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 March 31, 2002

                                       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:
            10,485,062 shares issued and outstanding at May 10, 2002
<PAGE>
Part I. - Financial Information

    Item 1. - Consolidated Financial Statements
                Consolidated balance sheets as of March 31, 2002
                (Unaudited) and December 31, 2001                           1-2

                Consolidated statements of operations for the three months
                ended March 31, 2002 and 2001 (Unaudited)                   3

                Consolidated statements of cash flows for the three months
                ended March 31, 2002 and 2001 (Unaudited)                   4

                Notes to consolidated financial statements                  5-12

    Item 2. - Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         13-20

    Item 3. - Quantitative and Qualitative Disclosures About Market Risk   21

Part II - Other Information

    Item 6. - Exhibits and Reports on Form 8-K                             22
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                           CONSOLIDATED BALANCE SHEETS

                                                     March 31,     December 31,
                                                       2002            2001
                                                   ------------     -----------
                                                    (Unaudited)
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                          $ 2,112,800     $ 3,110,000
  Restricted cash                                        250,000         250,000
  Accounts receivable, net of allowance for
    doubtful accounts of $400,000                      4,413,500       4,590,100
  Inventories                                          3,086,800       2,952,000
  Prepaid expenses and other current
    assets (Note 5)                                      374,100         387,300
  Income taxes receivable                              1,435,800         399,200
  Deferred tax assets                                    158,400         813,000
                                                     -----------     -----------

TOTAL CURRENT ASSETS                                  11,831,400      12,501,600

PROPERTY, PLANT AND EQUIPMENT, net                     4,622,800       4,711,500

DEPOSITS AND OTHER ASSETS                                 89,500         110,200
                                                     -----------     -----------

                                                     $16,543,700     $17,323,300
                                                     ===========     ===========

          See accompanying notes to consolidated financial statements.

                                      -1-
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                           CONSOLIDATED BALANCE SHEETS

                                                         March 31,  December 31,
                                                           2002         2001
                                                       -----------   -----------
                                                       (Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of notes payable                     $    57,000   $    55,900
  Floor plan inventory loans                               915,100     1,545,000
  Accounts payable                                       5,400,300     4,786,600
  Accrued expenses                                         375,400       379,200
                                                       -----------   -----------

TOTAL CURRENT LIABILITIES                                6,747,800     6,766,700

NOTES PAYABLE, less current portion                      3,215,900     3,230,300

DEFERRED TAX LIABILITIES                                    26,400        34,200
                                                       -----------   -----------

TOTAL LIABILITIES                                        9,990,100    10,031,200
                                                       -----------   -----------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST - PMIGA                                       --         2,200
                                                       -----------   -----------

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; 10,485,100 shares issued and
    outstanding                                             10,500        10,500
  Additional paid-in capital                             1,745,500     1,745,500
  Retained earnings                                      4,797,600     5,533,900
                                                       -----------   -----------
TOTAL SHAREHOLDERS' EQUITY                               6,553,600     7,289,900
                                                       -----------   -----------
                                                       $16,543,700   $17,323,300
                                                       ===========   ===========

          See accompanying notes to consolidated financial statements.

                                      -2-
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   Three Months Ended March 31,
                                                   ----------------------------
                                                       2002            2001
                                                   ------------    ------------
                                                    (Unaudited)     (Unaudited)
SALES:
  Products                                         $ 17,416,900    $ 19,907,200
  Services                                              215,400          49,300
                                                   ------------    ------------
TOTAL SALES                                          17,632,300      19,956,500
                                                   ------------    ------------
COST OF SALES:
  Products                                           16,181,400      18,562,200
  Services                                              139,200          14,300
                                                   ------------    ------------
TOTAL COST OF SALES                                  16,320,600      18,576,500
                                                   ------------    ------------
GROSS MARGIN                                          1,311,700       1,380,000

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES          2,387,100       2,090,100
                                                   ------------    ------------
(LOSS) FROM OPERATIONS                               (1,075,400)       (710,100)
                                                   ------------    ------------
OTHER (EXPENSE) INCOME:
  Interest income                                         6,600          53,700
  Interest expense                                      (46,400)        (73,900)
  Equity in (loss) in investment                             --          (6,000)
  Other income (expense)                                 (7,300)          7,200
                                                   ------------    ------------
TOTAL OTHER (EXPENSE)                                   (47,100)        (19,000)
                                                   ------------    ------------
(LOSS) BEFORE INCOME TAX BENEFIT AND MINORITY
   INTEREST                                          (1,122,500)       (729,100)

INCOME TAX (BENEFIT)                                   (384,000)       (225,500)
                                                   ------------    ------------
(LOSS) BEFORE MINORITY INTEREST                        (738,500)       (503,600)

MINORITY INTEREST                                         2,200          30,000
                                                   ------------    ------------
NET (LOSS)                                         $   (736,300)   $   (473,600)
                                                   ============    ============
Basic and diluted (loss) per share                 $      (0.07)   $      (0.05)
                                                   ============    ============
Basic weighted average common share outstanding      10,485,100      10,100,000
                                                   ============    ============

     See accompanying notes to consolidated financial statements.


                                      -3-
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED MARCH 31,
                                                             ----------------------------
                                                                 2002           2001
                                                              -----------    -----------
                                                              (Unaudited)    (Unaudited)
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss)                                                  $  (736,300)   $  (473,600)
  Adjustments to reconcile net (loss) to
    net cash (used in) provided by operating activities:
      Equity in loss in investment                                     --          6,000
      Depreciation and amortization                                75,300         67,100
      Provision for doubtful accounts                                  --         25,000
      Gain on disposal of fixed assets                             (6,300)            --
      Minority interest losses                                     (2,200)            --
      Changes in operating assets and liabilities:
        Accounts receivable                                       176,600        574,600
        Inventories                                              (134,800)      (804,000)
        Prepaid expenses and other current assets                  43,800        (76,900)
        Deferred taxes                                             (1,200)            --
        Income taxes receivable                                  (388,500)            --
        Accounts payable                                          613,700        814,600
        Accrued expenses                                           (3,700)      (107,100)
                                                              -----------    -----------
NET CASH (USED IN) PROVIDED BY
  OPERATING ACTIVITIES                                           (363,600)        25,700
                                                              -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Notes and interest receivable from shareholders                      --         21,400
  Acquisition of property and equipment                            (1,500)       (54,000)
  Reduction (addition) in deposits
    and other assets                                               20,700         (6,700)
  Advances to shareholder/officer (Note 5)                        (30,000)            --
  Proceeds from sale of property and equipment                     20,500             --
                                                              -----------    -----------
NET CASH PROVIDED BY (USED IN)
   INVESTING ACTIVITIES                                             9,700        (39,300)
                                                              -----------    -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
  Net decrease in floor plan inventory loans                     (630,000)    (1,136,300)
  Principal payments on notes payable                             (13,300)       (12,200)
                                                              -----------    -----------
NET CASH USED IN FINANCING ACTIVITIES                            (643,300)    (1,148,500)
                                                              -----------    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                        (997,200)    (1,162,100)

CASH AND CASH EQUIVALENTS, beginning of period                  3,110,000      4,874,200
                                                              -----------    -----------

CASH AND CASH EQUIVALENTS, end of period                      $ 2,112,800    $ 3,712,100
                                                              ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -4-
<PAGE>
                       PACIFIC MAGTRON INTERNATIONAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

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 $0.001 par value common stock. For accounting
purposes,  the acquisition has been treated as the acquisition of the Company by
PMI with PMI as the acquiror (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 and in
March 2002, FNC  repurchased and retired a total of 2,000,000 of its shares from
a former employees at $0.01 per share, resulting in an increase in the Company's
ownership of FNC from 87% to 96%.

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
with  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,
Ltd.,  the other 50% owner of Lea,  which was a development  stage  company.  In
December 2001, the Company entered into an agreement with Rising Edge Technology
(Rising Edge) and its principal owners to exchange the 50% Rising Edge ownership
interest in Lea for our 25% ownership interest in Rising Edge. As a consequence,
PMIC owns 100% of Lea and no longer has an ownership interest in Rising Edge. No
amounts were recorded for the 50% Rising Edge ownership interest in Lea received
in this exchange because of the write-down of the Rising Edge investment to zero
in the fourth quarter of 2001.

                                      -5-
<PAGE>
In August  2000,  PMI formed  Pacific  Magtron  (GA),  Inc.  (PMIGA),  a Georgia
corporation  whose  principal  activity is the wholesale  distribution  of PMI's
products in the eastern  United States  market.  During 2001,  PMIGA 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 PMIGA was reduced to 98%.

On October 15, 2001,  the Company  formed an  investment  holding  company,  PMI
Capital Corporation  (PMICC), a wholly-owned  subsidiary of the Company, for the
purpose  of   acquiring   companies  or  assets   deemed   suitable  for  PMIC's
organization. In October 2001, the Company acquired through PMICC certain assets
and assumed the accrued  vacation of certain  employees of Live Market,  Inc. in
exchange  for a cash  payment of  $85,000.  These  LiveMarket  assets  were then
transferred to Lea.

In  December  2001,  the  Company  incorporated  LiveWarehouse,   Inc.  (LW),  a
wholly-owned subsidiary of the Company, to provide consumers a convenient way to
purchase computer products via the internet.

2. CONSOLIDATION AND UNCONSOLIDATED INVESTEES

The  accompanying  consolidated  financial  statements  include the  accounts of
Pacific Magtron International Corp. and its wholly-owned subsidiaries, PMI, Lea,
PMICC and  LiveWarehouse  and  majority-owned  subsidiaries,  FNC and PMIGA. All
inter-company 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.  Equity investments with ownership of less than 20% are
accounted for on the cost method.

3. FINANCIAL STATEMENT PRESENTATION

The accompanying consolidated financial statements at March 31, 2002 and for the
three months  ended March 31, 2002 and 2001 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, 2001.
Interim  operating  results are not necessarily  indicative of operating results
expected for the entire year.

Certain  reclassifications  have been made to prior period  balances in order to
conform to the current period presentation.

4.  RECENT ACCOUNTING PRONOUNCEMENTS

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.  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

                                      -6-
<PAGE>
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.  Issue 00-25 will be effective  for the  Company's
2002  fiscal  year.  Both Issue 00-14 and 00-25 have been  codified  under Issue
01-09,  "Accounting  for  Consideration  Given by a Vendor  to a  Customer  or a
Reseller of the Vendor's  Products."  We are  currently  analyzing  Issue 01-09.
Issue 01-09 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  reached in Issue 00-25 and Issue 00-14 (codified by Issue
01-09) are effective for fiscal quarters beginning after December 15, 2001.

In June 2001, the Financial  Accounting  Standards Board finalized SFAS No. 141,
BUSINESS  COMBINATIONS,  and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS
No. 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 No. 141 also  requires  that the  Company
recognize  acquired  intangible  assets  apart  from  goodwill  if the  acquired
intangible  assets meet certain  criteria.  SFAS No. 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 No. 142 that the Company  reclassify the carrying  amounts of intangible
assets and goodwill based on the criteria in SFAS No. 141. The Company  recorded
its  acquisition  so Technical  Insights and LiveMarket in September and October
2001 in accordance with SFAS No. 141 and did not recognize any goodwill relating
to these transactions.  However, certain intangibles totaling $59,400, including
intellectual  property  and vendor  reseller  agreements,  were  identified  and
recorded in the consolidated financial statements in deposits and other assets.

SFAS No. 142 requires,  among other things,  that  companies no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS No. 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 No.  142.  SFAS No. 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 No. 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 No. 142. The Company
does not expect the  adoption  of SFAS No. 142 to have a material  effect on its
financial  position,  results of  operations  or cash  flows  since the value of
intangibles  recorded  is  relatively  insignificant  and no  goodwill  has been
recognized.

In  August  2001,  the FASB  issued  SFAS No.  143  Accounting  for  Obligations
associated  with the  Retirement  of Long-Lived  Assets.  SFAS No. 143 addresses
financial  accounting and reporting for the  retirement  obligation of an asset.
SFAS No. 143 states that companies  should  recognize the asset retirement cost,
at its fair value,  as part of the cost asset and classify the accrued amount as
a  liability  in the  balance  sheet.  The asset  retirement  liability  is then
accreted to the ultimate payout as interest expense.  The initial measurement of

                                      -7-
<PAGE>
the  ability  would  be  subsequently  updated  for  revised  estimates  of  the
discounted  cash  outflows.  SFAS No. 143 will be  effective  for  fiscal  years
beginning  after June 15, 2002. The Company does not expect the adoption of SFAS
No.  143 to  have a  material  effect  on its  financial  position,  results  of
operations, or cash flows.

In October 2001,  the FASB issued SFAS No. 144  Accounting for the Impairment or
Disposal  of  Long-Lived  Assets.  SFAS No. 144  supersedes  the SFAS No. 121 by
requiring  that one  accounting  model to be used for  long-lived  assets  to be
disposed of by sale, whether previously held and used or newly acquired,  and by
broadening the  presentation of discontinued  operation to include more disposal
transactions.  SFAS No. 144 will be effective for fiscal years  beginning  after
December 15,  2001.  The Company does not expect the adoption of SFAS No. 144 to
have a material effect on its financial position, results of operations, or cash
flows.

5. STATEMENTS OF CASH FLOWS

Cash was paid during the three months ended March 31, 2002 and 2001 for:

                                         THREE MONTHS ENDING MARCH 31,
                                              2002         2001
                                            --------     --------
Income taxes                                $  4,100     $  1,500
                                            ========     ========
Interest                                    $ 47,200     $ 73,900
                                            ========     ========

6. 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.  Included in prepaid
expenses and other  current  assets as of March 31, 2002 is $30,000 due from the
shareholder/officer.

The Company sells computer  products to a company owned by a member of our Board
of Directors. Management believes that the terms of these sales transactions are
no more favorable than given to unrelated customers.  For the three months ended
March  31,  2002,  and 2001,  the  Company  recognized  $136,700  and  $312,800,
respectively,  in sales  revenues  from  this  customer.  Included  in  accounts
receivable as of March 31, 2002 is $96,300 due from this related customer.

7. INCOME TAXES

On March 9, 2002,  legislation  was  enacted to extend the  general  Federal net
operating loss  carryback  period from two years to five years for net operating
losses  incurred  in 2001 and 2002.  As a result  of  Management's  analysis  of
estimated  future  operating  results  and other tax  planning  strategies,  the
Company has not  recorded a valuation  allowance  on the portion of the deferred
tax assets relating to Federal net operating loss  carryforward of $1,906,800 as
the Company  believes  that it is more likely  than not that this  deferred  tax
asset will be  realized.  During the first  quarter of 2002,  this  deferred tax
asset,  totaling  approximately  $648,300,  was  reclassified  to  income  taxes
receivable.

                                      -8-
<PAGE>
8. FLOOR PLAN INVENTORY LOANS AND LETTER OF CREDIT

The Company had a $7 million (including a $1 million letter of credit sub-limit)
auto-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 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  line  totaled
$1,329,500 as of December 31, 2000 and were subject to 45 day  repayment  terms,
at which time  interest  began to accrue at the prime rate (9.5% as of  December
31, 2000).  In March 2001,  the financial  institution  that provided this floor
plan inventory loan filed bankruptcy and the Company  subsequently  paid off its
remaining obligation.

On July 13,  2001,  PMI and PMIGA  (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  under certain  conditions and the termination is subject to a fee of
1% of the credit limit. The facility  includes 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 includes a sub-limit of $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 45 days  repayment,  at which time interest
begins to accrue at the prime rate,  which was 4.75% at March 31,2002.  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 March 31, 2002,  the Company
had an outstanding balance of $733,600 due under this credit facility.

Under the accounts receivable and inventory financing facility from Transamerica
Commercial  Finance  Corporation  (Transamerica),  PMI and PMIGA (Companies) are
required to maintain certain financial  covenants.  As of December 31, 2001, the
Companies were in violation of the minimum tangible net worth covenant. On March
6, 2002, the Bank issued a waiver of the default and revised the covenants under
the credit  agreement  retroactively  to September  30, 2001. As of December 31,
2001 and March  31,  2002,  the  Companies  were in  compliance  with  these new
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 judgments, 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 March 31,  2002,  FNC had an
outstanding balance of $181,500 under this credit facility.

FNC is required  to  maintain  certain  financial  covenants  to qualify for the
Deutsche  bank credit  line,  and was not in  compliance  with  certain of these
covenants  as of March 31, 2002 and  December  31,  2001,  which  constitutes  a
technical  default under the credit line.  This gives Deutsche the right to call
the loan and  terminate  the credit line.  The credit  facility is guaranteed by
PMIC and can be terminated by Deutsche  immediately given the default.  On April
30, 2002,  Deutsche  elected to terminate the credit facility  effective July 1,
2002.

                                      -9-
<PAGE>
9. 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 (1.88% as of March 31, 2002) 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%, 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 2001,
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 these loan covenant  violations  was obtained from the bank in
March 2002,  retroactive to December 31, 2001 and through December 31, 2002, the
Company was required to transfer  $250,000 to a restricted  account as a reserve
for debt  servicing.  This amount has been  reflected as restricted  cash in the
accompanying consolidated financial statements.

10. SEGMENT INFORMATION

The  Company  has  five  reportable   segments:   PMI,   PMIGA,   FNC,  Lea  and
LiveWarehouse.   PMI  imports  and  distributes  electronic  products,  computer
components,  and  computer  peripheral  equipment  to various  distributors  and
retailers  throughout the United  States,  with PMIGA focusing on the east coast
area.  LiveWarehouse  sells similar  products as PMI to the end-users  through a
website.  FNC  serves the  networking  and  personal  computer  requirements  of
corporate  customers.  Lea is designing and  installing  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 and
minority interest,  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.  PMI and PMIGA are  comparable
businesses with different locations of operations and customers.

The following table presents  information  about reported segment profit or loss
for the three months ended March 31, 2002 and 2001:

                                      -10-
<PAGE>
Three Months Ended March 31, 2002:

<TABLE>
<CAPTION>
                                         PMI           PMIGA            FNC              LEA             LW           TOTAL
                                     ------------    -----------    ------------     ------------     ---------    ------------
<S>                                  <C>             <C>            <C>              <C>              <C>          <C>
Revenues external
customers                            $ 13,430,600    $ 3,445,000    $  599,600(1)    $  135,600(2)    $  21,400    $ 17,632,300

Segment (loss) before income
taxes and minority interest              (305,500)      (142,000)     (338,400)        (266,300)        (70,300)     (1,122,500)

Three Months Ended March 31, 2001:

                                         PMI           PMIGA            FNC              LEA             LW           TOTAL
                                     ------------    -----------    ------------     ------------     ---------    ------------
Revenues external customers          $ 16,211,600    $ 3,001,000    $  743,900(1)            --              --    $ 19,956,500


Segment (loss) before income
taxes and minority interest              (219,300)      (228,800)     (276,300)              --              --        (724,400)
</TABLE>

(1)  Includes  service  revenues  of  $79,800  and  $49,300  in 2002  and  2001,
     respectively.
(2)  Includes service revenues of $135,600 in 2002.

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

                                                 Three Months Ended March 31,
                                                ------------------------------
                                                    2002              2001
                                                -------------     ------------

Total loss before income taxes and minority
  interest for reportable segments              $  (1,122,500)    $   (724,400)
Inter-company transactions                                 --            1,300
Equity in loss in investment in Rising Edge                --           (6,000)
                                                -------------     ------------
Consolidated loss before income taxes
  and minority interest                         $  (1,122,500)    $   (729,100)
                                                -------------     ------------

11. ACCOUNTS RECEIVABLE FACTORING AGREEMENT

Pursuant to a non-notification  accounts  receivable  factoring  agreement,  the
Company factors certain of its accounts receivable with a financial  institution
on a pre-approved  nonrecourse basis. The factoring  commission charge is 0.375%
and 2.375% of specific approved domestic and foreign receivables,  respectively.
The  agreement,  which  expires  February  28, 2003 and is subject to  automatic
annual renewal provisions, provides for the Company to pay a minimum of $200,000
in annual commission to the financial institution.  The Company's obligations to
the  factor are  collateralized  by the  related  accounts  receivable  sold and
assigned to the financial institution and the underlying inventory. However, any
collateral  assigned  to  the  financial  institution  is  subordinated  to  the
collateral  rights held by  Transamerica,  the  Company's  floor plan  inventory
lender. The financial institution has 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.

                                      -11-
<PAGE>
12. DEPOSITS AND OTHER ASSETS

Included in deposits  and other assets at March 31, 2002 are  intangible  assets
relating to intellectual  property and reseller  agreements  acquired during the
fourth quarter of 2001 with a cost basis of $59,400 and accumulated amortization
of $9,400.  The Company is amortizing  the  intangible  assets over a three year
period.  Amortization  expense  for the three  months  ended  March 31, 2002 was
approximately $9,000.

                                      -12-
<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, 2001 under the
heading "Cautionary Factors That May Affect Future Results", such as our ability
to respond to technological  changes,  insurance and potential excess liability,
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 Lea, risks associated with our acquisition
strategy, and dependence on key personnel.

GENERAL

We provide solutions to customers in several  synergetic and growing segments of
the  computer  industry.  Our business is organized  into five  divisions:  PMI,
PMIGA, FNC, Lea/LiveMarket and LiveWarehouse.  Our subsidiaries,  PMI and PMIGA,
provide 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 commenced operations in
October 2000 and distributes  PMI's products in the  southeastern  United States
market.  To  capture  the  expanding  corporate  IT  infrastructure  market,  we
established  the  FrontLine  Network  Consulting  division  in 1998  to  provide
professional   services  to   mid-market   companies   focused  on   consulting,
implementation  and support services of Internet  technology  solutions.  During
2000, this division was incorporated as FNC. On September 30, 2001, FNC acquired
certain  assets of  Technical  Insights,  Inc.,  a  computer  technical  support
company, in exchange for $20,000 worth of PMIC common stock (16,142 shares). The
acquired  business  unit,  Technical  Insights  enables FNC to provide  computer
technical training services to corporate clients.

We also invested in a 50%-owned joint software venture, 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, Ltd., the other 50%
owner of Lea. In December  2001,  we entered into an agreement  with Rising Edge
and its  principal  owners to exchange the 50% Rising Edge  ownership in Lea for

                                      -13-
<PAGE>
our 25% interest in Rising Edge. As a consequence,  PMIC owns 100% of Lea and no
longer has an interest in Rising Edge.  Certain  LiveMarket  assets,  which were
initially  purchased  through PMICC,  were  transferred to Lea Publishing in the
fourth  quarter  of  2001 to  further  assist  in the  development  of  internet
software.

In  December  2001,  LiveWarehouse,  Inc.  was  incorporated  as a  wholly-owned
subsidiary of PMIC, to provide  consumers a convenient way to purchase  computer
products via the internet.

As used herein and unless otherwise  indicated,  the terms Company,  we, and our
refer to Pacific Magtron International Corp. and each of our subsidiaries.

RESULTS OF OPERATIONS

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

                                                  Three Months Ended
                                                       March 31,
                                                  -----------------
                                                   2002        2001
                                                  -----       -----
Sales                                             100.0%      100.0%
Cost of sales                                      92.6        93.1
                                                  -----       -----
Gross margin                                        7.4         6.9
Operating expenses                                 13.6        10.5
                                                  -----       -----
(Loss) from operations                             (6.2)       (3.6)
Other income (expense), net                        (0.2)       (0.1)
Income taxes (benefit) expense                      2.2        (1.1)
Minority interest                                   0.0         0.2
                                                  -----       -----
Net (loss)                                         (4.2%)     (2.4%)
                                                  ======      =====

THREE MONTHS ENDED March 31, 2002 COMPARED TO THREE MONTHS ENDED March 31, 2001

Sales for the three months ended March 31, 2002 were $17,632,300,  a decrease of
$2,324,200, or approximately 11.7%, compared to $19,956,500 for the three months
ended March 31, 2001. The combined sales of PMI and PMIGA were  $16,875,600  for
the three months ended March 31, 2002, a decrease of $2,337,000 or approximately
12.2%,  compared to $19,212,600 for the three months ended March 31, 2001. Sales
for PMI decreased by $2,781,000 or 17.2% from  $16,211,600  for the three months
ended March 31, 2001 to  $13,430,600  for the three months ended March 31, 2002.
PMIGA's  sales  increased  by  $444,000 or 14.8% from  $3,001,000  for the three
months ended March 31, 2001 to  $3,445,000  for the three months ended March 31,
2002. The decrease in PMI sales was due to the continued  overall decline in the
computer  component  market and the lack of any new and  innovative  high-demand
products in the  multimedia  arena during the period of economic  slowdown.  The
increase in PMIGA's sales was due to the increase in market  penetration  on the
U.S.  east coast.  Sales  recognized by FNC for the three months ended March 31,
2002 were  $599,600,  a decrease of $144,300 or 19.4%,  compared to $743,900 for
the three month ended March 31,  2001.  The  decrease in FNC sales is due to the
continued  weak U.S.  economy and the reduction of capital  expenditures  by our
existing and potential customers.

                                      -14-
<PAGE>
In the fourth  quarter of 2001,  PMICC  acquired  certain  assets of LiveMarket.
Subsequently,  these assets were  transferred  to Lea.  Prior to the  LiveMarket
acquisition,  Lea did not  generate  any  revenues as it was in the  development
stage.  Revenues generated by Lea were $135,600 for the three months ended March
31, 2002.

In December 2001,  LiveWarehouse,  Inc. (LW) was  incorporated as a wholly-owned
subsidiary of PMIC, to provide  consumers a convenient way to purchase  computer
products  via the  internet.  Sales  generated  by LW were $21,400 for the three
months ended March 31, 2002.

Consolidated  gross  margin  for the  three  months  ended  March  31,  2002 was
$1,311,700,  or 7.4% of sales, compared to $1,380,000,  or 6.9% of sales for the
three months ended March 31, 2001.  The combined  gross margin for PMI and PMIGA
was  $1,197,300,  or 7.1% of sales for the three  months  ended March 31,  2002,
compared to  $1,298,600  or 6.8% of sales for the three  months  ended March 31,
2001.  PMI's gross margin was  $1,024,900  or 7.6% of sales for the three months
ended March 31, 2002  compared to  $1,185,700 or 7.3% for the three months ended
March 31, 2001. PMIGA's gross margin was $172,400 or 5.0% of sales for the three
months ended March 31, 2002  compared to $112,900 or 3.8% of sales for the three
months  ended March 31, 2001.  The  increase in gross margin as a percentage  of
sales for PMI and PMIGA was due to more products with higher  margins were being
sold during the three months  ended March 31, 2002  compared to the three months
ended March 31, 2001.

FNC's gross  margin was  $81,500,  or 13.4% of sales for the three  months ended
March 31, 2002  compared to $81,400 or 10.9% of sales for the three months ended
March  31,  2001.  The  higher  gross  margin  percentage  in 2002 was due to an
increase  in service  revenues  earned as a percent of total sales for the three
months  ended March 31, 2002  compared to the three months ended March 31, 2001.
Service revenues were $79,800 for the three months ended March 31, 2002 compared
to $49,300 for the three  months  ended March 31,  2001.  In general,  FNC has a
higher gross margin on  consulting  and  implementation  service  revenues  than
product sales revenues.

Lea  experienced  an overall gross margin of $28,400,  or 21.0% of sales for the
three months ended March 31, 2002.

Gross margin for LW was $4,500, or 21% of sales for the three months ended March
31, 2002.

Consolidated  operating  expenses,   which  consist  of  selling,   general  and
administrative  expenses,  were  $2,387,100 for the three months ended March 31,
2002, an increase of $297,000,  or 14.2%  compared to  $2,090,100  for the three
months  ended March 31, 2001.  Lea assumed  LiveMarket's  operations  in October
2001, and  LiveWarehouse  began its operations in the first quarter of 2002. The
increase  was  primarily  due to the  inclusion  of the  operating  expenses  of
$294,800 for Lea and $74,500 for  LiveWarehouse for the three months ended March
31, 2002 which were not incurred during the same period in 2001. The Company has
also  experienced a higher level of bad debt  write-offs.  The  consolidated bad
debt expense increased from $89,300 for the three months ended March 31, 2001 to
$133,200  for the three months  ended March 31,  2002.  Subsequent  to March 31,
2001,  we  started  to promote  our  Company's  stock,  products  and  services.
Consolidated  promotion expense was $66,000 for the three months ended March 31,

                                      -15-
<PAGE>
2002.  The  increases  were  partially  offset  by  the  cost  cutting  measures
implemented  by the Company,  such as reducing our employee count from 109 as of
March 31, 2001 to 94 as of March 31, 2002.

     PMI's  operating  expenses were $1,357,600 for the three months ended March
     31, 2002 compared to $1,385,800  for the three months ended March 31, 2001.
     The decrease of $28,200 or 2.0%,  was mainly due to the decrease in payroll
     expenses of approximately $106,300 and was partially offset by the increase
     in bad debt expense of $23,300 and promotion expense of $51,800.

     PMIGA's  operating  expenses were $314,700 for the three months ended March
     31, 2002, a decrease of $28,300, or 8.3% compared to $343,000 for the three
     months ended March 31, 2001.  The decrease was  primarily due to a decrease
     in payroll expense of  approximately  $56,600,  and was partially offset by
     the increase in professional service expense of $13,600.

     FNC's operating expenses were $395,400 for the three months ended March 31,
     2002,  an  increase of $32,500 or 9.0%  compared to $362,900  for the three
     months ended March 31,  2001.  FNC  acquired  certain  assets of a computer
     technical  support company,  Technical  Insight (TI) on September 30, 2001.
     The  operating  expenses for the three months ended March 31, 2002 included
     the expenses for operating the newly acquired  computer  technical  support
     business.  FNC also  experienced an increase in bad debt expense by $14,900
     in 2002.  The  increases  were  partially  offset by a decrease  in payroll
     expenses of approximately $13,500.

Consolidated  loss from operations for the three months ended March 31, 2002 was
$1,075,400  compared to $710,100 for the three  months ended March 31, 2001,  an
increase of 51.4%. As a percent of sales,  consolidated loss from operations was
6.1% for the three  months  ended March 31, 2002  compared to 3.6% for the three
months ended March 31, 2001. The increase in  consolidated  loss from operations
was  primarily  due to an  11.7%  decrease  in  consolidated  sales  and a 14.2%
increase in consolidated operating expenses.  Loss from operations for the three
months ended March 31, 2002,  including  allocations of PMIC corporate expenses,
for PMI, PMIGA, FNC, Lea and LW was $332,700,  $142,400, $264,000, $266,300, and
$70,000, respectively.

Consolidated  interest  income was $6,600 for the three  months  ended March 31,
2002 compared to $53,700 for the three months ended March 31, 2001. The decrease
in  interest  income  was mainly  due to a decline  in funds  available  to earn
interest.

Consolidated  interest  expense was $46,400 for the three months ended March 31,
2002 compared to $73,900 for the three months ended March 31, 2001. The decrease
in interest expense was largely due to a decrease in the floating  interest rate
charged on one of our  mortgages  on our  office  building  facility  located in
Milpitas, California.

In March  2002,  legislation  was  enacted to extend  the  general  Federal  net
operating loss carryback period from 2 years to 5 years for net operating losses
incurred  in 2001 and 2002.  As a result,  we  recorded an income tax benefit of
$384,000 on the net operating tax loss incurred for the three months ended March
31, 2002.

                                      -16-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

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

At March  31,  2002,  we had  consolidated  cash and cash  equivalents  totaling
$2,112,800  (excluding  $250,000  in  restricted  cash) and  working  capital of
$5,083,600.  At December 31, 2001, we had consolidated cash and cash equivalents
totaling $3,110,000 and working capital of $5,734,900.

Net cash used in  operating  activities  during the three months ended March 31,
2002 was $363,600,  which principally reflected the net loss incurred during the
period,  and an increase in income taxes receivable and  inventories,  which was
partially  offset by an increase in accounts  payable and a decrease in accounts
receivable.

Net cash  provided by investing  activities  during the three months ended March
31, 2002 was $9,700, primarily resulting from the proceeds from sale of property
and  equipment  and decrease in deposits and other  assets,  which was partially
offset by the $30,000 advanced to a shareholder/officer.

Net cash used in  financing  activities  was $643,300 for the three months ended
March 31, 2002, primarily from the $630,000 decrease in the floor plan inventory
loans.

On July 13,  2001,  PMI and PMIGA  (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
(Transamerica).  This new credit  facility  has a term of two years,  subject to
automatic  renewal  from  year to  year  thereafter.  The  credit  facility  can
beterminated  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 4.75% at March 31, 2002. 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 March 31, 2002,  there were
draws of $733,600 on the credit line.

Under the agreement,  PMI and PMIGA granted  Transamerica 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 December 31, 2001, the Companies were in violation of
the minimum  tangible net worth  covenant.  On March 6, 2002,  the Bank issued a
waiver of the  default  and revised  the  covenants  under the credit  agreement
retroactively to September 30, 2001. As of December 31, 2001 and March 31, 2002,
the Companies were in compliance with these new 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

                                      -17-
<PAGE>
and all judgments, 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.

FNC was  required to maintain  certain  financial  covenants  to qualify for the
Deutsche  bank credit  line,  and was not in  compliance  with  certain of these
covenants  as of March 31, 2002 and  December  31,  2001,  which  constitutes  a
technical  default  under the credit line.  This gave Deutsche the right to call
the loan and  terminate  the credit line.  The credit  facility is guaranteed by
PMIC and could be terminated by Deutsche immediately given the default. On April
30, 2002,  Deutsche  elected to terminate the credit facility  effective July 1,
2002. Upon  termination,  the  outstanding  balance must be repaid in accordance
with the terms and provisions of the financing agreement.  As of March 31, 2002,
there were draws of  $181,500  on the credit  line.  As of April 30,  2002,  the
outstanding balance under this credit facility was approximately $24,000.

Pursuant to one of our bank mortgage  loans with a $2,406,000  balance at March,
31, 2002, we are required to maintain certain financial covenants.  During 2001,
we were in  violation of a  consecutive  quarterly  loss  covenant and an EBITDA
coverage ratio  covenant,  which is an event of default under the loan agreement
that  gives the bank the right to call the  loan.  While a waiver of these  loan
covenant  violations  was obtained from the bank in March 2002,  retroactive  to
December 31, 2001,  and through  December 31, 2002, we were required to transfer
$250,000 to a restricted  account as a reserve for debt  servicing.  This amount
has been reflected as restricted cash in the consolidated financial statements.

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

Presently we do not have sufficient  funds to pursue our business plan involving
acquisitions  to pursue new markets and the growth of our business.  Although we
are actively seeking and evaluating potential acquisition prospects, there is no
assurance that we will be able to obtain additional  capital for these potential
acquisitions.  We are actively seeking additional capital to augment our working
capital and to finance  our new  business  initiatives  such as  LiveMarket  and
LiveWarehouse.  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.

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.  Presently,  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

                                      -18-
<PAGE>
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.

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.  Included in prepaid
expenses and other  current  assets as of March 31, 2002 is $30,000 due from the
shareholder/officer.

We sell  computer  products  to a  company  owned  by a member  of our  Board of
Directors. Management believes that the terms of these sales transactions are no
more  favorable  than given to unrelated  customers.  For the three months ended
March  31,  2002,  and 2001,  the  Company  recognized  $136,700  and  $312,800,
respectively,  in sales  revenues  from  this  customer.  Included  in  accounts
receivable as of March 31, 2002 is $96,300 due from this related customer.

RECENT ACCOUNTING PRONOUNCEMENTS

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.  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.  Issue 00-25 will be effective  for the  Company's
2002  fiscal  year.  Both Issue 00-14 and 00-25 have been  codified  under Issue
01-09,  "Accounting  for  Consideration  Given by a Vendor  to a  Customer  or a
Reseller of the Vendor's  Products."  We are  currently  analyzing  Issue 01-09.
Issue 01-09 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  reached in Issue 00-25 and Issue 00-14 (codified by Issue
01-09) are effective for fiscal quarters beginning after December 15, 2001.

In June 2001, the Financial  Accounting  Standards Board finalized SFAS No. 141,
BUSINESS  COMBINATIONS,  and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS
No. 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 No. 141 also  requires  that the  Company
recognize  acquired  intangible  assets  apart  from  goodwill  if the  acquired
intangible  assets meet certain  criteria.  SFAS No. 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 No. 142 that the Company  reclassify the carrying  amounts of intangible
assets and goodwill based on the criteria in SFAS No. 141. The Company  recorded
its  acquisition  so Technical  Insights and LiveMarket in September and October
2001 in accordance with SFAS No. 141 and did not recognize any goodwill relating
to these transactions.  However, certain intangibles totaling $59,400, including
intellectual  property  and vendor  reseller  agreements,  were  identified  and
recorded in the consolidated financial statements.

                                      -19-
<PAGE>
SFAS No. 142 requires,  among other things,  that  companies no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS No. 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 No.  142.  SFAS No. 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 No. 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 No. 142. The Company
does not expect the  adoption  of SFAS No. 142 to have a material  effect on its
financial  position,  results of  operations  or cash  flows  since the value of
intangibles  recorded  is  relatively  insignificant  and no  goodwill  has been
recognized.

In  August  2001,  the FASB  issued  SFAS No.  143  Accounting  for  Obligations
Associated  with the  Retirement  of Long-Lived  Assets.  SFAS No. 143 addresses
financial  accounting and reporting for the  retirement  obligation of an asset.
SFAS No. 143 states that companies  should  recognize the asset retirement cost,
at its fair value,  as part of the cost asset and classify the accrued amount as
a  liability  in the  balance  sheet.  The asset  retirement  liability  is then
accreted to the ultimate payout as interest expense.  The initial measurement of
the  ability  would  be  subsequently  updated  for  revised  estimates  of  the
discounted  cash  outflows.  SFAS No. 143 will be  effective  for  fiscal  years
beginning  after June 15, 2002. The Company does not expect the adoption of SFAS
No.  143 to  have a  material  effect  on its  financial  position,  results  of
operations, or cash flows.

In October 2001,  the FASB issued SFAS No. 144  Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121 by requiring
that one accounting model to be used for long-lived  assets to be disposed of by
sale, whether previously held and used or newly acquired,  and by broadening the
presentation  of discontinued  operation to include more disposal  transactions.
SFAS No. 144 will be effective  for fiscal years  beginning  after  December 15,
2001.  The  Company  does not  expect  the  adoption  of SFAS No.  144 to have a
material effect on its financial position, results of operations, or cash flows.

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.

                                      -20-
<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 $2,406,000 balance at March 31, 2002 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.

                                      -21-
<PAGE>
                                     PART II

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

     (a)  Exhibits

          Exhibit
          Number                  Description                        Reference
          ------                  -----------                        ---------
          10.7     Amendment No. 2 to Accounts Receivable               (1)
                   and Inventory Financing Agreement by and
                   between  Transamerica  Commercial Finance
                   Corporation and Pacific Magtron, Inc. and
                   Pacific Magtron (GA), Inc.

          10.8     Amendment No. 1 to Accounts Receivable               (1)
                   and Inventory Financing Agreement by and
                   between Transamerica Commercial Finance
                   Corporation and Pacific Magtron, Inc. and
                   Pacific Magtron (GA), Inc.


          (1)  Filed with Form 10-K,  dated December 31, 2001, and  incorporated
               herein by reference.


     (b)  Reports on Form 8-K

          None

                                      -22-
<PAGE>
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 15th day of May 2002.



                                        PACIFIC MAGTRON INTERNATIONAL CORP.,
                                        a Nevada corporation


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

                                      -23-