<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 June 27, 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 
       Incorporation or Organization)       Identification Number)

         20031 142nd Avenue, N.E.                    98072
         Woodinville, Washington                  (Zip Code)
(Address of Principal Executive Offices)
                                       
                                 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 July 11, 1997
------------------------------        ------------------------------
          Common Stock                          12,163,328


<PAGE>

                                    PART I

ITEM 1.  FINANCIAL STATEMENTS


                            APEX PC SOLUTIONS, INC.
                           STATEMENTS OF OPERATIONS


                            FOR THE QUARTER ENDED     FOR THE SIX MONTHS ENDED
                           JUNE 30,       JUNE 27,     JUNE 30,      JUNE 27,
                             1996          1997          1996          1997
                          ----------    ----------    ----------    -----------
 
Net sales                 $6,085,884   $12,094,483    $14,001,937   $23,681,366
Cost of sales              3,675,272     6,609,153      8,343,392    12,991,830
                          ----------   -----------    -----------   -----------
   Gross profit            2,410,612     5,485,330      5,658,545    10,689,536
                          ----------   -----------    -----------   -----------

Research and development     205,662       494,192        463,622       935,986
Sales and marketing          539,747       990,801      1,117,036     1,876,528
General and administrative   482,153       922,539        931,175     1,703,320
                          ----------   -----------    -----------   -----------
   Total operating 
     expenses              1,227,562     2,407,532      2,511,833     4,515,834
                          ----------   -----------    -----------   -----------

   Income from operations  1,183,050     3,077,798      3,146,712     6,173,702

Interest income (expense),
  net                       (474,937)      117,059       (946,875)     (123,344)
Other income                       -             -              -       146,324
                          ----------   -----------    -----------   -----------
Income from operations 
  before income taxes and 
  extraordinary item         708,113     3,194,857      2,199,837     6,196,682

Provision for income taxes  (240,561)   (1,089,454)      (748,185)   (2,114,954)
                          ----------   -----------    -----------   -----------
Income before 
  extraordinary item         467,552     2,105,403      1,451,652     4,081,728

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

Net income                $  467,552   $ 2,105,403    $ 1,451,652   $ 3,940,965
                          ----------   -----------    -----------   -----------
                          ----------   -----------    -----------   -----------

Pro forma per share 
  amounts:
   Income before 
     extraordinary item        $0.05         $0.16          $0.16         $0.34
   Extraordinary item             --            --             --         (0.01)
                          ----------   -----------    -----------   -----------
   Pro forma income 
     per share                 $0.05         $0.16          $0.16         $0.33
                          ----------   -----------    -----------   -----------
                          ----------   -----------    -----------   -----------

Pro forma weighted 
  average shares used in
  computing per share 
  amounts                  9,091,932    12,860,770      9,091,932    11,839,388


                    See notes accompanying these financial statements.


                                        2
<PAGE>


                             APEX PC SOLUTIONS, INC.
                                 BALANCE SHEETS


                                       DECEMBER 31,         JUNE 27,
                                          1996                1997
                                       ------------       -----------
ASSETS
Current assets:
   Cash and cash equivalents           $ 2,118,887        $ 7,956,172
   Accounts receivable, net of 
     allowance for doubtful
     accounts                            6,170,193          6,983,029
   Inventories                           1,653,011          2,393,250
   Prepaid expenses                        130,218            382,695
   Deferred tax assets                     800,700            519,320
                                       -----------        -----------
      Total current assets              10,873,009         18,234,466
                                       -----------        -----------
Property and equipment, at cost:
   Leasehold improvements                    4,677             12,239
   Furniture and office equipment          273,831            359,030
   Computer and other equipment            380,334            556,480
                                       -----------        -----------
                                           658,842            927,749
   Less accumulated depreciation           195,959            283,812
                                       -----------        -----------
                                           462,883            643,937
                                       -----------        -----------
Other assets                               617,255             17,672
                                       -----------        -----------
Total assets                           $11,953,147         18,896,075
                                       -----------        -----------
                                       -----------        -----------


(Continued on next page)


               See notes accompanying these financial statements.


                                        3
<PAGE>

                            APEX PC SOLUTIONS, INC.
                          BALANCE SHEETS (CONTINUED)


                                       DECEMBER 31,         JUNE 27,
                                          1996                1997
                                       ------------       -----------

LIABILITIES AND SHAREHOLDERS' EQUITY 
 (DEFICIT)

Current liabilities:
   Current portion of long-term debt   $    504,349       $        --
   Accounts payable                         530,525         1,206,589
   Accrued wages and commissions            554,352           525,166
   Accrued warranty costs                   630,000           745,000
   Other accrued expenses                   282,040           546,175
                                       ------------       -----------
       Total current liabilities          2,501,266         3,022,930
Subordinated debt                        20,000,000                --
Long-term debt, less current portion      5,110,549                --
Deferred taxes                               16,500            21,250
                                       ------------       -----------
       Total liabilities                 27,628,315         3,044,180
                                       ------------       -----------

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; 100,000 shares 
     authorized at December 31, 
     1996 and 1,000,000 shares
     authorized at June 27, 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 June 27 1997; 6,260,016
     and 12,163,328 shares issued 
     and outstanding                        648,260        31,526,508
   Deferred compensation                    (93,431)         (180,581)
   Accumulated deficit                  (19,434,997)      (15,494,032)
                                       ------------       -----------
     Total shareholders' equity 
       (deficit)                        (18,880,168)       15,851,895
                                       ------------       -----------
Total liabilities and shareholders'
   equity (deficit)                     $11,953,147       $18,896,075
                                       ------------       -----------
                                       ------------       -----------

            See notes accompanying these financial statements.


                                        4
<PAGE>

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


                                        JUNE 30,            JUNE 27,
                                          1996                1997
                                       ------------       -----------

NET CASH PROVIDED BY OPERATING 
  ACTIVITIES                           $    769,533       $ 3,831,463
                                       ------------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment     (231,141)         (268,907)
                                       ------------       -----------
       Net cash used by investing 
         activities                        (231,141)         (268,907)
                                       ------------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments on notes to 
     shareholder                           (270,000)               --
   Repayments of long-term debt              (2,074)      (25,614,898)
   Payment of loan fees                     (45,000)               --
   Proceeds from initial public 
     offering of common stock (1)                --        28,866,741
   Proceeds from issuance of common 
     stock and exercise of common 
     stock options                            9,508            22,886
   Redemption of Series B redeemable 
     preferred stock                             --        (1,000,000)
                                       ------------       -----------
       Net cash provided (used) by 
         investing activities              (307,566)        2,274,729
                                       ------------       -----------

Net increase in cash and cash 
  equivalents                               230,826         5,837,285
Cash and cash equivalents at 
  beginning of period                     2,676,290         2,118,887
                                       ------------       -----------
Cash and cash equivalents at 
  end of period                          $2,907,116        $7,956,172
                                       ------------       -----------
                                       ------------       -----------

(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.


              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 revenue 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 and the Company's Quarterly Report on Form 10-QSB for
     the quarter ended March 28, 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
     
     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 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.


                                        6
<PAGE>


3.   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.

4.   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 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, 
AND IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED 
MARCH 28, 1997, 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 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 six months ended June 27, 1997, sales to the 
Company's OEM customers represented 66% 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 

                                        7
<PAGE>


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
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.  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.


                                        8
<PAGE>

RESULTS OF OPERATIONS

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


                            FOR THE QUARTER ENDED     FOR THE SIX MONTHS ENDED
                            JUNE 30,     JUNE 27,     JUNE 30,        JUNE 27,
                              1996         1997         1996            1997
                            -------      --------     --------        --------

Net sales                     100.0%        100.0%       100.0%          100.0%
Cost of sales                  60.4          54.6         59.6            54.9
                               ----          ----         ----            ----
Gross margin                   39.6          45.4         40.4            45.1
                               ----          ----         ----            ----
Operating expenses:
   Research and development     3.4           4.1          3.3             4.0
   Sales and marketing          8.9           8.3          8.0             7.9
   General and administrative   7.9           7.6          6.6             7.2
                               ----          ----         ----            ----
      Total operating 
        expenses               20.2          20.0         17.9            19.1
                               ----          ----         ----            ----
Income from operations         19.4          25.4         22.5            26.0
Interest income (expense), 
  net                          (7.8)          1.0         (6.8)           (0.5)
Other income                    0.0           0.0          0.0             0.6
                               ----          ----         ----            ----
Income from operations 
  before income taxes 
  and extraordinary item       11.6          26.4         15.7            26.1
Provision for income taxes      3.9           9.0          5.3             8.9
                               ----          ----         ----            ----
Income before extraordinary 
  item                          7.7          17.4         10.4            17.2
Extraordinary item -- loss on 
  early extinguishment of 
  debt, net of applicable 
  income taxes                  0.0           0.0          0.0            (0.6)
                               ----          ----         ----            ----
Net income                      7.7%         17.4%        10.4%           16.6%
                               ----          ----         ----            ----


     NET SALES.  The Company's net sales consist of sales of stand-alone 
switching systems and integrated cabinet systems.  Net sales increased 99% to 
$12.1 million for the second quarter of 1997 from  $6.1 million for the 
second quarter of 1996, due primarily to increasing demand for Apex branded 
products. Branded sales increased to $5.1 million in the second quarter of 
1997 from $2.2 million a year ago. Private label OEM sales and sales of Apex 
branded products represented 58% and 42%, respectively, of net sales for the 
second quarter of 1997, compared to 64% and 36%, respectively, of net sales 
for the second quarter of 1996.  1997 year-to-date net sales increased 69% to 
$23.7 million from $14.0 million year-to-date in 1996, due primarily to 
absolute growth in sales of stand-alone switching systems to private label 
OEM customers and, to a lesser extent, to increased sales of Apex branded 
switching systems and integrated server cabinet systems.   1997 year-to-date 
private label OEM sales and sales of Apex branded products represented  66% 
and  34%, 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 45.4% for the second quarter of 
1997 from 39.6% for the second quarter of 1996, due primarily to a 
significant increase in the percentage of Apex branded sales, which generally 
have higher gross margins than OEM sales.  1997 year-to-date gross margin 
increased  to 45.1%  from 40.4% year-to-date in 1996, due primarily to shifts 
in the Company's product mix to a larger percentage of branded switch and 
integrated cabinet system sales.  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 $494,000 for the
second quarter of 1997 from $206,000 for the second quarter of 1996, due
primarily to increased compensation expenses associated with increased staffing
levels and, to a 


                                        9
<PAGE>


lesser extent, to increased project spending.   Research and development 
expenses as a percentage of net sales were 4.1% for the second quarter of 
1997, compared to 3.4% for the second quarter of 1996.   1997 year-to-date 
research and development expenses increased to $936,000  from $464,000 
year-to-date in 1996, due to the same reasons noted for the second quarter.  
As a percentage of net sales, 1997 year-to-date research and development 
expenses were 4.0%, compared to 3.3% 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 $991,000 for the second quarter of 1997 from $540,000 for the 
second quarter of 1996, but decreased as a percentage of net sales to 8.3% 
from 8.9%.   The increase in absolute dollars 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 $1.9 million from $1.1 million year-to-date 
in 1996, but decreased as a percentage of net sales to 7.9% from 8.0%.   The 
increase in absolute dollars was due to the same reasons noted above for the 
second 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 $923,000 for the second quarter of  
1997 from $482,000 for the second quarter of 1996, but decreased to 7.6% from 
7.9% of net sales.   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 $1.7 million  year-to-date for 1997 from 
$931,000 for year-to-date 1996, increasing to 7.2% from 6.6% of net sales.    
The increase in absolute dollars was due to the same reasons noted above for 
the second quarter.   The Company expects general and administrative expenses 
to increase in absolute dollars to support the growth of the operations and 
sales functions.

     NET INTEREST EXPENSE (INCOME).  The Company had net interest income of
$117,000 for the second quarter of 1997, compared to net interest expense of
$475,000 for the second quarter of 1996.  This $592,000 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 initial public offering in
February 1997 ("IPO").  1997 year-to-date net interest expense decreased to
$123,000 from $947,000 year-to-date 1996.  This $824,000 net change was due to
the same reasons noted above for the second quarter.

     PROVISION FOR INCOME TAXES.  The provision for income taxes was $1.1
million for the second quarter of  1997, compared to $241,000 for the second
quarter of 1996.  The 1997 year-to-date provision for income taxes increased to
$2.1 million from $748,000 year-to-date in 1996.  The effective federal tax
rate for each of these periods was approximately 34%.

     NET INCOME.  Net income increased 350% to $2.1 million for the second
quarter of 1997 from $468,000 for the second quarter of 1996 due primarily to
increased net sales and related gross profits and decreased  interest expense
resulting from the elimination of long-term indebtedness using the proceeds of
the Company's IPO and, to a lesser extent, to increased percentage gross
margin.   As a percentage of net sales, net income increased to 17.4% for the
second quarter of 1997 from 7.7% for the second quarter of


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<PAGE>


1996. The increase as a percentage of net sales was due to the factors 
discussed above. 1997 year-to-date net income increased 171% to $3.9 million 
from $1.45 million year-to-date in 1996 due to the same reasons noted above 
for the second quarter. As a percentage of net sales, 1997 year-to-date net 
income increased to 16.6% from 10.4% year-to-date in 1996, and for the same 
reasons noted above.

BACKLOG

     As of  June 27, 1997, the Company's backlog was $10.9 million, compared to
$4.2 million at the end of the second 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 June 27, 1997 the Company's principal sources of liquidity 
consisted of approximately $7.9 million in cash and cash equivalents, an 
increase of $5.8 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 June 1997. Thus, all $3.0 million was available through March 1997, 
and all $5.0 million thereafter.

     Cash generated from operating activities increased to  $3.8 million 
year-to-date for 1997 from $770,000 year-to-date for 1996.  This increase in 
cash flow was primarily due to increased net income, decreased bonus payments 
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, 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.  
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, 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 


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<PAGE>


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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

(a)  The Company held its Annual Meeting of Shareholders on June 26, 1997.  At
  the Annual Meeting, the shareholders elected each of the five nominees for
  director, Kevin J. Hafer, Sterling Crum, Jeffrey T. Chambers, William McAleer
  and Edwin L. Harper, with 11,673,887 votes in favor and 1,250 votes against
  each nominee.  The shareholders voted to ratify the appointment of Coopers &
  Lybrand LLP as the Company's auditors with 11,674,707 votes in favor and 430
  abstentions.

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

(a)  Exhibits

 3.2   Amended and Restated Bylaws (incorporated by reference to the Company's 
       Registration Statement on Form SB-2 filed with the Securities and 
       Exchange Commission on July 21, 1997)

10.3.2 First Amendment to Employment Agreement dated December 1996 by 
       and between the Company and Kevin J. Hafer (incorporated by 
       reference to the Company's Registration Statement on Form SB-2 
       filed with the Securities and Exchange Commission on July 21, 1997)

10.5.2 Second Amendment to Lease dated March 13, 1997 by and between 
       the Company and Christopher L. Clark (incorporated by reference 
       to the Company's Registration Statement on Form SB-2 filed with 
       the Securities and Exchange Commission on July 21, 1997)

10.6   Purchase Agreement dated September 19, 1994 by and between 
       the Company and Compaq Computer Corporation, as amended+ ++ 
       (incorporated by reference to the Company's Registration Statement 
       on Form SB-2 filed with the Securities and Exchange Commission on 
       July 21, 1997)

10.16  Business Loan Agreement dated March 27, 1997 by and between the 
       Company and U.S. Bank of Washington, National Association 
       (incorporated by reference to the Company's Registration Statement 
       on Form SB-2 filed with the Securities and Exchange Commission on 
       July 21, 1997)

11.1   Statement re Computation of Earnings Per Share

21.1   Subsidiaries of Registrant (incorporated by reference to the Company's 
       Registration Statement on Form SB-2 filed with the Securities and 
       Exchange Commission on July 21, 1997)

27.1   Financial Data Schedule

 + Confidential treatment requested for portions of this agreement.

++ Portions of this agreement are subject to confidential treatment.

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

                                  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)

                              /s/ Kevin J. Hafer
Date:  July 21, 1997          -----------------------
                              Kevin J. Hafer
                              President and Chief Executive Officer
                                       
                                       
                              /s/ Douglas A. Bevis
Date:  July 21, 1997          -----------------------
                              Douglas A. Bevis
                              Vice President, Chief Financial Officer


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