<PAGE>

-------------------------------------------------------------------------------


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                      ------------------------------------


                                    FORM 10-Q

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

  FOR THE QUARTER ENDED SEPTEMBER 30, 1998     COMMISSION FILE NUMBER 0-28488


                       MULTIPLE ZONES INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)


                WASHINGTON                        91-1431894
         (State of incorporation)              (I.R.S. Employer
                                             Identification Number)


               707 SOUTH GRADY WAY
               RENTON, WASHINGTON                  98055-3233
    (Address of principal executive offices)       (Zip Code)


                              (425) 430-3000
                          (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
                                      -----     -----

The number of shares of the registrant's Common Stock outstanding as of
October 13, 1998 was 13,084,838.

-------------------------------------------------------------------------------


<PAGE>


                       MULTIPLE ZONES INTERNATIONAL, INC.

                                    INDEX


                         PART I. FINANCIAL INFORMATION

<TABLE>
<S>         <C>                                                                  <C>
Item 1.     Consolidated Financial Statements:

            Consolidated Balance Sheets
            September 30, 1998 and December 31, 1997............................  3

            Consolidated Statements of Operations and Other Comprehensive Income
            Three and nine months ended September 30, 1998 and 1997.............  4

            Statements of Shareholders' Equity
            Nine months ended September 30, 1998................................  5

            Consolidated Statements of Cash Flows
            Nine months ended September 30, 1998 and 1997.......................  6

            Notes to Consolidated Financial Statements..........................  7

Item 2.     Management's Discussion and Analysis of
            Financial Condition and Results of Operations.......................  8

<CAPTION>
                           PART II. OTHER INFORMATION
<S>         <C>                                                                  <C>
Item 6.     Exhibits and Reports on Form 8-K.................................... 16

            Signatures.......................................................... 16
</TABLE>


                                       2


<PAGE>

                        PART I - FINANCIAL INFORMATION

                      MULTIPLE ZONES INTERNATIONAL, INC.
                          CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                     September 30,           December 31,
                                                                                         1998                    1997
                                                                                     -------------           ------------
<S>                                                                                  <C>                     <C>
                                    ASSETS
Current assets:
     Cash and cash equivalents                                                         $   13,612             $   1,645
     Receivables, net                                                                      35,395                42,944
     Inventories, net                                                                      32,333                40,169
     Prepaid expenses                                                                       3,167                 4,012
     Income tax receivable                                                                  5,409                 1,127
     Deferred income taxes                                                                  1,717                 1,889
                                                                                       ----------             ---------
         Total current assets                                                              91,633                91,786

Property and equipment, net                                                                 8,052                12,417
Other assets                                                                                  886                   607
                                                                                        ----------            ---------
         Total assets                                                                  $  100,571             $ 104,810
                                                                                       ----------             ---------
                                                                                       ----------             ---------
                      LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
     Bank lines of credit                                                              $    2,968             $   2,084
     Accounts payable                                                                      49,013                44,067
     Accrued liabilities and other                                                          9,105                 9,059
     Current portion of capital lease obligations                                             793                   961
     Income taxes payable                                                                     -                     540
                                                                                       ----------             ---------
         Total current liabilities                                                         61,879                56,711

Capital lease obligations, net of current portion                                             556                   892
Other                                                                                       1,792                 1,608
                                                                                       ----------             ---------
         Total liabilities                                                                 64,227                59,211
                                                                                       ----------             ---------

Minority interest                                                                             303                   628
                                                                                       ----------             ---------
Commitments and contingencies

Shareholders' equity:
     Common stock                                                                          37,898                37,751
     Retained earnings (deficit)                                                           (1,596)                7,256
     Foreign currency translation adjustment                                                 (261)                  (36)
                                                                                       ----------             ---------
         Total shareholders' equity                                                        36,041                44,971
                                                                                       ----------             ---------
         Total liabilities & shareholders' equity                                      $  100,571             $ 104,810
                                                                                       ----------             ---------
                                                                                       ----------             ---------
</TABLE>

                          See notes to consolidated financial statements


                                       3



<PAGE>

             MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                      (In thousands, except share data)
                                 (Unaudited)

<TABLE>
<CAPTION>

                                                            For the nine months                 For the three months
                                                            ended September 30,                  ended September 30,
                                                           1998               1997              1998              1997
                                                       ------------       ------------     ------------      ------------
<S>                                                    <C>                <C>              <C>               <C>
Net sales                                                  $355,010           $346,523         $124,329          $115,725
Cost of sales                                               316,830            305,959          110,199           102,694
                                                       ------------       ------------     ------------      ------------
   Gross profit                                              38,180             40,564           14,130            13,031
   Selling, general and administrative expenses              48,149             46,492           13,877            15,279
                                                       ------------       ------------     ------------      ------------
   Income (loss) from operations                             (9,969)            (5,928)             253            (2,248)
                                                       ------------       ------------     ------------      ------------
Other expense:
   Interest expense, net                                        564                805              174               216
   Other expense                                              2,938                263             (165)               48
   Minority interest                                            (42)               (36)              18                62
                                                       ------------       ------------     ------------      ------------
   Other expense                                              3,460              1,032               27               326
                                                       ------------       ------------      -----------      ------------
Income (loss) before income taxes                           (13,429)            (6,960)             226            (2,574)
Provision for (benefit from) income taxes                    (4,577)            (1,051)              77              (236)
                                                       ------------       ------------     ------------      ------------
   Net income (loss)                                        $(8,852)           $(5,909)            $149           $(2,338)

   Other comprehensive income (expense),
   net of tax:

      Foreign currency translation adjustments                   18               (122)               2               (10)

      Reclassification for gains included in
      net income                                               (243)
                                                       ------------       ------------      -----------      ------------
   Other comprehensive income (expense)                        (225)              (122)               2               (10)

   Comprehensive income (loss)                          $    (9,077)       $    (6,031)      $      151       $    (2,348)
                                                       ------------       ------------      -----------      ------------
                                                       ------------       ------------      -----------      ------------

   Basic earnings (loss) per share                      $     (0.68)       $     (0.46)      $     0.01       $     (0.18)
                                                       ------------       ------------      -----------      ------------
                                                       ------------       ------------      -----------      ------------

   Weighted average shares used in computation of
   basic earnings (loss) per share                       13,071,000         12,942,000       13,082,000        12,997,000

                                                       ------------       ------------      -----------      ------------
                                                       ------------       ------------      -----------      ------------

   Diluted earnings (loss) per share                    $     (0.68)       $     (0.46)      $     0.01       $     (0.18)
                                                       ------------       ------------      -----------      ------------
                                                       ------------       ------------      -----------      ------------

   Weighted average shares used in computation of
   diluted earnings (loss) per share                     13,071,000         12,942,000       13,161,000        12,997,000
                                                       ------------       ------------      -----------      ------------
                                                       ------------       ------------      -----------      ------------
</TABLE>

                          See notes to consolidated financial statements


                                       4



<PAGE>


             MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
                      STATEMENTS OF SHAREHOLDERS' EQUITY
                       (In thousands, except share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                  Foreign
                                                                                                 Currency
                                                    Common Stock                  Retained      Translation
                                                Shares            Amount          Earnings       Adjustment          Total
                                              ----------      ------------     ------------     ------------      -----------
<S>                                           <C>             <C>              <C>              <C>               <C>
Balance, January 1, 1998                      13,041,464      $    37,751      $     7,256      $       (36)      $    44,971
Issuance of common stock                          43,374              147                                                 147
Net loss                                                                            (8,852)                            (8,852)
Translation adjustment                                                                                 (225)             (225)
                                              ----------      ------------     -----------      -----------       -----------
Balance, September 30, 1998                   13,084,838      $     37,898     $    (1,596)     $      (261)      $    36,041
                                              ----------      ------------     -----------      -----------       -----------
                                              ----------      ------------     -----------      -----------       -----------
</TABLE>

                See notes to consolidated financial statements


                                       5



<PAGE>

             MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In thousands)
                               (Unaudited)

<TABLE>
<CAPTION>

                                                                                               For the nine months
                                                                                               ended September 30,
                                                                                           --------------------------
                                                                                              1998             1997
                                                                                           -----------     ----------
<S>                                                                                        <C>                 <C>

Cash flows from operating activities:
 Net loss                                                                                   $ (8,852)        $(5,909)
 Adjustments to reconcile net loss to
   net cash provided by operating activities:
 Allowance for inventory and receivables                                                       2,209           5,805
 Depreciation and amortization                                                                 2,551           2,079
 Deferred income taxes                                                                            87
 Write-off of goodwill                                                                                         1,300
 Loss on disposal of assets                                                                    3,645             307
 Minority interest                                                                              (325)            (36)
 Changes in assets and liabilities:
     Accounts receivable                                                                       6,131           9,519
     Inventory                                                                                 6,226          33,598
     Prepaid expenses and other assets                                                         1,732           6,838
     Accounts payable                                                                          3,340         (34,905)
     Accrued liabilities                                                                         483            (674)
     Income taxes                                                                             (4,778)         (2,335)
                                                                                           -----------     ----------
     Net cash provided by operating activities                                                12,449          15,587
                                                                                           -----------     ----------
Cash flows from investing activities:
 Capital expenditures                                                                         (2,016)         (4,822)
 Other                                                                                                           (41)
                                                                                           -----------     ----------
     Net cash used in investing activities                                                    (2,016)         (4,863)
                                                                                           -----------     ----------
Cash flows from financing activities:
 Borrowings under line of credit agreement                                                    14,136          66,730
 Payments under line of credit agreement                                                     (13,191)        (66,815)
 Net change in book overdrafts                                                                 1,325             428
 Proceeds from sale of common stock                                                              147             701
 Payments on capital leases                                                                     (542)           (937)
 Other                                                                                          (155)             21
                                                                                           -----------     ----------
     Net cash provided by financing activities                                                 1,720             128
                                                                                           -----------     ----------
Effect of exchange rate on cash and cash equivalents                                            (186)           (153)
                                                                                           -----------     ----------
Net increase in cash and cash equivalents                                                     11,967          10,699

Cash and cash equivalents at beginning of period                                               1,645             976
                                                                                           -----------     ----------
Cash and cash equivalents at end of period                                                 $  13,612        $ 11,675
                                                                                           -----------     ----------
                                                                                           -----------     ----------
</TABLE>

                    See notes to consolidated financial statements


                                       6

<PAGE>

             MULTIPLE ZONES INTERNATIONAL, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    BASIS OF PRESENTATION

The consolidated financial statements and related notes thereto for the three
and nine months ended September 30, 1998 and 1997 are unaudited and reflect all
normal recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the financial position and operating results for the
interim periods. The results of operations for such interim periods are not
necessarily indicative of the results for the entire fiscal year ending December
31, 1998. These financial statements should be read in conjunction with the
audited financial statements and notes thereto contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.

2.    EARNINGS PER SHARE

Earnings per share is computed using the provision of Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" (the "Statement"). The
Statement specifies the computation, presentation, and disclosure requirements
for earnings per share ("EPS"). Basic EPS excludes all dilution. It is based
upon the weighted average number of shares outstanding during the period.
Diluted EPS reflects the potential dilution that would occur if securities or
other contracts to issue common stock were exercised or converted into common
stock.

3.    RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("FAS 131"). FAS 131 establishes standards
for disclosures about operating segments in annual financial statements and
selected information in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. FAS 131 supersedes FAS No. 14, "Financial Reporting for Segments of a
Business Enterprise." FAS 131 is effective for the year ending December 31, 1998
and requires restatement of earlier periods presented. The impact of adopting
FAS 131 has not been determined.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes a new model
for accounting for derivatives and hedging activities. The implementation of FAS
133 is required for financial statements issued for periods beginning after June
15, 1999; earlier application is permitted. Management is currently evaluating
the requirements of FAS 133; however it is not expected to have a material
impact on the presentation of the Company's financial statements.

4.    STOCK OPTIONS

On June 1, 1998, the Board of Directors adopted a resolution for all employees
below the level of Vice-President, re-pricing all options granted and
unexercised prior to June 1, 1998 to that day's fair market value, or $3.13 per
share. The total number of shares re-priced was 344,672. While the vesting
periods were not affected, employees must wait one year to exercise vested
shares at the new price.


                                       7



<PAGE>


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

                           FORWARD-LOOKING INFORMATION

The matters described below contain forward-looking statements which involve
known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company or industry trends to differ
materially from those expressed or implied by such forward-looking statements.

The following discussion and analysis should be read in conjunction with the
Risk Factors and other information contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.

General

Multiple Zones International, Inc., together with its majority owned
subsidiaries (collectively the "Company"), is a leading international direct
marketer of brand name microprocessor-based hardware, software, accessories and
peripheral products for users of both the PC/Wintel ("PC") and Macintosh ("Mac")
operating systems. The Company markets products through its two flagship
catalogs, The Mac Zone (R) and The PC Zone (R). The Company began operations in
1988 by advertising in national trade publications. Catalog circulation
commenced with The Mac Zone in 1990, followed by The PC Zone in 1992.
International subsidiary operations and licensing activities commenced in 1992,
and outbound telemarketing operations, principally to business accounts, were
added in 1993. In 1997 the Company expanded onto the Internet through the
opening of its online superstore, zones.com. The Company distributed 35.3
million catalogs domestically in the nine months ended September 30, 1998, with
additional circulation by its subsidiaries and licensees through operations in
15 other countries worldwide.

Results of Operations

The following tables present the Company's unaudited consolidated results of
operations, in dollars and as a percentage of net sales, and selected domestic
operating data for the periods indicated. This information has been prepared by
the Company on a basis consistent with the Company's unaudited Consolidated
Financial Statements and, in the opinion of management, includes all adjustments
consisting of normal recurring accruals and charges necessary for a fair
presentation of the results of such periods.


                                       8



<PAGE>

<TABLE>
<CAPTION>

                                                Nine months ended               Three months ended
                                                   September 30,                    September 30,
                                           --------------------------       --------------------------
                                              1998            1997             1998            1997
                                           ---------        ---------       ---------        ---------
                                                      (In thousands, except operating data)
<S>                                        <C>              <C>             <C>              <C>
Net sales                                    $ 355,010        $346,523        $124,329        $115,725
Cost of sales                                  316,830         305,959         110,199         102,694
                                             ---------        --------        --------        --------
Gross profit                                    38,180          40,564          14,130          13,031
SG&A expenses                                   48,149          46,492          13,877          15,279
                                             ---------        --------        --------        --------
Income (loss) from operations                   (9,969)         (5,928)            253          (2,248)
Other expense                                    3,460           1,032              27             326
                                             ---------        --------        --------        --------
Income (loss) before taxes                     (13,429)         (6,960)            226          (2,574)
Provision for (benefit from) taxes              (4,577)         (1,051)             77            (236)
                                             ---------        --------        --------        --------
Net income (loss)                             $ (8,852)        $(5,909)       $    149         $(2,338)
                                             ---------        --------        --------        --------
                                             ---------        --------        --------        --------
</TABLE>


<TABLE>
<CAPTION>

                                                Nine months ended               Three months ended
                                                   September 30,                    September 30,
                                           --------------------------       --------------------------
                                              1998            1997             1998            1997
                                           ---------        ---------       ---------        ---------
<S>                                        <C>              <C>             <C>              <C>
Net sales                                   100.00%           100.00%        100.00%           100.00%
Cost of sales                                89.25             88.29          88.64             88.74
                                           ---------        ---------       ---------        ---------
Gross profit                                 10.75             11.71          11.36             11.26
SG&A expenses                                13.56             13.42          11.16             13.20
                                           ---------        ---------       ---------        ---------
Income (loss) from operations                (2.81)            (1.71)           .20             (1.94)
Other expense                                  .98              0.29            .02              0.28
                                           ---------        ---------       ---------        ---------
Income (loss) before taxes                   (3.79)            (2.00)           .18             (2.22)
Provision for (benefit from) taxes           (1.29)            (0.30)           .06             (0.20)
                                           ---------        ---------       ---------        ---------
Net income (loss)                            (2.50)%           (1.70)%          .12%            (2.02)%
                                           ---------        ---------       ---------        ---------
                                           ---------        ---------       ---------        ---------
Selected domestic operating data:
Catalog circulation                       35,300,000       36,300,000      11,650,000       10,700,000
Number of shipments                          880,000          918,000         287,000          288,000
Average order size                        $      365       $      351      $      392       $      369

</TABLE>


                                       9


<PAGE>

Comparison of the Three-month Periods Ending September 30, 1998 and 1997.

Net Sales. Net sales were $124.3 million for the three months ended September
30, 1998, representing a 7.4% increase over the prior year quarter. The increase
resulted primarily from growth in PC product sales. PC platform sales increased
to 49.0% of domestic sales, up from 45% in the comparable period. Mac product
sales increased slightly in the comparative period.

Net domestic PC product sales increased 16.1% to $51.6 million in the three
months ended September 30, 1998 from $44.4 million in the comparable period. The
increase was due primarily to growth in sales to business and education
accounts, as well as from customers responding to the catalog and through the
Internet store. Sales to business and education accounts increased 20.1% to
$45.9 million in the current quarter, 56% of which are PC products. Internet
sales increased 334% to $13.6 million, 60% of which are PC products.

Net domestic Mac product sales increased approximately 1% to $54.2 million in
the three months ended September 30, 1998 from $53.8 million in the comparable
period. Due primarily to the strength of Apple Computer's iMac and G3 product 
offerings, Mac product sales grew 12% sequentially from the second quarter of 
1998, marking the first quarter since December 31, 1997 that sales for Mac 
products have not declined.

International subsidiary net sales in the three months ended September 30, 1998
were $18.5 million, an increase of 5.4% over the comparable period. Excluding
results of subsidiaries no longer operating, net sales increased 21.5% over the
comparable period. The increase in international subsidiary net sales resulted
primarily from sales growth in the Company's operations in Germany and the
United Kingdom.

Gross Profit. Gross profit increased to $14.1 million in the three months ended
September 30, 1998 from $13.0 million in the comparative period, which included
$356,000 primarily related to allowances for obsolete inventories. Gross profit
as a percentage of net sales decreased due to continued price competition,
particularly on Mac products, as well as continued emphasis on growth in the
business and Internet sales, both of which carry lower average margins.

Selling, General, and Administrative Expenses. SG&A expenses totaled $13.9
million in the quarter ended September 30, 1998, or 11.2% of net sales. Selling,
general and administrative expenses in the comparative period totaled $15.3
million, including $1.6 million of charge related to the closure of certain
foreign subsidiaries. Prior to the charge, SG&A expenses averaged 11.8% of net
sales in the comparative period. The decrease in SG&A expense prior to the
effect of the charges was due primarily to lower salaries and professional fees
partially offset by higher net advertising costs. The decline in expenses as a
percentage of net sales resulted from sales leverage along with continued
emphasis on cost reduction.

Other Expense. Other expense was $27,000 in the three months ended September 30,
1998 compared to $326,000 in the prior year quarter. Included in the prior year
quarter was a $130,000 charge attributable to loss on disposal of assets related
to the closure of several foreign subsidiaries.

Income Tax Expense (Benefit). The income tax expense for the three months ended
September 30, 1998 was $77,000. The income tax benefit for the three months
ended


                                       10


<PAGE>

September 30, 1997 was $(236,000). The increase in income tax expense is due
to the Company earning a profit in the three months ended September 30, 1998
compared to loss in the prior year comparable period.

Net Profit (Loss). As a result of the above factors, a net profit of $149,000,
or 0.1% of net sales was realized for the three months ended September 30, 1998.
Net loss for the three months ended September 30, 1997 was $(2.3) million, 2.0%
of net sales.

Comparison of the Nine-month Periods Ending September 30, 1998 and 1997.

Net Sales. Net sales increased to $355.0 million in the nine months ended
September 30, 1998, from $346.5 million in the comparable period. PC product
sales grew 12% and comprised 48.6% of net domestic sales, compared to 44.0% in
the prior year period. Mac product sales declined 6.9% over last year.

Net domestic PC product sales increased to $145.8 million in the nine months
ended September 30, 1998 from $130.2 million in the comparable period. The
increase is due primarily to growth in sales to business and education accounts,
which increased 21.7% to $126.0 million in the nine months ended September 30,
1998 from $103.6 million in the comparable period. PC product sales represented
55.9% and 53.6% of sales to business and education accounts in each of the
respective periods.

Net domestic Mac product sales decreased 6.9% to $154.4 million in the nine
months ended September 30, 1998 from $165.9 million in the comparable period. 
Higher sales of Apple's iMac and G3 product offerings in the current quarter 
helped reverse a unit and sales decline throughout the first six months of 
1998.

International subsidiary net sales in the nine months ended September 30, 1998
were $54.8 million, an increase of 8.7% over the comparable period. Excluding
the results of subsidiaries no longer operating, net sales increased 26.9% over
the comparable period. The increase in international subsidiary net sales
resulted primarily from sales growth in the Company's operations in Germany, the
United Kingdom and France.

Gross Profit. Gross profit decreased to $38.2 million in the nine months ended
September 30, 1998 from $40.6 million in the comparable period, and decreased
between periods to 10.8% from 11.7% of net sales. Included in each period are
charges totaling $2.9 million, primarily related to allowances for obsolete and
non-returnable inventory. Excluding the charges, gross profit as a percentage of
sales was 11.6% and 12.5%, respectively. The decrease is due to continued price
competition and compression of average unit selling price.

Selling, General and Administrative Expenses. SG&A expenses increased to $48.1
million in the nine months ended September 30, 1998 from $46.5 million in the
comparable period, and increased between periods as a percentage of net sales to
13.6% from 13.4%. Charges totaling $2.3 million, primarily related to staffing
reductions and the closure or sale of certain international operations were
recorded in the current period. Included in the prior year period are charges
totaling $6.9 million, primarily related to uncollectible co-op receivables,
write-off of international goodwill, severance expense, asset revaluations and
charges related to the closure of several foreign subsidiaries. Excluding the
charges, SG&A increased to 12.9% in the nine months ended September 30, 1998
from 11.4% in the comparable period. The increase in SG&A expense is primarily
related to higher warehousing costs, salaries, and depreciation.


                                      11


<PAGE>

Other Expense. Other expense increased to $3.5 million in the nine months
ended September 30, 1998 from $1.0 million in the comparable period,
primarily related to the disposal of certain unproductive computer hardware
and software costs during the second quarter of this year.

Income Tax Benefit. The income tax benefit for the nine months ended September
30, 1998 was $4.6 million. The income tax benefit for the nine months ended
September 30, 1997 was $1.1 million. The increase in income tax benefit is due
to the increased loss recognized by the company in the nine months ended
September 30, 1998 compared to the loss in the prior year comparable period.

Net Loss. As a result of the above factors, a net loss of $8.8 million or 2.5%
of net sales was incurred for the nine months ended September 30, 1998. Net loss
for the nine months ended September 30, 1997 was $5.9 million or 1.7% of net
sales.


Trends

The Company has previously announced a planned evolution of its business
toward increased on-line sales over the Internet, increased sales to business
and education accounts through "outbound" sales efforts, and decreased
reliance upon catalogs to generate "inbound" sales activity. This evolution
continued in the third quarter of 1998, during which Internet and outbound
sales combined grew to more than 56.2% of the Company's domestic sales. The 
Company anticipates that increasing Internet and outbound sales will cause 
the percentage of its sales represented by PC/Wintel products to gradually 
increase above the 49.0% levels recorded in the second and third quarters of 
1998.

During the quarter ended September 30, 1998, sales through the Company's
Internet superstore, zones.com, grew to $13.6 million, or 12.8% of domestic
sales, an increase of 334% over the third quarter of 1997 and 73% over the
second quarter of 1998. This increase was facilitated by a variety of website
improvements during the quarter, including hardware upgrades to increase
system capacity, improvements to the website's user-friendliness, and the
addition of expanded software-delivery capabilities. The Company plans to
further customize its website to provide more efficient access and improved
product selection for its Business and Education customers. The Company also
promotes Internet sales by offering telephone sales assistance to its on-line
customers. About 70% of sales dollars through the Company's Internet store are
phone-assisted, which affords additional sales opportunities and results in
increased order sizes.

Outbound sales to business and education accounts grew to $45.9 million during
the third quarter, an increase of 20% and 15% over the third quarter of 1997
and second quarter of 1998, respectively. This growth was achieved through a
combination of process based productivity improvements and the Company's
successful efforts to expand its outbound account executive headcount. The
Company had 116 account executives at September 30, 1998, representing a 27.5%
increase during the third quarter, and intends to continue its aggressive
efforts to expand outbound sales headcount.

Inbound sales resulting from the circulation of the Company's catalogs, by
contrast, declined to $46.1 million during the third quarter, representing
17.5% and 1.3% decreases from inbound sales in the third quarter of 1997 and
second quarter of 1998, respectively. The Company believes that the rapid
growth of its Internet sales has been a significant factor in the flattening
of its inbound catalog sales, as increasing numbers of catalog recipients
choose to place their orders electronically rather than over the phone.
Approximately 60% of customers placing orders through the Internet store have
migrated from the Company's inbound catalog


                                      12


<PAGE>

sales division. The Company encourages this transition by featuring its
Internet superstore prominently throughout its catalogs and by making its
inbound telephone sales personnel available to assist on-line customers. The
Company intends to continue to adapt and adjust the size, content and
circulation of its outbound sales catalogs in an effort to optimize the
combined sales of its inbound and internet divisions. During the fourth
quarter of 1998, the Company plans to circulate 5.3 million PC Zone catalogs
and 5.6 million Mac Zone catalogs, reflecting the lessened emphasis on catalog
circulation in comparison to the fourth quarter of 1997.

Gross product margins have continued to decline industry-wide, primarily due
to falling average unit selling prices and increased price competition. The
Company's average order size has grown to $392, an increase of approximately
7% over both the third quarter of 1997 and the second quarter of 1998, due
primarily to the increase in outbound sales to business and education accounts
which support a higher average order. Although this increase in order size has
roughly offset the recent declines in gross margin percentage on an average
order, the Company expects that there may be further declines in gross product
margins, and that continued growth in order size, as well as continued cost
reductions, will likely be required to improve profitability.

The Company uses cooperative advertising funds to substantially offset the
costs associated with its catalog circulation and other marketing activities.
The amount of funding available from the Company's vendor-partners has
generally declined since 1997, both in dollars and as a percentage of sales.
The Company's net cost of advertising in the third quarter rose to $1.1
million, or 1.1% of domestic sales, compared with $504,000, or .44% in the
third quarter of 1997. Net advertising costs may continue to fluctuate or rise
in the future, as the Company continues to adapt and adjust its catalog
circulation and other marketing activities to optimize sales and profitability
in light of changing market conditions.

Industry

The market for microcomputer products is characterized by rapid changes and
frequent introductions of new products and product enhancements. These changes
result in rapid price fluctuations. Typically, prices of microcomputer products
initially increase with improvements in features, such as processing speed and
storage capacity. Prices subsequently decrease as manufacturers pass on savings
from lower-cost components and reduce their inventory of older models. The
Company expects pricing pressure to continue. In order to remain competitive,
the Company may be required to reduce its prices. Such a reduction in prices
could have a material adverse effect on the Company's future results of
operations.

Seasonal Factors

Seasonal factors cause sales of microcomputer software and hardware products
through the direct marketing channel to be somewhat stronger in the fourth
calendar quarter than in the other periods. Sales during the fourth quarter tend
to be stronger as


                                      13


<PAGE>

manufacturers make year-end introductions of new products and increased
marketing activities related to the holiday season, and as corporate
purchasing activities increase at the end of budgetary cycles.

Inflation

The Company does not believe that inflation has had a material impact on its
results of operations. However, there can be no assurance that inflation will
not have such an effect in future periods.

Liquidity and Capital Resources

As of September 30, 1998, the Company had total assets of $100.6 million, of
which $91.6 million were current assets. At September 30, 1998 and December 31,
1997 the Company had cash and cash equivalents of $13.6 million and $1.6
million, respectively, and working capital of $29.8 million and $35.1 million,
respectively. Net cash provided by operating activities was $12.5 million and
$15.6 million for the nine months ended September 30, 1998 and 1997,
respectively.

Cash inflows in the nine months ended September 30, 1998 were primarily due to a
reduction in accounts receivable and inventories, and an increase in accounts
payable. In the period ended September 30, 1998 accounts receivable decreased
$6.1 million, inventories decreased $6.2 million, and accounts payable increased
$3.3 million. Cash inflows in the nine months ended September 30, 1997 were
primarily due to a reduction in accounts receivable and inventories. In the nine
months ended September 30, 1997, accounts receivable decreased $9.5 million and
inventories decreased $33.6 million.

Cash outlays for capital expenditures were $2.0 million and $4.9 million in the
nine months ended September 30, 1998 and 1997, respectively. During the nine
months ended September 30, 1998 the Company wrote off $3.5 million of
unproductive computer hardware and software costs. During the current quarter
the Company invested $1.5 million in upgrading its current computer systems
capacity and is preparing to migrate to the newest version of its enterprise
software system in 1999.

During the nine months ended September 30, 1998 and 1997 the effect of the
foreign exchange rate on cash was an outflow of $186,000 and $153,000,
respectively.

The Company has two domestic revolving lines of credit from commercial lenders.
The Company has a $15.0 million and a $20.0 million line of credit
collateralized by accounts receivable and inventories, respectively. At
September 30, 1998, there were no borrowings outstanding under either of the
facilities. Additionally, at September 30, 1998, the Company had $2.5 million of
unused letters of credit.

The net amount of vendor credit outstanding at September 30, 1998 was $49.0
million of which $19.6 million was drawn from a $35.0 million inventory
financing facility between the Company and a commercial lender, which provides
financing for, and is collateralized by, inventory purchased from certain
participating vendors.

The Company believes that its existing available cash and cash equivalents,
operating cash flow and existing credit facilities will be sufficient to satisfy
its operating cash needs for at least the next 12 months. However, if working
capital or other capital requirements are greater than currently anticipated,
the Company could be required to seek additional funds through sales of equity,
debt or convertible securities or increased credit facilities. There can be no
assurance that additional financing will be available or that, if available, the
financing will be on terms favorable to the Company and its shareholders.


                                      14


<PAGE>

Other Matters

Impact of the Year 2000 Issue

The Year 2000 ("Y2K") issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Possible
effects of this issue could include disruption of operations including inability
to ship orders, process invoices and order product.

The Company established a Y2K assessment team in late 1997 to review all of 
its information technology "IT" systems and non-IT systems for Y2K 
compliance. The Company has contacted and received response from 
approximately 80% of its domestic systems and service suppliers. All major 
hardware and software systems have been reviewed. The Company believes that 
most of its systems, including its enterprise software system, are Y2K 
compliant. The Company has identified several systems it believes may not be 
compliant, including its phone system operating software and various computer 
workstations and servers. Additionally, a number of critical service 
providers have indicated that they are not currently compliant, including 
local and long distance phone providers, and several small software solution 
providers.

A plan to mitigate currently known compliance issues will be completed
during the fourth quarter of 1998. Testing to verify compliance will be
conducted during the first quarter of 1999. The Company will utilize both
internal and external resources to reprogram and test applications for
compliance. The Company does not currently have an estimate of all of the
expenses associated with ensuring Y2K compliance. Compliance costs for known
systems and software issues are estimated at $400,000. The testing phase,
scheduled for the first quarter of 1999, is currently expected to cost
approximately $150,000. Other costs associated with minor software compliance
are expected to be less than $100,000.

The Company has a project underway to upgrade its enterprise software system and
expects to complete this project early in the third quarter of 1999. Although
its current software version is Y2K compliant, several minor software
attachments will be replaced and brought into compliance in the process.

Based on its current assessment, the Company plans to be Year 2000 compliant 
during the third quarter of 1999. The Company is still assessing potential 
impact of Y2K issues on its foreign subsidiaries. The Company has not yet 
verified that all of its third party systems and service providers are Y2K 
compliant. Additionally, the Company has not yet completed testing to verify 
compliance for systems and accordingly has not begun contingency planning. 
Once developed, contingency plans and related cost estimates will be 
continually refined as additional information becomes available. Therefore, 
the Company cannot provide any assurance that it will be able to achieve 
timely Y2K compliance. Failure to achieve compliance could have an adverse 
effect on the Company's operations and financial results.

The activities associated with Y2K compliance have not had a material impact on
other critical IT or non-IT initiatives, and efforts to bring the Company's
non-compliant systems are not expected to delay any project or impact financial
results in any material way.

Statement under the Private Securities Litigation Reform Act of 1995

With the exception of the historical information contained herein, the matters
described herein contain forward-looking statements that involve risk and
uncertainties including but not limited to variability of quarterly results,
reliance on vendor support and relationships, and dependence on sales of
Macintosh products. These and other risk factors are described generally in the
Risk Factors section of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 filed with the Securities and Exchange Commission.


                                      15



<PAGE>


                          Part II. Other Information


Item 6.  Exhibits and Reports on Form 8-K

<TABLE>
<S>      <C>
(a)      Exhibits

27.1     Financial Data Schedule

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed during the Quarter ended
         September 30, 1998.
</TABLE>


Signatures

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


                                       MULTIPLE ZONES INTERNATIONAL, INC.


Dated:  November 13, 1998           By:
                                       ----------------------------------------
                                       Firoz H. Lalji, Chief Executive Officer



Dated:  November 13, 1998           By:
                                       -----------------------------------------
                                       Peter J. Biere, Chief Financial Officer


                                      16



<PAGE>

                                EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibits
<S>               <C>
27.1              Financial Data Schedule

</TABLE>


                                      17