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:  SEPTEMBER 30, 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 23,046,914 shares of Common Stock outstanding as of 
November 5, 1996.


<PAGE>
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


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


                                   September 30,       June 30,
                                       1996              1996
                                      ------            ------
        Assets

Current assets:
  Cash and cash equivalents       $  1,333,000     $  2,519,000
  Accounts receivable                6,676,000        5,620,000
  Costs and estimated earnings
   in excess of billings on 
   uncompleted contracts             3,532,000        3,026,000
  Inventories                        3,574,000        4,014,000
  Prepaid expenses and other
   current assets                      313,000          314,000
                                    ----------       ----------

     Total current assets           15,428,000       15,493,000
                                    ----------       ----------
Property, equipment and
 improvements, at cost:
  Buildings and improvements         5,639,000        5,604,000
  Plant equipment                   14,458,000       13,999,000
  Office and other equipment         1,534,000        1,444,000
                                    ----------       ----------

                                    21,631,000       21,047,000
Less: accumulated depreciation
 and amortization                  (15,527,000)     (15,130,000)
                                    ----------       ----------
Property, equipment and
 improvements, net                   6,104,000        5,917,000
                                    ----------       ----------
Other assets:
  Goodwill, net                      5,391,000        5,708,000
  Debt issue costs                     409,000          533,000
  Deposits and other assets            438,000          436,000
                                    ----------      -----------

                                     6,238,000        6,677,000
                                    ----------      -----------

                                  $ 27,770,000     $ 28,087,000
                                    ==========      ===========


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


                                   September 30,       June 30,
                                       1996              1996
                                      ------            ------
Liabilities and Stockholders' Equity

Current liabilities:
  Bank line of credit payable      $   952,000    $      -
  Current portion of 
   long-term debt                    5,915,000         603,000
  Accounts payable                   6,938,000       7,485,000
  Accrued payroll and
   employee benefits                   623,000         777,000
  Other accrued liabilities          3,007,000       3,114,000
                                    ----------      ----------  

     Total current liabilities      17,435,000      11,979,000
                                    ----------      ----------
Long-term debt:
  10% Senior Secured Notes               -           5,300,000
  7% Convertible Subordinated
   Debentures, less current 
   portion                             441,000         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              3,756,000       3,612,000
                                    ----------      ----------

     Total long-term debt            5,777,000      10,935,000
                                    ----------      ----------

Stockholders' equity:
  Common stock                         230,000         230,000
  Additional paid-in capital        29,380,000      29,304,000
  Common stock held in escrow       (1,325,000)     (1,325,000)
  Accumulated deficit              (22,725,000)    (22,000,000)
  Foreign currency translation
   adjustment                       (1,002,000)     (1,036,000)
                                    ----------      ----------

     Total stockholders' equity      4,558,000       5,173,000 
                                    ----------      ----------

                                  $ 27,770,000    $ 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 
                                           September 30,
                                       ----------------------
                                       1996             1995
                                      ------           ------

Sales                              $ 9,895,000      $ 6,192,000

Cost of goods sold                   8,799,000        5,466,000
                                     ---------        ---------
Gross profit                         1,096,000          726,000
                                     ---------        ---------
Operating expenses:
  Administrative and selling         1,151,000          864,000
  Goodwill amortization                317,000            -
                                     ---------        ---------

                                     1,468,000          864,000
                                     ---------        ---------

Operating loss                        (372,000)        (138,000)
                                     ---------        ---------
Non-operating income (expense):
  Investment income                     24,000          127,000
  Interest expense                    (258,000)        (115,000)
  Other income (expense)              (119,000)         100,000
                                     ---------        ---------

                                      (353,000)         112,000
                                     ---------        ---------

Loss before income taxes              (725,000)         (26,000)

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

Net income (loss)                  $  (725,000)     $ 1,084,000
                                     =========        =========



Earnings (loss) per share              $ (0.03)          $ 0.06 
                                          ====             ====     

Shares used in computing
 earnings (loss) per share          23,017,458       16,842,733
                                    ==========       ==========






                   See accompanying Notes to Unaudited
                    Consolidated Financial Statements


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


                                                 Three Months Ended 
                                                    September 30,
                                               ----------------------
                                               1996             1995
                                              ------           ------

Cash flows from operating activities:
  Net income (loss)                        $  (725,000)     $  1,084,000
  Adjustments to reconcile net income
   (loss) to net cash used by operating 
   activities - 
    Depreciation and amortization              755,000           178,000
    Net increase in operating
     working capital                        (2,099,000)       (1,528,000)
    Increase in deposits and
     other assets                               (2,000)            -    
    Benefit of noncapital grants               (58,000)          (16,000) 
    Other                                       23,000           (61,000)
                                             ---------         ---------

Net cash used by operating activities       (2,106,000)         (343,000)
                                             ---------         ---------
Cash flows from investing activities:
  Capital expenditures                         (84,000)         (127,000)
                                             ----------         ---------

Cash flows from financing activities:
  Proceeds from bank line of credit            946,000             -    
  Reductions of long-term debt                (199,000)         (182,000)
  Proceeds from exercise of stock options        -               219,000
  Proceeds from government grants              251,000             -    
                                             ---------         ---------

Net cash provided by financing activities      998,000            37,000 
                                             ---------         ---------

Effect of exchange rate changes on cash          6,000           (20,000)
                                             ---------         ---------

Decrease in cash and cash equivalents       (1,186,000)         (453,000)
       
Cash and cash equivalents at 
 beginning of period                         2,519,000         2,917,000
                                             ---------         ---------
Cash and cash equivalents at 
 end of period                             $ 1,333,000       $ 2,464,000
                                             =========         =========




                   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 customized, integrated 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 September 30, 1996 and its results 
of operations and cash flows for the three months ended September 30, 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 September 30 for clarity of 
presentation.  The actual periods ended on September 27, 1996 and September 
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 
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:


                                     September 30,    June 30,
                                         1996           1996
                                         ----           ----
    Trade receivables                 $6,698,000     $5,456,000
    Other receivables                    124,000        296,000
    Less allowance for doubtful
     accounts                           (146,000)      (132,000)  
                                       ---------      ---------
                                      $6,676,000     $5,620,000
                                       =========      =========

     Included in other receivables at September 30, 1996 and June 30, 1996
are grants due from the Industrial Development Board for Northern Ireland of
$59,000 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:

                                     September 30,    June 30,
                                         1996           1996
                                         ----           ----
  Costs incurred on uncompleted
   contracts                         $13,230,000    $11,181,000
  Estimated earnings                   1,203,000      1,544,000 
                                      ----------     ----------
                                      14,433,000     12,725,000
  Less:  Billings to date            (10,856,000)    (9,613,000)
         Customer advances and
          progress payments              (45,000)       (86,000)
                                      ----------     ----------
                                     $ 3,532,000    $ 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.



Note 5 - INVENTORIES

Inventories consist of the following:

                                     September 30,    June 30,
                                         1996           1996
                                         ----           ----
  Raw materials                       $2,797,000     $2,853,000
  Work in process                        967,000      1,263,000
  Finished goods                          59,000        146,000
  Less reserves                         (249,000)      (248,000)
                                       ---------      ---------
                                      $3,574,000     $4,014,000
                                       =========      =========


Note 6 - OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:

                                     September 30,    June 30,
                                         1996           1996
                                         ----           ----
  Environmental liabilities           $  708,000     $  728,000
  Accrued taxes payable                  951,000        951,000
  Other                                1,348,000      1,435,000
                                       ---------      ---------
                                      $3,007,000     $3,114,000
                                       =========      =========


Note 7 - FINANCING ARRANGEMENTS

Bank Credit Agreement:

The Company has a credit facility agreement with Ulster Bank Markets for its 
Northern Ireland operations.  This agreement includes a working capital line 
of credit of 1,250,000 pounds sterling (approximately $2,000,000), and 
provides for interest on borrowings at 1-1/2% over the Bank's base rate.  At 
September 30, 1996, borrowings outstanding under this credit facility 
amounted to $952,000.   

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 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 also deposited $375,000 into a restricted cash account 
maintained by an escrow agent, such amount to be used for interest payments on 
the 10% Senior Notes.  This restricted cash amounted to $71,000 and $201,000 
at September 30, 1996 and June 30, 1996, and is included in prepaid expenses 
and other current assets.


Note 8 - INFORMATION RELATING TO STATEMENT OF CASH FLOWS

"Net cash used by operating activities" includes cash payments for interest 
as follows:
                                        Three months ended
                                           September 30,
                                       ---------------------
                                        1996           1995
                                       ------         ------
Interest paid                        $ 276,000      $ 115,000 
                                       =======        =======   

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

                                        Three months ended
                                            September 30,
                                       ---------------------
                                        1996           1995
                                       ------         ------

Increase in accounts receivable    $(1,168,000)    $(1,640,000)
Increase in costs and estimated
 earnings in excess of billings
 on uncompleted contracts             (556,000)          -
(Increase) decrease in
  inventories                          616,000        (433,000)
(Increase) decrease in 
  prepaid expenses                       3,000        (119,000)
Increase (decrease) in
 accounts payable                     (728,000)        789,000 
Decrease in accrued payroll 
 and employee benefits                (157,000)       (170,000)
Increase (decrease) in other
 liabilities                          (109,000)         45,000 
                                     ---------       ---------
Net increase in operating
 working capital                   $(2,099,000)    $(1,528,000)
                                     =========       =========

Following is the supplemental schedule of non-cash investing and financing 
activities:
                                        Three months ended
                                            September 30,
                                       ---------------------
                                        1996           1995
                                       ------         ------
Capital expenditures financed by
 lease obligations                 $  395,000          $ 52,000 
                                    =========           ======= 
Conversion of debt to equity       $   76,000          $   -   
                                    =========           =======


Note 9 - EVENT SUBSEQUENT TO SEPTEMBER 30, 1996

In October 1996, the Company finalized 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%


<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 customized, integrated 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 electronic 
manufacturing services. 

RESULTS OF OPERATIONS

Consolidated sales for the three months ended September 30, 1996 were 
$9,895,000, compared to $6,192,000 for the first quarter of the previous 
fiscal year. The increase in sales results primarily from the acquisition of 
SMTEK, which contributed revenues of $3,506,000 in the latest quarter.  
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 
months ended September 30, 1995.  Sales of DDL Electronics, Ltd. ("DDL-E"), 
the Company's Northern Ireland EMS operation, increased approximately 15% in 
the latest quarter compared to the first quarter of last year, while sales of 
Irlandus Circuits, Ltd. ("Irlandus"), the Company's PCB operation, declined 
approximately 8% between these same two periods.  

Consolidated gross profit for the three months ended September 30, 1996 was 
$1,096,000, compared to $726,000 for the comparable period of the prior year. 
The acquisition of SMTEK in January 1996 accounted for $500,000 of the 
increase, offset by a decline in gross profit of the Company's Northern 
Ireland operations of $130,000. Irlandus' gross profit declined $47,000 due 
primarily to the decline in sales, while DDL-E's gross profit declined 
$83,000 despite higher sales.  

DDL-E's gross profit margin fell from 10.6% in last year's first quarter to 
7.3% in the latest quarter.  This decline occurred primarily as a result of 
the loss of a large, profitable assembly contract which had accounted for 
approximately 40% of DDL-E's sales in the first quarter of last fiscal year.  
Also contributing to the decline in gross profit margin was the fact that 
last year's first quarter included "consignment sales" of approximately 
$150,000.  Consignment sales, in which the customer furnishes the materials 
and components to be assembled, typically have higher profit margins that 
"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 quarter of fiscal 1997.  

The Company's consolidated gross profit margin declined from 11.7% in the 
three months ended September 30, 1995 to 11.1% in the three months ended 
September 30, primarily due to the decline in gross profit at DDL-E.

Administrative and selling expenses amounted to $1,151,000 and $864,000 in 
the three months ended September 30, 1996 and 1995, respectively.  This 
increase is the result of the acquisition of SMTEK in January 1996, as the 
1995 amount consisted of administrative and selling expenses for solely the 
Company's Northern Ireland operations and corporate office functions.

The operating loss for the three months ended September 30, 1996 was 
$372,000, compared to an operating loss of $138,000 for the three months 
ended September 30, 1995.  The increased loss results from goodwill 
amortization expense of $317,000 recorded in the latest quarter.  The 
goodwill arose from the acquisition of SMTEK.

Investment income for the three months ended September 30, 1996 and 1995 was 
$24,000 and $127,000, respectively.  The 1995 amount includes nonrecurring 
interest income of $106,000 received on income tax refunds.

Interest expense increased from $115,000 in the three months ended September 
30, 1995 to $258,000 in the three months ended September 30, 1996.  This 
increase is attributable to interest on debt issued in 1996 to finance the 
SMTEK acquisition.  

Other income (expense) for the three months ended September 30, 1996 and 1995 
was ($119,000) and $100,000, respectively.  The 1995 amount consists of 
income 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 $124,000 associated with the 
debt issued to finance the SMTEK acquisition.

During the nine months ended March 31, 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.  Through September 30, 1996, 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 first three months of fiscal 1996 was $725,000 or $0.03 
per share, compared to net income of $1,084,000 or $0.06 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 $1,333,000 at September 30, 1996, and its bank lines of 
credit.  During the three months ended September 30, 1996, cash and cash 
equivalents decreased by $1,186,000.  This decrease consisted of cash used by 
operating activities of $2,106,000 and capital expenditures of $84,000, 
partially offset by cash inflows of $747,000 from new borrowings net of debt 
repayments, proceeds from government grants of $251,000 and the effect of 
exchange rate changes on cash of $6,000.  

Cash and cash equivalents have declined steadily over the last few months.  
The persistence of this decline is a matter of concern to management and the 
Board of Directors, who are considering several means of addressing the 
problem.

Components of operating working capital increased by $2,099,000 during the 
first three months of fiscal 1997, comprised of a $1,168,000 increase in 
accounts receivable, a $556,000 increase in costs and earnings in excess of 
billings on uncompleted contracts and a $994,000 decrease in current 
liabilities, partially offset by a $616,000 decrease in inventory and a 
$3,000 decrease in prepaid expenses and other current assets. 

The Company has a credit facility agreement with Ulster Bank Markets for its 
Northern Ireland operations.  This agreement includes a working capital line 
of credit of 1,250,000 pounds sterling (approximately $2,000,000), and 
provides for interest on borrowings at 1.5% over the Bank's base rate.  At 
September 30, 1996, borrowings outstanding under this credit facility 
amounted to $952,000.  In October 1996, the Company finalized a bank line of 
credit for SMTEK, its U.S. EMS operation, which provides for borrowings up to 
the lesser of $2,500,000 or 85% of accounts receivable ($1,563,000 at 
November 8, 1996) at an interest rate of prime plus 1.25%. 

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'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 
$372,000 and negative cash flow from operating activities of $2,106,000 during 
the three months ended September 30, 1996.  In addition, at September 30, 1996 
the Company had a working capital deficit of $2,007,000 as a result of 
transferring the $5,300,000 10% Senior Notes maturing July 1997 from long-term 
debt to current liabilities.

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 will 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.

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 anticipates that the Company will continue to incur operating 
losses for at least the near term future due to its current level of fixed 
costs for manufacturing overhead relative to its current sales volume, as well 
as amortization expense of the goodwill arising from the acquisition of SMTEK.  
Operating losses are expected to continue until such time as sales increase to 
a level necessary to absorb fixed costs and 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.  

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:
     10    Business Financing Agreement between SMTEK, Inc. and Deutsche 
           Financial Services Corporation

     11    Computation of Earnings Per Share

     27    Financial Data Schedule (electronic filing only)

b.  Reports on Form 8-K: 

    On August 30, 1996, a Form 8-K was filed regarding a press release
    disclosing that the Company had terminated merger discussions with 
    another company.

    On September 18, 1996, a Form 8-K was filed regarding a press release 
    announcing the Company's financial results for the year ended June
    30, 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. 



       November 12, 1996                        /s/ Gregory L. Horton   
---------------------------------        -----------------------------------
           Date                               Gregory L. Horton 
                                              Chief Executive Officer and
                                               President


       November 12, 1996                        /s/ Richard K. Vitelle   
---------------------------------        -----------------------------------
           Date                                 Richard K. Vitelle 
                                                Vice President -Finance 
                                               (Principal Financial Officer)