The first payment was due on the closing date and the
remaining  four payments are due the last date of each month  beginning June 30,
2003.  All these  payments had been  received by the Company as of September 30,
2003. The Company recorded a loss of $13,700 on the sale of the FNC assets.

On June 30, 2003, the Company sold  substantially all of Lea's assets to certain
of the Lea's employees. The Company also obtained a Proprietary Software License
and Support  Agreement  from the  purchaser  for  providing  certain  electronic
commerce  support services to LW for a term of two years beginning July 1, 2003.
The Company received $5,000 on the closing date. The electronic commerce support
services contract was valued at $48,000.  The Company recorded a loss of $16,000
on the sale of the Lea assets.

The Company incurred a net loss applicable to common  shareholders of $2,596,600
and $3,110,100  for the nine months ended  September 30, 2003 and the year ended
December  31, 2002,  respectively.  During  2003,  the Company also  triggered a
redemption  provision  in  its  Series  A  mandatorily   redeemable  convertible
preferred  stock  agreement  and as a result,  has  classified  such  stock as a
current liability. In addition, the Company's common stock was delisted from the
NASDAQ Small Cap market  effective April 30, 2003 because the Company was out of
compliance  with the NASDAQ's  minimum market value and minimum common stock bid
price  requirements.  Based on anticipated  future results,  it is also probable
that the Company will be out of compliance  with certain of its real estate loan
financial  covenants as of December 31, 2003. These conditions raise doubt about
the Company's  ability to continue as a going concern.  The Company's ability to
continue  as  a  going  concern  is  dependent   upon  its  ability  to  achieve
profitability and generate sufficient cash flows to meet its obligations as they
come due. Management believes that the continued  downsizing and disposal of its
subsidiaries,  FNC, Lea and PMICC, and continued cost-cutting measures to reduce
overhead  at  all  of its  remaining  subsidiaries  will  enable  it to  achieve
profitability.   Management  is  also  pursuing   additional  capital  and  debt
financing,  and if  out of  compliance  with  its  real  estate  loan  financial
covenants  at  year-end,  will seek a waiver for such non  compliance.  However,
there is no assurance that these efforts will be successful.

At September 30, 2003, we had consolidated  cash and cash  equivalents  totaling
$2,558,400  and working  capital of  $417,800.  At  December  31,  2002,  we had
consolidated  cash and cash  equivalents  of $1,901,100  and working  capital of
$3,112,700.

Net cash provided by operating  activities  for the nine months ended  September
30,  2003 was  $501,200,  which  principally  reflected a decrease in income tax
receivable of $1,472,800 and an increase in accounts payable of $1,203,200 which
was partially  offset by the net loss from continuing  operations of $1,404,000.
Net cash used in operating activities during the nine months ended September 30,
2002 was $233,600,  which  principally  reflected  the net loss from  continuing
operations  of  $1,225,800


                                       23
<PAGE>

incurred  during the period and an increase in  inventories  of $953,100 and net
cash used in discontinued  operations of $1,291,600,  which was partially offset
by an increase in accounts payable of $2,513,300.

Net cash provided by investing  activities was $47,600 for the nine months ended
September 30, 2003 primarily resulting from the net investing  activities of the
discontinued  operations.  Net cash used by investing activities during the nine
months ended  September  30, 2002 was  $102,300,  primarily  resulting  from the
acquisition  of  property  and  equipment  of  $63,100  and  the  net  investing
activities of the discontinued operations of $66,600.

Net cash provided by financing activities was $108,500 for the nine months ended
September 30, 2003, primarily resulting from an increase in floor plan inventory
loans of $403,700  which was partially  offset by a pledge of $250,000 cash with
Textron as required by the floor plan inventory loan agreement. Net cash used in
financing  activities was $106,700 for the nine months ended September 30, 2002,
primarily from a decrease in the floor plan inventory  loans of $431,300 and the
net  financing  activities  of  discontinued  operations  of 111,300,  which was
partially  offset by the net proceeds of $477,500 from the issuance of preferred
stock.

On March  20,  2003,  the  Company  received  a  federal  income  tax  refund of
$1,427,400 attributable to the 2002 net operating loss carryback.

In April 2003, the Company settled a lawsuit relating to a counterfeit  products
claim for $95,000 which was paid in the second quarter of 2003.

On July 13, 2001, PMI and PMIGA (the Companies)  obtained a $4 million  (subject
to credit and borrowing  base  limitations)  accounts  receivable  and inventory
financing   facility   from   Transamerica    Commercial   Finance   Corporation
(Transamerica).  This credit facility had a term of two years and was subject to
automatic  renewal from year to year  thereafter.  The credit  facility could be
terminated by Transamerica,  under certain  conditions,  and the termination was
subject to a fee of 1% of the credit  limit.  The  facility  included up to a $3
million  inventory  line  (subject to a borrowing  base of up to 85% of eligible
accounts receivable plus up to $1,500,000 of eligible inventories) that included
a sub-limit  of $600,000 for working  capital and a $1 million  letter of credit
facility  used as security  for  inventory  purchased  on terms from  vendors in
Taiwan.  Borrowings  under  the  inventory  line  was  subject  to 30 to 45 days
repayment,  at which  time  interest  accrued  at the prime  rate.  Draws on the
working  capital  line also  accrued  interest  at the prime  rate.  The  credit
facility was guaranteed by both PMIC and FNC.

Under  the  accounts   receivable   and   inventory   financing   facility  from
Transamerica,   the  Companies  were  required  to  maintain  certain  financial
covenants and to achieve certain levels of  profitability.  As of June 30, 2002,
the  Companies  did  not  meet  the  revised  minimum  tangible  net  worth  and
profitability covenants.

On October 23, 2002,  Transamerica  issued a waiver of the default  occurring on
June 30, 2002 and revised the terms and  covenants  under the credit  agreement.
Under the revised  terms,  the credit  facility  included  FNC as an  additional
borrower and PMIC  continued as a guarantor.  Effective  October  2002,  the new
credit limit was $3 million in aggregate for  inventory  loans and the letter of
credit  facility.  The letter of credit facility was limited to $1 million.  The
credit limits for PMI and FNC were  $1,750,000  and $250,000,  respectively.  At
December  31,  2002 and  September  30,  2002,  the  Companies  did not meet the
covenants as revised on October 23, 2002 relating to profitability  and tangible
net worth.  This constituted a technical  default and gave  Transamerica,  among
other things,  the right to call the loan and  immediately  terminate the credit
facility.

On January 7,  2003,  Transamerica  elected  to  terminate  the credit  facility
effective April 7, 2003. However,  Transamerica agreed to continue its guarantee
of the Letter of Credit Facility through July 25, 2003 and to continue to accept
payments according to the terms of the agreement.  The Letter of Credit Facility
was discontinued in June 2003. As of June 30, 2003, the Companies had repaid the
entire balance outstanding.


                                       24
<PAGE>

In May 2003,  PMI  obtained a  $3,500,000  inventory  financing  facility  which
includes a $1 million  letter of credit  facility used as security for inventory
purchased  on terms from vendors in Taiwan from  Textron  Financial  Corporation
(Textron).  The credit facility is guaranteed by PMIC,  PMIGA,  FNC, Lea, LW and
two  shareholders/officers of the Company.  Borrowings under the inventory loans
are subject to 30 days  repayment,  at which time interest  accrues at the prime
rate plus 6% (10% at September  30,  2003).  The Company is required to maintain
collateral  coverage equal to 120% of the outstanding  balance.  A prepayment is
required  when the  outstanding  balance  exceeds the sum of 70% of the eligible
accounts receivables and 90% of the  Textron-financed  inventory and 100% of any
cash  assigned or pledged to Textron.  PMI and PMIC are required to meet certain
financial ratio covenants, including a minimum current ratio, a maximum leverage
ratio,  and required  levels of  profitability.  As of September  30, 2003,  the
Company was out of compliance with the maximum leverage ratio covenant for which
a waiver has been obtained. The Company is also required to maintain $250,000 in
a restricted  account as a pledge to Textron.  This amount has been reflected as
restricted cash in the accompanying  consolidated  financial  statements.  As of
September 30, 2003, the outstanding balance of this loan was $1,305,300.

Pursuant  to one of our  bank  mortgage  loans,  with a  $2,367,700  balance  at
September 30, 2003, we are required to maintain a minimum debt service coverage,
a maximum debt to tangible net worth ratio, no consecutive quarterly losses, and
achieve net income on an annual basis.  During 2002 and 2001, the Company was in
violation of two of these covenants which  constituted an event of default under
the loan agreement and gave the bank the right to call the loan. A waiver of the
loan covenant  violations was obtained from the bank in March 2002,  retroactive
to September 30, 2001,  and through  December 31, 2002. In March 2003,  the bank
extended the waiver  through  December 31, 2003. As a condition for this waiver,
the Company  transferred  $250,000 to a restricted account as a reserve for debt
servicing.  Based on anticipated future results, it is probable that the Company
will be out of compliance  with certain  financial  covenants as of December 31,
2003. If this were to occur and a waiver for the  violation  cannot be obtained,
the Company would be required to classify the bank loan as current,  which could
cause the Company to be out of compliance with financial  covenants  included in
it's inventory flooring facility.

On May 31, 2002 we received net proceeds of $477,500 from the sale of 600 shares
of 4% Series A Preferred  Stock.  An additional 400 shares were to be sold after
the completion of the registration of the underlying  common stock.  Even though
we completed the required registration of the underlying common stock in October
2002, the remaining 400 shares were not sold. There is no assurance that we will
able to obtain  additional  capital  financing  other than the issuance of these
shares of Preferred stock. Upon the occurrence of a Triggering Event, such as if
the Company were a party in a "Change of Control  Transaction," among others, as
defined,  the  holder of the  preferred  stock has the  rights to  require us to
redeem the  preferred  stock in cash at a minimum of 1.5 times the Stated Value.
On February  28,  2003,  Nasdaq  notified  the Company that its common stock had
failed  to  comply  with the  minimum  market  value  of  publicly  held  shares
requirement of Nasdaq Marketplace Rule. On March 6, 2003 the Company requested a
hearing before a Listing  Qualifications Panel, at which it would seek continued
listing.  The hearing was held on April 24, 2003.  The Company was also notified
by  Nasdaq  that the  Company  did not  comply  with the  Marketplace  Rule that
requires a minimum bid price of $1.00 per share of common  stock.  Subsequent to
April 24,  2003,  Nasdaq  notified  the Company  that its common  stock would be
delisted from the Nasdaq SmallCap Market effective and such delisting took place
on April 30, 2003.  The  Company's  common stock is eligible to be traded on the
Over the Counter  Bulletin Board (OCTBB).  The delisting of the Company's common
stock  enables  the  holder of the  Company's  Series A  Redeemable  Convertible
Preferred  Shares to request  the  repurchase  of such  shares 60 days after the
delisting  date. As of September 30, 2003, the redemption  value of the Series A
Preferred  Stock was  $949,100.  During 2003 the Company  increased the carrying
value of the Series A Redeemable  Convertible  Preferred Stock to its redemption
value and  recorded an increase in loss  applicable  to common  shareholders  of
$740,100 in the accompanying  consolidated statement of operations.  The Company
has reclassified its Series A Redeemable  Convertible Preferred Stock to current
liabilities. In the event we are required to redeem our Series A Preferred Stock
in cash, we might  experience a reduction in our ability to operate the business
at its current level.


                                       25
<PAGE>

We are  actively  seeking  additional  capital to augment our  working  capital.
However,  there is no assurance  that we can obtain such  capital,  or if we can
obtain capital that it will be on terms that are acceptable to us.

RELATED PARTY TRANSACTIONS

 During the first quarter of 2002, the Company made  short-term  salary advances
to a shareholder/officer totaling $30,000, without interest. These advances were
recorded as a salary paid to the  shareholder/officer  during the second quarter
ended June 30, 2002.

The Company sells computer  products to a company owned by a member of the Board
of Directors and Audit  Committee of the Company.  Management  believes that the
terms of these  sales  transactions  are no more  favorable  than those given to
unrelated customers. For the three and nine months ended September 30, 2003, and
2002,  the Company  recognized  the following  sales  revenues from this related
party:

                                 THREE MONTHS       NINE MONTHS
                                    ENDING             ENDING
                                  SEPTEMBER 30,     SEPTEMBER 30,
                                  -------------     -------------
                 Year 2003          $    500          $101,100
                                    ========          ========
                 Year 2002          $123,000          $494,400
                                    ========          ========

Included  in accounts  receivable  as of  September  30, 2003 and 2002 is $0 and
$96,300, respectively, due from this related customer.

RECENT ACCOUNTING PRONOUNCEMENTS

In  January  2003,  the FASB  issued  Interpretation  No. 46,  CONSOLIDATION  OF
VARIABLE INTEREST ENTITIES (FIN 46). This  interpretation of Accounting Research
Bulletin No. 51, Consolidated Financial Statements,  addresses  consolidation by
business  enterprises of variable  interest  entities.  Under current  practice,
enterprises   generally  have  been  included  in  the  consolidated   financial
statements  of another  enterprise  because one  enterprise  controls the others
through voting interests. FIN 46 defines the concept of "variable interests" and
requires existing  unconsolidated  variable interest entities to be consolidated
into the financial  statements of their  primary  beneficiaries  if the variable
interest entities do not effectively  disperse risks among the parties involved.
This  interpretation  applies  immediately to variable interest entities created
after  January 31, 2003.  It applies in the first fiscal year or interim  period
beginning  after  June 15,  2003,  to  variable  interest  entities  in which an
enterprise  holds a variable  interest that it acquired before February 1, 2003.
The  adoption  of FIN 46 did not have an  impact on the  Company's  consolidated
financial statements.

In November  2002,  the EITF issued  Issue No.  00-21,  "Accounting  for Revenue
Arrangements with Multiple  Deliverables." This issue addresses determination of
whether an arrangement  involving more than one  deliverable  contains more than
one unit of accounting and how arrangement  consideration should be measured and
allocated to separate  units of  accounting.  EITF Issue No. 00-21 was effective
for revenue  arrangements  entered into in fiscal quarters  beginning after June
15,  2003,  or the  Company  may elect to report the change in  accounting  as a
cumulative-effect adjustment. The Company's adoption of EITF Issue No. 00-21 did
not have an impact on its consolidated financial statements.


                                       26
<PAGE>

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes  standards  for  classifying  and measuring as  liabilities  certain
financial   instruments   that  embody   obligations  of  the  issuer  and  have
characteristics  of both  liabilities and equity.  SFAS No. 150 is effective for
all financial  instruments  created or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period  beginning  after June
15, 2003. Restatement of financial statements for earlier years presented is not
permitted.  The Company has adopted  SFAS No. 150  beginning  the third  quarter
2003.  The  adoption  of SFAS No.  150 did not have an impact  on the  Company's
consolidated financial statements.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

OUR REPORT OF INDEPENDENT AUDITORS CONTAINS A GOING CONCERN QUALIFICATION

We  received  a going  concern  opinion  from  our  auditors  for the  financial
statements for the year ended December 31, 2002. The opinion raises  substantial
doubts our  ability to  continue as a going  concern.  If we cannot  reverse our
trend of negative earnings an investor could lose his/her entire investment.

WE HAVE INCURRED OPERATING LOSSES AND DECREASED REVENUES FOR THE LAST TWO FISCAL
YEARS AND WE CANNOT ASSURE YOU THAT THIS TREND WILL CHANGE

We have incurred a net loss applicable to common  shareholders of $2,596,600 for
the nine months ended  September  30, 2003.  We also have incurred a net loss of
$2,835,900 and a net loss  applicable to common  shareholders  of $3,110,100 for
the year  ended  December  31,  2002 and we may  continue  to incur  losses.  In
addition, our revenues decreased 6.2% during the year ended December 31, 2002 as
compared to 2001. Our future ability to execute our business plan will depend on
our efforts to increase revenues,  reduce costs and return to profitability.  We
have implemented plans to reduce overhead and operating costs, and to build upon
our core business.  No assurance can be given,  however, that these actions will
result in increased  revenues  and  profitable  operations.  If we are unable to
return to profitable operations we may be unable to continue as a going concern.

WE CAN PROVIDE NO ASSURANCE THAT WE WILL BE ABLE TO SECURE ADDITIONAL CAPITAL
REQUIRED BY OUR BUSINESS

In the second quarter of 2002, we completed a private placement of 600 shares of
our Series A Convertible  Preferred  Stock at a stated price of $1,000 per share
for gross  proceeds of $600,000  and net  proceeds of  $477,500.  We also issued
common stock  purchase  warrants to the same  purchaser  exercisable to purchase
400,000  shares of our common  stock at $1.20 per share at any time within three
years from the date of issuance.

Based on our  projected  downsized  operations  we  anticipate  that our working
capital  will  satisfy our  working  capital  needs for the next twelve  months.
However, the actual results could differ materially from those we projected.  If
we fail to raise  additional  working  capital  prior to that  time,  we will be
unable to pursue our business  plan.  We may give no  assurance  that we will be
able to obtain  additional  capital  when  needed  or, if  available,  that such
capital will be available at terms acceptable to us.

OUR COMMON STOCK IS NOT ACTIVELY TRADED

On February  28,  2003,  Nasdaq  notified  the Company that its common stock had
failed  to  comply  with the  minimum  market  value  of  publicly  held  shares
requirement  of  Nasdaq  Marketplace  Rule.  The  Company's  common  stock  was,
therefore,  subject to delisting from the SmallCap Market.  On March 6, 2003 the
Company requested a hearing before a Listing  Qualifications  Panel, at which it
would seek continued  listing.  The hearing was scheduled on April 24, 2003. The
Company has also been  notified by Nasdaq that the Company has not complied with
Marketplace  Rule,  which


                                       27
<PAGE>

requires a minimum bid price of $1.00 per share of common  stock.  Subsequent to
April 24,  2003,  Nasdaq  notified  the Company  that its common  stock had been
delisted from the Nasdaq SmallCap Market effective April 30, 2003. The Company's
common  stock is eligible to be traded on the Over the  Counter  Bulletin  Board
(OCTBB). Our stock has not been actively traded since such delisting.

POTENTIAL SALES OF ADDITIONAL COMMON STOCK AND SECURITIES CONVERTIBLE INTO OUR
COMMON STOCK MAY DILUTE THE VOTING POWER OF CURRENT HOLDERS

We may issue equity securities in the future whose terms and rights are superior
to those of our common  stock.  Our  Articles  of  Incorporation  authorize  the
issuance of up to 5,000,000 shares of preferred  stock.  These are "blank check"
preferred shares,  meaning our board of directors is authorized to designate and
issue the shares from time to time without shareholder  consent. As of September
30,  2003 we had 600  shares of Series A  Preferred  outstanding.  The  Series A
Preferred are convertible  based on a sliding scale  conversion price referenced
to the market price of our common stock.  As of September 30, 2003, the Series A
Preferred was convertible into 843,600 shares of common stock based on the floor
conversion  price of $.75. Any additional  shares of preferred stock that may be
issued in the future  could be given  voting and  conversion  rights  that could
dilute the voting power and equity of existing holders of shares of common stock
and have  preferences  over shares of common stock with respect to dividends and
liquidation  rights. At the time of issuance of the Series A Preferred Stock, it
was  intended  that an  additional  400  shares be issued to the same  investor;
however,  the  purchaser  has  not  fulfilled  its  obligations  to  close  this
transaction and we do not anticipate that such sale will occur.

WE HAVE VIOLATED CERTAIN FINANCIAL  COVENANTS  CONTAINED IN OUR LOANS AND MAY DO
SO AGAIN IN THE FUTURE

We have a mortgage  on our offices  with Wells  Fargo Bank,  under which we must
maintain the following financial covenants:

i) Total liabilities must not be more than twice our tangible net worth;

ii) Net income  after taxes must not be less than one dollar on an annual  basis
and for no more than two consecutive quarters; and

iii) We must maintain annual EBITDA of one and one half times our debt.

We are currently in violation of covenants (ii) and (iii),  but we have received
a waiver for such  violation  through  December 31, 2003.  Based on  anticipated
future  results,  it is probable that the Company will be out of compliance with
certain financial covenants as of December 31, 2003. If this were to occur and a
waiver for the  violation  cannot be  obtained,  Wells  Fargo may  declare us in
default and accelerate  the loan. In addition,  the Company would be required to
classify  the bank loan as  current,  which may cause the  Company  to be out of
compliance  with  financial   covenants  included  in  it's  inventory  flooring
facility.  We  cannot  assure  you  that we will  be able to meet  all of  these
financial covenants in the future.

In May 2003 we  obtained a  $3,500,000  inventory  financing  facility  and a $1
million  letter of credit  facility used as security for inventory  purchased on
terms from  vendors in Taiwan from  Textron  Financial  Corporation.  Under this
financing  facility,  we are required to meet certain financial ratio covenants,
including a minimum current ratio, a maximum leverage ratio, and required levels
of  profitability.  As of September 30, 2003,  the Company was out of compliance
with the maximum  leverage  ratio covenant for which a waiver has been obtained.
As of September 30, 2003, the  outstanding  balance of this loan was $1,305,300.
We  cannot  assure  you  that we will be able to  comply  with  these  financial
requirements  in the  future or to  maintain  the  Textron  flooring  line if we
continue our losses.

IF WE ARE UNABLE TO SECURE PRICE PROTECTION PROVISIONS IN OUR VENDOR AGREEMENTS,
THE VALUE OF OUR INVENTORY WOULD QUICKLY DIMINISH

As a  distributor,  we incur the risk that the  value of our  inventory  will be
adversely  affected  by  industry  wide  forces.   Rapid  technology  change  is
commonplace  in the  industry  and can quickly  diminish  the  marketability  of
certain items, whose functionality and demand decline with the appearance of new
products.  These


                                       28
<PAGE>

changes  and price  reductions  by  vendors  may  cause  rapid  obsolescence  of
inventory and corresponding valuation reductions in that inventory. We currently
seek  provisions  in the vendor  agreements  common to  industry  practice  that
provide  price  protections  or credits for declines in inventory  value and the
right to return unsold inventory.  No assurance can be given,  however,  that we
can  negotiate  such  provisions  in each of our contracts or that such industry
practice will continue.

EXCESSIVE CLAIMS AGAINST WARRANTIES THAT WE PROVIDE COULD ADVERSELY EFFECT OUR
BUSINESS

Our suppliers  generally warrant the products that we distribute and allow us to
return  defective  products,  including  those that have been  returned to us by
customers.  We do not independently warrant the products that we distribute.  If
excessive claims were made against these  warranties,  our results of operations
would suffer.

WE MAY NOT BE ABLE TO SUCCESSFULLY COMPETE WITH SOME OF OUR COMPETITORS

All  aspects of our  business  are highly  competitive.  Competition  within the
computer products distribution industry is based on product availability, credit
availability,  price, speed and accuracy of delivery, effectiveness of sales and
marketing  programs,  ability to tailor  specific  solutions to customer  needs,
quality and  breadth of product  lines and  services,  and the  availability  of
product and technical support  information.  We also compete with  manufacturers
that sell directly to resellers and end users.  A number of our  competitors  in
the computer  distribution  industry are  substantially  larger and have greater
financial and other resources than we do.

WE DEPEND ON KEY SUPPLIERS FOR A LARGE PORTION OF OUR INVENTORY, LOSS OF THOSE
SUPPLIERS COULD HARM OUR BUSINESS

One supplier, Sunnyview/ComTronic ("Sunnyview"), accounted for approximately 23%
and 9% of our total  purchases for the nine months ended  September 30, 2003 and
2002, respectively.  We do not have a supply contract with Sunnyview, but rather
purchase products from it through individual  purchase orders, none of which has
been  large  enough  to be  material  to us.  Although  we have not  experienced
significant  problems with Sunnyview or our other  suppliers,  and we believe we
could obtain the products that Sunnyview supplies from other sources,  there can
be no  assurance  that our  relationship  with  Sunnyview  and  with  our  other
suppliers,  will continue or, in the event of a termination of our  relationship
with any given supplier,  that we would be able to obtain alternative sources of
supply on  comparable  terms  without a material  disruption  in our  ability to
provide  products and  services to our  clients.  This may cause a loss of sales
that could have a material adverse effect on our business,  financial  condition
and operating results.

WE ARE DEPENDENT ON KEY PERSONNEL

Our  continued  success  will  depend to a  significant  extent  upon our senior
management,  including  Theodore Li, President,  and Hui Cynthia Lee,  Executive
Vice President and head of sales operations. The loss of the services of Messrs.
Li or Ms. Lee, or one or more other key employees, could have a material adverse
effect on our business, financial condition or operating results. We do not have
key man insurance on the lives of any of members of our senior management.

ESTABLISHMENT    AND   MAINTENANCE   OF   OUR    BUSINESS-TO-CONSUMER    WEBSITE
LIVEWAREHOUSE.COM MAY NOT BE SUCCESSFUL

We have established a business-to-consumer website, LiveWarehouse.com. We cannot
assure you that we will achieve a profitable  level of operations,  that we will
be able to hire and retain  personnel with experience in online retail marketing
and


                                       29
<PAGE>

management,  that we will be able to execute our  business  plan with respect to
this market segment or that we will be able to adapt to  technological  changes.
Further, while we have experience in the wholesale marketing of computer-related
products,  we have limited  experience in retail marketing.  This market is very
competitive and many of our competitors have substantially greater resources and
experience than we have.

WE ARE SUBJECT TO RISKS BEYOND OUR CONTROL SUCH AS ECONOMIC AND GENERAL RISKS OF
OUR BUSINESS

Our success  will depend upon  factors that may be beyond our control and cannot
clearly be  predicted  at this  time.  Such  factors  include  general  economic
conditions,   both  nationally  and   internationally,   changes  in  tax  laws,
fluctuating operating expenses,  changes in governmental regulations,  including
regulations  imposed under federal,  state or local  environmental  laws,  labor
laws, and trade laws and other trade barriers.

INFLATION

Inflation has not had a material  effect upon our results of operations to date.
In the  event the rate of  inflation  should  accelerate  in the  future,  it is
expected  that to the  extent  increased  costs  are  not  offset  by  increased
revenues, our operations may be adversely affected.


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<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk for changes in interest  rates relates  primarily to
our bank  mortgage  loan with a $2,367,700  balance at September  30, 2003 which
bears  fluctuating  interest  based on the bank's  90-day LIBOR rate. We believe
that fluctuations in interest rates in the near term would not materially affect
our consolidated operating results. We are not exposed to material risk based on
exchange rate fluctuation or commodity price fluctuation.


ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

Our management,  with the  participation of our principal  executive officer and
principal  financial officer,  has evaluated the effectiveness of the design and
operation  of our  disclosure  controls  and  procedures  (as  defined  in Rules
13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934, as amended)
as of the end of the period  covered  by this  quarterly  report.  Based on this
evaluation,  our principal  executive  officer and principal  financial  officer
concluded  that these  disclosure  controls and  procedures  are  effective  and
designed to ensure that the information  required to be disclosed in our reports
filed or  submitted  under  the  Securities  Exchange  Act of 1934 is  recorded,
processed, summarized and reported within the requisite time periods.

(b) Changes in Internal Controls.

There was no change in our internal control over financial reporting (as defined
in Rules 13a-15(f) and 15d-15(f)  under the Securities  Exchange Act of 1934, as
amended)  identified in connection  with the evaluation of our internal  control
performed  during our last fiscal  quarter that has materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.


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<PAGE>

PART II

ITEM 1. - LEGAL PROCEEDINGS

None.


ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

Exhibit     Description                                                Reference
-------     -----------                                                ---------
3.1         Articles of Incorporation                                      (1)

3.2         Bylaws, as amended and restated                                (1)

31.1        Certificate of Chief Executive Officer and Chief Financial
            Officer pursuant to Section 302 of the Sarbanes-Oxley
            Act of 2002                                                     *

32.1        Certification of Chief Executive Officer and Chief
            Financial Officer pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002                                      *

(1) Incorporated by reference from the Company's  registration statement on Form
10SB-12G filed January 20, 1999.



* Filed herewith

(b)  Reports on Form 8-K
     None


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<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.

                                     PACIFIC MAGTRON INTERNATIONAL CORP.,
                                     a Nevada corporation

Date: November 19, 2003              By /s/ Theodore S. Li
                                     --------------------------------
                                     Theodore S. Li
                                     President and Chief Financial
                                     Officer


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