<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934

For the quarterly period ended September 26, 1997

[ ]  Transition report under Section 13 or 15(d) of the Exchange Act

For the period from __________ to __________

Commission file number:  000-21959


                             APEX PC SOLUTIONS, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

               Washington                              91-1577634
     (State or Other Jurisdiction of         (I.R.S. Employer Identification
     Incorporation or Organization)                      Number)

        20031 142 nd Avenue, N.E.
         Woodinville, Washington                          98072
(Address of Principal Executive Offices)                (Zip Code)

                                  425-402-9393
                (Issuer's Telephone Number, Including Area Code)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
     --    --

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                  Class                      Outstanding at October 10, 1997
                  -----                      -------------------------------
              Common Stock                             13,431,173


                                       1

<PAGE>

                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

                             APEX PC SOLUTIONS, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                        FOR THE QUARTER ENDED          FOR THE NINE MONTHS ENDED
                                                    SEPTEMBER 30,   SEPTEMBER 26,    SEPTEMBER 30,    SEPTEMBER 26,
                                                        1996            1997             1996             1997
                                                    -------------   -------------    -------------    -------------
<S>                                                 <C>             <C>              <C>              <C>
Net sales                                              $9,265,181     $15,276,397      $23,267,118      $38,957,763
Cost of sales                                           5,172,408       8,482,006       13,515,800       21,473,836
                                                    -------------   -------------    -------------    -------------
  Gross profit                                          4,092,773       6,794,391        9,751,318       17,483,927
                                                    -------------   -------------    -------------    -------------

Research and development                                  191,906         460,758          655,528        1,396,744
Sales and marketing                                       640,596       1,130,695        1,757,632        3,007,223
General and administrative                                772,903       1,005,128        1,704,078        2,708,448
                                                    -------------   -------------    -------------    -------------
  Total operating expenses                              1,605,405       2,596,581        4,117,238        7,112,415
                                                    -------------   -------------    -------------    -------------

  Income from operations                                2,487,368       4,197,810        5,634,080       10,371,512

Interest income (expense), net                           (472,419)        287,899       (1,419,294)         164,555
Other income                                                    -               -                -          146,324
                                                    -------------   -------------    -------------    -------------
Income from operations before income
  taxes and extraordinary item                          2,014,949       4,485,709        4,214,786       10,682,391

Provision for income taxes                                686,677       1,525,820        1,434,862        3,640,774
                                                    -------------   -------------    -------------    -------------

Income before extraordinary item                        1,328,272       2,959,889        2,779,924        7,041,617

Extraordinary item -- loss on early
  extinguishment of debt, net of applicable
  income taxes                                                  -               -                -         (140,763)
                                                    -------------   -------------    -------------    -------------

Net income                                           $  1,328,272    $  2,959,889     $  2,779,924     $  6,900,854
                                                    -------------   -------------    -------------    -------------
                                                    -------------   -------------    -------------    -------------

Pro forma per share amounts:
  Income before extraordinary item                          $0.15           $0.22            $0.31            $0.57
  Extraordinary item                                            -               -                -            (0.01)
                                                    -------------   -------------    -------------    -------------

  Pro forma income per share                                $0.15           $0.22            $0.31            $0.56
                                                    -------------   -------------    -------------    -------------
                                                    -------------   -------------    -------------    -------------

Pro forma weighted average shares used in
     computing per share amounts
                                                        9,091,932      13,553,725        9,091,932       12,410,213

</TABLE>

               See notes accompanying these financial statements.


                                       2

<PAGE>

                             APEX PC SOLUTIONS, INC.
                                 BALANCE SHEETS

                                                   DECEMBER 31,    SEPTEMBER 26,
                                                      1996             1997
                                                   ------------    -------------
ASSETS
Current assets:
  Cash and cash equivalents                        $  2,118,887    $  37,422,705
  Accounts receivable, net of allowance for
    doubtful accounts                                 6,170,193       10,210,066
  Inventories                                         1,653,011        2,512,007
  Interest receivable                                         -          208,246
  Prepaid expenses                                      130,218          302,553
  Deferred tax assets                                   800,700          524,700
                                                   ------------    -------------
    Total current assets                             10,873,009       51,180,277
                                                   ------------    -------------

Property and equipment, at cost:
  Leasehold improvements                                  4,677           33,865
  Furniture and office equipment                        273,831          443,205
  Computer and other equipment                          380,334          623,141
                                                   ------------    -------------
                                                        658,842        1,100,211
  Less accumulated depreciation                         195,959          350,340
                                                   ------------    -------------
                                                        462,883          749,871
                                                   ------------    -------------
Other assets                                            617,255           17,672
                                                   ------------    -------------
Total assets                                        $11,953,147      $51,947,820
                                                   ------------    -------------
                                                   ------------    -------------

(Continued on next page)

               See notes accompanying these financial statements.


                                       3

<PAGE>

                             APEX PC SOLUTIONS, INC.
                           BALANCE SHEETS (CONTINUED)

                                                    DECEMBER 31,  SEPTEMBER 26,
                                                       1996           1997
                                                    ------------  -------------

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Current portion of long-term debt                   $  504,349    $         -
  Accounts payable                                       530,525        619,550
  Accrued wages and commissions                          554,352        720,155
  Accrued warranty costs                                 630,000        745,000
  Accrued offering expenses                                    -        145,511
  Other accrued expenses                                 282,040        536,082
                                                    ------------  -------------
    Total current liabilities                          2,501,266      2,766,298
Subordinated debt                                     20,000,000              -
Long-term debt, less current portion                   5,110,549              -
Deferred taxes                                            16,500         26,950
                                                    ------------  -------------
     Total liabilities                                27,628,315      2,793,248
                                                    ------------  -------------

Preferred stock, Series A redeemable and
  convertible, no par value; 300,000 shares
  authorized, issued and outstanding at
  December 31, 1996                                    2,205,000              -

Preferred stock, Series B redeemable, no par
  value; 200,000 shares authorized, issued and
  outstanding at December 31, 1996                     1,000,000              -
                                                    ------------  -------------

Shareholders' equity (deficit):
  Preferred stock; no shares authorized at
    December 31, 1996 and 1,000,000 shares
    authorized at September 26, 1997; no shares
    issued and outstanding                                     -              -
  Common stock, no par value; 10,000,000 shares
    authorized at December 31, 1996 and 100,000,000
    shares authorized at September 26, 1997;
    6,260,016 and 13,431,173 shares issued and
    outstanding                                          648,260     61,863,071
  Deferred compensation                                  (93,431)      (174,356)
    Accumulated deficit                              (19,434,997)   (12,534,143)
                                                    ------------  -------------
      Total shareholders' equity (deficit)           (18,880,168)    49,154,572
                                                    ------------  -------------
Total liabilities and shareholders' equity
  (deficit)                                          $11,953,147    $51,947,820
                                                    ------------  -------------
                                                    ------------  -------------

               See notes accompanying these financial statements.


                                       4

<PAGE>

                             APEX PC SOLUTIONS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                            FOR THE NINE MONTHS ENDED

<TABLE>
<CAPTION>

                                                                   SEPTEMBER 30,    SEPTEMBER 26,
                                                                       1996             1997
                                                                   -------------    -------------
<S>                                                                <C>              <C>
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                     $  (548,509)      $2,988,384
                                                                   -------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property and equipment                               (263,293)        (441,369)

                                                                   -------------    -------------
           Net cash used by investing activities                        (263,293)        (441,369)
                                                                   -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Principal payments on notes to shareholder                        (270,000)               -
      Repayments of long-term debt                                        (3,136)     (25,614,898)
      Payment of loan fees                                               (45,000)               -
      Proceeds from initial public offering of common stock (1)                -       28,866,741
      Proceeds from follow-on public offering of common stock (2)              -       30,438,634
      Proceeds from issuance of common stock and exercise of
        common stock options                                              16,789           66,326
      Redemption of Series B redeemable preferred stock                        -       (1,000,000)
                                                                   -------------    -------------
           Net cash provided (used) by financing activities             (301,347)      32,756,803
                                                                   -------------    -------------

Net increase (decrease) in cash and cash equivalents                  (1,113,149)      35,303,818
Cash and cash equivalents at beginning of period                       2,676,290        2,118,887
                                                                   -------------    -------------
Cash and cash equivalents at end of period                            $1,563,141      $37,422,705
                                                                   -------------    -------------
                                                                   -------------    -------------

</TABLE>

(1)  Total net proceeds from the initial public offering of common stock were
     $28,550,762, after reduction of $315,979 for prepaid offering expenses
     incurred in 1996.
(2)  Total net proceeds from the follow-on public offering of common stock were
     $30,293,123, after reduction of $145,511 for offering expenses accrued at
     September 26, 1997.

               See notes accompanying these financial statements.


                                       5

<PAGE>

                             APEX PC SOLUTIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   Basis of Presentation

     The accompanying unaudited financial statements have been prepared in
     conformity with generally accepted accounting principles and reflect all
     adjustments consisting of normal recurring adjustments which, in the
     opinion of management, are necessary for a fair presentation of the results
     for the periods shown.  The results of operations for such periods are not
     necessarily indicative of the results expected for the full fiscal year or
     for any future period.  The preparation of financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reporting period.  Actual
     results could differ from those estimates and assumptions.

     The accompanying financial statements should be read in conjunction with
     the audited financial statements of Apex PC Solutions, Inc. (the "Company")
     for the year ended December 31, 1996 and the notes thereto contained in the
     Company's Annual Report on Form 10-KSB for the year ended December 31,
     1996, the unaudited financial statements contained in the Company's
     Quarterly Reports on Form 10-QSB for the quarters ended March 28, 1997, and
     June 27, 1997, on file with the Securities and Exchange Commission.

     The Company reports its annual results based on years ending December 31.
     Interim periods in years prior to 1997 are reported on a calendar quarter
     basis.  Commencing in 1997, the Company reports its quarterly results for
     the first three interim periods ending on the last Friday of March, June
     and September and for the fourth interim period ending on December 31.  The
     difference between quarterly results reported on this basis and quarterly
     results reported on the basis of calendar quarters for years prior to 1997
     is not material.

     The Company formed a foreign sales corporation subsidiary in the first
     quarter of 1997.  Consequently, beginning in 1997, the Company's financial
     statements are presented on a consolidated basis.

2.   Leveraged Recapitalization and Initial Public Offering

     In December 1995, the Company effected a leveraged recapitalization (the
     "Leveraged Recapitalization") pursuant to which (i) the Company redeemed
     from one of its shareholders Common Stock representing a 50% voting
     interest in the Company prior to the Leveraged Recapitalization for
     approximately $12.5 million in cash and a Class B Subordinated Promissory
     Note in the principal amount of $10.0 million, and (ii) the Company sold to
     a group of entities affiliated with TA Associates, Inc. (the "TA Group")
     Common Stock and Series A Redeemable and Convertible Preferred Stock
     representing a 50% voting interest in the Company after the Leveraged
     Recapitalization for $2.5 million and sold to the TA Group Class A
     Subordinated Promissory Notes in the aggregate principal amount of
     $10.0 million.  The subordinated promissory notes issued by the Company in
     connection with the Leveraged Recapitalization were repaid upon
     consummation of the Company's initial public offering in February 1997 (the
     "IPO").  In connection with the Leveraged Recapitalization, Kevin J. Hafer,
     the Company's President and Chief Executive Officer, received
     200,000 shares of the Company's Series B Redeemable Preferred Stock.  This
     Series B Redeemable Preferred Stock was fully vested on January 1, 1997.
     The Company redeemed 80,000 shares of such Series B Redeemable Preferred
     Stock on January 1, 1997 for $5.00 per share (an aggregate of $400,000) and
     redeemed the balance of such 


                                       6

<PAGE>

     shares for $5.00 per share (an aggregate of $600,000) upon the consummation
     of the Company's IPO.  In connection with the Leveraged Recapitalization,
     the Company incurred approximately $5.6 million of long-term bank
     indebtedness in December 1995, which was repaid using the net proceeds of
     the Company's IPO.

     3.   Follow-On Offering

     A follow-on public offering of 4.6 million shares of the Company's common
     stock (including  600,000 shares sold pursuant to the underwriters' over-
     allotment option) was completed in August 1997, at a price of $26 per
     share.  Of the total, 1,250,000 shares were offered by the Company and
     3,350,000 shares were offered by certain selling shareholders.  The Company
     plans to use the approximately $30.3 million in net proceeds for general
     corporate purposes.  Following this offering, the Company had 13,413,328
     shares of common stock outstanding as of August 8, 1997, and 13,431,173
     shares of common stock outstanding as of September 26, 1997.

     4.   Extraordinary Item

     Because of the early retirement of the long-term bank indebtedness and
     subordinated promissory notes upon consummation of the Company's IPO, the
     Company's statement of operations in the first quarter of 1997 reflects an
     extraordinary loss for the write-off of deferred financing costs of
     approximately $141,000, net of applicable income taxes.

     5.   Other Income

     The statement of operations includes other income of approximately $136,000
     received by the Company in the first quarter of 1997 in connection with the
     Leveraged Recapitalization.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

THE INFORMATION CONTAINED IN THIS ITEM 2 - "MANAGEMENT'S DISCUSSION AND 
ANALYSIS OR PLAN OF OPERATION" CONTAINS FORWARD-LOOKING STATEMENTS AS DEFINED 
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.  SUCH 
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS RELATING 
TO FUTURE NET SALES, FUTURE RESEARCH AND DEVELOPMENT EXPENDITURES, FUTURE 
SALES AND MARKETING EXPENDITURES, FUTURE GENERAL AND ADMINISTRATIVE 
EXPENDITURES, BACKLOG AND FUTURE LIQUIDITY AND CAPITAL RESOURCES.  SUCH 
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN  RISKS AND UNCERTAINTIES 
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED 
IN THE FORWARD-LOOKING STATEMENTS.  FACTORS THAT MIGHT CAUSE SUCH A 
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THIS ITEM 2 - 
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" AND IN THE 
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1996, 
THE COMPANY'S QUARTERLY REPORTS ON FORM 10-QSB FOR THE QUARTERS ENDED MARCH 28,
1997, AND JUNE 27, 1997, AND THE COMPANY'S REGISTRATION STATEMENT ON FORM SB-2 
(REGISTRATION NO. 333-31697), ALL AS ON FILE WITH THE SECURITIES AND EXCHANGE 
COMMISSION.

OVERVIEW

     The Company designs, manufactures and markets stand-alone switching 
systems and integrated server cabinet systems for the client/server computing 
market. The Company's switching products, including OUTLOOK, OUTLOOK(4)  and 
VIEWPOINT, enable network administrators to access multiple servers from a 
single, centralized keyboard, monitor and mouse configuration (a "console"), 
consolidate hardware 


                                       7

<PAGE>

and provide direct hardwired connections between the switch and the attached 
servers to facilitate access to servers even when the network is down.  The 
Company also offers integrated server cabinet systems to consolidate and 
store heterogeneous servers and related hardware in one or more cabinets to 
facilitate more efficient physical access and safer performance of hardware 
maintenance tasks.

     The Company markets and sells its products through a direct sales force 
and various distribution channels.  A substantial portion of the Company's 
sales are concentrated among a limited number of  original equipment 
manufacturers which purchase the Company's switching systems on a private 
label  basis ("OEMs"). For the nine months ended September 26, 1997, sales to 
the Company's OEM customers represented 67% of the Company's net sales.  The 
Company's OEM business is subject to risks such as contract termination, 
reduced or delayed orders, adoption of competing products developed by third 
parties for the OEM or by the OEM's internal development team, and change in 
corporate ownership, financial condition, business direction or product mix 
by the OEM, any of which could have a material adverse effect on the 
Company's results of operations.  In the past, the Company has experienced, 
and may continue to experience, significant reductions or delays in orders 
from its OEM customers which have had and may in the future have a material 
adverse effect on the Company's quarterly sales and operating results.  The 
failure of any of the Company's private label OEMs to continue to place 
orders at current or anticipated levels would likely have a material adverse 
effect on the Company's business, financial condition and results of 
operations.

     The Company has experienced substantial fluctuations in its operating 
results, on a quarterly and annual basis, and expects such fluctuations to 
continue in the future.  The Company's operating results are affected by a 
number of factors, including: the volume and timing of orders, and, 
particularly from OEM customers, the timing of shipments; the timing of new 
product introductions and enhancements by the Company and its competitors; 
changes in product or distribution channel mixes; changes in pricing policies 
or price reductions by the Company or its competitors; the availability and 
cost of supplies and  components; sales and marketing expenses relating to 
entering new markets, introducing new products and retaining current OEM and 
other large customers; seasonal customer demand; and fluctuations in sales of 
servers due to changes in economic conditions or capital spending levels.  
The Company is currently experiencing increased price competition in both the 
market for stand-alone switching systems and the market for integrated server 
cabinet systems and expects that pricing pressures will increase in the 
future. Increased competition could result in price reduction and loss of 
market share which would adversely   affect the Company's business, financial 
condition and results of operations.

     Gross margins may vary significantly from period to period depending on 
a number of factors, including: the ratio of OEM sales to branded sales, as 
OEM sales typically have lower gross margins than branded sales; product mix, 
including the percentage of integrated server cabinet system sales, which 
generally have lower gross margins than sales of stand-alone switching 
systems; raw materials and labor costs; new product introductions by the 
Company and its competitors; and the level of outsourcing of manufacturing 
and assembly services by the Company. The Company expects that increased 
competition and the introduction of new technologies may affect pricing of 
the Company's products and therefore   erode the Company's gross margins in 
the future. The Company expects that its operating results will be affected 
by seasonal trends and by general conditions in the server market.  The 
Company believes that it has experienced and will continue to experience some 
degree of seasonality due to customer buying cycles.  The Company believes 
that the fourth quarter has generally higher net sales levels due to customer 
budgeting and procurement cycles, which correspondingly may depress net sales 
in other quarters.  Because the Company's business and operating results 
depend to a significant extent on the general conditions in the server 
market, any adverse change in the server market due to adverse economic 
conditions, declining capital spending levels or other factors could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.

     In general, the Company's sales cycle varies substantially and may be 
lengthy, making revenues difficult to forecast.  The Company has experienced 
period to period variability in sales to each of its OEM customers and 
expects this pattern to continue in the future.  Although the Company's OEM 
customers 


                                       8

<PAGE>
typically place orders for products several months prior to scheduled 
shipment dates, these orders are subject to cancellation up to eight weeks 
prior to the scheduled shipment date.  The Company generally must plan 
production, order components and undertake its manufacturing activities prior 
to the time that these orders become firm.  In addition, the Company's OEM 
customers have in the past requested, and will likely continue to request 
from time to time, that the Company delay shipment dates or cancel orders for 
products that are subject to firm orders.  Further, OEMs may change their 
channel inventory and distribution patterns.  Accordingly, sales to OEMs for 
future quarters are difficult to predict.  Moreover, any cancellation, 
rescheduling or reduction of orders by OEM customers in the future could 
materially adversely affect the Company's operating results.  If the Company 
succeeds in increasing branded sales as a percentage of net sales, the 
Company's quarterly sales and operating results will become more dependent 
upon the volume and timing of branded product orders received during the 
quarter.  Because customers of the Company's branded products (including 
resellers) typically place orders shortly before their requested shipment 
date, revenues from branded sales are difficult to forecast. The failure of 
the Company to accurately forecast the timing and volume of orders for 
branded products during any given quarter could adversely affect the 
Company's operating results for such quarter and, potentially, for future 
periods.

RESULTS OF OPERATIONS

     The following table sets forth selected unaudited statement of operations 
data expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                          FOR THE QUARTER ENDED          FOR THE NINE MONTHS ENDED
                                                       SEPTEMBER 30,  SEPTEMBER 26,    SEPTEMBER 30,   SEPTEMBER 26,
                                                           1996           1997             1996            1997
                                                           ----           ----             ----            ----
<S>                                                    <C>            <C>              <C>             <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . .        100.0%         100.0%           100.0%         100.0%
Cost of sales. . . . . . . . . . . . . . . . . . . . .         55.8           55.5             58.1           55.1
                                                               ----           ----             ----           ----
Gross margin . . . . . . . . . . . . . . . . . . . . .         44.2           44.5             41.9           44.9
                                                               ----           ----             ----           ----
Operating expenses:
Research and development . . . . . . . . . . . . . . .          2.1            3.0              2.8            3.6
Sales and marketing. . . . . . . . . . . . . . . . . .          6.9            7.4              7.6            7.7
General and administrative . . . . . . . . . . . . . .          8.4            6.6              7.3            7.0
                                                               ----           ----             ----           ----
Total operating expenses . . . . . . . . . . . . . . .         17.4           17.0             17.7           18.3
                                                               ----           ----             ----           ----
Income from operations . . . . . . . . . . . . . . . .         26.8           27.5             24.2           26.6
Interest income (expense), net . . . . . . . . . . . .         (5.1)           1.9             (6.1)           0.4
Other income . . . . . . . . . . . . . . . . . . . . .          0.0            0.0              0.0            0.4
                                                               ----           ----             ----           ----
Income from operations before income
    taxes and extraordinary item . . . . . . . . . . .         21.7           29.4             18.1           27.4
Provision for income taxes . . . . . . . . . . . . . .          7.4           10.0              6.2            9.3
                                                               ----           ----             ----           ----
Income before extraordinary item . . . . . . . . . . .         14.3           19.4             11.9           18.1

Extraordinary item -- loss on early extinguishment of
     debt, net of applicable income taxes. . . . . . .          0.0            0.0              0.0           (0.4)
                                                               ----           ----             ----           ----
Net income . . . . . . . . . . . . . . . . . . . . . .         14.3%          19.4%            11.9%          17.7%
                                                               ----           ----             ----           ----
                                                               ----           ----             ----           ----
</TABLE>

     NET SALES.  The Company's net sales consist of sales of stand-alone 
switching systems and integrated cabinet systems.  Net sales increased 65% to 
$15.3 million for the third quarter of 1997 from  $9.3 million for the third 
quarter of 1996, due primarily to increased demand for stand-alone switching 
systems from private label OEM customers and, to a lesser extent, to 
increased demand for Apex branded switching systems.  Branded sales increased 
to $4.9 million in the third quarter of 1997 from $3.1 million a year ago.  
Private label OEM sales and sales of Apex branded products represented 68% 
and 32%, respectively, of net sales for the third quarter of 1997, compared 
to 66% and 34%, respectively, of net sales for the third quarter of 1996.  
1997 year-to-date net sales increased 

                                       9
<PAGE>

67% to $39.0 million from $23.3 million year-to-date in 1996, due to the same 
reasons noted above for the third quarter.  1997 year-to-date private label 
OEM sales and sales of Apex branded products represented  67% and  33%, 
respectively, of net sales, compared to 68% and 32%, respectively, 
year-to-date in 1996.  Any cancellation, rescheduling or reduction of orders 
by any of the Company's  private label OEM customers could materially 
adversely affect the Company's future operating results.

     GROSS MARGIN. Gross margin increased  to 44.5% for the third quarter of 
1997 from 44.2% for the third quarter of 1996.  1997 year-to-date gross 
margin increased  to 44.9%  from 41.9% year-to-date in 1996, due primarily to 
shifts in the Company's product mix to a larger percentage of switch sales, 
and lower levels of warranty expense.  The Company expects that increased 
price competition may affect pricing and therefore erode the Company's gross 
margins in the future.

     RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses 
include compensation for engineers and materials costs and are expensed as 
they are incurred.  Research and development expenses increased to $461,000 
for the third quarter of 1997 from $192,000 for the third quarter of 1996,  
due primarily to increased project spending and, to a lesser extent, to 
increased compensation expenses associated with increased staffing levels.  
Research and development expenses as a percentage of net sales were 3.0% for 
the third quarter of 1997, compared to 2.1% for the third quarter of 1996.  
1997 year-to-date research and development expenses increased to $1.4 million 
from $655,000 year-to-date in 1996, due to the same reasons noted above for 
the third quarter. As a percentage of net sales, 1997 year-to-date research 
and development expenses were 3.6%, compared to 2.8% year-to-date in 1996.  
The Company believes that the timely development of innovative products and 
enhancements to existing products is essential to maintaining its competitive 
position and, therefore, expects research and development expenditures to 
increase in absolute dollars.

     SALES AND MARKETING EXPENSES.  Sales and marketing expenses include 
promotional material, trade show expenses and sales and marketing personnel 
costs, including sales commissions and travel.  Sales and marketing expenses 
increased to $1.1 million for the third quarter of 1997 from $641,000 for the 
third quarter of 1996, and increased as a percentage of net sales to 7.4% 
from 6.9%.  The increase in absolute dollars and as a percentage of net sales 
was due primarily to increased compensation expense associated with increased 
staffing levels and increased advertising and trade show expenses, including 
expenses relating to market entry and advertising strategies for Europe.  
1997 year-to-date sales and marketing expenses increased to $3.0 million from 
$1.8 million year-to-date in 1996, and increased as a percentage of net sales 
to 7.7% from 7.6%.  The increase in absolute dollars and as a percentage of 
net sales was due to the same reasons noted above for the third quarter.  The 
Company expects sales and marketing expenditures to increase in absolute 
dollars as it seeks to increase branded sales, in general, and international 
sales, in particular.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative 
expenses include personnel costs for administration, finance, human resources 
and general management, as well as rent, utilities and legal and accounting 
expenses, and provision for Washington State's gross receipts tax.  General 
and administrative expenses increased to $1.0 million for the third quarter 
of  1997 from $773,000 for the third quarter of 1996, but decreased as a 
percentage of net sales to 6.6% from 8.4%.  The increase in absolute dollars 
was due primarily to increased personnel costs, including the addition of a 
Chief Financial Officer and Corporate Controller, and, to a lesser extent, to 
increased costs relating to the Company's transition to a public company.  
General and administrative expenses increased to $2.7 million  year-to-date 
for 1997  from $1.7 million for year-to-date 1996, but decreased as a 
percentage of net sales to 7.0% from 7.3%.  The increase in absolute dollars 
was due to the same reasons noted above for the third quarter.  The Company 
expects general and administrative expenses to increase in absolute dollars 
to support the growth of the operations and sales functions.


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<PAGE>

     INTEREST INCOME (EXPENSE), NET. Net interest income was $288,000 for the 
third quarter of 1997, compared to net interest expense of $472,000 for the 
third quarter of 1996.  This $760,000 net change resulted primarily from the 
elimination of all indebtedness incurred in the Leveraged Recapitalization, 
as well as the elimination of all long-term bank indebtedness, using the 
proceeds of the Company's February 1997 IPO, and, to a lesser extent, from 
interest earned on the approximately $30.3 million of net proceeds from the 
Company's follow-on offering completed in August 1997.  1997 year-to-date, 
net interest income was $165,000, compared to net interest expense of 
$1,419,000 year-to-date 1996.  This $1,584,000 net change was due to the same 
reasons noted above for the third quarter.

     PROVISION FOR INCOME TAXES.  The provision for income taxes increased to 
$1.5 million for the third quarter of  1997, from $687,000 for the third 
quarter of 1996.  The 1997 year-to-date provision for income taxes increased 
to $3.6 million from $1.4 million year-to-date in 1996.  The effective 
federal tax rate for each of these periods was approximately 34%.

     NET INCOME.  Net income increased 123% to $3.0 million for the third 
quarter of 1997 from $1.3 million for the third quarter of 1996 due primarily 
to increased net sales and related gross profits and, to a lesser extent, to 
decreased net interest expense.  As a percentage of net sales, net income 
increased to 19.4% for the third quarter of 1997 from 14.3%  for the third 
quarter of  1996 due to the same factors.  1997 year-to-date net income 
increased 148% to $6.9 million from $2.8 million year-to-date in 1996 due to 
the same  reasons noted above for the third quarter.  As a percentage of net 
sales, 1997 year-to-date net income increased to 17.7%  from 11.9% 
year-to-date in 1996, and for the same reasons noted above.

BACKLOG

     As of  September 26, 1997, the Company's backlog was $9.5 million, 
compared to $8.3 million at the end of the third quarter of 1996.  Backlog 
consists of purchase orders with delivery dates scheduled within the next six 
months.  None of the Company's customers is obligated to purchase products 
from the Company except pursuant to binding purchase orders.  Generally, 
purchase orders are subject to cancellation up to eight weeks prior to the 
scheduled shipment date. Because of the timing of orders and the possibility 
of customer changes to delivery schedules, the Company's backlog as of any 
particular date may not be representative of actual sales for any succeeding 
period.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 26, 1997 the Company's principal sources of liquidity 
consisted of approximately $37.4 million in cash and cash equivalents, an 
increase of $35.3 million from the December 31, 1996 balances.  In addition, 
since December 1995, the Company has maintained a combined line of credit and 
letter of credit facility with a bank.  In early April 1997, this facility 
was renewed, providing a final  maturity date of April 30, 1998 and 
increasing the aggregate borrowing capacity from $3.0 million to $5.0 
million. Under the line of credit, the Company may borrow up to a specified 
amount based upon its accounts receivable.  Under the letter of credit 
arrangement, the bank will issue commercial letters of credit up to $5.0 
million (less any amounts outstanding under the line of credit) at prime. 
There were no borrowings under the line of credit and the letter of credit 
facility from December 1995 through September 1997.  Thus, all $3.0 million 
was available through March 1997, and all $5.0 million thereafter.

     Cash generated from operating activities increased to  $3.0 million 
year-to-date for 1997 from a use of ($549,000) year-to-date for 1996.  This 
increase in cash flow was primarily due to increased net income, decreased 
bonus payments, decreased deferred taxes and an increase in accounts payable, 
partially offset by increases in accounts receivable and inventories.

     In February 1997, the Company consummated its IPO.  The net proceeds to 
the Company from  the IPO were approximately $28.4 million, after deducting 
approximately $190,000 of directors and officers insurance premium.  Of that 
amount, $20.0 million was used to repay the indebtedness evidenced by the 
Class A and Class B Subordinated Promissory Notes issued in the Leveraged 
Recapitalization, 


                                       11

<PAGE>

approximately $5.6 million was used to repay long-term bank debt incurred by 
the Company in December 1995, and $600,000 was used to redeem shares of 
Series B Redeemable Preferred Stock.  See Note 2 to Financial Statements. 
After application of the net proceeds of the IPO to the foregoing items, and 
payment of IPO expenses (including $190,000 of directors and officers 
insurance premium which is being expensed in 1997 as a period cost), the 
remaining proceeds from the IPO were approximately $2.2 million.  Further, in 
August 1997 the Company completed a follow-on offering, which yielded net 
proceeds of approximately $30.3 million.  The Company believes that existing 
cash balances, cash generated from operations and the funds available to it 
under credit facilities, together with the remaining proceeds from the IPO 
and the follow-on offering, will be sufficient to fund its operations through 
1998.

NEW ACCOUNTING PRONOUNCEMENTS

     In February 1997, the Financial Accounting Standards Board (the "FASB") 
issued Statement of Financial Accounting Standards No. 128, "Earnings Per 
Share."  This statement specifies the computation, presentation and 
disclosure requirements for earnings per share ("EPS"), to simplify the 
existing computational guidelines and increase comparability on an 
international basis. The statement will be effective for interim and annual 
reporting periods ending after December 15, 1997.  This statement will 
replace "primary" EPS with "basic" EPS, the principal difference being the 
exclusion of common stock equivalents in the computation of basic EPS.  In 
addition, this statement will require the dual presentation  of basic and 
diluted EPS on the face of the consolidated statements of operations.  Basic 
EPS computed pursuant to this statement will differ from historical net 
income per share previously reported due to the exclusion of common stock 
equivalents from the computation.  Diluted EPS computed pursuant to this 
statement is not expected to be materially different from the historical net 
income per share previously presented.

     In June 1997, the FASB issued Statement of Financial Accounting 
Standards No. 130, "Reporting  Comprehensive Income."  This statement 
requires that changes in comprehensive income be shown in a financial 
statement that is displayed with the same prominence as other financial 
statements.  The statement will be effective for fiscal years beginning after 
December 15, 1997. Reclassification for earlier periods is required for 
comparative purposes.  The Company is currently evaluating the impact this 
statement will have on its financial statements; however, because the 
statement requires only additional disclosure, the Company does not expect 
the statement to have a material impact on its financial position or results 
of operations.

     In June 1997, the FASB issued Statement of Financial Accounting 
Standards No. 131, "Disclosures About Segments of an Enterprise and Related 
Information." This statement supersedes Statement of Financial Accounting 
Standards No. 14, "Financial Reporting for Segments of a Business 
Enterprise."  This statement includes requirements to report selected segment 
information quarterly and entity-wide disclosures about products and 
services, major customers, and the material countries in which the entity 
holds assets and reports revenues.  The statement will be effective for 
fiscal years beginning after December 15, 1997. Reclassification for earlier 
periods is required, unless impracticable, for comparative purposes.  The 
Company is currently evaluating the impact this statement will have on its 
financial statements; however, because the statement requires only additional 
disclosure, the Company does not expect the statement to have a material 
impact on its financial position or results of operations.


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<PAGE>

                                     PART II

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

(a) Exhibits

11.1    Statement re: Computation of Earnings Per Share

27.1    Financial Data Schedule

ITEMS 1, 2, 3, 4 and 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.


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<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant 
caused this report to be signed on its behalf by the undersigned, thereunto 
duly authorized.

                                        APEX PC SOLUTIONS, INC.
                                        (Registrant)


Date:  November 7, 1997                 /s/ Kevin J. Hafer
                                        --------------------------
                                        Kevin J. Hafer
                                        President and Chief Executive Officer


Date:  November 7, 1997                 /s/ Douglas A. Bevis
                                        --------------------------
                                        Douglas A. Bevis
                                        Vice President, Chief Financial Officer


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