<PAGE>


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

                                      FORM 10-Q

(Mark One)

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

For the quarterly period ended March 27, 1998 or

[_]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

For the period from __________ to __________


Commission file number:  000-21959


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

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

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

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

     Indicate by check mark whether the registrant has (1) filed all reports,
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

[X]Yes  [_] No


     As of April 30, 1998, the number of outstanding shares of the Company's
Common Stock was 13,452,928.


                                       1
<PAGE>

                               APEX PC SOLUTIONS, INC.
                                      FORM 10-Q
                                    MARCH 27, 1998

                                        INDEX

<TABLE>
<CAPTION>
                                                                              Page(s)
                                                                              -------
<S>                                                                           <C>
Part I   Financial Information
         Item 1. Financial Statements
                 Consolidated Statements of Operations (unaudited) for the
                    Quarters Ended March 27, 1998 and March 28, 1997               3
                 Consolidated Balance Sheets at March 27, 1998 (unaudited)
                    and December 31, 1997                                          4
                 Condensed Consolidated Statements of Cash Flows (unaudited)
                    for the Quarters Ended March 27, 1998 and March 28, 1997       5
                 Notes to Consolidated Financial Statements (unaudited)          6-7
         Item 2. Management's Discussion and Analysis of Financial Condition
                   and Results of Operations                                    7-12

Part II   Other Information
          Item 1.   Legal Proceedings                                             13
          Item 6.   Exhibits and Reports on form 8-K                              13

Signatures                                                                        14
</TABLE>


                                              2

<PAGE>

                        PART I--FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           APEX PC SOLUTIONS, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                  FOR THE QUARTER ENDED
                                                                                         MARCH 27,                       MARCH 28,
                                                                                           1998                            1997
                                                                                         ----------                     ----------
                                                                                        (UNAUDITED)                     (UNAUDITED)
<S>                                                                                     <C>                             <C>
Net sales                                                                               $15,703,657                     $11,586,883
Cost of sales                                                                             8,327,476                       6,382,677
                                                                                         ----------                      ----------
     Gross profit                                                                         7,376,181                       5,204,206
                                                                                         ----------                      ----------

Research and development                                                                    646,370                         441,794
Sales and marketing                                                                       1,210,236                         885,727
General and administrative                                                                1,057,703                         780,781
                                                                                         ----------                      ----------
     Total operating expenses                                                             2,914,309                       2,108,302
                                                                                         ----------                      ----------

     Income from operations                                                               4,461,872                       3,095,904

Interest income (expense), net                                                              566,856                        (240,403)
Other income                                                                                      -                         146,324
                                                                                         ----------                      ----------
Income from operations before income taxes and
  Extraordinary item                                                                      5,028,728                       3,001,825

Provision for income taxes                                                                1,684,624                       1,025,500
                                                                                         ----------                      ----------

Income before extraordinary item                                                          3,344,104                       1,976,325

Extraordinary item -- loss on early extinguishment of debt,
  net of applicable income tax benefit of $72,511                                                 -                        (140,763)
                                                                                         ----------                      ----------

Net income                                                                              $ 3,344,104                     $ 1,835,562
                                                                                         ----------                      ----------
                                                                                         ----------                      ----------

Per share amounts:
     Basic:
        Income before extraordinary item                                                $      0.25                     $      0.22
        Extraordinary item                                                                        -                           (0.01)
                                                                                         ----------                      ----------
        Net income                                                                      $      0.25                     $      0.21
                                                                                         ----------                      ----------
                                                                                         ----------                      ----------

     Diluted:
        Income before extraordinary item                                                $      0.24                     $      0.18
        Extraordinary item                                                                        -                           (0.01)
                                                                                         ----------                      ----------
        Net income                                                                      $      0.24                     $      0.17
                                                                                         ----------                      ----------
                                                                                         ----------                      ----------

Weighted average shares used in computing net income per share:
     Basic                                                                               13,437,982                       8,837,027
                                                                                         ----------                      ----------
                                                                                         ----------                      ----------
     Diluted                                                                             13,965,831                      10,634,477
                                                                                         ----------                      ----------
                                                                                         ----------                      ----------
</TABLE>

        See notes accompanying these consolidated financial statements.

                                       3
<PAGE>

                           APEX PC SOLUTIONS, INC.
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         MARCH 27,                     DECEMBER 31,
                                                                                           1998                            1997
                                                                                        ----------                     ----------
                                                                                       (UNAUDITED)
<S>                                                                                    <C>                            <C>
ASSETS

Current assets:
   Cash and cash equivalents                                                           $ 9,910,310                    $11,824,978
   Investments                                                                          34,062,551                     27,878,683
   Accounts receivable, net of allowance for doubtful
     accounts                                                                           10,338,922                      9,843,716
   Inventories                                                                           3,011,906                      2,918,119
   Interest receivable                                                                     518,070                        378,730
   Prepaid expenses                                                                        505,393                        243,741
   Deferred tax assets                                                                     569,000                        554,664
                                                                                        ----------                     ----------
     Total current assets                                                               58,916,152                     53,642,631
                                                                                        ----------                     ----------
Property and equipment, at cost:

   Leasehold improvements                                                                  145,937                        145,937
   Furniture and office equipment                                                          497,935                        500,281
   Computer and other equipment                                                            659,331                        655,581
                                                                                        ----------                     ----------
                                                                                         1,303,203                      1,301,799
   Less accumulated depreciation                                                           518,565                        432,847
                                                                                        ----------                     ----------
                                                                                           784,638                        868,952
                                                                                        ----------                     ----------
Investments                                                                                742,858                        741,538
                                                                                        ----------                     ----------
Other assets                                                                               107,825                         17,672
                                                                                        ----------                     ----------
Total assets                                                                           $60,551,473                    $55,270,793
                                                                                        ----------                     ----------
                                                                                        ----------                     ----------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                                    $ 1,034,913                    $   326,619
   Accrued wages and commissions                                                           442,328                        791,062
   Accrued warranty costs                                                                  745,000                        745,000
   Accrued income taxes                                                                  1,594,953                              -
   Other accrued expenses                                                                  538,974                        634,765
                                                                                        ----------                     ----------
     Total current liabilities                                                           4,356,168                      2,497,446
Deferred taxes                                                                              39,000                         35,000
                                                                                        ----------                     ----------
Total liabilities                                                                        4,395,168                      2,532,446
                                                                                        ----------                     ----------

Commitments and contingencies

Shareholders' equity:
   Preferred stock, 1,000,000 shares authorized; no shares
     issued and outstanding                                                                      -                              -
   Common stock, no par value; 100,000,000 shares
     authorized; 13,438,159 and 13,434,384 shares issued
     and outstanding, respectively                                                      62,078,642                     62,014,406
   Deferred compensation                                                                  (158,513)                      (168,131)
   Retained earnings (deficit)                                                          (5,763,824)                    (9,107,928)
                                                                                        ----------                     ----------
     Total shareholders' equity                                                         56,156,305                     52,738,347
                                                                                        ----------                     ----------
Total liabilities and shareholders' equity                                             $60,551,473                    $55,270,793
                                                                                        ----------                     ----------
                                                                                        ----------                     ----------
</TABLE>
        See notes accompanying these consolidated financial statements.

                                       4
<PAGE>

                           APEX PC SOLUTIONS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                   FOR THE QUARTER ENDED
                                                                                          MARCH 27,                      MARCH 28,
                                                                                             1998                          1997
                                                                                         ------------                   ----------
                                                                                          (UNAUDITED)                   (UNAUDITED)
<S>                                                                                      <C>                            <C>

Net cash provided by operating activities                                                $  4,207,688                   $3,152,325
                                                                                         ------------                   ----------

Cash flows from investing activities:
   Purchases of investments                                                               (16,568,702)                           -
   Maturities of investments                                                               10,383,514                            -
   Purchases of property and equipment                                                         (1,404)                     (94,891)
                                                                                         ------------                   ----------
     Net cash used in investing activities                                                 (6,186,592)                     (94,891)
                                                                                         ------------                   ----------

Cash flows from financing activities:
   Repayments of long-term debt and capital lease                                                   -                  (25,601,095)
   Proceeds from initial public offering of common stock                                            -                   28,876,161
   Proceeds from issuance of common stock and exercise of
     Common stock options                                                                      64,236                            -
   Redemption of Series B redeemable preferred stock                                                                    (1,000,000)
                                                                                         ------------                   ----------
     Net cash provided by financing activities                                                 64,236                    2,275,066
                                                                                         ------------                    ----------

Net increase (decrease) in cash and cash equivalents                                       (1,914,668)                   5,332,500
Cash and cash equivalents at beginning of period                                           11,824,978                    2,118,887
                                                                                         ------------                   ----------
Cash and cash equivalents at end of period                                               $  9,910,310                   $7,451,387
                                                                                         ------------                   ----------
                                                                                         ------------                   ----------
</TABLE>





        See notes accompanying these consolidated financial statements.


                                          5
<PAGE>

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

NOTE 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 consolidated financial statements should be read in
     conjunction with the audited consolidated financial statements of Apex PC
     Solutions, Inc. ("Apex" or the "Company") for the year ended December 31,
     1997 and the notes thereto contained in the Company's Annual Report on Form
     10-KSB for the year ended December 31, 1997, on file with the Securities
     and Exchange Commission.

          The Company reports its annual results based on years ending December
     31.  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 financial statements of the Company are consolidated and include
     the accounts of the Company and its wholly-owned subsidiary, Apex PC
     Solutions, Ltd. (a foreign sales corporation).  Significant intercompany
     transactions and balances have been eliminated.

          The Company has evaluated the impact of Statement of Financial
     Accounting Standards No. 130,  "Reporting  Comprehensive Income"  and has
     determined that its current reporting is in compliance with the statement.
     The Company has also evaluated the impact of Statement of Financial
     Accounting No. 131, "Disclosures About Segments of an Enterprise and
     Related Information"  and has determined that its current reporting is in
     compliance with the statement, and has also determined that the 
     Company's operations consist of only one segment.

Note 2.   Inventories

          Inventories consisted of the following at:

<TABLE>
<CAPTION>
                                               MARCH 27,          DECEMBER 31,
                                                  1998                1997
                                               -------               ------
<S>                                           <C>                  <C>
 Raw materials                                $1,110,048          $  979,438
 Work-in-process                                 975,196             908,815
 Finished goods                                1,161,662           1,264,866
                                              ----------          ----------
                                               3,246,906           3,153,119
 Less reserve for obsolescence                  (235,000)           (235,000)
                                              ----------          ----------
                                              $3,011,906          $2,918,119
                                              ----------          ----------
                                              ----------          ----------
</TABLE>

NOTE 3.   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

                                          6
<PAGE>

     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.

Note 4.   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.

Note 5.   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.

Note 6.   Other Income

          Other income in the Quarter ended March 28, 1997 includes 
     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 OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     THE INFORMATION CONTAINED IN THIS ITEM 2 - "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" 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 GROSS MARGINS,
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 OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND IN THE COMPANY'S ANNUAL REPORT ON 
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1997, ON FILE WITH THE SECURITIES 
AND EXCHANGE COMMISSION.



                                          7

<PAGE>

OVERVIEW

     The Company designs, manufactures and markets stand-alone switching systems
and integrated server cabinet solutions for the client/server computing market.
The Company's switching products, including OUTLOOK, OUTLOOK(4) , VIEWPOINT, and
EL-40LC, enable network administrators to access multiple servers from one or
more centralized keyboard, monitor and mouse configurations ("consoles"),
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 solutions 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.  For the
quarter ended March 27, 1998, sales to the Company's private-label OEM customers
represented 55% of the Company's net sales.  The Company's private-label 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.
The Company has experienced, and may continue to experience, significant
reductions or delays in orders from its private-label 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's business and results of operations are becoming more
dependent upon the Company's sales of branded switching products to other
manufacturers of servers and related networking products, who integrate and sell
Apex-brand switches with their own products ("Apex-brand OEMs").  The Company
does not have contracts with any of these customers, who are obligated to
purchase products from the Company only pursuant to binding purchase orders and
could cease doing business with the Company at any time.  The Company's business
with these customers is subject to risks such as short order cycles and
difficulty in predicting sales, reductions or delays in orders, adoption of
competing products developed by third parties of the customer or by the
customer's own internal development team, and change in corporate ownership,
financial condition, business direction or product mix of the customer.  The
loss of, or material decline in orders from, certain of these customers could
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 an annual basis, and the Company 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,
particularly from private-label OEM and other large 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; competition and
price reductions by the Company's competitors; the availability and cost of
supplies and components; sales and marketing expenses related to entering into
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.


                                          8

<PAGE>

     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 private-label OEM customers
and expects this pattern to continue in the future.  Although the Company's
private-label OEM customers typically place orders for products up to several
months prior to scheduled shipment dates, these orders are subject to
cancellation up to four to six 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 private-label 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 private-label 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 (i.e.,
sales to customers other than private-label OEMs) 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 many 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.

     With recent industry-wide initiatives to reduce all channel inventories and
to shorten lead times, trends with Apex's major customers are, generally, to
reduce the number of weeks of forward-committed firm orders.  As a result of
this factor, which currently is affecting the Company's business with certain
private-label and Apex-brand OEMs, the Company believes that its sales are
becoming more difficult to predict.

     Gross margins may vary significantly from period to period depending on a
number of factors, including: the ratio of private-label OEM sales to branded
sales, as private-label OEM sales typically have lower gross margins than
branded sales; product mix, including the percentage of integrated server
cabinet solution 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
its gross margins will decline in the future primarily due to increased
competition and the introduction of new technologies that may affect the prices
of the Company's products. 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 third and fourth quarters generally have 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.

     On February 24, 1998 the Company signed an agreement for a five-year lease
of approximately 117,000 square feet in an industrial office building being
built in Redmond, Washington for scheduled occupancy in February 1999.  The
initial base rent under the lease, portions of which will be allocable to cost
of sales and to general and administrative expense, is approximately $90,000
per month, plus taxes, insurance and maintenance.  Consequently, beginning in
1999, the Company's gross margin and net income may be adversely affected by the
Company's increased rent expense.

                                          9

<PAGE>

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
                                                   MARCH 27,          MARCH 28,
                                                     1998              1997
                                                  ----------         ---------
<S>                                                 <C>               <C>
Net sales........................................     100.0%           100.0%
Cost of sales....................................      53.0             55.1
                                                      -----            -----
Gross margin.....................................      47.0             44.9
                                                      -----            -----
Operating expenses:
     Research and development....................       4.1              3.8
     Sales and marketing.........................       7.7              7.6
     General and administrative..................       6.8              6.8
                                                      -----            -----
          Total operating expenses...............      18.6             18.2
                                                      -----            -----
Income from operations...........................      28.4             26.7
Interest income (expense), net...................       3.6             (2.1)
Other income.....................................         -              1.3
                                                      -----            -----
Income before income taxes and                  
 extraordinary item.............................       32.0             25.9
Provision for income taxes......................       10.7              8.9
                                                      -----            -----
Income before extraordinary item................       21.3             17.0
Extraordinary item -- loss on early
     extinguishment of debt, net of applicable
     income tax benefit.........................          -             (1.2)
                                                      -----            -----

Net income......................................       21.3%            15.8%
                                                      -----            -----
                                                      -----            -----
</TABLE>

     NET SALES.  The Company's net sales consist of sales of stand-alone
switching systems and integrated cabinet solutions.  Net sales increased 36% to
$15.7 million for the first quarter of 1998 from  $11.6 million for the first
quarter of 1997, due to increased demand for Apex-brand products.  Apex-brand
product sales increased 138% to $7.0 million in the first quarter of 1998 from
$3.0 million a year ago.   Private-label OEM sales and sales of Apex-brand
products represented 55% and 45%, respectively, of net sales for the first
quarter of 1998, compared to 74% and 26%, respectively, of net sales for the
first quarter of 1997.  Any cancellation, rescheduling or reduction of orders by
certain of the Company's private-label OEM customers or other major customers
could materially adversely affect the Company's future operating results.

     GROSS MARGIN. Gross margin is affected by a variety 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 solution 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.   Gross
margin increased  to 47.0% for the first quarter of 1998 from 44.9% for the
first quarter of 1997 due primarily to shifts in the Company's product mix to a
larger percentage of higher-margin Apex-brand product sales, and to cost
efficiencies at higher levels of production.  The Company expects that increased
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 $646,000 for the
first quarter of 1998 from $442,000 for the first quarter of 1997.  As a
percentage of net sales, research and development expenses increased to 4.1%
for the first quarter of 1998 from 3.8% for the first quarter of 1997.  The
increase in absolute dollars and as a percentage of net sales was due primarily
to increased project spending and, to a lesser extent, increased compensation
expense associated with increased staffing levels.  The Company believes that
the timely development of innovative products and enhancements to existing
products is essential to maintaining its competitive


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<PAGE>

position and, therefore, expects research and development expenditures to
increase in absolute dollars.

     SALES AND MARKETING EXPENSES.  Sales and marketing expenses include
advertising, promotional material, trade show expenses and sales and marketing
personnel costs, including sales commissions and travel.  Sales and marketing
expenses increased to $1.2 million for the first quarter of 1998 from $886,000
for the first quarter of 1997.  As a percentage of net sales, sales and
marketing expenses increased to 7.7% for the first quarter of 1998 from 7.6%
for the first quarter of 1997.  The increase in absolute dollars and as a
percentage of net sales was due primarily to increased advertising and trade
show expenses, including expenses relating to market entry and advertising
strategies for Europe and increased compensation expense associated with
increased staffing levels.  The Company expects sales and marketing expenditures
to increase in absolute dollars as it continues its efforts to increase branded
sales and international sales.

     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 $1.1 million for the first quarter of 1998 from $781,000
for the first quarter of 1997.  As a percentage of net sales, general and
administrative expenses  remained constant at 6.8%.  The increase in absolute
dollars was due primarily to increased costs relating to the Company's being
publicly held and, to a lesser extent, increased occupancy costs associated with
the expansion of facilities in mid 1997. The Company expects general and
administrative expenses to increase in absolute dollars to support the growth of
the operations and sales functions.

     INTEREST INCOME (EXPENSE), NET.  Net interest income was $567,000 for the
first quarter of 1998, compared to net interest expense of $240,000 for the
first quarter of 1997.  This $807,000 net change resulted 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 interest earned on the approximately $30.3
million of net proceeds from the Company's follow-on offering completed in
August 1997.

     PROVISION FOR INCOME TAXES.  The provision for income taxes increased to
$1.7 million for the first quarter of 1998, from $1.0 million for the first
quarter of 1997. The effective federal tax rate declined to approximately 33.5%
for the first quarter of 1998 from approximately 34% for the first quarter of
1997 due primarily to the benefits associated with implementing a foreign sales
corporation.

     NET INCOME.  Net income increased 82% to $3.3 million for the first quarter
of 1998 from $1.8 million for the first quarter of 1997 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 21.3% for the first quarter of 1998 from 15.8%  for the first
quarter of 1997 due to the same factors.

BACKLOG

     As of  March 27, 1998, the Company's backlog was $10.6 million, compared to
$7.9 million at December 31, 1997 and $6.0 million at the end of the first
quarter of 1997.   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.  Moreover, with recent industry-wide
initiatives to reduce all channel inventories and shorten lead times, the
Company views backlog as a less important indicator of future results than may
have been the case through 1996.


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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     As of March 27, 1998 the Company's principal sources of liquidity consisted
of approximately $44.0 million in cash, cash equivalents and current
investments, an increase of $4.3 million from the December 31, 1997 balances. In
addition, the Company has a combined line of credit and letter of credit
facility with a bank with aggregate borrowing capacity of $5.0 million at prime.
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 an aggregate of $5.0 million (less
any amounts outstanding under the line of credit). The combined line of credit
and letter of credit facility had a maturity date of April 30, 1998.  In April
1998, this facility was renewed with an aggregate borrowing capacity of $5.0
million, under the same terms and provides a final maturity date of April 30,
1999.  There were no borrowings under the line of credit and the letter of
credit facility from January 1, 1996 through April 30, 1998, and all $5.0
million was available

     Cash generated from operating activities increased to  $4.2 million for the
first quarter of 1998 compared to $3.2 million for the first quarter of 1997.
This increase in cash flow was primarily due to increased net income and an
increase in accrued income taxes, partially offset by increases in 
accounts receivable.

     In February 1997, the Company consummated its IPO.  The net proceeds to 
the Company from  the IPO were approximately $28.4 million, after deducting 
$325,399 in offering expenses and 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 3 to Consolidated 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 was 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 and investment 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 for at least the next 12 months.


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<PAGE>

                             PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS.

     On February 25, 1998, the Company filed complaints for patent infringement
against Cybex Computer Products Corporation and Rose Electronics (cause numbers
C98-246Z and C98-245Z, respectively) in United States District Court for the
Western District of Washington at Seattle in connection with United States
Patent Number 5,721,842, which was issued to the Company on February 24, 1998.
The complaints allege that the products manufactured and sold by Cybex Computer
Products Corporation and Rose Electronics embody the inventions claimed in U.S.
Patent Number 5,721,842, and seek injunctive relief, damages, attorneys' fees,
interest and costs.


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

(a)  Exhibits

10.17     Lease Agreement dated February 24, 1998, by and between the Company
          and OPUS NORTHWEST, L.L.C.

11.1      Statement re: Computation of Net Income Per Share

27.1      Financial Data Schedule


ITEMS 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:     May 11, 1998                     /s/  Kevin J. Hafer
                                        -------------------------
                                        Kevin J. Hafer
                                        President and Chief Executive Officer



Date:     May 11, 1998                    /s/  Douglas A. Bevis
                                        --------------------------
                                        Douglas A. Bevis
                                        Vice President, Chief Financial Officer


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