<PAGE>
                     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:  DECEMBER 31, 1996 

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


     For the transition period from            to                  
                                    -----------   ------------


Commission File Number:  1-8101


Exact Name of Registrant as
  Specified in Its Charter:  DDL ELECTRONICS, INC.


State or Other Jurisdiction of                 I.R.S. Employer  
Incorporation or Organization: DELAWARE        Identification No.: 33-0213512
                                        


Address of Principal Executive Offices:        2151 Anchor Court
                                               Newbury Park, CA 91320

Registrant's Telephone Number:                 (805) 376-9415



Indicate by check mark whether the registrant:  (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.

Yes [X]  No [ ] 



The registrant had 23,066,914 shares of Common Stock outstanding as of 
February 5, 1997.


<PAGE>
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                  DDL ELECTRONICS, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEET
                     (Unaudited, except June 30, 1996)


                                   December 31 ,       June 30,
                                       1996              1996
                                      ------            ------
        Assets

Current assets:
  Cash and cash equivalents       $  1,052,000     $  2,519,000
  Accounts receivable                7,134,000        5,620,000
  Costs and estimated earnings
   in excess of billings on 
   uncompleted contracts             4,173,000        3,026,000
  Inventories                        3,394,000        4,014,000
  Prepaid expenses and other
   current assets                      210,000          314,000
                                    ----------       ----------

     Total current assets           15,963,000       15,493,000
                                    ----------       ----------
Property, equipment and
 improvements, at cost:
  Buildings and improvements         6,081,000        5,604,000
  Plant equipment                   14,383,000       13,999,000
  Office and other equipment         1,799,000        1,444,000
                                    ----------       ----------

                                    22,263,000       21,047,000
Less: accumulated depreciation
 and amortization                  (15,938,000)     (15,130,000)
                                    ----------       ----------
Property, equipment and
 improvements, net                   6,325,000        5,917,000
                                    ----------       ----------
Other assets:
  Goodwill, net                      5,074,000        5,708,000
  Debt issue costs                     285,000          533,000
  Deposits and other assets            578,000          436,000
                                    ----------      -----------

                                     5,937,000        6,677,000
                                    ----------      -----------

                                  $ 28,225,000     $ 28,087,000
                                    ==========      ===========


<PAGE>
                  DDL ELECTRONICS, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEET
                               (Continued)
                     (Unaudited, except June 30, 1996)


                                    December 31,       June 30,
                                       1996              1996
                                      ------            ------
Liabilities and Stockholders' Equity

Current liabilities:
  Bank lines of credit payable     $ 1,621,000    $      -
  Current portion of 
   long-term debt                    5,915,000         603,000
  Accounts payable                   6,999,000       7,485,000
  Accrued payroll and
   employee benefits                   671,000         777,000
  Other accrued liabilities          2,649,000       3,114,000
                                    ----------      ----------  

     Total current liabilities      17,855,000      11,979,000
                                    ----------      ----------
Long-term debt:
  10% Senior Secured Notes               -           5,300,000
  7% Convertible Subordinated
   Debentures, less current 
   portion                             409,000         443,000
  8-1/2% Convertible
   Subordinated Debentures           1,580,000       1,580,000
  Notes payable, capitalized
   lease obligations and
   other long-term debt, 
   less current portion              3,958,000       3,612,000
                                    ----------      ----------

     Total long-term debt            5,947,000      10,935,000
                                    ----------      ----------

Stockholders' equity:
  Common stock                         231,000         230,000
  Additional paid-in capital        29,408,000      29,304,000
  Common stock held in escrow       (1,325,000)     (1,325,000)
  Accumulated deficit              (23,256,000)    (22,000,000)
  Foreign currency translation
   adjustment                         (635,000)     (1,036,000)
                                    ----------      ----------

     Total stockholders' equity      4,423,000       5,173,000 
                                    ----------      ----------

                                  $ 28,225,000    $ 28,087,000
                                    ==========      ==========


                   See accompanying Notes to Unaudited
                    Consolidated Financial Statements

<PAGE>
                 DDL ELECTRONICS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF OPERATIONS
                              (Unaudited)


                                        Three Months Ended 
                                            December 31,
                                       ----------------------
                                       1996             1995
                                      ------           ------

Sales                              $11,185,000      $ 6,029,000

Cost of goods sold                   9,762,000        5,372,000
                                    ----------        ---------
Gross profit                         1,423,000          657,000
                                    ----------        ---------
Operating expenses:
  Administrative and selling         1,212,000        1,031,000
  Goodwill amortization                317,000            -
                                    ----------        ---------

                                     1,529,000        1,031,000
                                    ----------        ---------

Operating loss                        (106,000)        (374,000)
                                    ----------        ---------
Non-operating income (expense):
  Investment income                     19,000           73,000
  Interest expense                    (324,000)        (114,000)
  Other income (expense)              (120,000)          67,000
                                    ----------        ---------

                                      (425,000)          26,000
                                    ----------        ---------

Loss before income taxes              (531,000)        (348,000)

Income tax benefit                       -                -
                                    ----------        ---------

Net loss                           $  (531,000)     $  (348,000)
                                    ==========        =========



Net loss per share                     $ (0.02)         $ (0.02)
                                          ====             ====

Shares used in computing
 net loss per share                 23,048,233       16,485,249
                                    ==========       ==========




                   See accompanying Notes to Unaudited
                    Consolidated Financial Statements

<PAGE>
                 DDL ELECTRONICS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF OPERATIONS
                              (Unaudited)


                                         Six Months Ended 
                                            December 31,
                                       ----------------------
                                       1996             1995
                                      ------           ------

Sales                              $21,080,000      $12,221,000

Cost of goods sold                  18,561,000       10,838,000
                                    ----------       ----------
Gross profit                         2,519,000        1,383,000
                                    ----------       ----------
Operating expenses:
  Administrative and selling         2,363,000        1,895,000
  Goodwill amortization                634,000            -
                                    ----------       ----------

                                     2,997,000        1,895,000
                                    ----------       ----------

Operating loss                        (478,000)        (512,000)
                                    ----------       ----------
Non-operating income (expense):
  Investment income                     43,000          200,000
  Interest expense                    (582,000)        (229,000)
  Other income (expense)              (239,000)         167,000
                                    ----------       ----------

                                      (778,000)         138,000 
                                    ----------       ----------

Loss before income taxes            (1,256,000)        (374,000)

Income tax benefit                       -            1,110,000 
                                    ----------       ----------

Net income (loss)                  $(1,256,000)     $   736,000 
                                    ==========       ==========



Earnings (loss) per share              $ (0.05)         $  0.04 
                                          ====             ====

Shares used in computing
 earnings (loss) per share          23,032,845       16,985,366
                                    ==========       ==========




                   See accompanying Notes to Unaudited
                    Consolidated Financial Statements

<PAGE>
               DDL ELECTRONICS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF CASH FLOWS
                             (UNAUDITED)


                                                 Six Months Ended 
                                                    December 31,
                                               ----------------------
                                               1996             1995
                                              ------           ------

Cash flows from operating activities:
  Net income (loss)                        $(1,256,000)     $    736,000
  Adjustments to reconcile net income
   (loss) to net cash provided (used)
   by operating activities - 
    Depreciation and amortization            1,556,000           382,000
    Net increase in operating
     working capital                        (2,874,000)         (755,000)
    (Increase) decrease in deposits
     and other assets                         (142,000)            7,000
    Benefit of noncapital grants              (119,000)         (151,000) 
    Other                                       61,000           (60,000)
                                             ---------         ---------

Net cash provided (used) by 
 operating activities                       (2,774,000)          159,000  
                                             ---------         ---------
Cash flows from investing activities:
  Capital expenditures                        (207,000)         (380,000)
                                             ----------         ---------

Cash flows from financing activities:
  Proceeds from bank lines of credit         1,564,000             -    
  Reductions of long-term debt                (388,000)         (348,000)
  Proceeds from exercise of stock options        -               377,000
  Proceeds from exercise of warrants             -                21,000
  Proceeds from government grants              290,000           139,000
                                             ---------         ---------

Net cash provided by financing activities    1,466,000           189,000 
                                             ---------         ---------

Effect of exchange rate changes on cash         48,000           (57,000)
                                             ---------         ---------

Decrease in cash and cash equivalents       (1,467,000)          (89,000)
       
Cash and cash equivalents at 
 beginning of period                         2,519,000         2,917,000
                                             ---------         ---------
Cash and cash equivalents at 
 end of period                             $ 1,052,000       $ 2,828,000
                                             =========         =========


                   See accompanying Notes to Unaudited
                    Consolidated Financial Statements
<PAGE>

                   DDL ELECTRONICS, INC. AND SUBSIDIARIES 
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 



Note 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

DDL Electronics, Inc. provides integrated design and electronic manufacturing 
services ("EMS") to original equipment manufacturers ("OEMs") in the 
computer, telecommunications, instrumentation, medical, industrial and 
aerospace industries. The Company also manufactures multilayer printed 
circuit boards ("PCBs") for use primarily in the computer, communications and 
instrumentation industries.  The Company's EMS operations are located in 
Southern California and Northern Ireland.  The Company's PCB facilities are 
located in Northern Ireland. 

The accompanying consolidated financial statements, which have not been 
audited by independent accountants (except for the balance sheet as of June 
30, 1996), include the accounts of DDL Electronics, Inc. and its 
subsidiaries.  All significant intercompany transactions and accounts have 
been eliminated in consolidation.  In the opinion of the Company's 
management, the accompanying consolidated financial statements reflect all 
adjustments (consisting of normal recurring accruals) necessary to present 
fairly the Company's financial position at December 31, 1996 and its results 
of operations and cash flows for the six months ended December 31, 1996 and 
1995. 

The Company uses a 52-53 week fiscal year ending on the Friday closest to 
June 30.  In the accompanying interim consolidated financial statements, the 
interim period end for both years is shown as December 31 for clarity of 
presentation.  The actual periods ended on December 27, 1996 and December 29, 
1995.  Certain notes and other information are condensed or omitted from the 
interim financial statements presented in this Quarterly Report on Form 10-Q.  
Therefore, these financial statements should be read in conjunction with the 
Company's 1996 Annual Report to Stockholders as filed with the Securities and 
Exchange Commission on October 11, 1996.

Certain reclassifications have been made to the interim fiscal 1996 financial 
statements to conform with the fiscal 1997 financial statement presentation.  
Such reclassifications had no effect on the Company's results of operations 
or stockholders' equity.  


Note 2 - REVENUE AND COST RECOGNITION

The Company's Northern Ireland operating units recognize sales and cost of 
sales upon shipment of products.  

SMTEK, the Company's U.S. operating unit which was acquired in January 1996, 
has historically generated the majority of its revenue through long-term 
contracts with suppliers of electronic components and products to the federal 
government. Consequently, SMTEK uses the percentage of completion method to 
recognize sales and cost of sales.  SMTEK determines percentage complete on 
the basis of costs incurred to total estimated costs.  Contract costs include 
all direct material and labor costs and those indirect costs related to 
contract performance, such as indirect labor, supplies, tools, repairs and 
depreciation costs.  Selling, general and administrative costs are charged to 
<PAGE>
expense as incurred.  In the period in which it is determined that a loss 
will result from the performance of a contract, the entire amount of the 
estimated loss is charged to income.  Other changes in contract price and 
estimates of costs and profits at completion are recognized prospectively.  
This method recognizes in the current period the cumulative effect of the 
changes on current and prior periods.  The asset "Costs and estimated 
earnings in excess of billings on uncompleted contracts" represents revenues 
recognized in excess of amounts billed.  


Note 3 - ACCOUNTS RECEIVABLE

The components of accounts receivable are as follows:


                                     December 31,     June 30,
                                         1996           1996
                                         ----           ----
    Trade receivables                 $6,900,000     $5,456,000
    Other receivables                    401,000        296,000
    Less allowance for doubtful
     accounts                           (167,000)      (132,000)  
                                       ---------      ---------
                                      $7,134,000     $5,620,000
                                       =========      =========

Included in other receivables at December 31, 1996 and June 30, 1996 are 
grants due from the Industrial Development Board for Northern Ireland of 
$127,000 and $251,000, respectively.  


Note 4 - COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
          CONTRACTS

The components of costs and estimated earnings in excess of billings on 
uncompleted contracts are as follows:

                                      December 31,    June 30,
                                         1996           1996
                                         ----           ----
  Costs incurred on uncompleted
   contracts                         $15,979,000    $11,181,000
  Estimated earnings                   1,628,000      1,544,000 
                                      ----------     ----------
                                      17,607,000     12,725,000
  Less:  Billings to date            (13,302,000)    (9,613,000)
         Customer advances and
          progress payments             (132,000)       (86,000)
                                      ----------     ----------
                                     $ 4,173,000    $ 3,026,000  
                                      ==========     ========== 

Costs and estimated earnings in excess of billings on uncompleted contracts 
consists of revenue recognized under electronics assembly contracts which 
amounts were not billable at the balance sheet date.  Essentially all of the 
unbilled receivables are expected to be billed within 90 days of the balance 
sheet date.

<PAGE>

Note 5 - INVENTORIES

Inventories consist of the following:

                                      December 31,    June 30,
                                         1996           1996
                                         ----           ----
  Raw materials                       $2,777,000     $2,853,000
  Work in process                        886,000      1,263,000
  Finished goods                          13,000        146,000
  Less reserves                         (282,000)      (248,000)
                                       ---------      ---------
                                      $3,394,000     $4,014,000
                                       =========      =========


Note 6 - OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:

                                      December 31,    June 30,
                                         1996           1996
                                         ----           ----
  Environmental liabilities           $  679,000     $  728,000
  Accrued taxes payable                  795,000        951,000
  Other                                1,175,000      1,435,000
                                       ---------      ---------
                                      $2,649,000     $3,114,000
                                       =========      =========

Note 7 - FINANCING ARRANGEMENTS

Bank Line of Credit Agreements:

The Company has an accounts receivable-based working capital bank line of 
credit for SMTEK, its U.S. EMS operation, which provides for borrowings of up 
to $2,500,000 at an interest rate of prime plus 1.25%. At December 31, 1996, 
borrowings outstanding under this credit facility amounted to $663,000.  The 
Company also has a credit facility agreement with Ulster Bank Markets for its 
Northern Ireland operations.  This agreement includes a working capital line 
of credit of 1,150,000 pounds sterling (approximately $1,900,000), and 
provides for interest on borrowings at 1-1/2% over the Bank's base rate.  At 
December 31, 1996, borrowings outstanding under this credit facility amounted 
to $958,000.   

Acquisition indebtedness:

In February 1996, the Company issued 10% Senior Secured Notes due July 1, 
1997 in the aggregate amount of $5,300,000 (the "10% Senior Notes") as 
partial financing for the acquisition of SMTEK.   

The 10% Senior Notes are secured by (i) 1,060,000 shares of common stock and 
(ii) warrants to purchase 1,060,000 shares of common stock (the "Collateral 
Warrants"), all of which have been placed into an escrow account. In the 
event the Collateral Warrants are required to redeem the 10% Senior Notes, 
each warrant would be exercisable into one share of common stock at a price 
which is 6% less than the market value of the Company's common stock at the 
<PAGE>
time of exercise. If the 10% Senior Notes are repaid from sources other than 
the Collateral Warrants, then the Collateral Warrants expire and can no 
longer be exercised. 


Note 8 - INFORMATION RELATING TO STATEMENT OF CASH FLOWS

"Net cash provided (used) by operating activities" includes cash payments for 
interest as follows:
                                        Six months ended
                                           December 31,
                                       ---------------------
                                        1996           1995
                                       ------         ------
Interest paid                        $ 527,000      $ 225,000 
                                       =======        =======   

"Net increase in operating working capital" is comprised of the following:

                                        Six months ended
                                           December 31,
                                       ---------------------
                                        1996           1995
                                       ------         ------

Increase in accounts receivable    $(1,192,000)    $  (425,000)
Increase in costs and estimated
 earnings in excess of billings
 on uncompleted contracts           (1,198,000)          -
(Increase) decrease in
  inventories                          926,000        (561,000)
(Increase) decrease in 
  prepaid expenses                     113,000        (956,000)
Decrease in accounts payable          (900,000)       (441,000)
Decrease in accrued payroll 
 and employee benefits                (146,000)       (115,000)
Increase (decrease) in other
 liabilities                          (477,000)      1,743,000 
                                     ---------       ---------
Net increase in operating
 working capital                   $(2,874,000)    $  (755,000)
                                     =========       =========

Following is the supplemental schedule of non-cash investing and financing 
activities:
                                         Six months ended
                                            December 31,
                                       ---------------------
                                        1996           1995
                                       ------         ------
Capital expenditures financed by
 lease obligations                 $  615,000          $ 47,000 
                                    =========           ======= 

Conversion of debt to equity       $  105,000          $104,000
                                    =========           =======



<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

Certain statements made below are forward-looking in nature and reflect the 
Company's current expectations and plans.  Such statements involve various 
risks and uncertainties that could cause actual results to differ materially 
from those currently expected by the Company.  Meaningful factors that might 
cause such differences include, but are not limited to, significant 
historical losses, limited capital resources and a continuing need for 
financing, dependence on key personnel, concentration of revenues among major 
customers, historical dependence on government business on the part of the 
Company's U.S. operating unit and a recent shift into commercial business, 
industry conditions, competition, environmental matters, dependence on 
suppliers and other factors discussed in the Company's Securities and 
Exchange Commission filings, including other factors described as "Risk 
Factors" in the Company's Registration Statement on Form S-3 (No. 333-02969).

DESCRIPTION OF THE BUSINESS

The Company provides integrated design and electronic manufacturing services 
("EMS") to original equipment manufacturers ("OEMs") in the computer, 
telecommunications, instrumentation, medical, industrial and aerospace 
industries. The Company also manufactures multilayer printed circuit boards 
("PCBs") for use primarily in the computer, communications, and 
instrumentation industries.  The Company's EMS operations are located in 
Southern California and Northern Ireland.  Its PCB facilities are located in 
Northern Ireland.

The Company entered the EMS business by acquiring its domestic EMS operations 
in 1985 and by organizing its European EMS operations in 1990.  In fiscal 
1995, the Company liquidated or sold all assets associated with its PCB and 
EMS operations in the United States.  In January 1996, as the first step 
toward rebuilding a domestic presence in the EMS industry, the Company 
acquired SMTEK, Inc. ("SMTEK"), a provider of integrated design and 
electronic manufacturing services. 

RESULTS OF OPERATIONS

Consolidated sales for the three and six months ended December 31, 1996 were 
$11,185,000 and $21,080,000, respectively, compared to $6,029,000 and 
$12,221,000 for the same periods in the previous fiscal year. The sales 
increases result primarily from the acquisition of SMTEK, which contributed 
revenues of $4,210,000 and $7,716,000 in the three and six months ended 
December 31, 1996, respectively.  Because the acquisition of SMTEK was 
accounted for using the purchase method, SMTEK's operations are not included 
in the Company's results for the three and six months ended December 31, 
1995.  Sales of DDL Electronics, Ltd. ("DDL-E"), the Company's Northern 
Ireland EMS operation, increased approximately 25% in the latest quarter 
compared to the second quarter of last year, while sales of Irlandus 
Circuits, Ltd. ("Irlandus"), the Company's PCB operation, increased 
approximately 11% between these same two periods.  For the six months ended 
December 31, 1996, sales of DDL-E and Irlandus increased 20% and 2%, 
respectively, over sales for the comparable period of the prior year.
<PAGE>
Consolidated gross profit for the six months ended December 31, 1996 was 
$2,519,000, compared to $1,383,000 for the comparable period of the prior 
year. The inclusion of SMTEK in the latest six month period accounted for 
$1,150,000 of the increase. Irlandus' gross profit increased $184,000 during 
<PAGE>
the six months ended December 31, 1996 due primarily to an increase in higher 
margin quick-turn orders, while DDL-E's gross profit declined $198,000 
despite higher sales.  The Company's consolidated gross profit margin 
increased from 11.3% in the six months ended December 31, 1995 to 11.9% in 
the six months ended December 31, 1996, primarily due to inclusion of SMTEK 
in the results for the latest six month period and to improvement in 
Irlandus' gross profit margin.

DDL-E's gross profit margin fell from 11.1% in the six months ended December 
31, 1995 to 7.0% in the latest six month period.  This decline was 
attributable to several factors, including the loss of a large, profitable 
assembly contract which had accounted for a significant portion of DDL-E's 
sales in the first six months of last fiscal year.  Also contributing to the 
decline in gross profit margin was the fact that last year's first six months 
included "consignment sales".  Consignment sales, in which the customer 
furnishes the materials and components to be assembled, typically have higher 
profit margins than "turnkey" sales, in which the contract assembly company 
procures the materials on the customer's behalf.  DDL-E had no consignment 
sales in the first six months of fiscal 1997. DDL-E also incurred start-up 
training costs associated with several "box build" assembly contracts in the 
latest six month period, which further depressed its gross profit margins.

Consolidated gross profit for the three months ended December 31, 1996 was 
$1,423,000, compared to $657,000 for the comparable period of the prior year.  
The inclusion of SMTEK in the latest three month period accounted for 
$650,000 of the increase.  Irlandus' gross profit increased by $231,000 
between these two periods, while DDL-E's gross profit declined by $115,000.  
The lower gross profit at DDL-E was attributable to the factors cited above 
for the six month periods.  Despite the lower gross profit margin at DDL-E, 
the consolidated gross profit margin increased to 12.7% in the three months 
ended December 31, 1996 from 10.9% in the three months ended December 31, 
1995 due to inclusion of SMTEK in the results for the latest three month 
period and to improvement in Irlandus' gross profit margin.

Administrative and selling expenses for the three and six months ended 
December 31, 1996 were $1,212,000 and $2,363,000, respectively, compared to 
$1,031,000 and $1,895,000 for the same periods in the previous year. These 
increases are the result of the acquisition of SMTEK in January 1996, as the 
1995 amounts consisted of administrative and selling expenses for solely the 
Company's Northern Ireland operations and corporate office functions.

In the three and six months ended December 31, 1996, the consolidated 
operating losses were $106,000 and $478,000, respectively, compared to 
$374,000 and $512,000 for the same periods in the previous fiscal year. 
Increased gross profit as a result of the SMTEK acquisition is the primary 
reason for the lower operating losses in the latest three and six month 
periods.

<PAGE>
Investment income for the six months ended December 31, 1996 and 1995 was 
$43,000 and $200,000, respectively.  The 1995 amount includes nonrecurring 
interest income of $106,000 received on income tax refunds.

Interest expense increased from $114,000 in the three months ended December 
31, 1995 to $324,000 in the three months ended December 31, 1996.  In the six 
months ended December 31, 1996 and 1995, interest expense was $582,000 and 
$229,000, respectively.  These increases are attributable to interest on debt 
issued in 1996 to finance the SMTEK acquisition.  

<PAGE>
Other income (expense) for the six months ended December 31, 1996 and 1995 
was ($239,000) and $167,000, respectively.  The 1995 amount includes a 
$100,000 gain recognized upon the negotiated settlement of a facility lease 
commitment at less than the amount previously reserved.  The 1996 amount 
includes debt issue cost amortization expense of $248,000 associated with the 
debt issued to finance the SMTEK acquisition.

In fiscal year 1996, the Company recognized an income tax benefit associated 
with application for federal tax refunds as permitted under section 172(f) of 
the Internal Revenue Code.  In the aggregate the Company applied for federal 
tax refunds of $2,175,000, net of costs associated with applying for such 
refunds.  To date, the Company has received $1,871,000 of net refunds plus 
interest on such refunds of $106,000, and has recognized as an income tax 
benefit $1,110,000 net of certain expenses. Because of the possibility that 
the tax returns underlying these refunds may be subject to audit by the 
Internal Revenue Service and a portion of the refunds disallowed, the Company 
has not yet recognized a tax benefit for the remainder of the refunds 
received to date, or for the refunds still expected to be received.  
Nonetheless, the Company feels that its claim for refund and carry back of 
net operating losses can be substantiated and is supported by law, and that 
the Company will ultimately collect and retain a substantial portion of the 
refunds applied for.

The net loss for the six months ended December 31, 1996 was $1,256,000 or 
$0.05 per share, compared to net income of $736,000 or $0.04 per share for 
the same period of fiscal 1995.  Net income for the fiscal 1995 period 
includes the $1,110,000 income tax benefit discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are its cash and cash equivalents, 
which amounted to $1,052,000 at December 31, 1996, and its bank lines of 
credit.  During the six months ended December 31, 1996, cash and cash 
equivalents decreased by $1,467,000.  This decrease consisted of cash used by 
operating activities of $2,774,000 and capital expenditures of $207,000, 
partially offset by cash inflows of $1,176,000 from new borrowings net of 
debt repayments, proceeds from government grants of $290,000 and the effect 
of exchange rate changes on cash of $48,000.  

Components of operating working capital increased by $2,874,000 during the 
first six months of fiscal 1997, comprised of a $1,192,000 increase in 
accounts receivable, a $1,198,000 increase in costs and earnings in excess of 
<PAGE>
billings on uncompleted contracts and a $1,523,000 decrease in current 
liabilities, partially offset by a $926,000 decrease in inventory and a 
$113,000 decrease in prepaid expenses and other current assets. 

The Company has an accounts receivable-based working capital bank line of 
credit for SMTEK which provides for borrowings of up to $2,500,000 at an 
interest rate of prime plus 1.25%. At December 31, 1996, borrowings 
outstanding under this credit facility amounted to $663,000.  The Company 
also has a credit facility agreement with Ulster Bank Markets for its 
Northern Ireland operations.  This agreement includes a working capital line 
of credit of 1,150,000 pounds sterling (approximately $1,900,000), and 
provides for interest at 1-1/2% over the Bank's base rate.  At December 31, 
1996, borrowings outstanding under this credit facility amounted to $958,000.   

In February 1996, the Company issued 10% Senior Secured Notes due July 1, 
1997 in the aggregate amount of $5,300,000 (the "10% Senior Notes") as 
partial financing for the acquisition of SMTEK.  The 10% Senior Notes are 
secured by (i) 1,060,000 shares of common stock and (ii) warrants to purchase 
1,060,000 shares of common stock (the "Collateral Warrants"), all of which 
have been placed into an escrow account. In the event the Collateral Warrants 
are required to redeem the 10% Senior Notes, each warrant would be 
exercisable into one share of common stock at a price which is 6% less than 
the market value of the Company's common stock at the time of exercise. If 
the 10% Senior Notes are repaid from sources other than the Collateral 
Warrants, then the Collateral Warrants expire and can no longer be exercised.

The Company plans to retire the 10% Senior Notes at or prior to maturity by 
issuing new common stock.  The note holders have the option to accept common 
stock in lieu of cash.  If the note holders do not so elect, then the Company 
will endeavor to issue stock to other parties to raise the payoff amount.  No 
assurance can be given that the Company will be able to sell stock on 
acceptable terms or at all.  Under certain circumstances, as set forth in the 
agreements governing the 10% Senior Notes, the Company can apply some or all 
of the 1,060,000 common stock shares held in escrow toward the payoff of 
these notes.  The total number of new shares of common stock which would need 
to be issued to fund the retirement of these notes depends on several 
factors, including: (i) whether the notes are paid off prior to the maturity 
date; (ii) if paid prior to maturity, whether the prepayment is partial or 
complete; and (iii) the market price of the Company's common stock at the 
time of issuance.

Cash and cash equivalents have declined steadily over the last six months, 
primarily to fund increases in working capital necessitated by higher sales 
and backlog levels.  The cash decline is a matter of concern to management 
and the Board of Directors, who are considering several means of addressing 
the situation. 

The Company's financial statements are presented on a going concern basis, 
which contemplates the realization of assets and satisfaction of liabilities 
in the normal course of business.  The Company incurred an operating loss of 
$478,000 and negative cash flow from operating activities of $2,774,000 
during the six months ended December 31, 1996.  In addition, at December 31, 
1996 the Company had a working capital deficit of $1,892,000 as a result of 
<PAGE>
transferring the $5,300,000 10% Senior Notes maturing July 1997 from long-
term debt to current liabilities.

Management anticipates that the Company will continue to incur operating 
losses for at least the near term future due to the goodwill amortization 
expense arising from the acquisition of SMTEK.  Operating losses are expected 
to continue until such time as sales increase to a level sufficient to offset 
goodwill amortization.  No assurance can be given as to whether or when sales 
increases may be achieved.  Sales increases will depend in part upon 
strengthening the Company's sales and marketing functions for its existing 
operations and improving its price competitiveness in the EMS industry by 
achieving economies of scale in the procurement of electronic components.  

The achievement of sustained operating profitability is the most significant 
internal factor to ensure the Company's long-term viability. No assurance can 
be given that the Company will attain operating profitability or that cash 
generated from non-operating sources will be adequate to fund future cash 
needs.  As a necessary step to ensure the Company's increased profitability, 
the Company is actively pursuing strategic merger and acquisition candidates 
that will help ensure growth of the Company in the markets and industries in 
which it has expertise.  No assurance can be given that any such merger or 
acquisition will occur.

Management believes that the Company's cash resources and borrowing capacity 
on its bank lines of credit are sufficient to fund operations at current 
levels for at least the next 12 months.


PART II.  OTHER INFORMATION
Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

a.  Exhibits:
    
     11    Computation of Earnings Per Share

     27    Financial Data Schedule (electronic filing only)


b.  Reports on Form 8-K: 

There were no reports filed on Form 8-K during the three months ended 
December 31, 1996. 



<PAGE>

                                 SIGNATURES 

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



       February 7, 1997                        /s/ Gregory L. Horton   
---------------------------------        -----------------------------------
           Date                               Gregory L. Horton 
                                              Chief Executive Officer and
                                               President



       February 7, 1997                        /s/ Richard K. Vitelle   
---------------------------------        -----------------------------------
           Date                                 Richard K. Vitelle 
                                                Vice President -Finance 
                                               (Principal Financial Officer)