SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-Q

                                   (Mark One)

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

                  For the quarterly period ended June 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 July 28, 2003

<PAGE>

Part I. - Financial Information

    Item 1. - Consolidated Financial Statements

                Consolidated balance sheets as of June 30, 2003
                and December 31, 2002 (Unaudited)                            1-2

                Consolidated statements of operations for the three
                and six months ended June 30, 2003 and 2002 (Unaudited)        3

                Consolidated statements of cash flows for the six
                months ended June 30, 2003 and 2002 (Unaudited)                4

                Notes to consolidated financial statements                  5-14

   Item 2. - Management's Discussion and Analysis of Financial
             Condition and Results of Operations                           15-33

   Item 3. - Quantitative and Qualitative Disclosures About
             Market Risk                                                      34

   Item 4. - Controls and Procedures                                          34

Part II - Other Information

   Item 1. - Legal Proceedings                                                35

   Item 6. - Exhibits and Reports on Form 8-K                                 35

Signature                                                                     36

<PAGE>

                       PACIFIC MAGTRON INTERNATIONAL CORP.
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                                      June 30,      December 31,
                                                        2003            2002
                                                     -----------    ------------

ASSETS
Current Assets:
  Cash and cash equivalents                          $ 1,053,100     $ 1,901,100
  Restricted cash                                        500,000         250,000
  Accounts receivable, net of allowance for
    doubtful accounts of $355,100 and
    $305,000 in 2003 and 2002, respectively            4,433,900       5,124,100
  Inventories                                          3,172,300       3,370,500
  Prepaid expenses and other current
    assets                                               446,300         459,100
  Income tax refund receivable                              --         1,472,800
                                                     -----------     -----------
Total Current Assets                                   9,605,600      12,577,600

Property and equipment, net                            4,288,700       4,495,400

Deposits and other assets                                117,600         194,000
                                                     -----------     -----------
                                                     $14,011,900     $17,267,000
                                                     ===========     ===========

See accompanying notes to consolidated financial statements.


                                       1
<PAGE>

                       PACIFIC MAGTRON INTERNATIONAL CORP.
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   June 30,     December 31,
                                                                     2003           2002
                                                                 -----------    ------------
<S>                                                              <C>            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Current portion of notes payable                               $    63,400    $    60,800
  Floor plan inventory loans                                         573,300        901,600
  Accounts payable                                                 6,129,200      7,781,800
  Accrued expenses                                                   717,000        559,100
  Warrants                                                            54,900        161,600
                                                                 -----------    -----------
Total Current Liabilities                                          7,537,800      9,464,900

Notes Payable, less current portion                                3,137,200      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
    (liquidation value of $626,400 as of June 30, 2003)              939,700        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                                                350,300      2,423,800
                                                                 -----------    -----------
Total Shareholders' Equity                                         2,397,200      4,442,200
                                                                 -----------    -----------
                                                                 $14,011,900    $17,267,000
                                                                 ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       2
<PAGE>

                       PACIFIC MAGTRON INTERNATIONAL CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                Three Months Ended                        Six Months Ended
                                                                     June 30,                                  June 30,
                                                        ---------------------------------         ---------------------------------
                                                            2003                 2002                 2003                 2002
                                                        ------------         ------------         ------------         ------------
<S>                                                     <C>                  <C>                    <C>                <C>
Sales                                                   $ 17,275,900         $ 14,298,900           35,401,500         $ 31,196,000
Cost of sales                                             16,186,800           13,418,500           33,239,000           29,115,800
                                                        ------------         ------------         ------------         ------------
Gross margin                                               1,089,100              880,400            2,162,500            2,080,200
Selling, general and
  administrative expenses                                  1,505,000            1,555,200            2,991,200            3,230,300
                                                        ------------         ------------         ------------         ------------
Loss from continuing operations
  before other income (expense)
  and income tax benefit
  and minority interest                                     (415,900)            (674,800)            (828,700)          (1,150,100)
                                                        ------------         ------------         ------------         ------------
Other income (expense):
  Interest income                                                600                2,700                1,400                7,500
  Interest expense                                           (40,400)             (42,300)             (79,000)             (84,200)
  Litigation settlement                                         --                   --                (95,000)                --
  Change in fair value of
   warrants issued                                            (8,200)              16,500              106,700               16,500
  Other expense, net                                         (16,200)             (24,700)             (14,600)             (22,100)
                                                        ------------         ------------         ------------         ------------
Total other income (expense)                                 (64,200)             (47,800)             (80,500)             (82,300)
                                                        ------------         ------------         ------------         ------------
Loss from continuing operations
  before income tax benefit
  and minority interest                                     (480,100)            (722,600)            (909,200)          (1,232,400)
Income tax benefit                                              --               (233,200)                --               (409,300)
                                                        ------------         ------------         ------------         ------------
Loss from continuing operations
  before minority interest                                  (480,100)            (489,400)            (909,200)            (823,100)
Minority interest                                               --                   --                   --                  2,200
                                                        ------------         ------------         ------------         ------------
Loss from continuing operations                             (480,100)            (489,400)            (909,200)            (820,900)
                                                        ------------         ------------         ------------         ------------
Discontinued operations:
  Loss from discontinued
   operations of:
    Frontline Network Consulting,
      Inc. after tax benefit                                (144,400)            (198,000)            (279,300)            (428,500)
    Lea Publishing Inc. after
      tax benefit                                            (59,700)            (128,200)            (106,000)            (302,500)
  Loss from disposal of:
    Frontline Network Consulting,
      Inc. after tax benefit                                 (13,700)                --                (13,700)                --
    Lea Publishing Inc. after
      tax benefit                                            (16,000)                --                (16,000)                --
                                                        ------------         ------------         ------------         ------------
Loss from discontinued
  operations                                                (233,800)            (326,200)            (415,000)            (731,000)
                                                        ------------         ------------         ------------         ------------
Accretion of discount and deemed
  dividend related to beneficial
  conversion of Series A
  Convertible Preferred Stock                                 (6,300)            (262,000)             (12,300)            (262,000)
Accretion of redemption value of
  Series A Convertible Preferred
  Stock                                                       (3,100)                --               (737,000)                --
                                                        ------------         ------------         ------------         ------------
Net Loss applicable to
  common shareholders                                   $   (723,300)        $ (1,077,600)        $ (2,073,500)        $ (1,813,900)
                                                        ============         ============         ============         ============
Basic and diluted loss per share:
  Loss from continuing operations                       $      (0.05)        $      (0.07)        $      (0.16)        $      (0.10)
  Loss from discontinued
    operations                                                 (0.02)               (0.03)               (0.04)               (0.07)
                                                        ------------         ------------         ------------         ------------
  Net loss applicable to common
    shareholders                                        $      (0.07)        $      (0.10)        $      (0.20)        $      (0.17)
                                                        ============         ============         ============         ============
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 consolidated financial statements.


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                       SIX MONTHS ENDED JUNE 30,
                                                                                                        2003               2002
                                                                                                    -----------         -----------
<S>                                                                                                 <C>                 <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
  Net loss applicable to common shareholders                                                        $(2,073,500)        $(1,813,900)
  Less: Loss from discontinued operations                                                              (415,000)           (731,000)
        Accretion of discount related to Series
         A Convertible Preferred Stock                                                                  (12,300)           (262,000)
        Accretion of redemption value of Series
         A Convertible Preferred Stock                                                                 (737,000)               --
                                                                                                    -----------         -----------
  Net loss used in continuing operations                                                               (909,200)           (820,900)
  Adjustments to reconcile  net loss to net cash (used in) provided by operating
    activities:
      Deferred income taxes                                                                                --               262,700
      Depreciation and amortization                                                                     158,700             110,600
      Provision for doubtful accounts                                                                    23,200                --
      Gain on disposal of fixed assets                                                                     --                (8,300)
      Change in fair value of warrants                                                                 (106,700)            (16,500)
      Minority interest losses                                                                             --                (2,200)
      Changes in operating assets and
        liabilities:
         Accounts receivable                                                                            300,600             391,600
         Inventories                                                                                    399,800            (235,100)
         Prepaid expenses and other
           current assets                                                                              (167,000)             17,500
         Income taxes receivable                                                                      1,472,800                --
         Accounts payable                                                                            (1,374,300)            591,700
         Accrued expenses                                                                               227,800              15,700
                                                                                                    -----------         -----------
NET CASH PROVIDED BY CONTINUING OPERATIONS                                                               25,700             306,800
NET CASH USED IN DISCONTINUED OPERATIONS                                                               (309,400)           (737,500)
                                                                                                    -----------         -----------
NET CASH USED IN OPERATING ACTIVITIES                                                                  (283,700)           (430,700)
                                                                                                    -----------         -----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
  ACTIVITIES:
   Acquisition of property and equipment                                                                   --                (1,500)
   Reduction in deposits and other assets                                                                  --                24,900
   Proceeds from sale of property and equipment                                                            --                36,100
   Net investing activities of discontinued
     operations                                                                                          43,700            (105,200)
                                                                                                    -----------         -----------
NET CASH PROVIDED BY (USED IN) INVESTING
  ACTIVITIES                                                                                             43,700             (45,700)
                                                                                                    -----------         -----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
  ACTIVITIES:
   Net decrease in floor plan inventory loans                                                          (328,300)           (546,500)
   Principal payments on notes payable                                                                  (29,700)            (27,300)
   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                                                                                             --               117,600
                                                                                                    -----------         -----------
NET CASH PROVIDED BY (USED IN) FINANCING
  ACTIVITIES                                                                                           (608,000)             21,300
                                                                                                    -----------         -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                                              (848,000)           (455,100)

CASH AND CASH EQUIVALENTS:
  Beginning of period                                                                                 1,901,100           3,110,000
                                                                                                    -----------         -----------
  End of period                                                                                     $ 1,053,100         $ 2,654,900
                                                                                                    ===========         ===========
</TABLE>

See accompanying notes to 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), Frontline Network Consulting, Inc. (FNC), Lea
Publishing, Inc. (Lea), PMI Capital Corporation (PMICC), 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 FNC. The Company also sold all the  intangible  assets and
certain tangible assets of Lea to certain of Lea's  employees.  PMICC was formed
in 2001 for the purpose of  acquiring  companies or assets  deemed  suitable for
PMIC's organization.  During the second quarter 2003, the Company was authorized
to dissolve PMICC.

The  Company  has  incurred  a net loss  applicable  to common  shareholders  of
$2,073,500  for the six months ended June 30, 2003.  The Company also incurred a
net loss  applicable to common  shareholders  of  $3,110,100  for the year ended
December 31, 2002. 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  recently  completed or continued  downsizing  and disposal of its
subsidiaries,  FNC and  Lea,  and  continued  cost-cutting  measures  to  reduce
overhead at all of its  subsidiaries  will  enable it to achieve  profitability.
Management  is also pursuing  additional  capital and debt  financing.  However,
there is no assurance that these efforts will be successful.

FINANCIAL STATEMENT PRESENTATION AND PRINCIPLES OF CONSOLIDATION

While the financial information 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
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.


                                       5
<PAGE>

The accompanying  consolidated financial statements include the accounts of PMIC
and  its  wholly-owned  subsidiaries,  PMI,  PMIGA,  Lea,  PMICC  and LW and its
majority-owned subsidiary, FNC. 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. The Company also sold all
the intangible  assets and certain  tangible  assets of Lea, to certain of Lea's
employees.  During the second  quarter  2003,  the  Company  was  authorized  to
dissolve  PMICC.  The  activities  of FNC, Lea and PMICC were  reclassified  for
reporting  purposes as  discontinued  operations  for all  periods  shown in the
accompanying statements of operations and cash flows.

STOCK-BASED COMPENSATION

FASB Statement 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 based method prescribed in SFAS No.
123 as amended by SFAS No. 148.  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 six months  ended June 30,  2003.  For the six
months  ended June 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 six months
ended June 30, 2003 and 2002, no outstanding  options were exercised and options
to purchase 6,000 and 66,555 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 to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                   Three Months Ended                      Six Months Ended
                                                                        June 30,                               June 30,
                                                              -----------------------------         -------------------------------
                                                                2003               2002                2003                2002
                                                              ---------         -----------         -----------         -----------
<S>                                                           <C>               <C>                 <C>                 <C>
Net loss applicable to common shareholders:
  As reported                                                 $(723,300)        $(1,077,600)        $(2,073,500)        $(1,813,900)
    Add: total stock based
      employee compensation
      expense determined
      under fair value
      based method for all
      awards, net of tax                                        (10,800)            (37,000)            (22,100)            (46,400)
                                                              ---------         -----------         -----------         -----------
  Pro forma                                                   $(734,100)        $(1,114,600)        $(2,095,600)        $(1,860,300)
                                                              ---------         -----------         -----------         -----------
Basic and diluted loss per share:
  As reported                                                 $   (0.07)        $     (0.10)        $     (0.20)        $     (0.17)
  Pro forma                                                   $   (0.07)        $     (0.11)        $     (0.20)        $     (0.18)
</TABLE>


                                       6
<PAGE>

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  reflect the potential
dilution of securities,  using the treasury stock method that could share in the
earnings  of an entity.  During the three  months and six months  ended June 30,
2003 and 2002,  options and warrants to purchase shares of the Company's  common
stock and shares of common stock issuable upon  conversion of Series A Preferred
Stock were excluded from the calculation of diluted earnings (loss) per share as
their effect would be anti-dilutive.

The  following  is the  computation  of the basic and diluted loss per share for
loss from continuing operations:

<TABLE>
<CAPTION>
                                                               Three Months Ended                        Six Months Ended
                                                                    June 30,                                 June 30,
                                                        ---------------------------------         ---------------------------------
                                                            2003                 2002                 2003                 2002
                                                        ------------         ------------         ------------         ------------
<S>                                                     <C>                  <C>                  <C>                  <C>
Loss from continuing operations                         $   (480,100)        $   (489,400)        $   (909,200)        $   (820,900)
Accretion of discount and deemed
  dividend related to beneficial
  conversion of Series A
  Convertible Preferred Stock                                 (6,300)            (262,000)             (12,300)            (262,000)
Accretion of redemption value of
  Series A Convertible Preferred
  Stock                                                       (3,100)                --               (737,000)                --
                                                        ------------         ------------         ------------         ------------
Loss from continuing operations
  applicable to common
  shareholders                                          $   (489,500)        $   (751,400)        $ (1,658,500)        $ (1,082,900)
                                                        ============         ============         ============         ============
Basic and diluted loss per share -
  Loss from continuing operations                       $      (0.05)        $      (0.07)        $      (0.16)        $      (0.10)
                                                        ============         ============         ============         ============
Shares used in basic and diluted
   per share calculation                                  10,485,100           10,485,100           10,485,100           10,485,100
                                                        ============         ============         ============         ============
</TABLE>


                                       7
<PAGE>

2. 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.
If it is reasonably  possible that an enterprise  will  consolidate  or disclose
information about a variable interest entity when FIN 46 becomes effective,  the
enterprise  must  disclose  information  about those  entities in all  financial
statements  issued after  January 31, 2003.  The  interpretation  may be applied
prospectively with a cumulative-effect  adjustment as of the date on which it is
first applied or by restating  previously issued financial statements for one or
more years, with a cumulative-effect adjustment as of the beginning of the first
year  restated.  The  adoption  of FIN 46 did not have a material  effect 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 the  separate  units of  accounting.  EITF Issue No. 00-21 will be
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 has reviewed EITF Issue No. 00-21
and has  determined  it will  not have a  material  impact  on 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.  The  Company is  currently  reviewing  the  impact,  if any,  on its
financial position and results of operations upon the adoption of SFAS No. 150.

3. DISCONTINUED OPERATIONS

On June 2, 2003, the Company entered into an agreement to sell substantially all
of FNC's  intangible  assets  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. The Company recorded a loss of $13,000 on the sale of these 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 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 and the electronic  commerce  support  services  contract valued at
$48,000  which is based on the number of hours of the  services to be  provided.
The Company recorded a loss of $16,000 on the sale of these assets.

On June 6, 2003 the Board of  Directors  authorized  the  dissolution  of PMICC.
PMICC had no activities  since 2002 and had no assets and liabilities as of June
6, 2003.


                                       8
<PAGE>

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

<TABLE>
<CAPTION>
                                               FNC                                        Lea
                                        Three Months Ended                         Three Months Ended
                                             June 30,                                   June 30,
                                  -------------------------------             ------------------------------
                                     2003                  2002                 2003                  2002
                                  ---------             ---------             --------             ---------
<S>                               <C>                   <C>                   <C>                  <C>
Net sales                         $ 342,900             $ 881,500             $ 80,200             $ 197,400
Loss before income tax
  benefit                          (158,100)             (290,800)             (75,700)             (183,700)
Income tax benefit                     --                 (92,800)                --                 (55,500)
                                  ---------             ---------             --------             ---------
Net loss                          $(158,100)            $(198,000)            $(75,700)            $(128,200)
                                  ---------             ---------             --------             ---------
</TABLE>

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

<TABLE>
<CAPTION>
                                                   FNC                                            Lea
                                             Six Months Ended                               Six Months Ended
                                                 June 30,                                       June 30,
                                    -----------------------------------             -------------------------------
                                       2003                    2002                   2003                   2002
                                    -----------             -----------             ---------             ---------
<S>                                 <C>                     <C>                     <C>                   <C>
Net sales                           $ 1,313,500             $ 1,481,100             $ 179,700             $ 333,000
Loss before income tax
  benefit                              (293,000)               (637,300)             (122,000)             (450,000)
Income tax benefit                         --                  (208,800)                 --                (147,500)
                                    -----------             -----------             ---------             ---------
Net loss                            $  (293,000)            $  (428,500)            $(122,000)            $(302,500)
                                    -----------             -----------             ---------             ---------
</TABLE>

4. STATEMENTS OF CASH FLOWS

Cash was paid during the six months ended June 30, 2003 and 2002 for:

SIX MONTHS ENDING JUNE 30,    2003                 2002
                             -------              -------
Income taxes                 $ 6,000              $ 1,200
                             =======              =======
Interest                     $79,000              $93,100
                             =======              =======


                                       9
<PAGE>

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

SIX MONTHS ENDING JUNE 30,                    2003         2002
                                            --------     --------
Accretion of preferred stock dividend       $ 12,300     $  2,000
                                            ========     ========
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      $737,000     $     --
                                            ========     ========

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 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 six months ended June 30, 2003, and 2002,
the Company recognized the following sales revenues from this customer:

                             THREE MONTHS              SIX MONTHS
                                ENDING                    ENDING
                                JUNE 30,                 JUNE 30,
                             ------------              -----------
Year 2003                      $ 41,300                  $100,600
                             ============              ===========
Year 2002                      $234,700                  $371,400
                             ============              ===========

Included  in  accounts  receivable  as of June 30,  2003 and 2002 is $32,200 and
$125,400, respectively, due from this related customer.


                                       10
<PAGE>

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 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 $409,300  recorded for the six months ended June 30, 2002 primarily  reflects
the federal  income tax refund  attributable  to the net operating loss incurred
for the six months ended June 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 six months ended June 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,  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  loans  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  includes  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.


                                       11
<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 June 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 and levels of profitability.  As of June 30, 2003, the
Company is in compliance with these  covenants.  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 June 30,  2003,  the  outstanding  balance  of this  loan was
$573,300.

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 (1.375% as of June 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.

9. SEGMENT INFORMATION

The Company has five reportable segments:  PMI, PMIGA, LW, FNC and Lea.

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 through a website.

FNC  provides   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 is 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 intangible assets FNC. The Company
also sold all the  intangible  assets and  certain  tangible  assets of Lea,  to
certain of the Lea's  employees.  The  activities of FNC and Lea for all periods
were reclassified for reporting purposes as discontinued operations.


                                       12
<PAGE>

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.

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

<TABLE>
<CAPTION>
                                                                          Three Months Ended               Six Months Ended
                                                                               June 30,                         June 30,
                                                                    -----------------------------     -----------------------------
                                                                        2003             2002             2003             2002
                                                                    ------------     ------------     ------------     ------------
<S>                                                                 <C>              <C>              <C>              <C>
Revenues from external customers:
PMI                                                                 $ 14,323,000     $ 11,960,000     $ 29,067,100     $ 25,390,700
PMIGA                                                                  1,650,000        2,222,600        3,652,500        5,667,600
LW                                                                     1,302,900          116,300        2,681,900          137,700
                                                                    ------------     ------------     ------------     ------------
TOTAL                                                               $ 17,275,900     $ 14,298,900     $ 35,401,500     $ 31,196,000
                                                                    ============     ============     ============     ============

Segment loss before income taxes and minority interest:
    PMI                                                             $   (289,000)    $   (424,400)    $   (665,700)    $   (721,900)
    PMIGA                                                               (106,900)        (229,300)        (219,900)        (371,300)
    LW                                                                   (68,000)         (85,400)        (114,300)        (155,700)
                                                                    ------------     ------------     ------------     ------------
Total loss before
  income taxes and
  minority interest for
  reportable segments                                                   (463,900)    $   (739,100)        (999,900)    $ (1,248,900)
Change in fair value of
  warrants issued                                                         (8,200)          16,500          106,700           16,500
Amortization of warrant
  issuance costs                                                          (8,000)            --            (16,000)            --
                                                                    ------------     ------------     ------------     ------------
Consolidated loss before
  income taxes and
  minority interest                                                 $   (480,100)    $   (722,600)    $   (909,200)    $ (1,232,400)
                                                                    ============     ============     ============     ============
</TABLE>


                                       13
<PAGE>

10. ACCOUNTS RECEIVABLE FACTORING AGREEMENT

Pursuant to a non-notification  accounts  receivable  factoring  agreement,  the
Company factored certain of its accounts  receivable with GE Capital  Commercial
Services,  Inc.  (GE)  on  a  pre-approved  non-recourse  basis.  The  factoring
commission  charge  was  0.375% and 2.375% of  specific  approved  domestic  and
foreign  receivables,  respectively.  The agreement,  which expired February 28,
2003 and was renewed  through March 31, 2003,  provided for the Company to pay a
minimum of $200,000  (pro-rated for March 2003) in annual  commission to GE. The
Company's  obligations  to  GE  were  collateralized  by  the  related  accounts
receivable sold and assigned to GE and the underlying  inventory.  However,  any
collateral  assigned to GE was  subordinated  to the  collateral  rights held by
Transamerica,  the Company's floor plan inventory  lender. GE agreed to remit to
Transamerica,  on behalf of the Company, any collections on assigned accounts to
repay  amounts due  Transamerica  under the  Company's  inventory  floor line of
credit.

Beginning 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.  In April 2003, the Company  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 quarter ended June 30, 2003, accounts receivable
that were approved amounted to $1,825,000 and no receivables were factored.

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 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 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 June 30, 2003,  the  redemption  value of the
Series A Preferred  Stock,  if the holder had required the Company to redeem the
Series  A  Preferred  Stock as of that  date,  was  $939,700.  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 $737,000 in the accompanying  consolidated  statement of
operations.


                                       14
<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 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 five divisions:  PMI, PMIGA, FNC, Lea 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.  FNC provides 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 is 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 intangible assets FNC. The Company
also sold all the  intangible  assets and  certain  tangible  assets of Lea,  to
certain of the Lea's  employees.  The  activities of FNC and Lea for all periods
were 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:


                                       15
<PAGE>

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.  Revenues relating to services performed by FNC are recognized
upon  completion of the  contracts.  Software and service  revenues  relating to
software design and  installation  performed by FNC and Lea, are recognized upon
completion of the installation and customer acceptance.

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 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.

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.


                                       16
<PAGE>

INCOME TAXES

The Company  reports  income  taxes in  accordance  with  Statement of Financial
Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES, which requires
an asset and liability  approach.  This approach  results in the  recognition of
deferred  tax assets  (future tax  benefits)  and  liabilities  for the expected
future tax  consequences  of  temporary  differences  between the book  carrying
amounts and the tax basis of assets and liabilities. The deferred tax assets and
liabilities  represent the future tax consequences of those  differences,  which
will  either be  deductible  or  taxable  when the assets  and  liabilities  are
recovered or settled.  Future tax benefits are subject to a valuation  allowance
when management believes it is more likely than not that the deferred tax assets
will not be realized.

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     Six Months Ended
                                            June 30,              June 30,
                                        ----------------      ----------------
                                         2003       2002       2003       2002
                                        -----      -----      -----      -----
Sales                                   100.0%     100.0%     100.0%     100.0%
Cost of sales                            93.7       93.8       93.9       93.3
                                        -----      -----      -----      -----
Gross margin                              6.3        6.2        6.1        6.7
Operating expenses                        8.7       10.9        8.4       10.4
                                        -----      -----      -----      -----
                                         (2.4)      (4.7)      (2.3)      (3.7)
Other income (expense), net              (0.4)      (0.3)      (0.2)      (0.3)
Income tax benefit                       --         (1.6)      --         (1.4)
Minority interest                         0.0        0.0        0.0        0.0
                                        -----      -----      -----      -----
Loss from continuing
 operations                              (2.8)%     (3.4)%     (2.5)%     (2.6)%
                                        =====      =====      =====      =====

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

Sales for the three months ended June 30, 2003 were $17,275,900,  an increase of
$2,977,000, or approximately 20.8%, compared to $14,298,900 for the three months
ended June 30, 2002.  The combined sales of PMI and PMIGA were  $15,973,000  for
the three months ended June 30, 2003, an increase of $1,790,400 or approximately
12.6%,  compared to $14,182,600 for the three months ended June 30, 2002.  Sales
for PMI increased by $2,363,000 or 19.8% from  $11,960,000  for the three months
ended June 30, 2002 to  $14,323,000  for the three  months  ended June 30, 2003.
PMIGA's  sales  decreased  by  $572,600 or 25.8% from  $2,222,600  for the three
months  ended June 30, 2002 to  $1,650,000  for the three  months ended June 30,
2003. The increase in PMI sales was due to improved  computer  component  market
conditions  since the first  quarter of 2003  compared  to the same  period last
year.  The decrease in PMIGA's  sales was due to the intense  competition  and a
continuing decrease in market share on the U.S. east coast.

Sales  generated  by LW were  $116,300 for the three months ended June 30, 2002,
compared to $1,302,900  for the three months ended June 30, 2003, an increase of
$1,186,600.  LW was an operating  entity  during the three months ended June 30,
2003,  whereas it was in a development  stage during the three months ended June
30, 2002.


                                       17
<PAGE>

Consolidated  gross  margin  for the  three  months  ended  June  30,  2003  was
$1,089,100,  or 6.3% of sales,  compared to  $880,400,  or 6.2% of sales for the
three months ended June 30,  2002.  The combined  gross margin for PMI and PMIGA
was  $963,800,  or 6.0% of sales  for the  three  months  ended  June 30,  2003,
compared to $855,600 or 6.0% of sales for the three months ended June 30, 2002.

PMI's gross margin was $829,500 or 5.8% of sales for the three months ended June
30, 2003, compared to $763,800 or 6.4% for the three months ended June 30, 2002.
The  increase in gross  margin for PMI was due to a 19.8%  increase in sales for
the three  months ended June 30, 2003  compared to the same period in 2002.  The
decrease in gross margin as a percent of sales for PMI 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  margin was  $134,600 or 8.2% of sales for the three months ended
June 30,  2003,  compared to $91,700 or 4.1% of sales for the three months ended
June 30, 2002. Even though PMIGA's sales decreased by 25.8% for the three months
ended  June 30,  2003  compared  to the same  period in 2002,  the gross  margin
increased  by  $65,700.  The  increase  in gross  margin both in amount and as a
percent of sales for the three months  ended June 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  margin for LW was  $125,400 or 9.6% of sales for the three  months  ended
June 30, 2003, compared to $22,800, or 19.6% of sales for the three months ended
June 30, 2002. LW was in a development  stage during the three months ended June
30, 2002.

Consolidated  operating  expenses,   which  consists  of  selling,  general  and
administrative  expenses,  were  $1,505,000  for the three months ended June 30,
2003,  a decrease of $50,200,  or 3.2%,  compared  to  $1,555,200  for the three
months ended June 30, 2002.  Employee  count was 80 at June 30, 2003 compared to
77 at June 30,  2002.  The  increase  in  employee  count was due to  additional
employees  hired by LW during  2003.  LW was in a  development  stage during the
three months  ended June 30, 2002.  Consolidated  payroll  expense  increased by
$41,600 for the three months ended June 30, 2003, compared to the same period in
2002.  Consolidated  expenses related to E-commerce  incurred by LW increased by
$18,800 for the three  months  ended June 30,  2003  compared to the same period
last year when LW was in a development stage. Offsetting such increased expenses
was an overall lower level of bad debt  write-offs.  The  consolidated  bad debt
expense  decreased by $67,000 for the three months ended June 30, 2003  compared
to the same period in 2002. Consolidated  promotional expenses for our Company's
stock,  products and services and communication expense decreased by $47,200 and
$23,000, respectively, for the three months ended June 30, 2003, compared to the
same period in 2002. We expect certain expenses, such as promotional expense and
communication expense, will continue to be reduced in 2003 compared to 2002.

PMI's  operating  expenses were  $1,085,300  for the three months ended June 30,
2003,  compared to  $1,119,400  for the three months  ended June 30,  2002.  The
decrease of $34,100 or 3.0%,  was mainly due the decrease in bad debt expense of
$45,600  and  promotional  expenses  of  $34,300  and  communication  expense of
$23,100.  These  decreases  were  partially  offset by an  increase  in  payroll
expenses  of  approximately  $58,000  resulting  from an  increase  in  worker's
compensation insurance costs, further, for the three months ended June 30, 2002,
the Company recorded a short-term salary advance to a shareholder/officer in the
first quarter 2002 as a salary expense thus increasing  payroll expense for that
quarter.


                                       18
<PAGE>

PMIGA's  operating  expenses  were  $239,900 for the three months ended June 30,
2003, a decrease of $66,100, or 21.6%, compared to $306,000 for the three months
ended June 30, 2002.  The decrease  was  primarily  due to a decrease in payroll
expense,  bad debt  expense  and  promotional  expense of  $19,400,  $24,600 and
$18,600, respectively.

LW's operating  expenses were $188,500 for the three months ended June 30, 2003,
an increase  of $80,900,  or 75.2%,  compared to $107,600  for the three  months
ended June 30, 2002. LW was in a development stage during the three months ended
June 30, 2002. The increase was mainly due to the increase in payroll  expenses,
bank charges, and e-commerce service fees of approximately $15,400, $12,200, and
$18,800, respectively.

Consolidated  loss from  operations for the three months ended June 30, 2003 was
$415,900,  compared to $674,800  for the three  months  ended June 30,  2002,  a
decrease  of $258,900 or 38.4%.  As a percent of sales,  consolidated  loss from
operations  was 2.4% for the three months ended June 30, 2003,  compared to 4.7%
for the three months ended June 30, 2002. The decrease in consolidated loss from
operations  was  primarily  due to a 23.7%  increase in gross  margin and a 3.2%
decrease in consolidated operating expenses.  Loss from operations for the three
months ended June 30, 2003,  including  allocations of PMIC corporate  expenses,
for PMI, PMIGA and LW was $368,800, $47,900 and $81,600, respectively. Loss from
operations  for the three months ended June 30, 2002,  including  allocations of
PMIC  corporate  expenses,  for PMI,  PMIGA  and LW was  $496,800,  $89,200  and
$76,300, respectively.

Consolidated  interest  expense was $40,400 for the three  months ended June 30,
2003, compared to $42,300 for the three months ended June 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 three months ended June 30, 2003  included an
$8,200 expense,  compared to $16,500 income 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.

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 $233,200 recorded for the three months ended June 30, 2002 primarily reflects
the federal  income tax refund  attributable  to the net operating loss incurred
for the three months ended June 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 June 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.


                                       19
<PAGE>

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 June 30, 2003,  the  redemption  value of the
Series A Preferred  Stock,  if the holder had required the Company to redeem the
Series  A  Preferred  Stock as of that  date,  was  $939,700.  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 $737,000 for the three months and six months
ended June 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  intangible  assets  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. The Company recorded a loss of $13,700 on the sale of these 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 for providing certain electronic commerce support services to LW for a
term of two years.  The Company  received  $5,000 on the  closing  date and will
receive the electronic commerce support services 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 three months ended June 30, 2003 and 2002 were as follows:

<TABLE>
<CAPTION>
                                                        FNC                                           Lea
                                                 Three Months Ended                           Three Months Ended
                                                       June 30,                                    June 30,
                                            -------------------------------             ------------------------------
                                              2003                   2002                 2003                  2002
                                            ---------             ---------             --------             ---------
<S>                                         <C>                   <C>                   <C>                  <C>
Net sales                                   $ 343,000             $ 881,500             $ 80,100             $ 197,400
Loss before income tax benefit               (158,100)             (290,800)             (75,700)             (183,700)
Income tax benefit                               --                 (92,800)                --                 (55,500)
                                            ---------             ---------             --------             ---------
Net loss                                    $(158,100)            $(198,000)            $(75,700)            $(128,200)
                                            ---------             ---------             --------             ---------
</TABLE>


                                       20
<PAGE>

FNC's sales  decreased from $881,500 for the three months ended June 30, 2002 to
$343,000  for the three  months June 30,  2003.  Loss before  income  taxes also
reduced  from  $290,800 for the three months ended June 30, 2002 to $158,100 for
the  three  months  ended  June  30,  2003.  FNC  disposed  of  its  assets  and
discontinued  its  operations on June 2, 2003.  The sales and operating loss for
the quarter  ended June 30, 2003 were for the  operations  through  June 2, 2003
(the date of the assets disposal).

Lea  generated  $80,100 in sales for the three  months  ended June 30,  2003,  a
decrease of  $117,300,  compared to $197,400 for the three months ended June 30,
2002. The decrease in sales was due to the pricing  pressure on our services and
less  web-site  development  work demanded in the second  quarter of 2003.  Loss
before  income  taxes for Lea reduced  from  $183,700 for the three months ended
June 30, 2002 to $75,700 for the three month ended June 30,  2003.  The decrease
in loss before  income taxes was primarily due to a reduction in expenses of all
levels.

The  income tax  benefits  recorded  for the three  months  ended June 30,  2002
primarily  reflects  the  federal  income  tax  refund  attributable  to the net
operating  loss  incurred for the three months ended June 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 $2,000 from the issuance  date
(May 31, 2002) to June 30, 2002. The value of the beneficial  conversion  option
and the accretion of the preferred stock were 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 the 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.

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

Sales for the six months  ended June 30, 2003 were  $35,401,500,  an increase of
$4,205,500,  or approximately 13.5%,  compared to $31,196,000 for the six months
ended June 30, 2002.  The combined sales of PMI and PMIGA were  $32,719,600  for
the six months ended June 30, 2003, an increase of  $1,661,300 or  approximately
5.3%,  compared to $31,058,300  for the three months ended June 30, 2002.  Sales
for PMI  increased by $3,676,400  or 14.5% from  $25,390,700  for the six months
ended  June 30,  2002 to  $29,067,100  for the six months  ended June 30,  2003.
PMIGA's  sales  decreased by  $2,015,100  or 35.6% from  $5,667,600  for the six
months ended June 30, 2002 to $3,652,500 for the six months ended June 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 continuing decrease in market share on
the U.S. east coast.

Sales  generated by LW were  $2,681,900  for the six months ended June 30, 2003,
compared  to $137,700  for the six months  ended June 30,  2002,  an increase of
$2,544,200.  LW was an  operating  entity  during the six months  ended June 30,
2003, whereas it was in a development stage during the six months ended June 30,
2002.


                                       21
<PAGE>

Consolidated gross margin for the six months ended June 30, 2003 was $2,162,500,
or 6.1% of sales,  compared to  $2,080,200,  or 6.7% of sales for the six months
ended June 30, 2002. The combined gross margin for PMI and PMIGA was $1,903,800,
or 5.8% of sales for the six months ended June 30, 2003,  compared to $2,052,900
or 6.6% of sales for the six months ended June 30, 2002.

PMI's gross margin was $1,645,300 or 5.7% of sales for the six months ended June
30, 2003, compared to $1,788,700 or 7.0% for the six months ended June 30, 2002.
The  increase in gross  margin for PMI was due to a 14.5%  increase in sales for
the six months  ended June 30, 2003  compared  to the same  period in 2002.  The
decrease in gross margin as a percent of sales for PMI 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 margin was $258,600 or 7.1% of sales for the six months ended June
30,  2003,  compared to $264,100 or 4.7% of sales for the six months  ended June
30, 2002.  Even though PMIGA's sales decreased by 35.6% for the six months ended
June 30, 2003  compared to the same period in 2002,  the gross margin  decreased
only by $5,500.  The  increase in gross margin as a percent of sales for the six
months  ended  June 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  margin for LW was $258,700 or 9.6% of sales for the six months ended June
30, 2003,  compared to $27,300,  or 19.8% of sales for the six months ended June
30,  2002.  LW was in a  development  stage during the six months ended June 30,
2002.

Consolidated  operating  expenses,   which  consists  of  selling,  general  and
administrative expenses, were $2,991,200 for the six months ended June 30, 2003,
a decrease of $239,100, or 7.4%, compared to $3,230,300 for the six months ended
June 30, 2002. Employee count was 80 at June 30, 2003 compared to 77 at June 30,
2002. The increase in employee count was due  additional  employees  hired by LW
which was in a  development  stage  during the six months  ended June 30,  2002.
Consolidated  payroll  expenses for the six months ended June 30, 2003 decreased
by $11,300  compared  to the six months  ended June 30,  2002.  The  decrease in
consolidated payroll expenses was due to the salary and employee count reduction
in PMI and PMIGA which was partially offset by the increase in employee count in
LW. Consolidated expenses related to E-commerce and bank charges for credit card
transactions incurred by LW increased by $37,400 and 20,700,  respectively,  for
the six months ended June 30, 2003 compared to the same period last year when LW
was in a development  stage.  Offsetting such increased  expenses was an overall
lower level of bad debt write-offs.  The consolidated bad debt expense decreased
by $161,000 for the six months  ended June 30, 2003  compared to the same period
in 2002. Consolidated promotional expenses for our Company's stock, products and
services,  receivables collection expense and communication expense decreased by
$84,900,  $42,100 and $40,100,  respectively,  for the six months ended June 30,
2003,  compared to the same period in 2002. We expect certain expenses,  such as
promotional  expense and communication  expense,  will continue to be reduced in
2003 compared to 2002.

PMI's operating expenses were $2,152,000 for the six months ended June 30, 2003,
compared to $2,427,000  for the six months ended June 30, 2002.  The decrease of
$275,000 or 11.3%, was mainly due to the decrease in payroll expenses,  bad debt
expense,   promotional  expenses  and  communication  expense  of  approximately
$29,000, $158,500, $63,700 and $41,700, respectively.


                                       22
<PAGE>

PMIGA's operating expenses were $475,800 for the six months ended June 30, 2003,
a decrease of  $144,900,  or 23.3%,  compared to $620,700  for the three  months
ended March 31, 2002.  The decrease was  primarily due to a decrease in expenses
for accounts receivable collection, payroll expense, promotional expense and bad
debt  expense  of   approximately   $18,800,   $31,600,   $35,100  and  $30,300,
respectively.

LW's operating expenses were $363,400 for the six months ended June 30, 2003, an
increase of  $181,300,  or 99.6%,  compared to $182,100 for the six months ended
June 30, 2002.  LW was in a  development  stage during the six months ended June
30, 2002. The increase was mainly due to the increase in payroll  expenses,  bad
debt  expense,  bank  charges,  and  e-commerce  service  fees of  approximately
$49,300, $27,900, $25,800, and $37,400, respectively.

Consolidated  loss from continuing  operations for the six months ended June 30,
2003 was  $828,700,  compared to  $1,150,100  for the six months  ended June 30,
2002, a decrease of $321,400 or 27.9%. As a percent of sales,  consolidated loss
from  operations  was 2.3% for the six months ended June 30,  2003,  compared to
3.7% for the six months ended June 30, 2002. The decrease in  consolidated  loss
from  operations was primarily due to a 4.0% increase in gross margin and a 7.4%
decrease in consolidated  operating  expenses.  Loss from operations for the six
months ended June 30, 2003,  including  allocations of PMIC corporate  expenses,
for PMI, PMIGA and LW was $759,600,  $103,900 and $144,200,  respectively.  Loss
from operations for the six months ended June 30, 2002, including allocations of
PMIC  corporate  expenses,  for PMI, PMIGA and LW was  $1,085,600,  $198,500 and
$112,000, respectively.

Consolidated  interest  expense was  $79,000  for the six months  ended June 30,
2003,  compared to $84,200 for the six months ended June 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 three  months  ended June 30, 2003  included
$106,700 income compared to $16,500 income 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 six months ended June 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 $409,300  recorded for the six months ended June 30, 2002 primarily  reflects
the federal  income tax refund  attributable  to the net operating loss incurred
for the six months ended June 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 June 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 the 2002 net  operating  loss
carryback.


                                       23
<PAGE>

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 June 30, 2003,  the  redemption  value of the
Series A Preferred  Stock,  if the holder had required the Company to redeem the
Series  A  Preferred  Stock as of that  date,  was  $939,700.  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 $737,000  for the six months ended June 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  intangible  assets  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. The Company recorded a loss of $13,700 on the sale of these 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 for providing certain electronic commerce support services to LW for a
term of two years.  The Company  received  $5,000 on the  closing  date and will
receive the electronic commerce support services 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 six months ended June 30, 2003 and 2002 were as follows:

<TABLE>
<CAPTION>
                                                   FNC                                      Lea
                                             Six Months Ended                         Six Months Ended
                                                 June 30,                                 June 30,
                                    ---------------------------------           -----------------------------
                                       2003                  2002                 2003                2002
                                    -----------           -----------           ---------           ---------
<S>                                 <C>                   <C>                   <C>                 <C>
Net sales                           $ 1,313,500           $ 1,481,100           $ 179,700           $ 333,000
Loss before income tax benefit         (293,000)             (637,300)           (122,000)           (450,000)
Income tax benefit                         --                (208,800)               --              (147,500)
                                    -----------           -----------           ---------           ---------
Net loss                            $  (293,000)          $  (428,500)          $(122,000)          $(302,500)
                                    -----------           -----------           ---------           ---------
</TABLE>


                                       24
<PAGE>

FNC's sales  decreased from $1,481,100 for the six months ended June 30, 2002 to
$1,313,500  for the six months  June 30,  2003.  Loss before  income  taxes also
reduced from $637,300 for the six months ended June 30, 2002 to $293,000 for the
six months ended June 30, 2003. FNC disposed of its assets and  discontinued its
operations  on June 2,  2003.  The sales and  operating  loss for the six months
ended June 30, 2003 were for the  operations  through  June 2, 2003 (the date of
the assets disposal).

Lea  generated  $179,700  in sales for the six  months  ended June 30,  2003,  a
decrease of  $153,300,  compared to $333,000  for the six months  ended June 30,
2002. The decrease in sales was due to the pricing  pressure on our services and
less web-site  development  work demanded in 2003.  Loss before income taxes for
Lea reduced from $450,000 for the six months ended June 30, 2002 to $122,000 for
the six month ended June 30, 2003.  The decrease in loss before income taxes was
primarily due to a reduction in expenses of all levels.

The  income  tax  benefits  recorded  for the six  months  ended  June 30,  2002
primarily  reflects  the  federal  income  tax  refund  attributable  to the net
operating loss incurred for the six months ended June 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 $2,000 from the issuance  date
(May 31, 2002) to June 30, 2002. The value of the beneficial  conversion  option
and the accretion of the preferred stock were 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 the 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  intangible  assets  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. The Company recorded a loss of $13,700 on the sale of these 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 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 and the electronic  commerce  support  services  contract valued at
$48,000. The Company recorded a loss of $16,000 on the sale of these assets.


                                       25
<PAGE>

The Company has incurred a loss of $909,200 on continuing  operations  and a net
loss  applicable to common  shareholders  of $2,073,500 for the six months ended
June 30,  2003.  The  Company  also  incurred  a net loss  applicable  to common
shareholders  of  $3,110,100  for  the  year  ended  December  31,  2002.  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 recently completed or
continued  downsizing  and  disposal  of its  subsidiaries,  FNC  and  Lea,  and
continued  cost-cutting  measures to reduce overhead at all of its  subsidiaries
will enable it to achieve profitability.  Management is also pursuing additional
capital and debt  financing.  However,  there is no assurance that these efforts
will be successful.

At June  30,  2003,  we had  consolidated  cash and  cash  equivalents  totaling
$1,053,100  (excluding  $500,000  in  restricted  cash) and  working  capital of
$2,067,800.  At December 31, 2002, we had consolidated cash and cash equivalents
of $1,901,100  (excluding  $250,000 in restricted  cash) and working  capital of
$3,112,700.

Net cash used by operating activities for the six months ended June 30, 2003 was
$283,700,  which  principally  reflected  a  decrease  in  accounts  payable  of
$1,374,300  and a net loss from  continuing  operations  of  $909,200  which was
partially  offset by the decrease in income tax  receivable of  $1,472,800.  Net
cash used in operating  activities during the six months ended June 30, 2002 was
$430,700, which principally reflected the net loss from continuing operations of
$820,900  incurred  during the period and an increase  inventories  and net cash
used in discontinued  operations of $737,500,  which was partially  offset by an
increase in accounts payable and a decrease in accounts receivable.

Net cash provided by investing  activities  was $43,700 for the six months ended
June 30, 2003  resulting from the net investing  activities of the  discontinued
operations.  Net cash used by investing  activities  during the six months ended
June 30, 2002 was $45,700, primarily resulting from the net investing activities
of the  discontinued  operations,  which was partially offset by the proceeds of
sales of property and equipment and reduction in deposits and other assets.

Net cash used in financing activities was $608,000 for the six months ended June
30, 2003,  primarily  resulting from a decrease in floor plan inventory loans of
$328,300  and a pledge of  $250,000  cash with  Textron as required by the floor
plan inventory  loan  agreement.  Net cash provided by financing  activities was
$21,300 for the six months ended June 30, 2002,  primarily from the net proceeds
of  $477,500  from  the  issuance  of  preferred  stock  and the  net  financing
activities of discontinued  operations of 117,600, which was partially offset by
a decrease in the floor plan inventory loans of $546,500.

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.


                                       26
<PAGE>

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,  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  loans  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  includes  FNC as an  additional
borrower and PMIC  continues 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 loans
are subject to 30 days  repayment,  at which time interest  accrues at the prime
rate  plus 6% (10% at June 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 and levels of profitability.  As of June 30, 2003, the
Company is in compliance with these  covenants.  The Company is also required to
maintain $250,000 in a restricted account as a pledge to Textron. As of June 30,
2003, the outstanding balance of this loan was $573,300.

Pursuant to one of our bank mortgage  loans,  with a $2,374,500  balance at June
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.


                                       27
<PAGE>

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 its  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
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 June 30, 2003,  the  redemption  value of the
Series A Preferred  Stock,  if the holder had required the Company to redeem the
Series A Preferred Stock as of that date, was $939,700.  During 2003 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 $737,000 in the accompanying  consolidated
statement  of  operations.  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.

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 six months ended June 30, 2003, and 2002,
the Company recognized the following sales revenues from this customer:

                             THREE MONTHS                  SIX MONTHS
                                ENDING                       ENDING
                                JUNE 30,                    JUNE 30,
                             ------------                 ------------
Year 2003                      $ 41,300                     $100,600
                             ============                 ============
Year 2002                      $234,700                     $371,400
                             ============                 ============


                                       28
<PAGE>

Included  in  accounts  receivable  as of June 30,  2003 and 2002 is $32,200 and
$125,400, 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.
If it is reasonably  possible that an enterprise  will  consolidate  or disclose
information about a variable interest entity when FIN 46 becomes effective,  the
enterprise  must  disclose  information  about those  entities in all  financial
statements  issued after  January 31, 2003.  The  interpretation  may be applied
prospectively with a cumulative-effect  adjustment as of the date on which it is
first applied or by restating  previously issued financial statements for one or
more years, with a cumulative-effect adjustment as of the beginning of the first
year  restated.  The  adoption  of FIN 46 did not have a material  effect 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 the  separate  units of  accounting.  EITF Issue No. 00-21 will be
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 has reviewed EITF Issue No. 00-21
and has  determined  it will  not have a  material  impact  on 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.  The  Company is  currently  reviewing  the  impact,  if any,  on its
financial position and results of operations upon the adoption of SFAS No. 150.


                                       29
<PAGE>

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 $2,073,500 for
the six  months  ended  June  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,  including the $477,500 raised in our second quarter 2002 placement and
a recently  received tax refund of $1,427,400,  will satisfy our working capital
needs  for the next  twelve  months.  However,  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.


                                       30
<PAGE>

OUR COMMON STOCK IS NOT CURRENTLY LISTED ON THE NASDAQ SMALLCAP MARKET

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  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 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).  The market for our common stock is
not as broad as if it were traded on the Nasdaq  SmallCap  Market and it is more
difficult to trade in our common stock.

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 June 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 June 30, 2003,  the Series A Preferred
was  convertible  into  835,200  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 as of the date of this filing,  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. We cannot assure you that
we will be able to meet all of these  financial  covenants in the future.  If we
fail to meet the covenants, Wells Fargo may declare us in default and accelerate
the loan.

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
and  levels  of  profitability.  We  were in  compliance  with  these  financial
requirements as of June 30, 2003.  However, we cannot assure you that we will be
able to comply with these  financial  requirements  or to  maintain  the Textron
flooring line if we continue our losses.


                                       31
<PAGE>

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  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,
except that we do warrant services provided in connection with the products that
we configure for customers and that we build to order from components  purchased
from other sources. 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/CompTronic  ("Sunnyview"),  accounted for approximately
23.4% and 10.5% of our total  purchases  for the six months  ended June 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.


                                       32
<PAGE>

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  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 $2,374,500  balance at June 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

Adaptec, Inc. filed a lawsuit against the Company and thirteen other defendants,
claiming amongst other things, copyright and trademark infringement,  and unfair
business  practices.  The Company  denied  these  allegations.  On April 4, 2003
Pacific  Magtron,  Inc.  agreed to a out-of-court  settlement of this claim with
Adaptec,  Inc. for $95,000  after  giving  consideration  to the on-going  legal
costs.

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)

10.1          Asset Purchase Agreement with Sable Computer,Inc.
              dated as of May 31, 2003                                    (2)

10.2          Asset Purchase Agreement with LiveCSP, Inc.
              dated as of June 30, 2003                                   (3)

10.3          Credit Line for Inventory Financing with Textron Financial   *

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.
(2)   Filed as an exhibit to our Form 8-K dated June 2, 2003.
(3)   Filed as an exhibit to our Form 8-K dated July 15, 2003.

* Filed herewith

(b) Reports on Form 8-K

The  Company  filed a current  report on Form 8-K on June 2, 2003  under  Item 2
reporting  the  sale  of  substantially  all of  the  intangible  assets  of its
Frontline Network Consulting, Inc. subsidiary.

The  Company  filed a current  report on Form 8-K on July 15,  2003 under Item 2
reporting the sale of  substantially  all of the  intangible  assets and certain


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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: August 14, 2003                   By /s/ Theodore S. Li
                                           --------------------------------
                                           Theodore S. Li
                                           President and Chief Financial Officer


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