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 September 30, 2001

                                       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 [ ]

                    Common Stock, $0.001 par value per share:
           10,412,900 shares issued and outstanding at November 14, 2001
<PAGE>
Part I. - Financial Information

     Item 1. - Consolidated Financial Statements

               Consolidated balance sheets as of September 30, 2001
               (Unaudited) and December 31, 2000                             1-2

               Consolidated statements of operations for the three months and
               nine months ended September 30, 2001 and 2000 (Unaudited)       3

               Consolidated statements of cash flows for the nine months
               ended September 30, 2001 and 2000 (Unaudited)                   4

               Notes to consolidated financial statements                   5-11

     Item 2. - Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         12-18

     Item 3. - Quantitative and Qualitative Disclosures About Market Risk     19

Part II - Other Information

     Item 6. - Exhibits and Reports on Form 8-K                               19

Signature
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                           CONSOLIDATED BALANCE SHEETS

                                                   September 30,    December 31,
                                                       2001            2000
                                                   ------------     -----------
                                                    (Unaudited)
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                         $ 2,838,100     $ 4,874,200
  Restricted cash                                       175,000              --
  Accounts receivable, net of allowance for
    doubtful accounts of $250,000 in 2001
    and $175,000 in 2000                              5,768,300       5,629,200
  Inventories                                         3,987,200       3,917,900
  Prepaid expenses and other current assets             595,100         446,500
  Income taxes receivable                               450,300         215,700
  Notes receivable from shareholders                     80,000         171,400
  Deferred income taxes                                  80,300          80,300
                                                    -----------     -----------

TOTAL CURRENT ASSETS                                 13,974,300      15,335,200

PROPERTY, PLANT AND EQUIPMENT, net                    4,627,600       4,752,300

INVESTMENT IN RISING EDGE                               453,400         468,000

INVESTMENT IN TARGETFIRST                                    --         250,000

DEPOSITS AND OTHER ASSETS                                63,200          55,600
                                                    -----------     -----------

                                                    $19,118,500     $20,861,100
                                                    ===========     ===========

          See accompanying notes to consolidated financial statements.

                                        1
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         September 30,   December 31,
                                                             2001            2000
                                                         ------------    ------------
                                                         (Unaudited)
<S>                                                      <C>             <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of notes payable                       $     53,600    $     51,400
  Floor plan inventory loans                                1,655,900       1,329,500
  Accounts payable                                          5,892,900       5,788,600
  Accrued expenses                                            271,400         541,300
                                                         ------------    ------------

TOTAL CURRENT LIABILITIES                                   7,873,800       7,710,800

NOTES PAYABLE, less current portion                         3,245,700       3,286,200

DEFERRED INCOME TAXES                                           6,300           6,300
                                                         ------------    ------------

TOTAL LIABILITIES                                          11,125,800      11,003,300
                                                         ------------    ------------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST - PMI-GA                                      5,000              --
                                                         ------------    ------------
SHAREHOLDERS' EQUITY:
  Preferred stock, $0.001 par value; 5,000,000
    shares authorized; no shares issued and
    outstanding                                                    --              --

  Common stock, $0.001 par value; 25,000,000 shares
    authorized; 10,412,900 and 10,100,000 shares
    issued and outstanding at September 30, 2001
    and December 31, 2000 respectively                         10,400          10,100
  Additional paid-in capital                                1,662,800       1,463,100
  Retained earnings                                         6,329,200       8,384,600
                                                         ------------    ------------
                                                            8,002,400       9,857,800
  Less: Treasury stock, at cost, 20,400 and
          0 shares at September 30, 2001 and
          December 31, 2000 respectively                      (14,700)             --
                                                         ------------    ------------
TOTAL SHAREHOLDERS' EQUITY                                  7,987,700       9,857,800
                                                         ------------    ------------

                                                         $ 19,118,500    $ 20,861,100
                                                         ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        2
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            Three Months Ended               Nine Months Ended
                                                               September 30,                   September 30,
                                                        ----------------------------    ----------------------------
                                                            2001            2000            2001            2000
                                                        ------------    ------------    ------------    ------------
                                                         (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
<S>                                                     <C>             <C>             <C>             <C>
SALES                                                   $ 20,840,200    $ 24,125,300    $ 55,758,100    $ 68,924,800

COST OF SALES                                             19,375,000      22,369,700      51,933,200      63,616,400
                                                        ------------    ------------    ------------    ------------

GROSS MARGIN                                               1,465,200       1,755,600       3,824,900       5,308,400
                                                        ------------    ------------    ------------    ------------

OPERATING EXPENSES:
  Selling, general and administrative                      1,737,700       1,568,100       5,857,200       4,786,700
  Research and development                                    46,800         100,000          68,500         100,000
                                                        ------------    ------------    ------------    ------------

TOTAL OPERATING EXPENSES                                   1,784,500       1,668,100       5,925,700       4,886,700
                                                        ------------    ------------    ------------    ------------

(LOSS) INCOME FROM OPERATIONS                               (319,300)         87,500      (2,100,800)        421,700
                                                        ------------    ------------    ------------    ------------
OTHER (EXPENSE) INCOME:
  Interest income on shareholder notes                            --           2,300              --           6,800
  Interest income                                             20,000          56,400         107,900         167,000
  Interest expense                                           (60,200)        (73,700)       (201,900)       (218,300)
  Litigation settlement                                           --         300,000              --         300,000
  Equity loss on investment                                   (4,600)         (6,300)        (14,500)         (6,300)
  Impairment loss on investment                                   --              --        (250,000)             --
  Other (expense) income                                     (14,100)             --           8,400              --
                                                        ------------    ------------    ------------    ------------

TOTAL OTHER (EXPENSE) INCOME                                 (58,900)        278,700        (350,100)        249,200
                                                        ------------    ------------    ------------    ------------
(LOSS) INCOME BEFORE INCOME TAXES
  AND MINORITY INTEREST                                     (378,200)        366,200      (2,450,900)        670,900

INCOME TAX BENEFIT (EXPENSE)                                      --        (161,800)        365,500        (283,700)
                                                        ------------    ------------    ------------    ------------

(LOSS) INCOME BEFORE MINORITY INTEREST                      (378,200)        204,400      (2,085,400)        387,200
MINORITY INTEREST IN FNC AND PMI-GA LOSSES                     8,200          50,300          30,000          50,300
                                                        ------------    ------------    ------------    ------------
NET (LOSS) INCOME                                       $   (370,000)   $    254,700    $ (2,055,400)   $    437,500
                                                        ============    ============    ============    ============

Basic and diluted (loss) earnings per share             $      (0.04)   $       0.03    $      (0.20)   $       0.04
                                                        ============    ============    ============    ============

Basic weighted average common shares outstanding          10,420,700      10,100,000      10,228,800      10,100,000

Stock options                                                     --          59,700              --          52,200
                                                        ------------    ------------    ------------    ------------

Diluted weighted average common shares outstanding        10,420,700      10,159,700      10,228,800      10,152,200
                                                        ============    ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        3
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,                                   2001             2000
                                                               -----------      -----------
                                                               (Unaudited)      (Unaudited)
<S>                                                            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                            $(2,055,400)     $   437,500
  Adjustments to reconcile net (loss) income to
    net cash (used in) provided by operating activities:
      Equity in loss in investment                                  14,500            6,300
      Impairment loss on investment - TargetFirst                  250,000               --
      Depreciation and amortization                                203,600          153,800
      Provision for doubtful accounts                               75,000               --
      Loss on disposal of fixed assets                               1,400               --
      Minority interest losses                                     (30,000)              --
      Changes in operating assets and liabilities:
        Accounts receivable                                       (214,100)        (809,700)
        Inventories                                                (69,300)        (223,900)
        Prepaid expenses and other current assets                   51,400         (418,700)
        Income tax receivable                                     (234,600)              --
        Accounts payable                                           104,300        1,447,300
        Accrued expenses                                          (269,900)          12,100
                                                               -----------      -----------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES             (2,173,100)         604,700
                                                               -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Notes and interest receivable from shareholders                   91,400           (6,800)
  Investments in Rising Edge and TargetFirst                            --         (750,000)
  Deposits and other assets                                         (7,600)         502,200
  Acquisition of property and equipment                            (80,200)         (41,500)
                                                               -----------      -----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                  3,600         (296,100)
                                                               -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase in floor plan inventory loans                       326,400          297,700
  Principal payments on notes payable                              (38,300)         (35,200)
  Restricted cash                                                 (175,000)              --
  Treasury stock purchases                                         (14,700)              --
  Proceeds from sale of FNC and PMI-GA stock
    to minority shareholders                                        35,000               --
                                                               -----------      -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                          133,400          262,500
                                                               -----------      -----------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS            (2,036,100)         571,100

CASH AND CASH EQUIVALENTS, beginning of period                   4,874,200        4,416,300
                                                               -----------      -----------

CASH AND CASH EQUIVALENTS, end of period                       $ 2,838,100      $ 4,987,400
                                                               ===========      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        4
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION

Pacific Magtron  International Corp. (formerly Wildfire Capital  Corporation,  a
publicly traded shell corporation) (the Company or PMIC), a Nevada  corporation,
was incorporated on January 8, 1996.

On  July  17,  1998  the  Company  completed  the  acquisition  of  100%  of the
outstanding  common  stock of Pacific  Magtron,  Inc.  (PMI),  in  exchange  for
9,000,000  shares of the Company's $.001 par value common stock.  For accounting
purposes,  the acquisition has been treated as the acquisition of the Company by
PMI with PMI as the acquirer (reverse acquisition).

PMI, a  California  corporation,  was  incorporated  on August 11,  1989.  PMI's
principal  activity  consists of the importation  and wholesale  distribution of
electronics  products,  computer  components,  and computer peripheral equipment
throughout the United States.

In May 1998, the Company  formed its Frontline  Network  Consulting  (Frontline)
division,  a corporate  information systems group that serves the networking and
personal computer requirements of corporate customers. In July 2000, the Company
formed  Frontline  Network  Consulting,  Inc.  (FNC), a California  corporation.
Effective  October 1, 2000, PMI  transferred  the assets and  liabilities of the
Frontline  division to FNC.  Concurrently,  FNC issued  20,000,000 shares to the
Company and became a  wholly-owned  subsidiary.  On January 1, 2001,  FNC issued
3,000,000  shares  of its  common  stock to  three  key FNC  employees  for past
services rendered pursuant to certain Employee Stock Purchase  Agreements.  As a
result of this transaction,  the Company's ownership interest in FNC was reduced
to 87%. In August 2001, one of the key employees  resigned,  and FNC repurchased
and retired one million of its shares from the  ex-employee  at $0.01 per share.
Consequently, the Company's ownership interest in FNC was increased to 91%.

On September  30,  2001,  FNC acquired  certain  assets of a computer  technical
support  company in exchange  for $20,000 to be paid in PMIC common  stock.  The
number of shares of PMIC stock that will be required to be issued was determined
by dividing  $20,000 by the average  share price for the ten days  preceding the
acquisition  date. The purchase price also includes a contingent  payment and an
earn-out  payment.  Upon  completion and full  settlement of a sale  transaction
specified in the purchase  agreement,  FNC shall pay $140,000 to the seller. The
seller will also be entitled to an earn-out payment,  calculated as a percentage
of the adjusted gross profits, as defined in the agreement.

In May 1999, the Company  entered into a Management  Operating  Agreement  which
provided  for a 50%  ownership  interest in Lea  Publishing,  LLC, a  California
limited  liability  company ("Lea") formed in January 1999 to develop,  sell and
license  software  designed to provide  Internet users,  resellers and providers
advanced solutions and applications. On June 13, 2000, the Company increased its
direct and indirect interest in Lea to 62.5% by completing its investment in 25%
of the outstanding common stock of Rising Edge Technologies, the other 50% owner
of Lea. Lea is a development stage company.

In August 2000, PMI formed  Pacific  Magtron (GA),  Inc., a Georgia  corporation
whose principal activity is the wholesale  distribution of PMI's products in the
eastern United States market.  During the nine months ended  September 30, 2001,
PMI-GA sold 15,000  shares of its common stock to an employee for $15,000.  As a
result of this  transaction,  PMI's ownership  interest in PMI-GA was reduced to
98%.

2. CONSOLIDATION AND UNCONSOLIDATED INVESTEES

The accompany consolidated financial statements include the accounts of Pacific

                                        5
<PAGE>
Magtron International Corp. and its wholly-owned subsidiary, PMI, and majority-
owned  subsidiaries,  FNC,  Pacific Magtron (GA), Inc. and Lea. All intercompany
accounts and  transactions  have been eliminated in the  consolidated  financial
statements.  Investments in companies in which  financial  ownership is at least
20%, but less than a majority of the voting  stock,  are accounted for using the
equity method.  Investments with ownership of less than 20% are accounted for on
the cost method.

3. FINANCIAL STATEMENT PRESENTATION

The accompanying consolidated financial statements at September 30, 2001 and for
the  three  and  nine  month  periods  ended  September  30,  2001  and 2000 are
unaudited.  However,  they 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  generally
accepted accounting principles 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, 2000.

4. NEW ACCOUNTING PRONOUNCEMENTS

In July 2000,  the Emerging  Issues Task Force  ("EITF")  reached a consensus on
Issue 00-10,  "Accounting  for Shipping and Handling Fees and Costs." This issue
addresses the income statement classification for shipping and handling fees and
costs by companies.  The Company believes that its current  accounting  policies
are in  conformity  with this issue and does not  believe  that Issue 00-10 will
have a material effect on the Company's financial statements.

In May 2000,  the EITF  reached a  consensus  on Issue  00-14,  "Accounting  for
Certain Sales  Incentives."  This issue addresses the recognition,  measurement,
and income statement  classification for sales incentives offered voluntarily by
a vendor without charge to customers that can be used in, or are  exercisable by
a  customer  as a result  of, a single  exchange  transaction.  The  Company  is
currently  analyzing  Issue  00-14.  However,   based  on  management's  current
understanding and interpretation, Issue 00-14 is not expected to have a material
impact on the Company's financial position or results of operations, except that
certain reclassifications may occur.

In April 2001,  the EITF  reached a consensus  on Issue  00-25,  "Vendor  Income
Statement  Characterization  of  Consideration  to a Purchaser  of the  Vendor's
Products or Services."  This issue  addresses the  recognition,  measurement and
income  statement  classification  of  consideration,  other than that  directly
addressed by Issue 00-14, from a vendor to a retailer or wholesaler. The Company
is currently  analyzing  Issue 00-25.  However,  based on  management's  current
understanding and interpretation, Issue 00-25 is not expected to have a material
impact on the Company's financial position or results of operations, except that
certain  reclassifications may occur. The consensus's reached in Issue 00-25 and
Issue 00-14 (amended by Issue 00-25) are effective for fiscal quarters beginning
after December 15, 2001.

In June 2001, the Financial Accounting Standards Board finalized FASB Statements
No. 141,  BUSINESS  COMBINATIONS  (SFAS 141),  and No. 142,  GOODWILL  AND OTHER
INTANGIBLE  ASSETS (SFAS 142).  SFAS 141 requires the use of the purchase method
of  accounting  and  prohibits  the use of the  pooling-of-interests  method  of
accounting for business  combinations  initiated  after June 30, 2001.  SFAS 141
also requires that the Company recognize  acquired  intangible assets apart from
goodwill if the  acquired  intangible  assets meet  certain  criteria.  SFAS 141
applies to all  business  combinations  initiated  after  June 30,  2001 and for
purchase  business  combinations  completed  on or after July 1,  2001.  It also
requires,  upon adoption of SFAS 142, that the Company  reclassify  the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

                                        6
<PAGE>
SFAS 142  requires,  among  other  things,  that  companies  no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS 142 requires that the Company  identify  reporting units for the
purposes of assessing  potential  future  impairments of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal  years  beginning  after  December  15,  2001 to all  goodwill  and other
intangible assets recognized at that date,  regardless of when those assets were
initially  recognized.  SFAS 142 requires the Company to complete a transitional
goodwill  impairment  test six months from the date of adoption.  The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

5. STOCK OPTIONS AND EQUITY AWARDS

During the nine months ended September 30, 2001, 570,000 options to purchase the
Company's  common  stock at $0.88 to $0.97 per share  were  granted  to  certain
officers,  shareholders  and  directors of the Company.  No issued  options were
exercised during the nine months ended September 30, 2001.

On January  1,  2001,  under the terms of the 2000 FNC Stock  Option  Plan,  FNC
granted  3,905,000 options to purchase its common stock at $0.01 per share (fair
market value based upon an independent  appraisal) to employees.  Also, in order
to preserve FNC's election to file  consolidated  tax returns,  which require at
least an 80%  ownership  interest  by the  Company,  FNC  granted to the Company
20,000,000  options  to  purchase  its common  stock at $0.01 per share.  No FNC
options were  exercised and 1,655,000 FNC options were cancelled due to employee
terminations during the nine months ended September 30, 2001.

During the three and nine month  periods ended  September  30, 2001,  options to
purchase  835,222  shares of the  Company's  common stock were excluded from the
calculation of diluted weighted average common shares outstanding  because their
effect would be antidilutive.

6. STATEMENTS OF CASH FLOWS

Cash was paid during the nine months ended September 30, 2001 and 2000 for:

NINE MONTHS ENDING SEPTEMBER 30,              2001         2000
                                            --------     --------
Income taxes                                $  1,500     $203,700
                                            ========     ========
Interest                                    $201,900     $218,300
                                            ========     ========

As further discussed in Note 12, the Company issued 333,333 shares of its common
stock  (valued at  $200,000)  in June 2001 in exchange  for prepaid  advertising
services.

7. INVESTMENTS

In May 1999, the Company and Rising Edge Technologies, Ltd., a corporation based
in  Taiwan  (Rising  Edge),   entered  into  an  Operating  Agreement  with  Lea
Publishing,  LLC, a California limited liability company (Lea) formed in January
1999. The objective of Lea is to provide internet users, resellers and providers
advanced  solutions  and  applications.   Lea  is  developing  various  software
products.  Prior to June 13, 2000,  the Company and Rising Edge each owned a 50%
interest in Lea. The brother of a director, officer and principal shareholder of
the Company is also a director,  officer and the majority  shareholder of Rising
Edge (Rising Edge Majority  Shareholder).  The Company has no commitment to fund
future  losses of Lea beyond its  investment  or guarantee any debt that Lea may

                                        7
<PAGE>
incur.  On June 13,  2000,  the Company  purchased a 25%  ownership  interest in
Rising Edge common stock for $500,000 from the Rising Edge Majority Shareholder.
As such, the Company has a 62.5% combined direct and indirect ownership interest
in Lea, which requires the consolidation of Lea with the Company. The Company is
accounting for its investment in Rising Edge by the equity method whereby 25% of
the equity interest in the net income or loss of Rising Edge  (excluding  Rising
Edge's portion of the results of Lea and all inter-company  transactions)  flows
through to the Company.  The  Company's  share of Rising  Edge's loss during the
nine months ended September 30, 2001 was $14,500.

In November 1999, Lea entered into a software  development  contract with Rising
Edge which calls for the development of certain internet software by Rising Edge
for a $940,000 fee. Of this amount,  the contract  specifies that $440,000 would
be  applied  to  services  performed  in 1999 and  $500,000  would be applied to
services  to be  performed  in 2000,  and the  Company  and Rising Edge are each
responsible  for $470,000 of the fee. During 1999, the Company paid $470,000 for
its portion of the total fee payable  under the  contract.  During 2000,  Rising
Edge performed  $100,000 worth of services as specified  under the contract.  In
January 2001, the contract was terminated by mutual agreement of the parties and
the Company's remaining portion of the software  development fees paid under the
contract, totaling $200,000, was refunded.

In January 2000, the Company acquired, in a private placement, 485,900 shares of
convertible preferred stock of an unrelated nonpublic company, TargetFirst, Inc.
(formerly  ClickRebates.com),  for  approximately  $250,000 under the terms of a
Series A  Preferred  Stock  Purchase  Agreement.  The  Company's  investment  in
TargetFirst Inc., which represents  approximately 8% of the $3 million preferred
stock  offering,  was being  accounted for using the cost method.  In connection
with  the  Company's  ongoing  evaluation  of the net  realizable  value of this
investment, the Company elected to reserve the investment 100% during the second
quarter of 2001.

8. SEGMENT INFORMATION

The Company has four reportable  segments:  PMI,  PMIGA,  Frontline and Lea. PMI
imports and distributes electronic products,  computer components,  and computer
peripheral  equipment to various  customers  throughout the United States,  with
PMIGA  focusing  on the east coast area.  Frontline  serves the  networking  and
personal  computer  requirements  of  corporate  customers.  Lea  is  developing
advanced solutions and applications for internet users, resellers and providers.
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,
not including  nonrecurring  gains or losses.  Inter-segment  transfers  between
reportable segments have been insignificant.  The Company's  reportable segments
are strategic  business units that offer different  products and services.  They
are managed separately  because each business requires different  technology and
marketing strategies.

The following table presents  information  about reported segment profit or loss
for the nine months ended September 30, 2001:

<TABLE>
<CAPTION>
                                          PMI            Frontline          PMI-GA           LEA            Totals
                                      ------------    --------------     ------------    ------------    ------------
<S>                                   <C>             <C>                <C>             <C>             <C>
Revenues from external customers      $ 44,993,700    $  2,184,300(1)    $  8,580,100    $         --    $ 55,758,100

Segment (loss) before income taxes
  and minority interest                   (943,100)       (664,200)          (509,200)        (71,500)     (2,188,000)
</TABLE>

                                        8
<PAGE>
The following table presents  information  about reported segment profit or loss
for the nine months ended September 30, 2000:

<TABLE>
<CAPTION>
                                       PMI         Frontline           LEA          Totals
                                   -----------   -------------     -----------    -----------
<S>                                <C>           <C>               <C>            <C>
Revenues from external customers   $63,235,300   $ 5,689,500(1)    $        --    $68,924,800

Segment income or (loss) before
income taxes                           793,600       (15,600)         (100,800)       677,200
</TABLE>

The following table presents  information  about reported segment profit or loss
for the three months ended September 30, 2001:

<TABLE>
<CAPTION>
                                         PMI           Frontline           PMI-GA           LEA            Totals
                                     ------------    ------------       ------------    ------------    ------------
<S>                                  <C>             <C>                <C>             <C>             <C>
Revenues from external customers     $ 16,993,600    $    638,400(2)    $  3,208,200    $         --    $ 20,840,200

Segment (loss) before income taxes
and minority interest                     (72,900)       (155,500)           (86,400)        (41,400)       (356,200)
</TABLE>

The following table presents  information  about reported segment profit or loss
for the three months ended September 30, 2000:

<TABLE>
<CAPTION>
                                       PMI         Frontline           LEA           Totals
                                   -----------   -------------     -----------    -----------
<S>                                <C>           <C>               <C>            <C>
Revenues from external customers   $22,243,700   $ 1,881,600(2)    $        --    $24,125,300

Segment income or (loss) before
income taxes                           519,100       (45,800)         (100,800)       372,500
</TABLE>

----------
(1)  Includes  service  revenues  of  $114,100  and  $218,800  in 2001 and 2000,
     respectively.
(2)  Includes  service  revenues  of  $35,600  and  $113,100  in 2001 and  2000,
     respectively.

The following is a reconciliation of reportable  segment income or (loss) before
income taxes to the Company's consolidated total:

<TABLE>
<CAPTION>
                                                    Three months         Nine months
                                                       Ended                Ended
                                                September 30, 2001   September 30, 2001
                                                ------------------   ------------------
<S>                                             <C>                  <C>
Total loss before income taxes and minority
  interest for reportable segments                  $  (356,200)        $(2,188,000)
Inter-company transactions                              (17,400)              1,600
Equity in loss in investment in Rising Edge              (4,600)            (14,500)
Impairment loss on investment                                --            (250,000)
                                                    -----------         -----------
Consolidated loss before income taxes
  and minority interest                             $  (378,200)        $(2,450,900)
                                                    -----------         -----------
</TABLE>

                                        9
<PAGE>
<TABLE>
<CAPTION>
                                                    Three months         Nine months
                                                       Ended                Ended
                                                September 30, 2000   September 30, 2000
                                                ------------------   ------------------
<S>                                             <C>                  <C>
Total income before income taxes and minority
  interest for reportable segments                   $ 372,500            $ 677,200
Equity in loss in investment in Rising Edge             (6,300)              (6,300)
                                                     ---------            ---------
Consolidated income before income taxes
  and minority interest                              $ 366,200            $ 670,900
                                                     ---------            ---------
</TABLE>

9. FLOOR PLAN INVENTORY LOANS AND LINE OF CREDIT

As of December  31,  2000,  the Company had $7 million  (including  a $1 million
letter of credit  sub-limit)  automatically  renewing  floor plan inventory loan
available from a financial institution which was collateralized by the purchased
inventory and any proceeds from its sale or  disposition.  The $1 million letter
of credit was being maintained as security for inventory purchased on terms from
vendors in Taiwan and required an annual  commitment fee of $15,000.  Borrowings
under the floor plan inventory  loan totaled  $1,329,500 as of December 31, 2000
and were subject to 30 to 60 days repayment  terms, at which time interest began
to accrue at the prime  rate.  In March 2001,  the  financial  institution  that
provided this floor plan inventory loan filed bankruptcy.

On July 13,  2001,  PMI and  PMI-GA  (the  Companies)  obtained a new $4 million
(subject to credit and  borrowing  base  limitations)  accounts  receivable  and
inventory  financing facility from Transamerica  Commercial Finance  Corporation
("the  Bank").  This new credit  facility  has a term of two  years,  subject to
automatic  renewal  from year to year  thereafter.  The credit  facility  can be
terminated by either party upon 60 days' prior written notice and immediately if
the  Companies  lose the right to sell or deal in any product line of inventory.
The Companies are subject to an early  termination fee equal to 1% of their then
established  credit limit. The facility  includes a $2.4 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), a $600,000 working capital line and a
$1 million letter of credit facility used as security for inventory purchased on
terms from vendors in Taiwan. Borrowing under the inventory loans are subject to
30 to 60 days  repayment,  at which time interest  begins to accrue at the prime
rate, which was 6% at September 30, 2001. Draws on the working capital line also
accrue  interest at the prime rate.  The credit  facility is  guaranteed by both
PMIC and FNC. As of September  30, 2001,  there were draws of  $1,470,600 on the
credit line.

Under the agreement,  PMI and PMI-GA granted the Bank a security interest in all
of their accounts, chattel paper, cash, documents,  equipment, fixtures, general
intangibles, instruments, inventories, leases, supplier benefits and proceeds of
the  foregoing.  The Companies are also required to maintain  certain  financial
covenants. As of September 30, 2001, the Companies were in compliance with these
covenants.

In March,  2001, FNC obtained a $2 million  discretionary  credit  facility from
Deutsche Financial Services Corporation  ("Deutsche") to purchase inventory.  To
secure payment, Deutsche obtained a security interest in all of FNC's inventory,
equipment,  fixtures, accounts,  reserves,  documents, general intangible assets
and all judgements,  claims,  insurance  policies,  and payments owed or made to
FNC. Under the loan agreement, all draws mature in 30 days. Thereafter, interest
accrues at the lesser of 16% per annum or at the maximum lawful contract rate of
interest  permitted  under  applicable law. As of September 30, 2001, FNC had an
outstanding balance of $185,300 due under this credit facility.

                                       10
<PAGE>
FNC is required  to  maintain  certain  financial  covenants  to qualify for the
credit line,  and was not in  compliance  with certain of these  covenants as of
September 30, 2001, which constitutes a technical default under the credit line.
This gives the financial institution,  among other things, the right to call the
loan and  terminate the credit line.  The credit  facility is guaranteed by PMIC
and can be terminated by Deutsche with 30 days prior notice or immediately  upon
a default.

10. NOTES RECEIVABLES FROM SHAREHOLDERS

As of  September  30, 2001 and  December 31,  2000,  notes  receivable  from two
officer shareholders aggregated $80,000 and $171,400,  respectively. In December
2000, the repayment  terms of these notes were  renegotiated  to require monthly
principal payments,  without interest, to pay off the loan by December 31, 2001.
Also,  based  upon the  renegotiated  terms,  periodic  bonuses  are paid to the
officer shareholders, and the proceeds are used to repay the notes.

11. TREASURY STOCK

On May 7, 2001, the Company's Board of Directors  authorized a share  repurchase
program  whereby,  up to $100,000  worth of the  Company's  common  stock may be
repurchased  at a maximum  price of $1.25 per share and held in treasury.  As of
September 30, 2001, the Company  acquired 20,400 shares of its common stock at a
cost of $14,700.

12. BARTER AGREEMENT

On June 14, 2001,  the Company  issued  333,333 shares of its common stock to an
unrelated party in exchange for radio advertising services to be received over a
three-year  period.  All  of  the  shares  vested  upon  issuance  and  are  non
forfeitable, resulting in a measurement date and final valuation of these shares
of $200,000  based upon the market  price of the  Company's  common stock on the
date of  issuance.  Included in prepaid  expenses  and other  current  assets at
September  30,  2001 is  $200,000  which will be  recorded  as an expense in the
statement of  operations  as the services are  provided.  Through  September 30,
2001, no radio advertising services have been received by the Company under this
arrangement.

13.  NOTES PAYABLE

Pursuant to one of the Company's bank mortgage  loans with a $2,417,300  balance
at September,  30, 2001, the Company is required to maintain  certain  financial
covenants.  At September 30, 2001,  the Company was in violation of one 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 this  loan  covenant  was
subsequently  obtained  from the  bank for  quarterly  losses  incurred  through
December 31, 2001, the Company was required to transfer $175,000 to a restricted
account as a reserve  for debt  servicing.  This  amount has been  reflected  as
restricted cash in the accompanying financial statements.

14.  SUBSEQUENT EVENTS

On October 15, 2001,  the Company  formed an  investment  holding  company,  PMI
Capital  Corporation  (PMICC),  for the purpose of acquiring companies or assets
deemed  suitable for PMIC's  organization.  PMICC was authorized by its board of
directors to issue 10,000,000 shares of common stock to PMIC.

On October 17, 2001,  PMICC  purchased  certain  assets of a company and assumed
certain liabilities for a cash payment of $85,000.

                                       11
<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, 2000 under the
heading   "Cautionary   Factors  That  May  Affect  Future  Results",   such  as
technological  changes,   diminished   marketability  of  inventory,   need  for
additional  capital,  increased  warranty  costs,  competition,  recruitment and
retention  of  technical   personnel,   dependence  on  continued   manufacturer
certification,  dependence  on  certain  suppliers,  risks  associated  with the
projects in which we are engaged to complete,  the risks associated with our Lea
venture,  risks  associated with our investments in Rising Edge and TargetFirst,
and dependence on key personnel.

GENERAL

We provide  solutions to customers in several  rapidly  growing  segments of the
computer   industry.   To  take   advantage  of  the   expanding   corporate  IT
infrastructure   market,  we  established  Frontline  Network  Consulting  (FNC)
division  in 1998 to  provide  professional  services  to  mid-market  companies
focused  on  consulting,   implementation   and  support  services  of  Internet
technology  solutions.  This division was incorporated as a separate  subsidiary
during 2000. In January 2001,  Frontline issued 3,000,000 of its shares to three
of its key employees resulting in a decrease in our ownership interest of FNC to
87%. In August  2001,  one of the key  employees  resigned,  and FNC bought back
1,000,000 of its shares from the  ex-employee  at $0.01 per share.  As a result,
our ownership interest in FNC was increased to 91%.

On September  30,  2001,  in order to provide an expanded  base of  professional
services,  FNC acquired certain assets of a computer  technical  support company
for an initial  consideration  of  $20,000,  payable by  issuance of PMIC common
stock.  The number of shares of PMIC stock that we will be required to issue was
determined  by  dividing  $20,000 by the  average  share  price for the ten days
preceding the  acquisition  date.  The purchase price also includes a contingent
payment and an earn-out  payment.  Upon completion and full settlement of a sale
transaction  specified in the purchase agreement,  FNC shall pay $140,000 to the
seller. The seller will also be entitled to an earn-out payment, calculated as a
percentage of the adjusted gross profits, as defined in the agreement.

We also invested in a 50%-owned  joint software  venture,  Lea  Publishing,  LLC
(Lea), in 1999 to focus on Internet-based  software application  technologies to
enhance corporate IT services. Lea is a development stage company. In June 2000,
we increased our direct and indirect  interest in LEA to 62.5% by completing our
purchase of 25% of the outstanding common stock of Rising Edge Technologies, the
other 50% owner of LEA.

Our  subsidiaries,  Pacific  Magtron,  Inc. (PMI) and Pacific Magtron (GA), Inc.
(PMI-GA), provide the wholesale distribution of computer multimedia and storage

                                       12
<PAGE>
peripheral products and provide  value-added  packaged solutions to a wide range
of  resellers,   vendors,  OEM's  and  systems  integrators.   PMI-GA  commenced
operations in October 2000 and distributes  PMI's products in the eastern United
States market.

On October 15, 2001,  the Company  formed an  investment  holding  company,  PMI
Capital  Corporation  (PMICC),  for the purpose of acquiring companies or assets
deemed  suitable for PMIC's  organization.  PMICC was authorized by its board of
directors to issue  10,000,000  shares of common  stock to PMIC.  On October 17,
2001,  PMICC  purchased   certain  assets  of  a  company  and  assumed  certain
liabilities for a cash payment of $85,000.  As used herein and unless  otherwise
indicated,  the  terms  "Company",  "we"  and  "our"  refer to  Pacific  Magtron
International Corp. and our subsidiaries.

Our stock is  currently  traded  on The  Nasdaq  SmallCap  Market.  However,  we
received  notice in July 2001 from  Nasdaq  that we failed to maintain a minimum
market value of public float of $1 million and a minimum bid price of $1.00 over
30  consecutive  trading  days as required by Nasdaq's  rules.  We were given 90
calendar  days, or until October 1, 2001 to regain  compliance by  maintaining a
minimum  market  value of public  float of $1 million  and bid price of at least
$1.00 for a minimum of 10 consecutive  trading days. As of September 5, 2001, we
believe we have  complied with this notice by achieving the public float and bid
price  targets.  Subsequently,  on September  27,  2001,  Nasdaq  implemented  a
moratorium  on the  minimum  bid price  and  market  value of public  floatation
requirements   to  all  companies   that  were   previously   subject  to  these
requirements.  The moratorium suspended such requirements until January 2, 2002.
Despite the suspension of the listing requirements,  the Company share price has
been maintained above the $1.00 minimum bid price since August 22, 2001.

RESULTS OF OPERATIONS

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

                                     Three Months Ended       Nine Months Ended
                                        September 30,           September 30,
                                     ------------------       -----------------
                                      2001         2000        2001        2000
                                     -----        -----       -----       -----
Sales                                100.0%       100.0%      100.0%      100.0%
Cost of sales                         93.0         92.7        93.1        92.3
                                     -----        -----       -----       -----
Gross margin                           7.0          7.3         6.9         7.7
Operating expenses                     8.6          6.9        10.6         7.1
                                     -----        -----       -----       -----
(Loss) income from operations         (1.6)         0.4        (3.7)        0.6
Other (expense) income                (0.3)         1.4        (0.6)        0.4
Income tax benefit (expense)           0.0         (0.7)        0.6        (0.4)
Minority interest in FNC, LEA
 and PMI-GA                            0.0          0.0         0.0         0.0
                                     -----        -----       -----       -----
Net (loss) income                     (1.9)%        1.1%       (3.7)%       0.6%
                                     =====        =====       =====       =====

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000

Sales for the three months ended September 30, 2001 were $20,840,200, a decrease
of $3,285,100,  or  approximately  13.6%,  compared to $24,125,300 for the three
months ended September 30, 2000. This decrease was primarily attributable to our
computer  products  subsidiaries  (PMI and PMI-GA)  which  reported a decline in
sales  for  the  three  months  ended   September  30,  2001  of  $2,041,900  or
approximately 9.2%,

                                       13
<PAGE>
compared to the  corresponding  period in 2000.  Sales  recognized by the PMI-GA
were approximately  $3,208,200 during the three months ended September 30, 2001.
We believe that the  decrease  was due to a  continuing  decline in the computer
component market and the lack of any new and innovative  high-demand products in
the  multimedia  arena during a period of economic  slowdown.  In  addition,  we
believe that the  uncertainty  regarding  the overall  economy  depressed  sales
during the first  three  quarters of 2001 as  customers  were  postponing  their
buying  decisions.  Approximately  $638,400 of our sales  recognized  during the
third  quarter of 2001 was  attributable  to FNC, a decrease of  $1,243,200,  or
approximately 66.1%, compared to $1,881,600 for the three months ended September
30, 2000. FNC has experienced an overall  slowdown in the IT market,  as well as
pricing pressures and increased competition.

Gross margin for the three months ended  September  30, 2001 was  $1,465,200,  a
decrease of $290,400 or 16.5%, compared to $1,755,600 for the three months ended
September 30, 2000. The gross margin as a percentage of sales decreased slightly
from 7.3% for the three  months ended  September  30, 2000 to 7.0% for the three
months ended  September  30, 2001.  This decrease in gross margin is primarily a
result  of  reduction  in  vendor  rebates  and  advertising  funding  programs.
Additionally,  our computer products division  experienced  pricing pressures in
selling its products.  We believe that because of the economic  slowdown,  there
was an excess supply of computer  products  during 2001 which reduced demand and
increased pressure on gross margins.  The gross margin generated by our computer
products  subsidiaries (PMI and PMI-GA) for the three months ended September 30,
2001 was $1,343,500,  a decrease of $106,300 or approximately 7.3% over the same
period of last year.  Gross margin relating to PMI-GA for the three months ended
September  30, 2001 was  $201,800.  Gross  margin  relating to FNC for the three
months ended September 30, 2001 was $121,700, or 19.1% of FNC's sales during the
same period as compared to $305,800, or 16.4% of FNC's sales during three months
ended September 30, 2000.  Since FNC's sales levels  accounted for only 3.1% and
7.7% of our consolidated  sales during the three months ended September 30, 2001
and 2000  respectively,  the gross  margin  percentage  earned by FNC had only a
minor effect on our overall gross margin in both periods.

Operating   expenses  for  the  three  months  ended  September  30,  2001  were
$1,784,500,  an increase of $216,800,  or 13.8%,  compared to $1,567,700 for the
three months ended  September  30, 2000.  Although we  implemented  cost cutting
measures,  such as reducing our employee  count from 103 in the first quarter of
2001 to 95 by third quarter of 2001, in anticipation  of the economic  slowdown,
expenses increased  primarily due to the addition of PMI-GA  operations.  During
the three  months  ended  September  30, 2001,  we also  increased  spending for
professional  services to assist in the formation of an acquisition strategy. As
a percentage of sales, operating expenses increased to 8.6% for the three months
ended  September 30, 2001 compared to 6.5% for the three months ended  September
30, 2000. This increase was the result of the combined effects of an increase in
our operating expenses and a reduction in our revenues.

For the  three  months  ended  September  30,  2001,  we  incurred  a loss  from
operations  of $319,300  compared to income from  operations  of $87,500 for the
three  months ended  September  30, 2000.  As a percentage  of sales,  loss from
operations  was 1.5% for the three months ended  September  30, 2001 compared to
income from operations of 0.4% for the three months ended September 30, 2000.

Interest  expense for the three months ended  September 30, 2001 was $60,200,  a
decrease of $13,500,  or 18.3%,  compared to $73,700 for the three  months ended
September  30,  2000.  This  decrease  was due to a  reduction  in the  floating
interest rate charged on one of the mortgages on our office  building  facility.
Interest income  decreased from $56,400 for the three months ended September 30,
2000 to $20,000 for the three  months ended  September  30, 2001, a reduction of
$36,400,  or 64.7%,  which was  principally  due to lower market  interest rates
available  for  short-term  investments  of  cash  and  cash  equivalents  and a
reduction in cash balances.

                                       14
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000

Sales for the nine months ended September 30, 2001 were $55,758,100,  a decrease
of $13,166,700,  or  approximately  19.1%,  compared to $68,924,800 for the nine
months ended September 30, 2000. This decrease was primarily attributable to our
computer  products  subsidiaries  (PMI and PMI-GA)  which  reported a decline in
sales  for  the  nine  months  ended   September   30,  2001  of  $9,661,500  or
approximately 15.3% compared to the corresponding  period of September 30, 2000.
Sales recognized by PMI-GA were approximately  $8,580,100 during the nine months
ended  September 30, 2001. The decrease was due primarily to the overall decline
in the  computer  component  market  and the  lack  of any  new  and  innovative
high-demand  products  in the  multimedia  arena  during a period of  continuous
economic slowdown.  Because of the uncertainty regarding the economic down turn,
customers were postponing their purchase decisions.  Approximately $2,184,300 of
the sales  earned by us during the nine  months  ended  September  30,  2001 was
attributable to FNC, a decrease of $3,505,600 or approximately 61.6% compared to
$5,689,900 for the nine months ended  September 30, 2000 as FNC has  experienced
an overall slowdown in the IT market, as well as pricing pressures and increased
competition.

Gross  margin for the nine months ended  September  30, 2001 was  $3,824,900,  a
decrease of  $1,483,500,  or 28.0%,  compared to $5,308,400  for the nine months
ended  September 30, 2000.  The gross margin as a percentage of sales  decreased
from 7.7% for the nine  months  ended  September  30,  2000 to 6.9% for the nine
months ended  September 30, 2001.  This decrease in gross margin  percentage was
primarily a result of reduction in vendor rebates,  advertising funding programs
and an increase in freight costs.  Additionally,  our computer products division
experienced  pricing pressures in selling its products.  We believe that because
of the economic slowdown, there was an excess supply of computer products during
the first three quarters of 2001 which reduced demand and increased  pressure on
gross margins. The gross margin generated by our computer products  subsidiaries
(PMI and PMI-GA) for the nine months ended September 30, 2001 was $3,521,800,  a
decrease of $977,600 or 21.7%  compared to $4,499,400  for the nine months ended
September  30,  2000.  The gross  margin  relating to PMI-GA for the nine months
ended September 30, 2001 was $430,100. Gross margin relating to FNC for the nine
months ended September 30,2001 was $303,100,  or 13.9% of FNC's sales during the
same  period as compared to  $809,000,  or 14.3% of FNC's sales  during the nine
months ended  September 30, 2000.  This decrease in gross margin was primarily a
result of pricing  pressures and weaker  demand for higher  margin  corporate IT
planning  services.  Since FNC's sales levels  accounted for only 4% and 8.2% of
our consolidated sales during the nine months ended September 30, 2001 and 2000,
respectively,  the gross margin percentage earned by FNC had only a minor effect
on our overall gross margin in both periods.

Operating expenses for the nine months ended September 30, 2001 were $5,925,700,
an increase of $1,039,000,  or 21.3%, compared to $4,886,700 for the nine months
ended  September  30, 2000.  Although we  implemented  cost cutting  measures in
anticipation of the economic slowdown,  such as reducing our employee count from
103 in the first  quarter of 2001 to 95 in the third  quarter of 2001,  expenses
increased  primarily  due to the continued  establishment  of our FNC and PMI-GA
operations,  including among other things,  additional  expenses associated with
our new distribution facility in Georgia. During the nine months ended September
30, 2001, we also increased spending for professional  services to assist in the
formation  of an  acquisition  strategy.  As a  percentage  of sales,  operating
expenses  increased  to 10.6%  for the nine  months  ended  September  30,  2001
compared to 7.1% for the nine months ended  September 30, 2000 resulting from an
increase in our operating expenses during a period of decreased sales.

For the nine months ended  September 30, 2001 we incurred a loss from operations
of $2,100,800 compared to income from operations of $421,700 for the nine months
ended  September 30, 2000. As a percentage of sales,  loss from  operations  was
3.8% for the nine  months  ended  September  30,  2001  compared  to income from
operations of 0.6% for the nine months ended September 30, 2000. This change was
primarily due to the decrease in sales and gross margin  percentage and increase
in operating expenses during the period.

                                       15
<PAGE>
Interest  expense for the nine months ended  September 30, 2001 was $201,900,  a
decrease of $16,400,  or 7.5%,  compared to $218,300  for the nine months  ended
September 30, 2000.  Interest income decreased from $173,800 for the nine months
ended  September  30, 2000 to $107,900 for the nine months ended  September  30,
2001, a decrease of $65,800,  or 37.9%,  which was  principally  caused by lower
market  interest  rates  available for short term  investments  of cash and cash
equivalents and a reduction in cash balances.

During the nine months ended  September 30, 2001, we  established a 100% reserve
on our TargetFirst Inc.  investment as a result of our ongoing evaluation of the
net  realizable  value of this  investment,  resulting in an impairment  loss of
$250,000.

The income tax benefit  recorded during the nine months ended September 30, 2001
represents  the  estimated  tax  benefit  from the  carry  back of  Federal  net
operating losses to the 2000 and 1999 tax years, adjusted for the interim period
based upon the estimated loss for 2001 tax.

LIQUIDITY AND CAPITAL RESOURCES

Since  inception,  we  have  financed  our  operations  primarily  through  cash
generated by operations and  borrowings  under our floor plan inventory loan and
line of credit.

At September 30, 2001, we had consolidated  cash and cash  equivalents  totaling
$2,838,100  (excluding  $175,000  in  restricted  cash) and  working  capital of
$6,100,500.  At December 31, 2000, we had consolidated cash and cash equivalents
totaling $4,874,200 and working capital of $7,624,400.

Net cash used in operating activities during the nine months ended September 30,
2001 was $2,173,100,  which  principally  reflected the net loss incurred during
the period, an increase in receivables and a decrease in accrued expenses.

Net cash provided by investing activities during the nine months ended September
30, 2001 was $3,600,  primarily resulting from repayment of the notes receivable
owed by certain  shareholders  which was partially  offset by the acquisition of
property and equipment.

Net cash provided by financing activities was $133,400 for the nine months ended
September  30, 2001,  primarily  from the  increase in the floor plan  inventory
loans.

On July 13,  2001,  PMI and  PMI-GA  (the  Companies)  obtained a new $4 million
(subject to credit and  borrowing  base  limitations)  accounts  receivable  and
inventory  financing facility from Transamerica  Commercial Finance  Corporation
(the  "Bank").  This new credit  facility  has a term of two  years,  subject to
automatic  renewal  from year to year  thereafter.  The credit  facility  can be
terminated by either party upon 60 days' prior written notice and immediately if
the  Companies  lose the right to sell or deal in any product line of inventory.
The Companies are subject to an early  termination fee equal to 1% of their then
established  credit limit. The facility  includes a $2.4 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), a $600,000 working capital line and a
$1 million letter of credit facility used as security for inventory purchased on
terms from vendors in Taiwan. Borrowing under the inventory loans are subject to
30 to 60 days  repayment,  at which time interest  begins to accrue at the prime
rate,  which was 6.0% at September 30, 2001.  Draws on the working  capital line
also accrue  interest at the prime rate.  The credit  facility is  guaranteed by
both PMIC and FNC. As of September  30, 2001,  there were draws of $1,470,600 on
the credit line.

Under the agreement,  PMI and PMI-GA granted the Bank a security interest in all
of their accounts, chattel paper, cash, documents,  equipment, fixtures, general
intangibles, instruments, inventories, leases, supplier benefits and proceeds of
the  foregoing.  The Companies are also required to maintain  certain  financial
covenants. As of September 30, 2001, the Companies were in compliance with these
covenants.

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<PAGE>
In March,  2001, FNC obtained a $2 million  discretionary  credit  facility from
Deutsche Financial Services Corporation  ("Deutsche") to purchase inventory.  To
secure payment, Deutsche obtained a security interest in all of FNC's inventory,
equipment,  fixtures, accounts,  reserves,  documents, general intangible assets
and all judgements,  claims,  insurance  policies,  and payments owed or made to
FNC. Under the loan agreement, all draws mature in 30 days. Thereafter, interest
accrues at the lesser of 16% per annum or at the maximum lawful contract rate of
interest  permitted  under  applicable law. As of September 30, 2001, FNC had an
outstanding balance of $185,300 due under this credit facility.

FNC is required  to  maintain  certain  financial  covenants  to qualify for the
credit line,  and was not in  compliance  with certain of these  covenants as of
September 30, 2001, which constitutes a technical default under the credit line.
This gives the financial institution,  among other things, the right to call the
loan and  terminate the credit line.  The credit  facility is guaranteed by PMIC
and can be terminated by Deutsche with 30 days prior notice or immediately  upon
a default.

Pursuant  to one of our  bank  mortgage  loans  with  a  $2,417,300  balance  at
September, 30, 2001, we are required to maintain certain financial covenants. At
September 30, 2001, we were in violation of one 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 this loan covenant was  subsequently  obtained from
the bank for  quarterly  losses  incurred  through  December 31,  2001,  we were
required to  transfer  $175,000  to a  restricted  account as a reserve for debt
servicing. This amount has been reflected as restricted cash in the accompanying
financial statements.

On May 7, 2001,  our Board of Directors  authorized a share  repurchase  program
whereby up to $100,000 worth of our common stock may be repurchased  and held as
treasury  stock.  Through  September  30, 2001,  we purchased  20,400 shares for
treasury at a cost of $14,700.  We estimate that  approximately  $85,300 will be
required to repurchase these shares on the open market under this program during
the  remainder  of 2001 using  available  cash from  operations,  if we elect to
repurchase such shares.

We presently have  insufficient  working capital to pursue our long-term  growth
plans with respect to expansion of our service and product offerings.  Moreover,
we expect  that  additional  resources  are needed to fund the  development  and
marketing  of Lea's  software.  We  believe,  however,  that the cash  flow from
operations, borrowings under our credit facility and trade credit from suppliers
will satisfy our  anticipated  requirements  for working  capital to support our
present operations through the next 12 months.

Our stock is  currently  traded  on The  Nasdaq  SmallCap  Market.  However,  we
received  notice in July 2001 from  Nasdaq  that we failed to maintain a minimum
market value of public float of $1 million and a minimum bid price of $1.00 over
30  consecutive  trading  days as required by Nasdaq's  rules.  We were given 90
calendar  days, or until October 1, 2001 to regain  compliance by  maintaining a
minimum  market  value of public  float of $1 million  and bid price of at least
$1.00 for a minimum of 10 consecutive  trading days. As of September 5, 2001, we
believe we have complied  with this notice and maintain the necessary  minimums,
including   trading  at  or  above  $1.00  for  the  minimum  10  trading  days.
Subsequently,  on September  27, 2001,  Nasdaq  implemented  a moratorium on the
minimum  bid price and market  value of public  floatation  requirements  to all
companies that were  previously  subject to these  requirements.  The moratorium
suspended such requirements until January 2, 2002. Despite the suspension of the
listing  requirements,  our  share  price  had been  maintained  above the $1.00
minimum bid price since August 22, 2001.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2000,  the Emerging  Issues Task Force  ("EITF")  reached a consensus on
Issue 00-10,  "Accounting  for Shipping and Handling Fees and Costs." This issue

                                       17
<PAGE>
addresses the income statement classification for shipping and handling fees and
costs by companies.  The Company believes that its current  accounting  policies
are in  conformity  with this issue and does not  believe  that Issue 00-10 will
have a material effect on the Company's financial statements.

In May 2000,  the EITF  reached a  consensus  on Issue  00-14,  "Accounting  for
Certain Sales  Incentives."  This issue addresses the recognition,  measurement,
and income statement  classification for sales incentives offered voluntarily by
a vendor without charge to customers that can be used in, or are  exercisable by
a  customer  as a result  of, a single  exchange  transaction.  The  Company  is
currently  analyzing  Issue  00-14.  However,   based  on  management's  current
understanding and interpretation, Issue 00-14 is not expected to have a material
impact on the Company's financial position or results of operations, except that
certain reclassifications may occur.

In April 2001,  the EITF  reached a consensus  on Issue  00-25,  "Vendor  Income
Statement  Characterization  of  Consideration  to a Purchaser  of the  Vendor's
Products or Services."  This issue  addresses the  recognition,  measurement and
income  statement  classification  of  consideration,  other than that  directly
addressed by Issue 00-14, from a vendor to a retailer or wholesaler. The Company
is currently  analyzing  Issue 00-25.  However,  based on  management's  current
understanding and interpretation, Issue 00-25 is not expected to have a material
impact on the

Company's  financial  position or results of  operations,  except  that  certain
reclassifications  may occur.  The consensus's  reached in Issue 00-25 and Issue
00-14 (amended by Issue 00-25) are effective for fiscal quarters beginning after
December 15, 2001.

In June 2001, the Financial Accounting Standards Board finalized FASB Statements
No. 141,  BUSINESS  COMBINATIONS  (SFAS 141),  and No. 142,  GOODWILL  AND OTHER
INTANGIBLE  ASSETS (SFAS 142).  SFAS 141 requires the use of the purchase method
of  accounting  and  prohibits  the use of the  pooling-of-interests  method  of
accounting for business  combinations  initiated  after June 30, 2001.  SFAS 141
also requires that the Company recognize  acquired  intangible assets apart from
goodwill if the  acquired  intangible  assets meet  certain  criteria.  SFAS 141
applies to all  business  combinations  initiated  after  June 30,  2001 and for
purchase  business  combinations  completed  on or after July 1,  2001.  It also
requires,  upon adoption of SFAS 142, that the Company  reclassify  the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

SFAS 142  requires,  among  other  things,  that  companies  no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS 142 requires that the Company  identify  reporting units for the
purposes of assessing  potential  future  impairments of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal  years  beginning  after  December  15,  2001 to all  goodwill  and other
intangible assets recognized at that date,  regardless of when those assets were
initially  recognized.  SFAS 142 requires the Company to complete a transitional
goodwill  impairment  test six months from the date of adoption.  The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

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  resulting  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
one of our bank mortgage  loans with a $2,417,300  balance at September 30, 2001
which bears  fluctuating  interest  based on the bank's  90-day  LIBOR rate.  In
addition,  one of our flooring and working  capital lines bears  interest at the
bank's prime rate.  However,  interest expenses incurred in connection with this
financing  agreement  have  historically  been  insignificant.  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.

                                     PART II

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

     (a)  Exhibits

          None

     (b)  Reports on Form 8-K

          None
                                       19
<PAGE>
                                   SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused this report on Form 10-Q to be signed on its behalf
by the undersigned, thereunto duly authorized, this 14th day of November, 2001.

                                PACIFIC MAGTRON INTERNATIONAL CORP.,
                                a Nevada corporation


                                By /s/ Theodore S. Li
                                   ---------------------------------------
                                   Theodore S. Li
                                   President and Chief Financial Officer

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