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

                                    FORM 10-Q

(Mark One)

[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       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: 0-22515


                          MILLENNIUM ELECTRONICS, INC.
             (Exact name of Registrant as specified in its charter)

            Nevada                                        33-0750730
  (State or other jurisdiction                         (I.R.S. Employer
  of incorporation or organization)                    Identification No.)

  51 Discovery, Irvine, California                           92618
  (Address of principal executive offices)                 (Zip Code)


       Registrant's telephone number, including area code: (949) 788-8100



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 .....


At August 14, 1998, there were 8,282,445 shares of the Registrant's $.001 Par
Value Common Stock outstanding.



                            Exhibit Index on page 27


                                  Page 1 of 28

<PAGE>

                                TABLE OF CONTENTS

                                                                       Page No.


PART I - FINANCIAL INFORMATION............................................3

Item 1.  Financial Statements.............................................3
         CONSOLIDATED CONDENSED BALANCE SHEETS............................3
         CONSOLIDATED CONDENSED STATEMENTS OF INCOME......................4
         CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS..................5
         NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.............6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operation.........................................9

PART II  - OTHER INFORMATION.............................................23

Item 1.  Legal Proceedings...............................................23

Item 2.  Changes in Securities ..........................................23

Item 3.  Defaults Upon Senior Securities.................................23

Item 4.  Submission of Matters to a Vote of Security Holders.............23

Item 5.  Other Information...............................................24

Item 6.  Exhibits and Reports on Form 8-K................................25

SIGNATURES ..............................................................26

EXHIBIT INDEX............................................................27



                                  Page 2 of 28

<PAGE>
PART I -   FINANCIAL INFORMATION
Item 1.    Financial Statements

                          MILLENNIUM ELECTRONICS, INC.
                               AND ITS SUBSIDIARY
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                                      6/30/98        12/31/97
                                                    (Unaudited)      (Audited)
Current assets
  Cash & Cash Equivalents                         $    192,084    $    211,273
  Accounts receivable, net of an allowance for
    doubtful accounts of  $783,000 and $175,000
    respectfully                                     5,740,865       6,876,495
  Stock Subscription Receivable                              0       1,494,366
  Inventories                                        2,384,565       1,541,666
  Prepaid expenses                                     101,779         100,139
  Income Taxes Receivable                              157,881         163,719
  Deferred Tax Asset                                   125,000         125,000
  Other current assets                                  92,355          57,551
                                                  ------------    ------------
       Total current assets                          8,794,529      10,570,209

Furniture and equipment, net                           370,826         147,675
Other assets                                           103,663          97,735
Excess cost over fair value of net assets
  acquired, net of accumulated amortization
  of $168,516 and $84,258 respectfully               2,106,421       2,274,937
                                                  ------------    ------------
          Total assets                            $ 11,375,439    $ 13,090,556
                                                  ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Lines of credit                                 $  4,307,334    $  4,877,286
  Accounts payable and accrued liabilities           1,951,510       1,317,229
                                                  ------------    ------------
       Total current liabilities                     6,258,844       6,194,515

Long Term Liabilities
  Deferred income taxes                                 25,000          25,000
                                                  ------------    ------------
Stockholders' equity
  Common stock, par value
    .001:  25,000,000 shares authorized,
    8,282,445 and 8,167,150 shares issued
    and outstanding                                      7,988           8,167
  Treasury Stock                                       (84,087)              0
  Additional Paid Capital                            6,927,279       6,575,359
  Retained earnings (accumulated deficit)           (1,759,585)        287,515
                                                  ------------    ------------
       Total stockholders' equity                    5,091,595       6,871,041
                                                  ------------    ------------
           Total liabilities and stockholders'
             equity                               $ 11,375,439    $ 13,090,556
                                                  ============    ============

See the accompanying notes to these consolidated condensed financial statements

                                  Page 3 of 28
<PAGE>
                          MILLENNIUM ELECTRONICS, INC.
                               AND ITS SUBSIDIARY
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>
                                               3 Months Ended                 6 Months Ended
                                                  June 30,                        June 30
                                       ----------------------------    -----------------------------
                                            1998            1997            1998            1997
                                            ----            ----            ----            ----
<S>                                    <C>             <C>             <C>             <C>         
Net sales                              $  8,782,839    $  7,394,183    $ 22,911,590    $ 19,971,927

Cost of sales                             8,381,456       6,619,700      21,590,142      17,993,311
                                       ------------    ------------    ------------    ------------

Gross profit                                401,383         774,483       1,321,448       1,978,616

Selling, general and administrative
   expenses                               1,483,022         826,466       3,100,491       1,654,400
                                       ------------    ------------    ------------    ------------

Income (Loss)  from operations           (1,081,639)        (51,983)     (1,779,043)        324,216

Other income (expense)
    Other income                                805               0             806          18,771
    Other expenses                         (103,772)       (102,069)       (268,863)       (253,302)
                                       ------------    ------------    ------------    ------------

Income (Loss) before provision
   for income taxes                      (1,184,606)       (154,052)     (2,047,100)         89,685

Provision (Benefit) for Income taxes
    Current                                 174,000         (91,085)              0         (86,429)
    Deferred                                175,000          30,000       ________0         (55,600)
                                                       ------------    ------------    ------------

Net income                             $ (1,533,606)   $    (92,967)   $ (2,047,100)   $    231,714
                                       ============    ============    ============    ============

Basic earnings (loss) per share        $       (.19)   $       (.01)   $       (.25)   $        .04
                                       ============    ============    ============    ============

Diluted earnings (loss) per share      $       (.19)   $       (.01)   $       (.25)   $        .04
                                       ============    ============    ============    ============

Weighted average shares outstanding       8,226,100       7,243,051       8,226,100       6,240,359
                                       ============    ============    ============    ============
</TABLE>


 See the accompanying notes to these consolidated condensed financial statements






                                  Page 4 of 28

<PAGE>
                          MILLENNIUM ELECTRONICS, INC.
                               AND ITS SUBSIDIARY
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                        For the Six Months Ended June 30,

                                                     6/30/98         6/30/97
                                                   (Unaudited)     (Unaudited)
Cash flows from operating activities
  Net income (loss)                               $(2,047,100)   $   231,714
  Adjustments to reconcile net income (loss)
    to net cash used in operating activities
  Deferred income taxes                                     0        (55,600)
  Depreciation and amortization                       215,972         10,276
   (Increase) decrease in
      Accounts receivable                           1,135,630      2,357,288
      Inventories                                    (842,899)      (395,987)
      Income tax receivable                             5,839              0
      Prepaid expenses & other assets                 (69,074)    (1,487,600)
   Increase (decrease) in
      Accounts payable and accrued liabilities        634,283       (622,464)
      Income Tax  Payable                                   0        (10,881)
                                                  -----------    -----------
      Net cash (used in) provided by
         operating activities                        (967,349)        26,746
                                                  -----------    -----------
Cash flows from investing activities
  Acquisition of Beacon, net of cash acquired               0        513,534
  Due to others                                             0        (80,000)
  Acquisition of furniture and equipment             (243,908)       (57,695)
  Repayment (issuance) of note receivable
    to stockholder                                          0        151,339
                                                  -----------    -----------
      Net cash (used in) provided by
         investing activities                        (243,908)       527,178
                                                  -----------    -----------
Cash flows from financing activities
  Net proceeds from line of credit facility          (569,952)    (2,191,102)
  Increase (decrease) in book overdraft                     0        (98,289)
  Distributions to "S" corporation stockholders             0       (533,257)
  Proceeds from  Private Placement                  1,846,107      2,983,997
  Proceeds from (payments on) stockholder loan              0         23,486

Payment of offering costs and commissions                   0       (437,532)
  Repayment of stockholder loan                             0       (301,227)
  Common stock repurchased                            (84,087)             0
                                                  -----------    -----------
      Net cash provided by (used in)
         financing activities                       1,192,068       (553,924)
                                                  -----------    -----------
                Net change                            (19,189)          --
                                                  -----------    -----------
Cash at beginning of period                           211,273           --
                                                  -----------    -----------

Cash at end of period                             $   192,084    $      --
                                                  ===========    ===========
 See the accompanying notes to these consolidated condensed financial statements

                                  Page 5 of 28
<PAGE>
                          MILLENNIUM ELECTRONICS, INC.
                               AND ITS SUBSIDIARY
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Organization and Line of Business

      Millennium Electronics, Inc. ("MEI" or the "Registrant") was incorporated
in Nevada on February 13, 1997 with the intention of being a holding company.
MEI, through its wholly-owned subsidiary, Millennium Memory, Inc. ("MMI" and
together with Registrant, the "Company"), is engaged in the manufacture and
distribution of computers to resellers. In addition, the Company is engaged in
manufacturing, through subcontractors, and distribution of Dynamic Random Access
Memory ("DRAM"), memory upgrade components for personal computers, laptops, and
notebook computers, file servers and printers to retailers, resellers, value
added resellers, value added distributors, original equipment manufacturers,
aggregators, and national or regional distributors.

Summary of Significant Accounting Policies
------------------------------------------

Principles of Consolidation

      The accompanying consolidated financial statements include the accounts of
MEI and MMI, including the NetRam division of MMI ("NetRam"), from the date the
agreement of merger was signed, September 30, 1997, after the elimination of
intercompany accounts and transactions.

Cash and Cash Equivalents

      For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with original maturities of three months or
less to be cash equivalents.

Interim Financial Information

      The consolidated interim financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations.

      The consolidated interim financial statements reflect all adjustments
(which include only the normal recurring adjustments) necessary for a fair
presentation of financial position, results of operations and cash flows for
such periods. The results of operations for the six month period ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1998, or any other future periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Factors that May Affect Future Results."


                                  Page 6 of 28

<PAGE>

Inventories

      Inventories, which are primarily memory chips and computer components, are
stated at the lower of cost (weighted average method) or market.

Revenue Recognition

      The Company recognizes revenue from product sales at the time of shipment
net of expected returns.

Lines of Credit

      As of June 30, 1998, the Company had a $10,000,000 line of credit
(accounts receivable credit line) expiring September 30, 1999. On the expiration
date, the line shall automatically and continuously renew for successive
additional terms of one year unless terminated at the option of the Company or
the lender on the anniversary date. As of June 30, 1998, the line bears interest
at prime plus 1.5% per annum. The Company's ability to borrow money under this
line of credit agreement is based upon a percentage of defined accounts
receivable. In addition, the line is collateralized by substantially all assets
of the Company.

      The debt agreement contains certain restrictions and covenants that
prohibit the Company from entering into certain transactions without lender
approval and also limits distributions to stockholders. In addition, the Company
is required to make a credit facility fee payment of $3,500 per quarter in
advance, and a $50,000 loan fee is payable on the earlier of the third
anniversary date (September 1998) or the date the loan agreement is terminated
or terminates by its terms. The $50,000 loan fee is being accrued over the term
of the agreement.

      As of June 30, 1998, the Company had a $1,000,000 line of credit
(inventory credit line). The Company borrowed an initial amount of $150,000,
which was repaid on March 31, 1997. The Company's ability to borrow money under
this line of credit agreement is based upon a percentage of defined inventories.
This line of credit's remaining terms are identical to the accounts receivable
credit line.

      The outstanding balance under the accounts receivable line of credit
agreement at June 30, 1998 was $4,109,334. The outstanding balance under the
inventory line of credit agreement at June 30, 1998 was $198,000.

Related Party Transactions

      The Company pays, on behalf of the majority stockholder of the Company,
monthly lease payments for two vehicles of approximately $2,160.

      The Company pays a consulting fee of $5,000 per month to the firm Glick
Morganstern for interfacing with the Company's secured financing lender and for


                                  Page 7 of 28

<PAGE>


general organizational consulting. Barry G. Morganstern, a director of the
Company, is a founder and principal of Glick Morganstern.

      The Company's predecessor, Beacon Capital Investment, Inc., entered into a
one year Consulting Agreement with Douglas P. Morris, a director of the Company.
The Company has renewed the Consulting Agreement for the one year period
beginning April 1, 1998. Over the current term of the Consulting Agreement, the
Company will pay Mr. Morris $100,000.

Other Significant Transactions

      The Company experienced a reduction in orders from its largest customer as
a result of quality problems in its sub-$1000 computers and a decision to reduce
the Company's losses in the retail channel by selectively accepting higher
margin orders. In the second quarter of 1998, this customer accounted for 20% of
the revenues compared to 31% in the first quarter of 1998.

      In late April 1998 the company relocated to a new 34,000 square foot
facility located in Irvine, California. The facility enables the company to
perform in-house manufacturing as opposed to subcontracting the manufacturing to
an outside source. During the April and May time period the company experienced
production delays as a result of the start up. In addition, the company also
received a high level of returns from the quality problems related to the third
party contract manufacturer used in the fourth quarter 1997 and first quarter
1998.

      Each quarter, the Company makes an assessment of its expected tax rate for
the year. During the quarter ended June 30, 1998, the Company determined that it
does not expect to have an income tax liability at the end of the year.
Additionally, there was no way to determine if it was more likely than not that
the Company would be able to use its accumulated net operating losses.
Therefore, for the quarter ended June 30, 1998, the Company elected to reverse
the tax benefit recognized in the first quarter.

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

      This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the financial
statements of the Company included in this Form 10-Q.



                                  Page 8 of 28

<PAGE>

Forward Looking Statements

      The statements contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations include "forward looking"
information 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,
and are subject to the safe harbor created by those sections. The actual future
results of the Company could differ materially from those projected in the
forward looking information. For a discussion of certain factors that could
cause actual results to differ materially from those projected by the forward
looking information, see "Factors That May Affect Future Results" herein.

Background

      The Company manufactures and sells personal computer ("PC") systems and
semiconductor memory products through its wholly-owned subsidiary, MMI. The
Company develops, markets, assembles, sells and supports a wide range of high
quality, high-performance desktop PC systems as well as a line of network
servers under the NetRam brand name. The Company also develops markets,
assembles, sells and supports a limited range of quality, low-cost basic
computers for home and business under the Laguna Computer brand name. In
addition, the Company offers a variety of other system components with its PC
systems and network servers, including monitors, modems, audio and video cards,
CD-ROM drives, hard drives, floppy drives and network cards.

      The Company also manufactures, through subcontractors, and distributes
DRAM memory upgrade components for PC's, laptop and notebook computers, file
servers and printers to retailers, resellers, value added resellers ("VARs"),
value added distributors ("VADs"), original equipment manufacturers ("OEMs"),
aggregators and national or regional distributors.

      MMI effectively commenced operations in April of 1995 focusing on the
manufacture, through subcontractors, and sale of standard memory modules. In
1997, the Company began manufacturing and selling computer systems, which are
manufactured on a pre-sold basis and are sold primarily to the Company's three
largest customers. In September 1997, the Company expanded its sales of PC
Computer Systems with the acquisition by merger of NetRam Components, Inc., a
California corporation ("NetRam"). Following the merger, NetRam became a
division of MMI. NetRam manufactures and distributes PC computer systems to both
wholesale and retail markets.

      For the six months ended June 30, 1998 and the full year 1997, the
Company's top ten customers accounted for approximately 80% and 63%,
respectively, of the Company's net sales. While the Company expects to continue
to be dependent upon these customers for a significant percentage of its net
sales, the composition of the Company's top ten customers may change in the


                                  Page 9 of 28

<PAGE>

future. The Company has added a number of new customers in recent months, and it
expects to increase its sales to both existing and new customers. In the quarter
ended June 30, 1998, and in the full year 1997, the Company's net sales to its
largest customer accounted for approximately 20% and 33%, respectively. The
Company is striving to expand its base to include more than three large
customers. International sales by the Company were minimal for both periods.

Income as a Percentage of Net Sales

      The following table sets forth certain condensed statements of income data
of the Company expressed as a percentage of net sales (unaudited):

                                           Three Months Ended   Six Months Ended
                                                June 30,            June 30,
                                           ------------------   ----------------
                                             1998      1997      1998      1997
                                             ----      ----      ----      ----

Net sales .............................     100.0%    100.0%    100.0%    100.0%
                                 
Cost of sales .........................      95.4      89.5      94.2      90.1
Gross Profit ..........................       4.6      10.5       5.8       9.9
Sales, general & administrative .......      16.9      11.2      13.5       8.3
Income (Loss) from operations .........     (12.3)      (.7)     (7.7)      1.6

Other income (expense), net ...........      (1.2)     (1.4)     (1.2)     (1.2)
Income (Loss) before provision for
  income taxes ........................     (13.5)     (2.1)     (8.9)       .4
Provision (Benefit) for income taxes ..       3.9       (.8)        0       (.7)
Net income (Loss) .....................     (17.4)     (1.3)     (8.9)      1.1


Results of Operations
---------------------

Three month period ended June 30, 1998 and 1997
-----------------------------------------------

Net Sales

      Consolidated net sales for the second quarter of 1998 were $8.8 million
representing an increase of approximately 16% over the second quarter of 1997
net sales of $7.4 million. Net sales of computers during the second quarter of
1998 declined 44.2% to $5.3 million from $9.5 million during the first quarter
ended March 31, 1998. There is no comparison to second quarter 1997 for the
computers, since computer sales commenced with the acquisition of NetRam in the
fourth quarter 1997 due to the extraordinary level of returns of sub-$1,000
computers and a decline in sales to the retail channel. Memory module and PC
card sales declined 54% to $3.4 million from the comparable 1997 second quarter
level of $7.4 million as a results of the Company's strategic shift in emphasis
to computer sales and a continued decline in memory prices.



                                  Page 10 of 28

<PAGE>

Gross Profit

      Cost of sales includes the costs of computer components, memory chips, and
other components and materials purchased by the Company for its products, as
well as subcontractor charges and overhead costs associated with testing and
manufacturing.

      For the quarter ended June 30, 1998, gross profit decreased 48.1% to
approximately $401,400 from $774,500 in same quarter of 1997. In the same
periods, gross profit as a percentage of net sales decreased to 4.6% from 10.5%,
respectively. The decline in gross margin was due primarily to two events. The
first major event was a write down to market of on hand inventories of
approximately $263,000, reflecting the impact of pricing pressures within the
industry. The second factor negatively impacting gross margin was an
extraordinary increase in sales returns of the Company's sub-$1000 computers.
These computers were assembled by a third party contract manufacturer and do not
appear to have been properly tested upon final assembly. The Company has now
assumed inventory and manufacturing control in its new combined headquarters and
manufacturing facility. These sales returns have in turn caused an increase in
inventories.

      Gross margin on computer sales declined to 2.9% in the second quarter
ended June 30, 1998 from 5.9% in the first quarter ended March 31, 1998. Factors
responsible for the drop were the previously mentioned inventory adjustments
which accounted for a decline of 2.3% of the second quarter 1998 margin, the
higher level of returns also previously discussed, and a comparatively
unfavorable sales channel mix. Sales to retailers are at much lower margins than
those experienced through VAR channels. These problems were further exacerbated
by the production delays associated with the start up of in-house manufacturing.

      Gross margin on memory products declined to 7.6 % in the second quarter of
1998 from 10.5% in the second quarter of 1997. The decrease is attributable to a
general decline in memory prices.

Selling, General and Administrative

      Selling, general and administrative costs include all personnel costs,
including salaries, commissions, performance-based bonuses and employee
benefits, the costs of advertising, promotions and trade shows, and rental costs
and other support costs, including utilities, insurance and professional fees.
Selling, general and administrative expenses increased 79% to $1,483,022 in the
three month period ended June 30, 1998 from $826,466 in the three month period
ended June 30, 1997. As a percentage of net sales, selling, general and
administrative expenses increased to 16.9% from 11.2%, respectively, in the same
periods. Reserves for doubtful accounts increased from $175,000 as of December
31, 1997 to $783,000 as of June 30, 1998. The increase in reserves consist of
$534,600 for trade receivables outstanding in excess of 90 days for disputed
receivables relating to returns and price adjustments, $43,700 for outstanding
trade receivables acquired in the NetRam acquisition, $60,500 for pending trade
insurance claims, and the balance of $144,200 represents defective components
that are to be returned to the Company upon the Company's issue of replacement
components and computers awaiting evaluation.


                                  Page 11 of 28

<PAGE>

     For the three month period ended June 30, 1998, $90,168 of goodwill
related to the NetRam acquisition was amortized.

      Other expense level increases stem from an increase in upper management to
accompany the current growth of the Company, additional legal, accounting and
public relations expenses as a result of being a public company and increases in
selling expenses attributable to the shift in emphasis from semiconductor memory
products to PC computers and relating to promotion and marketing to a wider
geographic area.

Other Income (Expense), Net

     Other income (expense), increased to a net expense of $102,967 in the
three month period ended June 30, 1998 from a net expense of $102,069 in the
three month period ended June 30, 1997. As a percentage of sales the other
income (expense) decreased to 1.2% from 1.4% in those same periods. The decrease
is principally due to the decrease in the credit line rate from prime plus 3%
per annum in second quarter 1997 to prime plus 1.5% per annum in second quarter
1998. This decrease in rate is part of the line of credit agreement which
establishes a reduction in rate upon meeting a certain minimum net worth. The
Company expects that utilization of its line of credit will continue to increase
as sales increase.

Provision for Income Taxes

      The Company's effective tax rate for the three month period ended June 30,
1998 and the three month period ended June 30, 1997 was 0% and 40%,
respectively. Due to the loss in the six-month period ended June 30, 1998 and
the expectation that the Company will not be profitable for the fiscal year end
1998, the Company elected to reverse the tax benefit recognized for the quarter
ended March 31, 1998. The Company was taxed as an "S" corporation prior to March
31, 1997. Effective with the merger of the Company with Beacon Capital
Investment, Inc. on March 31, 1997, the Company changed its "S" corporation
status and began to be taxed as a "C" corporation at which time the Company
recorded a deferred tax asset in the amount of $87,600 in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109.

Six month period ended June 30, 1998 and 1997
---------------------------------------------

Net Sales

      Consolidated net sales for the six month period of 1998 were $22.9 million
representing an increase of approximately 15% over the six month period of 1997.
The primary factor contributing to this increase was the acquisition of NetRam
in the fourth quarter 1997, and diversifying into the manufacturing of 
computers.

Gross Profit

      For the six month period ended June 30, 1998, gross profit decreased 31.6%
to approximately $1.3 million from $1.9 million in the six month period ended
June 30, 1997. In the same periods, gross profit as a percentage of net sales


                                  Page 12 of 28

<PAGE>

decreased to 5.8% from 9.9%, respectively. The decline in gross margin was due
primarily to an extraordinary increase in sales returns of the Company's
sub-$1,000 computers. These computers were assembled by a third party
manufacturer and do not appear to have been properly tested upon final assembly.
The Company has now assumed inventory and manufacturing control in its new
combined headquarters and manufacturing facility. However, there have been
production delays associated with the start up of in-house manufacturing which
have contributed to a decline in gross margin. Other factors contributing to
the decrease in gross margin are the unfavorable sales channel mix, and the
decline in memory prices. Computers sold through the retail channel are at
much lower margins than those experienced through VAR channels.

Selling, General and Administrative

      Selling, general and administrative expenses increased 94% to $3.1 million
in the six month period ended June 30, 1998 from $1.6 million in the six month
period ended June 30, 1997. As a percentage of net sales, selling, general and
administrative expenses increased to 13.5% from 8.3%, respectively, in the same
periods. As previously discussed, reserves for doubtful accounts increased from
$175,000 as of December 31, 1997 to $783,000 as of June 30, 1998. See "Three
month period ended June 30, 1998 and 1997 - Selling, General and
Administrative."

     For the six month period ended June 30, 1998, $180,336 of goodwill related
to the NetRam acquisition was amortized.

      Other expense level increases stem from an increase in upper management to
accompany the current growth of the Company, additional legal, accounting and
public relations expenses as a result of being a public company and increases in
selling expenses attributable to the shift in emphasis from semiconductor memory
products to PC computers and relating to promotion and marketing to a wider
geographic area.

Other Income (Expense), Net

      Other income (expense) increased to a net expense of $268,057 in the six
month period ended June 30, 1998 from a net expense of $234,531 in the six month
period ended June 30, 1997. As a percentage of sales the other income (expense)
remained the same at 1.2% of sales in those same periods.

Provision for Income Taxes

     The Company's effective tax rate for the six month period ended June 30,
1998 and the six month period ended June 30, 1997 was 0% and 158%, respectively.
The Company was taxed as an "S" corporation prior to March 31, 1997. Effective
with the merger of the Company with Beacon Capital Investment, Inc. on March 31,
1997, the Company changed its "S" corporation status and began to be taxed as a
"C" corporation at which time the Company recorded a deferred tax asset in the
amount of $87,600 in accordance with SFAS No. 109. Due to the loss in the
six-month period ended June 30, 1998 and the expectation that the Company will
not be profitable for the fiscal year end 1998, the Company elected to reverse
the tax benefit recognized for the quarter ended March 31, 1998.


                                  Page 13 of 28

<PAGE>

Liquidity and Capital Resources

     For the six month period ended June 30, 1998, accounts receivable declined
by $1,135,630 to $5,740,865 due to the increase in reserves, as previously
discussed, and the decline in net sales from first quarter 1998 sales levels.

     Since its inception, the Company has used funds generated from borrowings
to support its operations, finance inventory and acquire capital equipment. In
the three month period ended June 30, 1998 and the three month period ended June
30, 1997, the Company used and generated cash from operating activities of
$967,300 and $26,700, respectively. As of June 30, 1998, the Company had
$4,912,505 available under its principal line of credit, and working capital of
$2,535,686.

     The Company has a revolving line of credit of $10,000,000 expiring on
September 30, 1999 that is secured by substantially all of the Company's assets.
On the expiration date the line will automatically and continuously renew for
successive additional terms of one year unless terminated at the option of the
Company or the bank on the anniversary date. Amounts available for borrowing
under the Company's existing line of credit are limited to the lower of the
commitment amount or a borrowing base amount calculated based on certain levels
of inventory and accounts receivable. As of June 30, 1998, the outstanding
balance under the accounts receivable line of credit was $4,109,334. Financial
covenants set forth in the Company's line of credit agreement prohibit the
Company from paying dividends where the payment of such dividends would reduce
the Company's net worth below certain levels and prohibit the Company from
engaging in certain transactions without lender approval.

      Capital expenditures totaled $243,900 and $57,700 in the six month periods
ended June 30, 1998 and 1997, respectfully. The expenditures were primarily for
office, test, warehousing and assembly equipment resulting from the Company's
move to its new headquarters and manufacturing facility in late April, 1998.

      The Company is in the process of seeking additional funding to support
working capital needs in support of the Company's expansion. Current cash flow
from operations and the amounts available under its existing lines of credit may
not be sufficient to meet its working capital and capital expenditure
requirements for the next twelve months.

Factors That May Affect Future Results
--------------------------------------

      The Company's business, financial condition and results of operations may
be impacted by a number of factors including, without limitation, the factors
discussed below.

Significant Customer Concentration

      During the years ended December 31, 1996 and 1997, and in the six month
period ended June 30, 1998, the Company had two major customers which accounted
for approximately 50%, 42% and 47% of the Company's net sales during those
periods, respectively. The amounts due from these major customers on December
31, 1996 and 1997, and on June 30, 1998 amounted to approximately $4,785,000,
$5,335,000, and $3,243,000, respectively. The Company's ten largest customers
accounted for 80%, 63%, and 80% of net sales in 1996 and 1997, and the six month
period ended June 30, 1998, respectively. The Company expects to continue to be
dependent upon those customers for a significant percentage of its sales;

                                  Page 14 of 28

<PAGE>

however, there can be no assurance that such customers will continue to utilize
the Company's products at current levels, if at all. The loss of a major
customer or any reduction in orders by any such customer could have a material
adverse effect on the Company's business, financial condition and results of
operations.

      The Company generally has no firm long-term volume commitments from its
customers and generally enters into individual purchase orders with its
customers. The Company has experienced cancellations of orders and fluctuations
in order levels from period to period and expects it will continue to experience
such cancellations and fluctuations in the future. In addition, customer
purchase orders may be canceled and order volume levels can be changed, canceled
or delayed with limited or no penalties. The replacement of canceled, delayed or
reduced purchase orders with new business cannot be assured. Moreover, the
Company's business, financial condition and results of operations will depend
upon its ability to obtain orders from new customers, as well as the financial
condition and success of its customers, its customers' products and the general
economy. The factors affecting any of the Company's major customers or their
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.

Intense Competition

      The memory module and personal computer industries are intensely
competitive. The memory module and personal computer manufacturing markets are
comprised of a large number of competitive companies, several of which have
achieved a substantial share of their respective markets. Certain of the
Company's competitors in each of these markets have substantially greater
financial, marketing, technical, distribution and other resources, greater name
recognition, lower cost structures and larger customer bases than the Company.
In the OEM memory module market, the Company competes against semiconductor
manufacturers that maintain captive memory module production capabilities,
including Celestica (a division of IBM), Integrated Device Technology, Inc.,
Micron Electronics, Inc. (a subsidiary of Micron Technology Inc.), and Multichip
Technology, Inc. (a division of Cypress Semiconductor Corporation). The Company
also competes with independent memory module manufacturers, including PNY
Electronics, Inc. In the computer systems reseller market for memory modules,
the Company primarily competes with Kingston Technology, Inc., SMART Modular
Technologies, Viking Technology, Inc. and Vision Tek. In the PC manufacturing
market, the Company competes against PC manufacturers that maintain captive PC
systems production capabilities, including but not limited to companies such as
Compaq Computer Corporation, Packard Bell NEC. Inc., Dell Computer Corporation,
Gateway 2000, Inc. and Hewlett-Packard Company. The Company faces competition
from current and prospective customers that evaluate the Company's capabilities
against the merits of manufacturing products internally. In addition, the
Company competes and expects to continue to compete with certain of its
suppliers. Those suppliers may have the ability to manufacture competitive
products at lower costs than the Company as a result of their integration. The
Company also faces and may face competition from new and emerging companies that
have recently entered or may in the future enter the markets which the Company
serves. To be competitive, the Company must continue to produce products
promptly, maintain quality levels, and offer flexible delivery schedules,
deliver finished products on a reliable basis and compete favorably on the basis
of price. In addition, increased competitive pressure has led in the past and
may continue to lead to intensified price competition, resulting in lower prices
and gross margins, which could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to compete successfully in the future.

                                  Page 15 of 28

<PAGE>

Fluctuations in Operating Results

      The Company's results of operations and gross margins have in the past
fluctuated significantly and may in the future continue to fluctuate
significantly from period to period. The primary factors that have affected and
may affect in the future the Company's results of operations include the
inability to procure required components, adverse changes in the mix of products
sold by the Company, fluctuating market demand for and declines in the selling
prices of the Company's products, market acceptance of new products and enhanced
versions of the Company's products, delays in the introduction of new products
and enhancements to existing products, manufacturing inefficiencies associated
with the start up of new product introductions, the timing of new product
announcements and releases by the Company or its competitors, the timing of
significant orders, patterns of spending by customers, delays, cancellations or
rescheduling of orders due to customer financial difficulties or other events,
inventory obsolescence, including the reduction in value of the Company's
inventories due to unexpected price declines, unexpected product returns, and
cycles in the Company's targeted markets. Other factors which may affect the
Company's results of operations in the future include the loss of a principal
customer or the short term loss of a customer due to product inventory
accumulation by the customer (such as occurred in the second quarter of 1997 and
the first quarter of 1998), the ability to volume produce products and meet
customer requirements, the timing of expenditures in anticipation of increased
sales, and regulatory changes.

      In addition, operating results in future periods may be impacted by
general economic conditions and various competitive factors, including
price-based competition and competition from other parties employing competing
technologies. The Company's operating results could also be affected in any
given period by business interruptions or costs associated with an earthquake,
fire, theft or other similar events outside the control of the Company, which
events may not be fully covered by applicable insurance coverage.

      The Company's gross margins have varied and will continue to vary
significantly based on a variety of factors, including the mix of products sold
and the manufacturing services provided, the channels through which the
Company's products are sold, declines in selling prices, the level of
manufacturing efficiencies achieved and pricing by competitors or suppliers. The
selling prices of the Company's memory products have declined in the past and
the Company expects that prices will decline in the future. The decline in
selling price may not be offset by increased unit sales volumes of existing
memory products or the introduction and sale of new semiconductor memory
products in quantities sufficient to compensate for any declines in selling
prices because there can be no assurance that the Company will be able to
increase unit sales volumes of its semiconductor memory products, introduce and
sell new semiconductor memory products or reduce its cost per unit.

      The Company expects to increase sales of PC systems. Except for sales to
retailers, the margins associated with the sale of the Company's PC systems are
higher than those associated with the Company's semiconductor memory products.
Accordingly, the Company's ability to maintain or increase net sales will be, in
part, dependent upon its ability to transition from primarily selling
semiconductor memory products to primarily selling PC systems. Declining selling


                                  Page 16 of 28

<PAGE>

prices of its PC systems may also have a material adverse effect on the
Company's gross margins unless the Company is able to reduce its cost per unit
to offset declines in selling prices or increase the unit sales volume of its PC
systems. There can be no assurance that the Company will be able to successfully
change its focus from selling semiconductor memory products to selling PC
systems, reduce its cost per units of its PC products or increase the unit sales
volumes of its PC systems.

      The Company's results of operations may also be affected by inflation and
the value of the United States dollar due to the fact that the Company purchases
components from foreign suppliers. Fluctuations in the value of the United
States dollar in relation to foreign currencies could increase the cost of
certain components for the Company's products and could also make the price of
the Company's products in foreign countries more expensive compared to the price
of other companies' products denominated in other currencies.

      There can be no assurance that the Company will maintain its current level
of net sales or rate of growth for any period in the future. Accordingly, there
can be no assurance that the Company will be able to be profitable or that it
will not sustain losses in future periods. The Company believes that the
period-to-period comparisons of the Company's financial results should not be
relied upon as indications of future performance. Due to the foregoing factors,
it is likely that in some future quarter the Company's operating results will be
below the expectations of public market analysts and investors.

Dependence on Limited Sources of Supply

      The Company depends on third party manufacturers to produce certain of the
Company's memory modules and PC computer products. The electronics industry has
experienced shortages in semiconductor memory devices and computer components,
including DRAM. Shortages may occur in the future or supplies could be available
only with increased lead times. The Company generally has no written agreements
with its suppliers. The inability to continue to obtain sufficient supplies of
components as required, or to develop alternative sources if required, could
cause delays, disruptions or reductions in product shipments which could damage
relationships with current or prospective customers, could impede the Company's
ability to respond quickly to changes in demand, could increase prices and could
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company will
receive adequate supplies on a timely basis in the future despite the strong
relationships with its current suppliers.

Risks Associated With New Facility

      The Company began operations at its new facility in late April 1998. This
facility requires the expenditure of significant management resources. In
addition to the usual risk of establishing a new manufacturing facility, such as
installation of equipment, implementation of systems, procedures and controls
and the hiring and training of qualified personnel, there are additional risks
associated with this facility. The Company is expanding its business to include
the process of assembling its PC systems. There can be no assurance that the
Company will not experience delays and other start-up difficulties or that once
the facility is fully operational that it will produce high quality and low cost


                                  Page 17 of 28

<PAGE>

memory modules and PC systems. Manufacturing and other problems which occur in
connection with the commencement, expansion and integration of operations at
this facility could materially adversely affect the Company's results of
operations and financial condition.

Difficulties Inherent In The Acquisition Of Or Merger With Other Entities

      Acquisitions and mergers involve numerous risks, including difficulties in
the assimilation of the operations, technologies and products of the acquired
companies, the diversion of management's attention from other business concerns,
risks of entering markets in which the Company has no or limited direct prior
experience and where competitors in such markets have stronger market positions,
and the potential loss of key employees of the acquired company. Achieving the
anticipated benefits of the NetRam merger will depend in part upon whether the
integration of businesses is accomplished in an efficient and effective manner,
and there can be no assurance that this will occur. The successful combination
of companies in the high technology industry may be more difficult to accomplish
than in other industries. The combination of companies requires, among other
things, integration of the companies' respective product offerings and
coordination of their sales and marketing and research and development efforts.
There can be no assurance that such integration will be accomplished smoothly or
successfully. The integration of certain operations following the NetRam merger
will require the dedication of management resources that may distract attention
from the day-to-day business of the combined company. The inability of
management to successfully integrate the operations of NetRam could have a
material adverse effect on the business and results of operations of the
Company.

Inventory Purchasing Policy

      The Company's current policy is to purchase 75% of its inventory only if
it has been pre-sold; the balance is generally purchased at reduced prices in
anticipation of future sales. Such anticipatory purchases will expose the
Company to the risk that it will not be able to use such components before they
become obsolete and to adverse fluctuations in the price of such components and
of the products the Company sells, while the non-anticipatory purchasing policy
exposes the Company to the risk that it will either not be able to receive
inventory in a timely manner or will have to pay a higher price for such
inventory. Accordingly, there can be no assurance that the Company's purchasing
policy will be profitable.

Management of Growth; Expansion of Operations

      The Company has significantly expanded its operations since its inception.
Projected future growth will significantly increase the responsibility of
existing management, which may place a significant strain on the Company's
limited personnel, management and other resources. The Company's ability to
manage future growth will depend upon continued expansion of its accounting and
other internal management systems, procedures and controls. There can be no
assurance that significant problems in those areas will not occur or that the
Company will attain such certification. Any failure to expand those systems,
procedures and controls in an efficient manner and at a pace consistent with the
Company's business could have a material adverse effect on the Company's
business, financial condition and results of operations.



                                  Page 18 of 28

<PAGE>

      In connection with the Company's recent growth, the Company's operating
expenses have increased significantly and the Company anticipates that operating
expenses will continue to increase significantly in the future. Should the
Company increase its expenditures in anticipation of a future level of sales
that does not materialize, the Company's business, financial condition and
results of operations would thereby be subject to material adverse effects.
Certain customers have required and may continue to require accelerated delivery
schedules, which have placed and may continue to place an excessive burden on
the Company's resources. In order to achieve anticipated sales levels and
profitability, the Company will continue to be required to manage its assets and
operations efficiently. In addition, should the Company expand geographically,
it may experience certain inefficiencies from management of geographically
dispersed facilities.

Dependence on Semiconductor and Computer Industries

      The semiconductor industry has been characterized by cyclical market
conditions. The industry has experienced significant economic downturns at
various times, characterized by diminished product demand, accelerated erosion
of average selling prices and production overcapacity. As a result of
overproduction and lower than anticipated sales of Windows 95(R), in 1996 the
price of DRAM declined by as much as 80% from the beginning of the year,
resulting in much lower profit per memory unit. During 1996, 1997 and the first
half of 1998, there were significant declines in DRAM and SRAM semiconductor
prices and declines in Flash semiconductor prices. Price declines can have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, the Company may experience substantial
period-to-period fluctuations in future operating results due to general
industry conditions or events occurring in the general economy.

      The Company's Laguna product line is directed towards a segment of the
personal computer market which is characterized by even greater competition than
that segment in which the Company's NetRam line competes. There are
correspondingly greater market pressures on the pricing and margins of the
Laguna product line. While the competition in the higher-end segment of the
personal computer market to which the NetRam product line caters is currently
less, there can be no assurance that the competition will remain less and that
there will be less downward pressure on prices of the NetRam products than there
currently is on the Laguna products.

      From time to time, the computer industry, like the semiconductor industry,
has experienced significant downturns, often in connection with, or in
anticipation of, declines in general economic conditions. Accordingly, any
factor adversely affecting the semiconductor or computer industries or
particular segments within the semiconductor or computer industries, such as the
market for memory products, could materially adversely affect the Company's
sales and results of operations.

Requirements for Response to Rapid Technological Change

      The semiconductor and computer industries are subject to rapid
technological change, short product life cycles, frequent new product
introductions and enhancements, changes in end-user requirements and evolving

                                  Page 19 of 28

<PAGE>

industry standards. The Company's ability to be competitive in these markets
will depend in significant part upon its ability to provide technologically
advanced products, maintain quality levels, offer flexible delivery schedules,
deliver finished products on a reliable basis and compete favorably on the basis
of price.

Dependence on Key Personnel

      The Company's future operating results depend in significant part upon the
continued contributions of its senior management and sales personnel, many of
whom would be difficult to replace. Of such persons, only four, including Mr.
Troy D. Barnes, the Company's Chief Executive Officer, have written employment
agreements with the Company. The Company's future operating results also depend
in significant part upon its ability to attract and retain qualified management,
manufacturing and quality assurance, engineering, marketing, and sales
personnel. The Company is actively recruiting such personnel. However,
competition for such personnel is intense; and there can be no assurance that
the Company will be successful in attracting or retaining such personnel now or
in the future. There may be only a limited number of persons with the requisite
skills to serve in such positions, and it may be increasingly difficult for the
Company to hire such persons over time. The loss of any key employee, the
failure of any key employee to perform in his or her current position, the
Company's inability to attract and retain skilled employees as needed or the
inability of the officers and key employees of the Company to expand, train and
manage the Company's employee base could materially adversely affect the
Company's business, financial condition and results of operations.

No Assurance of Product Quality, Performance and Reliability

      The Company expects that its customers will continue to establish
demanding specifications for quality, performance, reliability and delivery. For
the six months ended June 30, 1998, the Company experienced significant quality
problems. While the Company believes that it has resolved those problems by
assuming the tasks of assembling its PC systems, there can be no assurance that
such problems will not occur in the future with respect to the quality,
performance, reliability and delivery of the Company's semiconductor memory or
PC products. If such problems occur, the Company could experience increased
costs associated with such products, delays in or cancellations or rescheduling
of orders or shipments of semiconductor memory or PC products, delays in
collecting accounts receivable and increases in product returns and discounts,
any of which could have a material adverse effect on the Company's business,
financial condition or results of operations.

      In addition, the Company's management has had no experience managing the
assembly of its PC systems. Although management has overseen the work performed
by the subcontractors who have historically assembled the Company's PC systems
and has hired consultants to assist them during the transition to internal
assembly of the PC systems, there can be no assurance that management's lack of
experience will not result in an increase in problems with PC systems product
quality and returns of PC systems. If such problems occur, the Company could
experience increased costs associated with the PC systems, delays in or
cancellations or rescheduling of orders or shipments of PC systems, delays in


                                  Page 20 of 28

<PAGE>

collecting accounts receivable and increases in product returns and discounts,
any of which could have a material adverse effect on the Company's business,
financial condition or results of operations.

Uncertainty Regarding Protection of Proprietary Rights

      The Company attempts to protect its intellectual property rights including
its trademarks and trade secrets through a variety of measures, including
federal trademark applications and non-disclosure agreements. There can be no
assurance, however, that such measures will provide adequate protection for the
Company's intellectual property, that disputes with respect to the ownership of
its intellectual property rights will not arise, that the Company's trade
secrets or proprietary technology will not otherwise become known or be
independently developed by competitors or that the Company can otherwise
meaningfully protect its intellectual property rights. There can be no assurance
that third parties will not assert intellectual property infringement claims
against the Company. There can be no assurance that foreign intellectual
property laws will adequately protect the Company's intellectual property rights
abroad. The failure of the Company to protect its proprietary rights could have
a material adverse effect on its business, financial condition and results of
operations. The Company has filed two trademark applications with the United
States Patent and Trademark Office for the "MILLENNIUM MEMORY, INC." mark and
logo. In addition, in connection with the acquisition of NetRam, the Company
was assigned the federal trademark application for registration of the "NETRAM"
mark and logo. There is no assurance that registration of these marks and logos
will be unopposed or granted even if not opposed. The word "MILLENNIUM," the
word "RAM" and the ram's head design are employed by other companies involved in
the manufacture and/or sale of computer products, which may reduce the
likelihood that trademark registrations will be issued to the Company.

      In the semiconductor and computer industries, it is typical for companies
to receive notices from time to time alleging infringement intellectual property
rights. While there is currently no pending intellectual property litigation
involving the Company, the Company may from time to time in the future be
notified of claims alleging infringement of third party intellectual property
rights. There can be no assurance that third parties will not in the future
pursue claims against the Company with respect to the alleged infringement of
third party intellectual property rights. Litigation may be necessary to protect
the Company's intellectual property rights, to determine the validity of and
scope of the proprietary rights of others, or to defend against third party
claims of invalidity. Litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition and results of operations.

      There can be no assurance that infringement, invalidity, right to use or
ownership claims of third parties or claims for indemnification resulting from
infringement claims will not be asserted in the future. If any claims or actions
are asserted against the Company, the Company may seek to obtain a license for
third party intellectual property rights. There can be no assurance, however,
that a license will be available under reasonable terms or at all. The failure
to obtain a license for third party technology or marks used by the Company
could cause the Company to incur substantial liabilities and to suspend the


                                  Page 21 of 28

<PAGE>

manufacture of the products utilizing the invention or bearing a disputed mark.
Should the Company decide to litigate such claims, such litigation could be
extremely expensive and time consuming and could materially adversely affect the
Company's business, financial condition and results of operations, regardless of
the outcome of the litigation.

Environmental Issues

      The Company's operations are not currently impacted significantly by
federal, state, local and foreign environmental protection laws and regulations.
However, changes in environmental laws and regulations and in the Company's
business could subject the Company to significant compliance expenses,
production suspensions or delay, restrictions on expansion, the acquisition of
costly equipment or other liabilities.

Recently Issued Accounting Pronouncement

      SFAS No. 130, "Reporting Comprehensive Income," issued by the Financial
Accounting Standards Board ("FASB") is effective for financial statements with
fiscal years beginning after December 15, 1997. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. The Company does not
believe the adoption of SFAS No. 130 will have a material impact on its
financial position or results of operations.

      The FASB issued SFAS No. 131, "Disclosure About Segments of an Enterprise
and Related Information." This statement establishes additional standards for
segment reporting in the financial statements and is effective for fiscal years
beginning after December 15, 1997. Management believes that SFAS No. 131 will
not have an effect on the Company's financial statements.

Year 2000

      The Company has not made a formal assessment of Year 2000 issues.
Generally, "Year 2000 issues" refers to problems that may arise due to the
inability of some computer software to distinguish between the early part of the
present century and the early part of the next because the software only uses
two digits to identify the year. Thus, 2001 would be indistinguishable from
1901. The Company believes that there are three possible ways that it could be
impacted by this problem. First, the Company's internal software could fail. If
the Company's software should fail it might disrupt accounting, inventory
control, order processing and similar tasks. Although it has not made an
assessment of its software, the Company does not believe that its internal
software is susceptible to Year 2000 problems. The Company believes that even if
its software should fail, remediation would not create a material expense.

      The second concern posed by Year 2000 issues is the impact that such
software failure would have on the Company's suppliers and customers. The
Company does not believe that either its suppliers or customers could not
continue to conduct business even in the face of Year 2000 problems. In
addition, the Company believes that its customers and suppliers are


                                  Page 22 of 28

<PAGE>

sufficiently sophisticated computer users that they will not experience
problems, either by remediation or because they are already using software which
can make the distinction between centuries. In the event that either its
suppliers or customers should experience software failure, the Company believes
that the impact of either eventuality would not be material to the Company.

      The third possible threat posed to the Company by Year 2000 issues is one
of a general downturn in the economy due to software failures.

      Although the Company believes that it will not suffer any material adverse
effects as a result of Year 2000 issues, it has not made a formal assessment of
the problem. In the event that the Company, its suppliers or customers
experience a software failure, such a failure could have a material adverse
impact on the Company's business, financial condition and results of operations.
Similarly, if the economy as a whole should be adversely impacted by Year 2000
problems, it could have a material adverse effect on the Company's business,
financial condition and results of operations.


PART II  - OTHER INFORMATION

Item 1.    Legal Proceedings

           None.

Item 2.    Changes in Securities

           None

Item 3.    Defaults Upon Senior Securities

           None.

Item 4.    Submission of Matters to a Vote of Security Holders

      The following matters were submitted to a vote of stockholders during the
Company's Annual Meeting of Stockholders held July 22, 1998:



                                  Page 23 of 28

<PAGE>

Description of Matter

1.
Election of Directors:             Votes Cast For            Withheld
----------------------             --------------            --------
Troy D. Barnes                     4,888,337                 3,354,108
Douglas P. Morris                  4,888,337                 3,354,108
Fred O. Newton                     4,880,337                 3,362,108
Barry G. Morganstern               4,880,589                 3,361,856
Anthony F. Coppola                 4,878,587                 3,363,858


2.
                                    Votes Cast                Broker Non-votes
                      -------------------------------------   ----------------
                         For         Against      Withheld
                         ---         -------      --------
Approval and          5,244,974      22,645       2,974,826         N/A
adoption of the
1998 Non-employee
Directors Stock
Option Plan.

3.
                                    Votes Cast                Broker Non-votes
                      -------------------------------------   ----------------
                         For         Against      Withheld
                         ---         -------      --------
Ratification of       5,251,274      18,845       2,972,326         N/A
appointment of
independent
accountants.


Item 5.    Other Information

           None.



                                  Page 24 of 28

<PAGE>



Item 6.    Exhibits and Reports on Form 8-K

           (a)      Exhibits

                    Exhibit No.          Description
                    -----------          -----------
                    27                   Financial Data Schedule

           (b)      Reports on Form 8-K

                    None.


















                                  Page 25 of 28

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


Date:  August 14, 1998                 MILLENNIUM ELECTRONICS, INC.


                                       By: /s/ Kenneth W. Gerstner
                                          -----------------------------------
                                          Kenneth W. Gerstner, C.M.A.
                                          Chief Financial Officer





















                                  Page 26 of 28

<PAGE>

                                  EXHIBIT INDEX

Exhibit                                                                  Page
-------------------------------------------------------------------------------
   27          Financial Data Schedule                                    28




































                                  Page 27 of 28