EXHIBIT 13
                                            ANNUAL REPORT TO STOCKHOLDERS






                DDL ELECTRONICS, INC. AND SUBSIDIARIES 
                           FINANCIAL HIGHLIGHTS
                 (In thousands except per share amounts)



                                            Year Ended June 30
                            -----------------------------------------------
                            1998       1997       1996       1995      1994  
                            ----       ----       ----       ----      ----  
Revenues                  $ 53,265   $ 51,640  $ 35,490  $ 31,393  $ 49,798

Operating income (loss)
  before acquisition 
  expenses                $  2,154   $  1,036  $   (522) $ (4,592) $ (6,809)

Operating income (loss)   $  1,545   $  1,036  $   (552) $ (4,592) $ (6,809)

Income (loss) before
  income taxes            $    493   $   (868) $ (1,377) $ (2,145) $ (8,368)

Income tax benefit        $    -     $    -    $  1,110  $    -    $    - 

Extraordinary item             -     $    -    $  2,356  $  2,441  $    -   

Net income (loss)         $    493   $   (868) $  2,089  $    296  $ (8,368)

Earnings (loss) 
  per common share        $   0.02   $  (0.03) $   0.09  $   0.02  $  (0.45) 

EBITDA, as adjusted (1)   $  5,176   $  4,052  $  1,673  $    446  $ (4,035)




(1)  "EBITDA, as adjusted" consists of pretax income (loss) plus net interest
     expense, depreciation, amortization and, for fiscal 1998, non-recurring
     acquisition expenses.





DESCRIPTION OF BUSINESS

     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 fabricates 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, Florida and Northern Ireland.  Its PCB facilities 
are located in Northern Ireland. 


PRESIDENT'S LETTER TO STOCKHOLDERS

     President's letter to stockholders will be filed via amendment to the 
Form 10-K.






                    DDL ELECTRONICS, INC. AND SUBSIDIARIES
                         FIVE-YEAR FINANCIAL SUMMARY
                    (In thousands except per share amounts) 


                                             Year ended June 30
                                --------------------------------------------
OPERATING DATA                  1998      1997      1996      1995      1994
                                ----      ----      ----      ----      ----
Revenues                     $ 53,265  $ 51,640  $ 35,490  $ 31,393  $ 49,798
                               ------    ------    ------    ------    ------

Costs and expenses:
  Cost of goods sold           43,933    43,894    30,906    27,598    48,791
  Administrative and 
    selling expenses            5,910     5,442     4,502     6,854     7,816
  Goodwill amortization         1,268     1,268       634       -         -
  Restructuring charges           -         -         -       1,533       - 
  Acquisition expenses            609       -         -         -         -
                               ------    ------    ------    ------    ------
Total costs and expenses       51,720    50,604    36,042    35,985    56,607 
                               ------    ------    ------    ------    ------
Operating income (loss)         1,545     1,036      (552)   (4,592)   (6,809)
                               ------    ------    ------    ------    ------
Non-operating income (expense):
  Interest income                  97        96       255       117       172 
  Interest expense             (1,101)   (1,227)   (1,045)   (1,048)   (1,267)
  Debt issue cost amortization    -        (937)     (281)      -         -
  Gain on sale of assets           22       142       -       3,317         2 
  Earthquake expenses             -         -         -         -        (500)
  Other income (expense), net     (70)       22       246        61        34 
                               ------    ------    ------    ------    ------
Total non-operating
  income (expense)             (1,052)   (1,904)     (825)    2,447    (1,559)
                               ------    ------    ------    ------    ------
Income (loss) before 
  income tax benefit              493      (868)   (1,377)   (2,145)   (8,368)

Income tax benefit                -         -       1,110       -         -
                               ------    ------    ------    ------    ------
Income (loss) before 
  extraordinary item              493      (868)     (267)   (2,145)   (8,368)

Extraordinary item - Gain	
  on debt extinguishment          -         -       2,356     2,441       -  
                               ------    ------    ------    ------    ------
Net income (loss)            $    493  $   (868) $  2,089  $    296  $ (8,368)
                               ======    ======    ======    ======    ======

                    DDL ELECTRONICS, INC. AND SUBSIDIARIES
                         FIVE-YEAR FINANCIAL SUMMARY
                    (In thousands except per share amounts)
                                 (Continued) 


                                             Year ended June 30
                                --------------------------------------------
OPERATING DATA                  1998      1997      1996      1995      1994
(Continued)                     ----      ----      ----      ----      ----

Earnings (loss) per share:
  Basic and diluted: 
   Income (loss) before
     extraordinary item       $ 0.02    $(0.03)   $(0.01)   $(0.11)  $ (0.45)
   Extraordinary item            -         -        0.10      0.13       - 
                               -----     -----     -----     -----    ------
Total                         $ 0.02    $(0.03)   $ 0.09    $ 0.02   $ (0.45)
                               =====     =====     =====     =====    ======








                                                  June 30
                                --------------------------------------------
BALANCE SHEET DATA              1998      1997      1996      1995      1994
                                ----      ----      ----      ----      ----

Current assets               $ 21,533  $ 21,673  $ 16,443  $  9,778  $ 12,550 

Current liabilities          $ 17,088  $ 18,585  $ 12,301  $  9,238  $ 21,390 

Working capital (deficit)    $  4,445  $  3,088  $  4,142  $    540  $ (8,840)

Current ratio                     1.3       1.2       1.3       1.1       0.6 

Total assets                 $ 31,830  $ 33,669  $ 29,498  $ 13,962  $ 24,148 

Long-term debt               $  7,186  $  9,445  $ 12,560  $  8,772  $  8,572 

Stockholders' equity 
  (deficit)                  $  7,556  $  5,639  $  4,637  $ (4,048) $ (5,814)

Equity (deficit) per share   $   0.22  $   0.19  $   0.18  $  (0.20) $  (0.31)

Shares outstanding (000s)      34,088    28,943    26,295    20,419    18,825 


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS

Basis of Presentation

     The Company utilizes a 52-53 week fiscal year ending on the Friday 
closest to June 30 which, for fiscal years 1998, 1997 and 1996, fell on 
July 3, June 27, and June 28, respectively.  In the accompanying 
consolidated financial statements, the fiscal year-end for all years is 
shown as June 30 for clarity of presentation.  Fiscal 1998 consisted of 53 
weeks compared to 52 weeks for the fiscal years 1997 and 1996.     

     As more fully described in the accompanying financial statements, the 
Company's acquisition of Jolt Technology, Inc. ("Jolt") on June 30, 1998 
was accounted for under the pooling-of-interests method and, accordingly, 
the consolidated financial statements for all periods presented have been 
restated to include the accounts and results of operations of Jolt.  All 
significant intercompany transactions and accounts have been eliminated in 
consolidation. 


Results of Operations

     The following table sets forth the Company's revenues and other 
operating data as percentages of revenues:
                                        
                                               Year Ended June 30 
                                          -----------------------------
                                          1998        1997         1996
                                          ----        ----         ----
Revenues                                 100.0%       100.0%       100.0%
Cost of goods sold                        82.5         85.0         87.1 
                                         -----        -----        -----
Gross profit                              17.5         15.0         12.9 

Administrative and selling expenses       11.1         10.5         12.7 
Goodwill amortization                      2.4          2.5          1.8 
Acquisition expenses                       1.1           -            - 
                                         -----        -----        -----
Operating income (loss)                    2.9          2.0         (1.6)

Interest income                            0.2          0.2          0.7 
Interest expense                          (2.1)        (2.4)        (2.9)
Debt issue cost amortization                -          (1.8)        (0.8) 
Gain on sale of assets                      -           0.3           - 
Other income (expense), net               (0.1)          -           0.7
                                         -----        -----        -----

Income (loss) before income taxes          0.9         (1.7)        (3.9)

Income tax benefit                          -            -           3.1
                                         -----        -----        -----
Income (loss) before 
  extraordinary item                       0.9         (1.7)        (0.8)

Extraordinary item - Gain on
  debt extinguishment                       -            -           6.6 
                                         -----        -----        -----

Net income (loss)                          0.9%        (1.7)%        5.8%
                                         =====        =====        =====

Fiscal 1998 vs. 1997
     
     Consolidated revenues for fiscal 1998 were $53,265,000 compared to 
$51,640,000 for fiscal 1997.  Revenues for the Company's EMS operations for 
fiscal 1998 increased by $3,355,000 over fiscal 1997, and such increase is 
attributable primarily to higher levels of business with existing customers.  
Revenues for fiscal 1998 for the PCB operations declined by 17% from the 
comparable period in the prior year as a result of a decline in business from 
a major customer as well as the fact that fiscal 1997 revenues included a 
relatively large quick-turn contract that was not recurring business. 

     Consolidated gross profit (revenues less cost of goods sold) for fiscal 
1998 was $9,332,000 (17.5% of revenues) compared to $7,746,000 (15.0% of 
revenues) for fiscal 1997.  Gross profit of the EMS operations was $7,272,000 
for fiscal 1998, compared to $5,662,000 for the prior year.  A change in the 
mix of business, with lower direct material costs as a percentage of revenues 
in fiscal 1998, contributed to the increase in EMS gross profit, along with 
higher sales volume and increased productivity.  For fiscal 1998, gross profit 
from PCB operations declined by $24,000 from fiscal 1997 as a result of the 
decline in revenues.  Gross profit as a percentage of revenues for the PCB 
operations was 24.0% for fiscal 1998, compared to 20.2% for fiscal 1997.  This 
improvement is attributable primarily to an increase in higher margin quick-
turn orders, material price reductions and processing cost savings.

     Administrative and selling expenses for fiscal 1998 were $5,910,000, 
compared to $5,442,000 in the previous year.  The increase is attributable to 
the addition of a key management position in the European operations and other 
increases in administrative staff. 

     In fiscal 1998, the Company incurred acquisition-related expenses of 
$609,000 related to the acquisition of Jolt.

     Operating income was $1,545,000 for fiscal 1998, compared to $1,036,000 
for fiscal 1997.  This improvement is primarily attributable to the increased 
gross profit of the Company's EMS operations.  

     Net non-operating expense decreased from $1,904,000 for the year ended 
June 30, 1997 to $1,052,000 for fiscal 1998.  This decrease is primarily 
attributable to non-recurring debt issue cost amortization expense of $937,000 
in fiscal 1997 related to the 10% Senior Notes of $5,300,000 which were repaid 
on June 30, 1997.

     Net income for 1998 was $493,000, or $0.02 per share, compared to net 
loss of ($868,000), or ($0.03) per share for fiscal 1997.  


Fiscal 1997 vs. 1996 

     Consolidated revenues for fiscal 1997 were $51,640,000, compared to 
$35,490,000 for fiscal 1996.  The increase in revenues results primarily 
from the acquisition of EMS-provider SMTEK, Inc. ("SMTEK") which 
contributed sales of $19,267,000 in the year ended June 30, 1997 compared 
to $8,668,000 in fiscal 1996.  Because the acquisition of SMTEK in January 
1996 was accounted for using the purchase method, SMTEK's operations prior 
to the acquisition date are not included in the Company's results.  Sales 
growth at the Company's Northern Ireland EMS-provider DDL Electronics, Ltd. 
("DDL-E") accounted for most of the remaining increase in consolidated 
revenues.  DDL-E added several new customers that have contributed to sales 
growth and significantly increased sales to one of its existing customers 
during fiscal 1997.  

     Consolidated gross profit for fiscal 1997 was $7,746,000 compared to 
$4,584,000 for fiscal 1996.  Gross profit for fiscal 1997 for the Company's 
EMS operations increased by $2,323,000 from fiscal 1996, due to higher 
sales volume and the fact that gross profit in fiscal 1996 was adversely 
impacted by a ramp-up in the workforce and higher than normal equipment 
costs.  Gross profit for PCB operations increased primarily due to a 
reduction of indirect costs.  The Company's consolidated gross profit 
margin increased from 12.9% in fiscal 1996 to 15.0% in fiscal 1997, due 
primarily to improvement in the PCB operations gross profit margin from 
11.4% in fiscal 1996 to 20.2% in fiscal 1997.  The improvement in the PCB 
operations gross profit margin is attributable to an increase in higher 
margin quick-turn orders and a reduction of indirect costs as a percentage 
of sales.  

     Administrative and selling expenses increased from $4,502,000 for the 
year ended June 30, 1996 to $5,442,000 for fiscal 1997.  This increase is 
principally the result of the acquisition of SMTEK in January 1996.

     Operating income was $1,036,000 for fiscal 1997, compared to operating 
loss of ($552,000) for fiscal 1996.  This improvement is primarily 
attributable to increased gross profit of the EMS operations.

     Net non-operating expense increased from $825,000 in fiscal 1996 to 
$1,904,000 in fiscal 1997.  This change is attributable to increases in 
debt issue cost amortization and interest expense, as the result of debt 
issued in February 1996 to finance the SMTEK acquisition.  Debt issue cost 
amortization expense amounted to $937,000 in fiscal 1997 compared to 
$281,000 in fiscal 1996.  Nearly all of the fiscal 1997 debt issue cost 
amortization relates to the 10% Senior Notes of $5,300,000 which were 
repaid on June 30, 1997. 

     During fiscal 1996, the Company recognized an income tax benefit 
associated with its 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 June 30, 1996, the Company had 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 the tax returns underlying these refunds are subject to audit by 
the Internal Revenue Service and a portion of the refunds could be 
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.  No additional refunds were received subsequent to 
fiscal 1996.  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 1997 was ($868,000), or ($0.03) per share, compared 
to net income of $2,089,000, or $0.09 per share for fiscal 1996.  Net 
income for fiscal 1996 includes an extraordinary gain on debt 
extinguishment of $2,356,000 associated with the reduction of the Company's 
outstanding obligations to certain former officers, employees and directors 
in March 1996, as further described in Note 6 to the accompanying 
consolidated financial statements.


Recent Accounting Pronouncements

     The Financial Accounting Standards Board ("FASB") issued Statement 
No. 130, "Reporting Comprehensive Income" ("SFAS 130") in June 1997.  
SFAS 130 establishes standards for reporting and display of 
comprehensive income and its components in financial statements.  SFAS 
130 is effective for fiscal years beginning after December 15, 1997.  
The Company will adopt SFAS 130 in the first quarter of its fiscal year 
ending June 30, 1999.  Management believes that the adoption of SFAS 130 
will not have a material impact on the Company's financial position or 
results of operations.

     The FASB issued Statement No. 131, "Disclosures about Segments of 
an Enterprise and Related Information" ("SFAS 131") in June 1997.  SFAS 
131 establishes standards for the way public business enterprises are to 
report information about operating segments in annual financial 
statements and requires enterprises to report selected information about 
operating segments in interim financial reports issued to shareholders.  
It also establishes standards for related disclosures about products and 
services, geographic areas, and major customers.  It replaces the 
"industry segment" concept of Statement of Financial Accounting 
Standards No. 14, "Financial Reporting for Segments of a Business 
Enterprise", with a "management approach"  basis for identifying 
reportable segments.  SFAS 131 is effective for financial statements for 
fiscal years beginning after December 15, 1997.  The Company will adopt 
SFAS 131 in its fiscal year ending June 30, 1999.  Management believes 
that the adoption of SFAS 131 will not have a material impact on the 
Company's financial position or results of operations.

     In June 1998, the FASB issued Statement No. 133, "Accounting for 
Derivative Instruments and Hedging Activities" ("SFAS 133") which will 
require recognition of all derivatives as either assets or liabilities 
on the balance sheet at fair value.  The Company will adopt SFAS 133 in 
the first quarter of its fiscal year ending June 30, 2000.  Management 
has not completed an evaluation of the effects this standard will have 
on the Company's consolidated financial statements.

Inflation

     Changes in product mix from year to year and highly competitive 
markets make it difficult to accurately assess the impact of inflation on 
profit margins.  Management generally believes that business has not been 
affected materially and adversely by inflationary increases in costs and 
expenses.  On the other hand, the current low inflationary environment has 
inhibited the Company's ability to increase the price of its products and 
services.

Liquidity and Capital Resources

     The Company's primary sources of liquidity are its cash and cash 
equivalents, which amounted to $4,413,000 at the end of fiscal 1998, and 
its bank lines of credit.  During fiscal 1998, cash and cash equivalents 
decreased by $985,000.  This net cash outflow consisted of capital 
expenditures of $785,000, debt repayments of $6,232,000 and S Corporation 
dividends of $529,000 paid to Jolt shareholders prior to the acquisition of 
Jolt, partially offset by cash provided by operating activities of 
$1,122,000, cash proceeds from new borrowings of $5,074,000, cash proceeds 
from the issuance of common stock of $138,000, proceeds from government 
grants of $123,000, proceeds from the sale of assets of $16,000 and the 
effect of exchange rate changes on cash of $88,000.

     Components of operating working capital increased by $2,178,000 during 
fiscal 1998, which consisted of a $333,000 increase in accounts receivable, 
a $1,624,000 increase in costs and estimated earnings in excess of billings 
on uncompleted contracts, and a $1,234,000 decrease in accounts payable, 
partially offset by a $846,000 decrease in inventories, a $36,000 decrease 
in prepaid expenses, a $74,000 increase in accrued payroll and employee 
benefits, and a $57,000 increase in other accrued liabilities.

     The Company has a working capital bank line of credit for SMTEK, 
based upon and secured by accounts receivable and inventory, which 
provides for borrowings of up to $2,750,000 at an interest rate of prime 
(8.50% at June 30, 1998) plus 1.25%.  At June 30, 1998, borrowings 
outstanding under this credit facility amounted to $2,583,000.  SMTEK's 
line of credit expires on September 1, 1999.  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 3,000,000 pounds sterling (approximately $4,900,000), and 
provides for interest on borrowings at the bank's base rate (6.77% at 
June 30, 1998) plus 1.50%.  At June 30, 1998, borrowings outstanding 
under this credit facility amounted to $1,858,000.  The credit facility 
agreement with Ulster Bank Markets expires August 31, 1998.  Management 
is currently in discussions with Ulster Bank Markets and believes that 
the credit facility agreement will be extended in the normal course of 
business for at least one year.

     The Company's EMS and PCB fabrication businesses require continuing 
investment in plant and equipment to remain competitive.  Capital 
expenditures during fiscal 1998, 1997 and 1996 were approximately 
$1,424,000, $2,372,000 and $1,825,000, respectively.  The Company 
anticipates it will need to increase its capital spending in the coming 
years in order to stay competitive as technology evolves.  Management 
estimates that capital expenditures of as much as $3 million may be 
required in fiscal 1999.  Of that amount, the substantial majority is 
expected to be financed by a combination of capital leases, secured loans 
and foreign government grants.

      Management believes that the Company's cash resources and borrowing 
capacity on its working capital lines of credit are sufficient to fund 
operations for at least the next year.


Year 2000 Issues.  

     Many existing computer programs use only two digits to identify a 
year in the date field.  These programs were designed and developed 
without considering the impact of the upcoming change in the century.  
If not corrected, many computer applications could fail or create 
erroneous results by or at the year 2000.  The global extent of the 
potential impact of the Year 2000 problem is not yet known, and if not 
timely corrected, it could affect the economy and the Company.  The 
Company uses computer information systems and manufacturing equipment 
which may be affected.  It also relies on suppliers and customers who 
are also dependent on systems and equipment which use date dependent 
software. 
 
     The Company's Year 2000 compliance program includes the following 
phases: identifying systems that need to be replaced or fixed; carrying 
out remediation work to modify existing systems or convert to new 
systems; and conducting validation testing of systems and applications 
to ensure compliance.  The Company has essentially completed the first 
phase of the program and is now primarily in the remediation phase. The 
amount of remediation work required is not expected to be extensive, 
because the Company has replaced certain of its financial and 
operational systems in the normal course of business during the last two 
years to enhance or better meet its functional business and operational 
requirements. Management believes that such replacements substantially 
meet or address its Year 2000 issues. In addition to such normal 
replacement, the Company may be required to modify some of the existing 
software and hardware in order for its computer systems to function 
properly with respect to dates in the year 2000 and thereafter. The 
estimated cost of the remaining replacement and modification for the 
Year 2000 issue is not considered material to the Company's earnings or 
financial position.  The Company also has contacted its major suppliers 
to assess their preparations for the year 2000.  Similar contacts also 
are planned for major customers.  These actions are intended to help 
mitigate the possible external impact of Year 2000 issues. Even so, it 
is impossible to fully assess the potential consequences if service 
interruptions occur from suppliers or in such infrastructure areas as 
utilities, communications, transportation, banking and government. 

     The Company anticipates that the remediation and validation phases 
will be completed not later than December 31, 1998.  The Company has not 
yet developed a contingency plan to provide for continuity of processing 
in the event of various problem scenarios, but will assess the need to 
develop such a plan based on the outcome of its validation phase and the 
results of surveying its major suppliers and customers.  If the Company 
is unsuccessful or if the remediation efforts of its key suppliers or 
customers are unsuccessful in dealing with Year 2000 problems, there may 
be a material adverse impact on the Company's consolidated results and 
financial condition.  The Company is unable to quantify any potential 
adverse impact at this time, but will continue to monitor and evaluate 
the situation.



                         Independent Auditors' Report




The Board of Directors and Stockholders
DDL Electronics, Inc.:

We have audited the accompanying consolidated balance sheets of DDL 
Electronics, Inc. and subsidiaries as of June 30, 1998 and 1997, and the 
related consolidated statements of operations, stockholders' equity 
(deficit), and cash flows for each of the years in the three-year period 
ended June 30, 1998.  These consolidated financial statements are the 
responsibility of the Company's management.  Our responsibility is to 
express an opinion on these consolidated financial statements based on our 
audits. 

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audits to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation.  We believe that our audits 
provide a reasonable basis for our opinion.  

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of DDL 
Electronics, Inc. and subsidiaries as of June 30, 1998 and 1997, and the 
results of their operations and their cash flows for each of the years in 
the three-year period ended June 30, 1998 in conformity with generally 
accepted accounting principles. 



/s/ KPMG PEAT MARWICK LLP

Los Angeles, California
August 21, 1998




                    DDL ELECTRONICS, INC. AND SUBSIDIARIES
                         Consolidated Balance Sheets
                      (In thousands except share amounts)


                                                             June 30
                                                        -----------------
                                                        1998         1997
                                                        ----         ----
           Assets

Current assets:
   Cash and cash equivalents                          $ 4,413      $ 5,398 
   Accounts receivable, net (Notes 3 and 6)             9,786        9,647 
   Costs and estimated earnings in excess 
     of billings on uncompleted 
     contracts (Notes 4 and 6)                          4,785        3,161 
   Inventories, net (Note 5)                            2,446        3,327 
   Prepaid expenses                                       103          140 
                                                       ------       ------

          Total current assets                         21,533       21,673
                                                       ------       ------

Property, equipment and improvements,
 at cost (Notes 6 and 10):
   Buildings and improvements                           6,084        6,101 
   Plant equipment                                     15,646       16,352 
   Office and other equipment                           2,180        1,982 
                                                       ------       ------

                                                       23,910       24,435 
   Less:  Accumulated depreciation 
    and amortization                                  (17,035)     (17,188) 
                                                       ------       ------

   Property, equipment and 
    improvements, net                                   6,875        7,247
                                                       ------       ------

Other assets:
   Goodwill, net (Note 2)                               3,171        4,439 
   Deposits and other assets (Note 6)                     251          310
                                                       ------       ------
                                                        3,422        4,749 
                                                       ------       ------
                                                     $ 31,830     $ 33,669
                                                       ======       ======



                    DDL ELECTRONICS, INC. AND SUBSIDIARIES
                         Consolidated Balance Sheets
                      (In thousands except share amounts)


                                  (Continued)
 

                                                             June 30
                                                        -----------------
                                                        1998         1997
                                                        ----         ----
Liabilities and Stockholders' Equity   
   
Current liabilities:   
   Bank lines of credit payable (Note 6)            $   4,441      $ 1,378
   Current portion of long-term 
    debt (Note 6)                                       1,214        4,167
   Accounts payable                                     7,795        9,093
   Accrued payroll and employee benefits                1,211        1,145
   Other accrued liabilities (Note 9)                   2,427        2,802
                                                       ------       ------

          Total current liabilities                    17,088       18,585
                                                       ------       ------

Long-term debt (Note 6):
  Notes payable to related party                        2,000        1,625
   
  Other long-term debt, less current 
   portion                                              5,186        7,820
                                                       ------       ------

          Total long-term debt                          7,186        9,445
                                                       ------       ------
   
Commitments and contingencies (Note 10)   
   
Stockholders' equity (Note 8):   
   Preferred stock, $1 par value; 1,000,000 
    shares authorized; no shares issued
    or outstanding                                        -            -
   Common stock, $.01 par value; 75,000,000 
    shares authorized; 34,088,128 and 
    28,943,102 shares issued and outstanding 
    in 1998 and 1997, respectively                        341          289 
   Additional paid-in capital                          32,159       29,719 
   Accumulated deficit                                (24,294)     (23,678)
   Foreign currency translation adjustment               (650)        (691)
                                                       ------       ------

          Total stockholders' equity                    7,556        5,639
                                                       ------       ------

                                                     $ 31,830     $ 33,669
                                                       ======       ======
   
      
See accompanying notes to consolidated financial statements.



                    DDL ELECTRONICS, INC. AND SUBSIDIARIES
                     Consolidated Statements of Operations
                    (In thousands except per share amounts)

                                                   Year ended June 30
                                             -----------------------------
                                             1998         1997        1996
                                             ----         ----        ----

Revenues                                  $ 53,265     $ 51,640    $ 35,490
                                            ------       ------      ------
Costs and expenses:     
   Cost of goods sold                       43,933       43,894      30,906 
   Administrative and selling expenses       5,910        5,442       4,502
   Goodwill amortization                     1,268        1,268         634
   Acquisition expenses (Note 2)               609          -           -
                                            ------       ------      ------
                                            51,720       50,604      36,042 
                                            ------       ------      ------
Operating income (loss)                      1,545        1,036        (552) 
                                            ------       ------      ------
Non-operating income (expense):     
   Interest income                              97           96         255 
   Interest expense                         (1,101)      (1,227)     (1,045)
   Debt issue cost amortization                -           (937)       (281)
   Gain on sale of assets                       22          142          - 
   Other income (expense), net                 (70)          22         246
                                            ------       ------      ------
                                            (1,052)      (1,904)       (825)
                                            ------       ------      ------
Income (loss) before income benefit            493         (868)     (1,377)
     
Income tax benefit (Note 7)                    -            -         1,110
                                            ------       ------      ------
Income (loss) before extraordinary item        493         (868)       (267)
     
Extraordinary item - Gain on debt     
  extinguishment (Note 6)                      -            -         2,356
                                            ------       ------      ------

Net income (loss)                         $    493     $   (868)    $ 2,089 
                                            ======       ======      ======
     
Basic and diluted earnings (loss) 
  per share:     
   Income (loss) before 
     extraordinary item                   $   0.02     $  (0.03)    $ (0.01)
   Extraordinary item                           -            -         0.10
                                            ------       ------      ------
Basic and diluted earnings (loss) 
  per share                               $   0.02     $  (0.03)    $  0.09
                                            ======       ======      ======

Shares used in computing basic and 
  diluted earnings (loss) per share:
    Basic                                   29,026       27,506      22,536
                                            ======       ======      ======
    Diluted                                 29,443       27,506      22,536
                                            ======       ======      ======
     
     See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
                                   DDL ELECTRONICS, INC. AND SUBSIDIARIES
                                    Consolidated Statements of Cash Flows
                                               (In thousands)
                                                  

                                                                 Year ended June 30
                                                            -----------------------------
                                                            1998         1997        1996
                                                            ----         ----        ----
<S>                                                      <C>          <C>         <C> 
Cash flows from operating activities:     
    Net income (loss)                                    $    493     $   (868)   $  2,089 
    Adjustments to reconcile net income (loss)
     to net cash provided by operating activities:     
       Depreciation                                         1,720        1,584       1,345
       Amortization                                         1,272        2,205         915
       Acquisition expenses settled with stock                138          -           -
       Eliminate duplicate period of pooled 
        company to conform year ends                         (464)         -           - 
       Gain on debt extinguishment                            -            -        (2,356)
       Gain on sale of assets                                 (22)        (142)        -   
       Net increase in operating working capital, 
        net of effects of business acquired                (2,178)      (1,655)     (1,330)
       (Increase) decrease in deposits 
         and other assets                                      55          124         (93) 
       Benefit of non-capital grants                          -           (242)       (265)
       Other                                                  108           84          44
                                                           ------       ------      ------
Net cash provided by operating activities                   1,122        1,090         349 
                                                           ------       ------      ------

Cash flows from investing activities:     
    Capital expenditures                                     (785)      (1,151)     (1,136)
    Purchase of SMTEK, Inc., net of cash acquired             -            -        (7,638)
    Proceeds from sale of assets                               16          202         -
                                                           ------       ------      ------
Net cash used in investing activities                        (769)        (949)     (8,774)
                                                           ------       ------      ------

Cash flows from financing activities:     
    Proceeds from bank lines of credit                      3,074        1,366         -
    Proceeds from long-term debt                            2,000          -         8,800
    Payments of long-term debt                             (6,232)        (787)     (2,041)
    Debt issue costs                                          -            -          (372)
    Proceeds from issuance of common stock, net               -          1,385       1,112 
    Proceeds from exercise of stock options                   138           75         437 
    Proceeds from exercise of stock warrants                  -            -           448
    Proceeds from foreign government grants                   123          605         229
    S Corporation dividends paid                             (529)        (600)       (325)
                                                           ------       ------      ------
Net cash provided by (used in) 
 financing activities                                      (1,426)       2,044       8,288 
                                                           ------       ------      ------

Effect of exchange rate changes on cash                        88           80        (79) 
                                                           ------       ------      ------

Increase (decrease) in cash and cash equivalents             (985)       2,265        (216) 
     
Cash and cash equivalents at beginning of year              5,398        3,133       3,349
                                                           ------       ------      ------

Cash and cash equivalents at end of year                 $  4,413     $  5,398    $  3,133
                                                           ======       ======      ======
</TABLE>





          See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
                                             DDL ELECTRONICS, INC. AND SUBSIDIARIES
                                    Consolidated Statements of Stockholders' Equity (Deficit)
                                            Years ended June 30, 1998, 1997 and 1996         
                                               (In thousands except share amounts)            
                                                            
                                Common Stock                               Foreign       Total
                               --------------    Additional                currency   stockholders'
                                           Par     paid-in   Accumulated  translation    equity
                              Shares      value    capital     deficit    adjustment   (deficit) 
                              ------      ------    -----      -------     -------      -------  
<S>                           <C>          <C>     <C>        <C>           <C>        <C>     

Balance at June 30, 1995      20,419,223   $204    $20,238    $(23,598)     $(890)     $(4,046)
Net income                           -        -        -         2,089        -          2,089
Stock issued as partial pay-
 ment for SMTEK acquisition    1,000,000     10        791         -          -            801
Stock issued as debt 
 placement fee                   572,683      6        710         -          -            716
Sale of common stock             600,000      6      1,106         -          -          1,112
Conversion of debentures       2,764,275     28      3,292         -          -          3,320
Exercise of stock options
 and warrants                    918,942      9        876         -          -            885
Warrant compensation costs           -        -        196         -          -            196 
Other stock transactions          20,000      -         35         -          -             35
S Corporation dividends and 
 other equity transactions 
 of pooled company                   -        -        166        (491)       -           (325)
Translation adjustments              -        -         -          -         (146)        (146) 
                              ----------   ----     ------      ------      -----        ----- 
Balance at June 30, 1996      26,295,123    263     27,410     (22,000)    (1,036)       4,637
Net loss                             -        -         -         (868)       -           (868)
Stock issued as debt 
 placement fee                   353,333      3        439         -          -            442
Sale of common stock           2,000,000     20      1,365         -          -          1,385
Exercise of stock options
 and warrants                    294,646      3        295         -          -            298
S Corporation dividends and 
 other equity transactions 
 of pooled company                   -        -        210        (810)       -           (600)
Translation adjustments              -        -        -           -          345          345
                              ----------   ----     ------      ------      -----        -----
Balance at June 30, 1997      28,943,102    289     29,719     (23,678)      (691)       5,639

Net income                           -        -        -           493        -            493
Conversion of debt of 
 pooled company                4,643,756     47      2,008         -          -          2,055
Stock issued as brokerage fee    200,000      2        136         -          -            138
Exercise of stock options
 and warrants                    301,270      3        180         -          -            183
Elimination of duplicate
 period of pooled company
 to conform year ends                -        -        -          (464)       -           (464)
S Corporation dividends and 
 other equity transactions 
 of pooled company                   -        -        116        (645)       -           (529)
Translation adjustments              -        -        -           -           41           41
                              ----------   ----    -------     -------     ------       ------
Balance at June 30, 1998      34,088,128   $341    $32,159    $(24,294)    $ (650)      $7,556
                              ==========   ====    =======     =======     ======       ====== 

                                  See accompanying notes to consolidated financial statements. 

</TABLE>

 

                  DDL ELECTRONICS, INC. AND SUBSIDIARIES
                Notes to Consolidated Financial Statements


Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

     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, Florida and Northern Ireland.  The Company's PCB 
facilities are located in Northern Ireland. 

     The consolidated financial statements include the accounts of DDL 
Electronics, Inc. and its subsidiaries (collectively, the "Company" or 
"DDL").  As more fully described in Note 2, the Company's acquisition of 
Jolt Technology, Inc. on June 30, 1998 was accounted for under the pooling-
of-interests method and, accordingly, the consolidated financial statements 
prior to the acquisition have been restated to include the accounts and 
results of operations of Jolt for all periods presented.  All significant 
intercompany transactions and accounts have been eliminated in 
consolidation. 

Accounting Period

     The Company utilizes a 52-53 week fiscal year ending on the Friday 
closest to June 30 which, for fiscal years 1998, 1997 and 1996, fell on July 
3, June 27, and June 28, respectively.  In these consolidated financial 
statements, the fiscal year-end for all years is shown as June 30 for 
clarity of presentation, except where the context dictates a more specific 
reference to the actual year-end date.  Fiscal 1998 consisted of 53 weeks 
compared to 52 weeks for the fiscal years 1997 and 1996.

Cash Equivalents

     For financial reporting purposes, cash equivalents consist primarily of 
money market instruments and bank certificates of deposit that have original 
maturities of three months or less.  

Fair Value of Financial Instruments

     As of June 30, 1998, the carrying amount of the Company's cash and cash 
equivalents, accounts receivable, accounts payable and accrued liabilities 
approximate their fair value because of the short maturity of those 
instruments.  At June 30, 1998 and 1997, the carrying amount of long-term 
debt (including current portion thereof) was $8,400,000 and $13,612,000, 
respectively, and the fair value was $8,222,000 and $13,138,000, 
respectively.  The fair value of the Company's long-term debt is estimated 
based on the quoted market prices for the same or similar issues or on the 
current rates offered to the Company for debt of the same remaining 
maturities.  All financial instruments are held for purposes other than 
trading. 

Concentrations of Credit Risk

     Financial instruments that potentially subject the Company to 
concentrations of credit risk consist principally of money market 
instruments and trade receivables.  The Company invests its excess cash in 
money market instruments and certificates of deposit with high credit 
quality financial institutions and, by policy, limits the amount of credit 
exposure to any one issuer.  Concentrations of credit risk with respect to 
trade receivables exist because the Company's EMS and PCB operations rely 
heavily on a relatively small number of customers.  The Company performs 
ongoing credit evaluations of its customers and generally does not require 
collateral.  The Company maintains reserves for potential credit losses and 
such losses, to date, have been within management's expectations. 

Inventories

     Inventories are stated at the lower of cost or net realizable value, 
with cost determined principally by use of the first-in, first-out method.  

Long-Lived Assets 

     Property, equipment and improvements are stated at cost.  Depreciation 
and amortization are computed on the straight-line and declining balance 
methods.  The principal estimated useful lives are:  buildings - 20 years; 
improvements - 10 years; and plant, office and other equipment - 3 to 7 
years.  Upon the retirement of assets, costs and the related accumulated 
depreciation are eliminated from the accounts and any gain or loss is 
included in income.  Property, equipment and improvements acquired by the 
Company's foreign subsidiaries are recorded net of capital grants received 
from the Industrial Development Board for Northern Ireland.

     Goodwill represents the excess of acquisition cost over the fair value 
of net assets of a purchased business, and is being amortized over five 
years. 

     The Company periodically reviews the carrying value of long-lived 
assets, and if future undiscounted cash flows are believed insufficient 
to recover the remaining carrying value of the asset, the carrying value 
is written down to fair market value in the period the impairment is 
identified.

Revenue and Cost Recognition

     All of the Company's operating units except SMTEK, Inc. ("SMTEK") 
recognize revenues and cost of sales upon shipment of products.

     SMTEK has historically generated a significant portion 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 revenues 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 cost of 
goods sold.  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.  Included in SMTEK's revenues and cost of sales amounts 
are sales and cost of sales from engineering design and test services, which 
are immaterial.

Income Taxes

     Income taxes are accounted for under the asset and liability method.  
Deferred tax assets and liabilities are recognized for the expected future 
tax consequences attributable to differences between the financial statement 
carrying amounts of existing assets and liabilities and their respective tax 
bases and operating loss and credit carryforwards.  In estimating future tax 
consequences, all expected future events other than enactments of changes in 
tax law or statutorily imposed rates are considered.  The effect on deferred 
tax assets and liabilities of a change in tax rates is recognized in income 
in the period that includes the enactment date.

Earnings (Loss) Per Share

     In 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement No. 128, "Earnings per Share" ("SFAS 128").  SFAS 128 replaced 
the previously reported primary and fully diluted earnings per share 
with basic and diluted earnings per share.  Basic earnings per share 
represents income available to common shareholders divided by the 
weighted average number of common shares outstanding for the period.  
Unlike primary earnings per share, basic earnings per share excludes any 
dilutive effects of options, warrants, and convertible securities.  
Diluted earnings per share is very similar to the previously reported 
fully diluted earnings per share.  All earnings per share amounts for 
all periods have been presented, and where necessary, restated to 
conform to SFAS 128 requirements.


Foreign Currency Translation

     The financial statements of DDL's foreign subsidiaries have been 
translated into U.S. dollars from their functional currency, British pounds 
sterling, in the accompanying statements in accordance with Statement of 
Financial Accounting Standards No. 52.   Balance sheet amounts have been 
translated at the exchange rate on the balance sheet date and income 
statement amounts have been translated at average exchange rates in effect 
during the period.  The net translation adjustment is recorded as a 
component of stockholders' equity.  

Use Of Estimates

     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.

Stock Based Compensation

     Prior to July 1, 1996, the Company accounted for its employee stock 
compensation plans in accordance with Accounting Principles Board (APB) 
Opinion No. 25, "Accounting for Stock Issued to Employees," and related 
interpretations.  As such, compensation expense would be recorded only if, 
on the date of grant, the current market price of the underlying stock 
exceeded the exercise price.  On July 1, 1996, the Company adopted Statement 
of Financial Accounting Standards No. 123, "Accounting for Stock-Based 
Compensation" ("SFAS 123") which permits entities to recognize as expense 
over the vesting period the fair value of all stock-based awards on the date 
of grant.  Alternatively, SFAS 123 also allows entities to continue to apply 
the provisions of APB Opinion No. 25 and provide pro forma net income and 
pro forma earnings per share disclosures for stock-based awards made in 
fiscal 1996 and future years as if the fair-value-based method defined in 
SFAS 123 had been applied.  The Company has elected to continue to apply the 
provisions of APB Opinion No. 25 and provide the pro forma disclosure 
provisions of SFAS 123.


Recent Accounting Pronouncements

     The FASB issued Statement No. 130, "Reporting Comprehensive Income" 
("SFAS 130") in June 1997.  SFAS 130 establishes standards for reporting 
and display of comprehensive income and its components in financial 
statements.  SFAS 130 is effective for fiscal years beginning after 
December 15, 1997.  The Company will adopt SFAS 130 in the first quarter 
of its fiscal year ending June 30, 1999.  Management believes that the 
adoption of SFAS 130 will not have a material impact on the Company's 
financial position or results of operations.

     The FASB issued Statement No. 131, "Disclosures about Segments of 
an Enterprise and Related Information" ("SFAS 131") in June 1997.  SFAS 
131 establishes standards for the way public business enterprises are to 
report information about operating segments in annual financial 
statements and requires enterprises to report selected information about 
operating segments in interim financial reports issued to shareholders.  
It also establishes standards for related disclosures about products and 
services, geographic areas, and major customers.  It replaces the 
"industry segment" concept of Statement of Financial Accounting 
Standards No. 14, "Financial Reporting for Segments of a Business 
Enterprise", with a "management approach"  basis for identifying 
reportable segments.  SFAS 131 is effective for financial statements for 
fiscal years beginning after December 15, 1997.  The Company will adopt 
SFAS 131 in its fiscal year ending June 30, 1999.  Management believes 
that the adoption of SFAS 131 will not have a material impact on the 
Company's financial position or results of operations.

     In June 1998, the FASB issued Statement No. 133, "Accounting for 
Derivative Instruments and Hedging Activities" ("SFAS 133") which will 
require recognition of all derivatives as either assets or liabilities 
on the balance sheet at fair value.  The Company will adopt SFAS 133 in 
the first quarter of its fiscal year ending June 30, 2000.  Management 
has not completed an evaluation of the effects this standard will have 
on the Company's consolidated financial statements.


Note 2 - ACQUISITIONS

Jolt - Pooling-of-Interests Method

     On June 30, 1998, the Company issued 9,000,000 shares of Common Stock 
in exchange for all of the outstanding shares of Jolt, a provider of 
electronic manufacturing services located in Fort Lauderdale, Florida.  This 
acquisition has been accounted for under the pooling-of-interests method.

     The results of operations previously reported by the separate 
enterprises, and the combined amounts presented in the accompanying 
consolidated financial statements, are summarized below (in thousands):

<TABLE> 
<CAPTION>

                            Nine months                              Year ended June 30,
                               ended                 ---------------------------------------------------
                          March 31, 1998                      1997                       1996
                     -----------------------         -----------------------     -----------------------
                          (Unaudited)                             Net income                  
                     Revenues     Net income         Revenues       (loss)       Revenues     Net income
                     --------     ----------         --------     ----------     --------     ----------
<S>                 <C>           <C>               <C>           <C>           <C>           <C>
DDL without Jolt     $ 37,576      $    226          $ 48,919      $ (1,678)     $ 33,136      $  1,598
Jolt                    2,257           764             2,721           810         2,354           491
                      -------       -------           -------       -------       -------       -------
Restated DDL         $ 39,833      $    990          $ 51,640      $   (868)     $ 35,490      $  2,089
                      =======       =======           =======       =======       =======       =======

</TABLE>

     Certain reclassifications have been made to the financial statements of 
Jolt to conform to the Company's financial presentation. 

     Prior to the combination, Jolt's fiscal year ended on December 31.  In 
recording the pooling-of-interests combination, Jolt's financial statements 
for the twelve months ended June 30, 1998 were combined with DDL's financial 
statements for the same period.  Jolt's financial statements for the years 
ended December 31, 1997 and 1996 were combined with DDL's financial 
statements for the years ended June 30, 1997 and 1996.  An adjustment of 
$464,000 has been made to stockholders' equity as of June 30, 1998 to 
eliminate the effect of including Jolt's results of operations for the six 
months ended December 31, 1997 in both the fiscal years ended June 30, 1998 
June 30, 1997.

     Jolt's S Corporation status terminated upon consummation of the
acquisition. Jolt's undistributed earnings at June 30, 1998, and all prior
periods, have been reclassified to additional paid-in-capital in the
accompanying consolidated financial statements in accordance with pooling-
of-interests accounting.  Accordingly, dividend distributions by Jolt to 
Jolt shareholders have been charged to additional paid-in-capital.

     Acquisition expenses of $609,000 related to the combination with Jolt 
were recognized upon consummation of the transaction, and are included in 
the accompanying 1998 consolidated statement of operations.

     Concurrent with the acquisition of Jolt, the Company reversed the 
quasi-reorganization it implemented effective June 27, 1997 as required by 
the pooling-of-interests accounting method. 


SMTEK - Purchase Method

     On January 12, 1996, the Company acquired 100% of the outstanding stock 
of SMTEK, a provider of integrated electronic manufacturing services.  The 
purchase price of $8,000,000 was paid in cash of $7,199,000 and 1,000,000 
shares of unregistered common stock of the Company which was valued at 
$801,000. The Company also incurred acquisition-related fees and other costs 
totaling $495,000.  The cash portion of the purchase price was financed 
through the issuance of 10% Senior Notes in the aggregate amount of 
$5,300,000 and 10% Convertible Debentures in the aggregate amount of 
$3,500,000. 

     The 10% Convertible Debentures, which were sold to offshore investors, 
were convertible into common stock at any time after 60 days at a conversion 
price equal to 82% of the market price of the Company's common stock at the 
time of conversion.  In May and June 1996, the holders of all of the 10% 
Debentures elected to convert such debentures into common stock.  As a 
result of these conversions, a total of 2,698,275 shares of common stock 
were issued and stockholders' equity increased by $3,188,000, net of the 
remaining unamortized issue costs associated with these debentures.  

     The 10% Senior Notes were repaid on June 30, 1997.  Because the 
Company's 1997 fiscal year ended on June 27, 1997 under its 52-53 week 
convention, this debt repayment was a fiscal 1998 transaction.
 
     In connection with the sale of the 10% Senior Notes and 10% Convertible 
Debentures, the Company paid $352,000 as a fee to the placement agent for 
these financings.  The Company also issued to the placement agent as 
additional compensation 572,683 shares of common stock valued at $716,000 
and warrants, Series E, to purchase 1,500,000 shares of common stock for 
$2.50 per share which are exercisable for five years.  As further described 
in Note 8, the Series E warrants contain an antidilution provision which has 
lowered the exercise price.

     The acquisition of SMTEK was accounted for using the purchase method.  
In accordance with Accounting Principles Board Opinion No. 16, the total 
investment made in SMTEK of $8,495,000 was allocated to the assets and 
liabilities acquired at their estimated fair values at the acquisition date, 
which resulted in the recognition of goodwill of $6,342,000.  Accumulated 
amortization of goodwill was $3,171,000 and $1,903,000 as of June 30, 1998 
and 1997, respectively.  SMTEK's operations have been included in the 
consolidated financial statements of DDL since the date of acquisition, 
January 12, 1996.



Note 3 - ACCOUNTS RECEIVABLE

     The components of accounts receivable are as follows (in thousands):

                                                June 30 
                                         --------------------
                                         1998            1997
                                         ----            ----
Trade receivables                     $  9,890         $  9,262 
Other receivables                           63              548
Less allowance for doubtful
 accounts                                 (167)            (163)
                                         ------           ------

                                       $ 9,786          $ 9,647
                                        ======           ======

     Included in other receivables at June 30, 1997 are grants due from the 
Industrial Development Board for Northern Ireland of $125,000 (Note 10).  


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 (in thousands):


                                                June 30 
                                         --------------------
                                         1998            1997
                                         ----            ----
Costs incurred on uncompleted 
 contracts                             $32,324          $20,455 
Estimated earnings                       5,802            2,714
                                        ------           ------  
                                        38,126           23,169
Less:  Billings to date                (33,341)         (20,008)
                                        ------           ------
                                       $ 4,785          $ 3,161 
                                        ======           ======
 

     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, net of 
$71,000 and $149,000 of billings in excess of costs and estimated earnings 
at June 30, 1998 and 1997, respectively.  Essentially all of the unbilled 
amount is expected to be billed within 90 days of the balance sheet date. 



Note 5 - INVENTORIES

     Inventories consist of the following (in thousands):

                                              June 30 
                                         ------------------
                                         1998          1997
                                         ----          ----
Raw materials                           $2,014        $2,964 
Work in process                            643           695
Finished goods                             278           160
Less reserves                             (489)         (492)
                                         -----         ----- 

                                        $2,446        $3,327 
                                        ======        ======

  
Note 6 - FINANCING ARRANGEMENTS

Bank Credit Agreements

     The Company has a working capital bank line of credit for SMTEK, 
based upon and secured by accounts receivable and inventory, which 
provides for borrowings of up to $2,750,000 at an interest rate of prime 
(8.50% at June 30, 1998) plus 1.25%.  At June 30, 1998, borrowings 
outstanding under this credit facility amounted to $2,583,000.  SMTEK's 
line of credit expires on September 1, 1999.  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 3,000,000 pounds sterling (approximately $4,900,000), and 
provides for interest on borrowings at the bank's base rate (6.77% at 
June 30, 1998) plus 1.50%.  At June 30, 1998, borrowings outstanding 
under this credit facility amounted to $1,858,000.  The credit facility 
agreement with Ulster Bank Markets expires August 31, 1998.  Management 
is currently in discussions with Ulster Bank Markets and believes that 
the credit facility agreement will be extended in the normal course of 
business for at least one year.


Notes Payable to Related Party

     The note payable to related party of $2,000,000 at June 30, 1998, 
is payable to Thomas M. Wheeler, a member of the Company's Board of 
Directors and the Company's largest stockholder.  The note bears 
interest at 8%, matures on October 31, 1999, and is secured by the 
common stock of SMTEK.

     The notes payable to related party aggregating $1,625,000 at June 
30, 1997, were due from Jolt to Mr. Wheeler, prior to the consummation 
of the acquisition of Jolt (Note 2).  The notes payable consisted of two 
notes of $1,525,000 and $100,000, bearing interest at 7.1% and 8.25%, 
respectively.  As a condition of and prior to the consummation of the 
Jolt acquisition, the $1,625,000 notes payable and accrued interest 
thereon of $430,000, were converted to common stock of Jolt.  Mr. 
Wheeler received 4,643,756 shares of common stock of the Company as a 
result of the conversion of the debt into common stock of Jolt.



Other Long-Term Debt

     Other long-term debt consists of the following (in thousands):


                                                              June 30
                                                        ------------------
                                                        1998          1997
                                                        ----          ----
10% Senior Notes (Note 2)                              $  -        $ 5,300

Mortgage notes secured by real property at the
 Northern Ireland operations, with interest at 
 variable rates (8.0% at June 30, 1998), 
 payable in semiannual installments through 2009         1,214       1,300

Notes payable secured by equipment, interest 
 at 7.95% to 10.9%, payable in monthly 
 installments through June 2003                            951       1,129

Capitalized lease obligations (Note 10)                  1,215       1,197

8-1/2% Convertible Subordinated Debentures, due 2008,
 interest payable semi-annually and convertible at 
 holders' option at a price of $10.63 per share at 
 any time prior to maturity                              1,580       1,580

7% Convertible Subordinated Debentures ("CSDs"),
 due May 15, 2001, interest payable semi-annually and 
 convertible at holders' option at a conversion price
 of $2.00 per share at any time prior to maturity          398         421

Obligations to former officers, employees and directors
  under consulting and deferred fee agreements             859         826
Other                                                      183         234
                                                        ------      ------
                                                         6,400      11,987
Less current maturities                                  1,214       4,167
                                                        ------      ------
                                                       $ 5,186     $ 7,820
                                                        ======      ======
  

     At June 30, 1998, one of the notes payable secured by equipment was 
further collateralized by an irrevocable standby letter of credit, which in 
turn is secured by the Company's restricted cash deposit of $145,000.  This 
amount is included in deposits and other assets in the accompanying 
consolidated balance sheet at June 30, 1998 and 1997.

     The aggregate amounts of minimum maturities of other long-term debt for 
the indicated fiscal years (other than capitalized lease obligations, as 
described in Note 10) are as follows:  1999 - $837,000; 2000 - $586,000; 
2001 - $729,000; 2002 - $240,000; 2003 - $244,000; and thereafter - 
$2,549,000.

     During fiscal 1996, holders of $132,000 in principal of 7% CSDs 
exchanged such CSDs for common stock of 66,000 shares.  Accrued interest 
related to the converted debentures was credited to income.

     In March 1996, the Company entered into a settlement agreement with 
certain of its former officers, key employees and directors (the 
"Participants") to restructure its outstanding obligations under several 
consulting programs and deferred fee arrangements which had provided for 
payments to the Participants after their retirement from the Company or from 
its Board of Directors.  Under terms of the settlement, the Participants 
agreed to relinquish all future payments due them under these consulting 
programs and deferred fee arrangements in return for an aggregate of 595,872 
common stock purchase warrants, Series G.  The exercise price of the 
warrants, which expired June 1, 1998, was $2.50 per warrant.  Pursuant to 
the terms of the settlement agreement, the Company subsidized the exercise 
of warrants by crediting the Participants with $2.50 for each warrant 
exercised.  During fiscal 1998 and 1997, 26,808 and 144,646 Series G 
warrants, respectively, were exercised.  The Company is obligated to pay the 
Participants $2.50 for each warrant which remained unexercised on the June 
1, 1998 warrant expiration date, payable in semiannual installments over two 
to ten years.  The Company has recorded a liability for the present value of 
these future payments, which amounted to $836,000 and $802,000 at June 30, 
1998 and 1997, respectively.  As a result of this settlement agreement, the 
Company recorded an extraordinary gain in fiscal 1996 of $2,356,000, net of 
$197,000 of compensation expense related to the "call" feature of the 
warrants.


Note 7 - INCOME TAXES

     Temporary differences between financial statement carrying amounts and 
the tax bases of assets and liabilities that give rise to significant 
portions of the deferred tax assets and liabilities relate to the following 
(in thousands):
                                                          June 30
                                                   ---------------------
                                                   1998             1997
                                                   ----             ----
Deferred tax assets:    
  Accrued employee benefits                     $   479          $   346
  Loss reserves                                     416              452
  Domestic net operating loss carryforwards      14,338           14,102
  Foreign net operating loss carryforwards        3,582            3,955
  Other                                              57               74
                                                 ------           ------
Total deferred tax assets                        18,872           18,929
  
Deferred tax liabilities:  
  Depreciation                                    (130)             (118)
                                                 ------           ------
  Net deferred tax assets before allowance       18,742           18,811
  Less valuation allowance                      (18,742)         (18,811)
                                                 ------           ------
Net deferred tax assets after allowance         $   -            $   -  
                                                 ======           ======


     In assessing the realizability of net deferred tax assets, management 
considers whether it is more likely than not that some portion or all of the 
net deferred tax assets will be realized.  The ultimate realization of net 
deferred tax assets is dependent upon the generation of future domestic and 
foreign taxable income of approximately $38,000,000 and $10,233,000, 
respectively, prior to the expiration of the net operating loss 
carryforwards.  Based on the level of historical losses and projections for 
future taxable income, management believes that it is not more likely than 
not that the deferred tax assets will be realized, and therefore, has 
recorded a 100% valuation allowance to offset the assets.  The valuation 
allowance was $18,811,000 and $18,382,000 as of July 1, 1997 and 1996, 
respectively.  The net change in the total valuation allowance for the years 
ended June 30, 1998 and 1997 was a decrease of $69,000 and an increase of 
$429,000, respectively.  

     The provision (benefit) for income taxes differs from an amount 
computed using the statutory federal income tax rate as follows (in 
thousands): 


                                              Year ended June 30
                                          --------------------------- 
                                          1998       1997        1996
                                          ----       ----        ----
Federal tax expense (benefit)
 computed at statutory rate             $  168      $(293)      $(468)
Differences in taxation of
 foreign earnings, net                    (538)      (263)        114
Untaxed S Corporation earnings            (377)      (275)       (167)
Amortization of debt issue costs            -          -         (108) 
Amortization of goodwill                   431        431         215
Utilization of net operating losses         -          -       (1,110)  
Deferred tax effect of domestic 
 temporary differences                      36       (102)      6,871
Deferred tax effect of foreign
 temporary difference                      373         27      (1,252)
Net change in valuation allowance          (69)       429      (5,194)
Other                                      (24)        46         (11)
                                         -----      -----       -----
Income tax expense (benefit)            $   -     $    -      $(1,110)
                                         =====      =====       =====


     During fiscal 1996, the Company recognized an income tax benefit 
associated with its 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 June 30, 1996, the Company had 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 the tax returns underlying these refunds are subject to audit by the 
Internal Revenue Service and a portion of the refunds could be 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.  
No additional refunds were received subsequent to fiscal 1996.  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. 

     As of June 30, 1998, the Company has U.S. federal net operating loss 
("NOL") carryforwards of $38,200,000, expiring in 2004 through 2013, and 
state NOL carryforwards of $27,300,000, expiring in 1999 through 2013. The 
NOL carryforward for federal alternative minimum tax purposes is 
approximately $24,000,000.  

     The Company's ability to use its NOL carryforwards to offset future 
taxable income may be subject to annual limitations due to certain 
substantial stock ownership changes which have occurred in the current and 
prior years.  The Company is currently studying this matter to determine if 
the future utilization of the NOLs will be limited due to these ownership 
changes.

     Income of the Company's Northern Ireland subsidiaries is sheltered by 
operating loss carryforwards for United Kingdom income tax purposes (the 
"U.K. NOL").  The income tax benefit from the U.K. NOL was $322,000 and 
$244,000 in fiscal 1998 and 1997, respectively, and has been treated as a 
reduction in the provision for income taxes.  There was no income tax 
benefit from the U.K. NOL in fiscal 1996.  At June 30, 1998, the U.K. NOL 
amounted to approximately $10,233,000.  Substantially all of these net 
operating losses from prior years can be carried forward by the Company's 
Northern Ireland subsidiaries for an indefinite period of time to reduce 
future taxable income.

     Pretax income (loss) from foreign operations for fiscal 1998, 1997 and 
1996 was $1,480,000, $772,000, and ($338,000), respectively. It is not 
practicable to estimate the amount of tax that might be payable on the 
eventual remittance of such earnings to the U.S. parent company. On 
remittance, the United Kingdom imposes withholding taxes that would then be 
available for use as a credit against the U.S. tax liability, if any, 
subject to certain limitations.   

     Effective June 30, 1998, the Company acquired Jolt, which was an S 
Corporation for income tax purposes prior to its acquisition by the Company. 
Following are pro forma consolidated operating results, which present state 
income taxes (the Company's federal NOLs are assumed to be utilized to 
shelter Jolt's federal taxable income) as a pro forma adjustment as if Jolt 
had filed C Corporation tax returns for the pre-acquisition periods  (in 
thousands):


 
                                                 Year ended June 30
                                              ------------------------
                                              1998      1997      1996
                                              ----      ----      ----
Net income (loss) before pro forma 
  adjustments, per consolidated 
  statements of operations                    $493     $(868)    $2,089
Pro forma provision for income taxes            61        45         27
                                              ----     -----     ------
Pro forma net income (loss)                   $432     $(913)    $2,062
                                              ====     =====     ======

 

Note 8 - STOCKHOLDERS' EQUITY

Sales of Common Stock

     In June 1997, the Company sold 2,000,000 shares of common stock to 
various investors, generating proceeds of $1,385,000, which is net of 
issuance costs of $115,000.  

     In March 1996, the Company sold 600,000 shares of common stock to an 
offshore investor, generating proceeds of $1,112,000, which is net of 
issuance costs of $58,000.


Common Stock Issued as Brokerage Fee

     In June 1998, 200,000 shares of common stock were issued as a brokerage 
fee in conjunction with the closing of the acquisition of Jolt.  The 
ascribed value of the 200,000 shares of $138,000 is included in acquisition 
expenses in the accompanying 1998 consolidated statement of operations.  

Common Stock Issued as Debt Placement Fee

     In June 1997, in connection with the payoff of the 10% Senior Notes, 
353,333 shares of common stock were issued to the placement agent of the 10% 
Senior Notes as a debt placement fee.  The ascribed value of the 353,333 
shares of $442,000 was expensed in June 1997 and is included in fiscal 1997 
debt issue cost amortization expense in the accompanying consolidated 
statement of operations.

Stock Option Plans

     The Company has in effect several stock-based plans under which non-
qualified and incentive stock options and restricted stock awards have been 
granted to employees and directors.  Subject to the discretion of the 
Compensation Committee of the Board of Directors (the "Committee"), employee 
stock options generally become exercisable in installments of 33.3% per 
year, or over an alternative vesting period determined by the Committee, and 
generally have a 10-year term when granted. 

     The exercise price of all incentive stock options must be equal to or 
greater than the fair market value of the shares on the date of grant.  The 
exercise price of non-statutory stock options must be at least 85% of the 
fair market value of the common stock on the date of grant.  

     In July 1996, following stockholder approval, the Company adopted a 
stock option plan for non-employee directors.  Under this plan, annually on 
July 1 each non-employee director will be granted a non-statutory stock 
option to purchase 30,000 shares of common stock.  In July 1998, 1997 and 
1996, options to purchase a total of 90,000, 150,000 and 120,000 shares, 
respectively, were granted to the Company's non-employee directors at 
exercise prices of $0.81, $1.06, and $1.63, respectively.


     Activity under the employee and non-employee director stock option 
plans for fiscal years 1998, 1997 and 1996 was as follows:

                                                        Weighted average
                                                         exercise price
                                        Shares              per share
                                        ------              ---------
   
Shares under option, June 30, 1995     1,356,619              $0.87
   
Granted                                  906,042               1.72
Expired or canceled                      (33,928)              1.44
Exercised                               (595,442)              0.75
                                       ---------              -----

Shares under option, June 30, 1996     1,633,291               1.37
   
Granted                                1,852,758               1.23
Expired or canceled                   (1,139,058)              1.66
Exercised                               (150,000)              0.50
                                       ---------              -----
   
Shares under option, June 30, 1997     2,196,991               1.16

Granted                                  611,200               0.85
Expired or canceled                     (185,849)              1.04
Exercised                               (274,462)              0.50
                                       ---------              -----
Shares under option, June 30, 1998     2,347,880              $1.17
                                       =========              =====

     In fiscal 1997, pursuant to resolutions of the Compensation Committee 
of the Board of Directors, 762,329 options with exercise prices of $1.63 to 
$4.88 were canceled and were replaced by new options for the same number of 
shares at an exercise price of $1.25, the then fair market value of the 
common stock.

     The following table summarizes information about shares under option at 
June 30, 1998:

                            Outstanding                     Exercisable
             -------------------------------------    -----------------------
                             Weighted    
                             average       Weighted                  Weighted
 Range of                    remaining     average                   average
 exercise       Options     contractual    exercise     Options      exercise
 prices      outstanding       life         price     exercisable     price
---------      ---------      ---------    ---------   ---------     --------
$0.75- 0.81      362,380       9.5 years      $0.77       137,280      $0.79
 1.00- 1.25    1,741,500       8.4             1.18       915,426       1.16
 1.63            244,000       8.0             1.63       202,665       1.63
               ---------                                ---------
               2,347,880                      $1.17     1,255,371      $1.20
               =========                                =========

     At June 30, 1998, under the employee and non-employee director stock 
option plans there were 660,147 and 540,000 shares, respectively, 
available for future grants.  


Stock Based Compensation

     The Company applies the provisions of APB Opinion No. 25 and related 
interpretations in accounting for its stock option plans and the Series H 
warrants granted to non-employee directors (see "Warrants" below).  
Accordingly, no compensation cost has been recognized for its stock option 
plans and awards of warrants to non-employee directors.  Had compensation 
cost for stock-based awards been determined consistent with SFAS 123, the 
Company's results of operations would have been reduced to the pro forma 
amounts indicated below:

                                          Year ended June 30
                                --------------------------------------
                                  1998          1997            1996
                                ------        -------          -------
Net income (loss):  
  As reported                   $ 493,000    $  (868,000)   $2,089,000
  Pro forma                     $  28,000    $(1,441,000)   $1,830,000
  
Earnings (loss) per share:  
  As reported                      $ 0.02         $(0.03)       $ 0.09
  Pro forma                        $  --          $(0.05)       $ 0.08


     For purposes of this pro forma disclosure, the "fair value" of each 
option and warrant is estimated on the date of grant using the Black-Scholes 
option-pricing model with the following assumptions used for grants in 1998, 
1997 and 1996:  dividend yield of 0.0% percent for all years;  expected 
volatility 65%, 68% and 67% for 1998, 1997 and 1996, respectively;  risk-
free interest rates ranging from 5.4% to 6.3% for 1998, 6.1% to 6.8% for 
1997 and 6.6% to 6.7% for 1996; and expected lives of five years for all 
years.

     The weighted average fair value of options granted during the years 
ended June 30, 1998, 1997 and 1996 was $0.51, $0.76 and $1.06, respectively.  
The weighted average fair value of Series H warrants granted to non-employee 
directors in fiscal 1996 was $0.84 per warrant.


Preferred Stock Purchase Rights

     At June 30, 1998, 1,000 preferred stock purchase rights are 
outstanding.  Each right may be exercised to purchase one-hundredth of a 
share of Series A Participating Junior Preferred Stock at a purchase price 
of $30, subject to adjustment.  The rights may be exercised only after 
commencement or public announcement that a person (other than a person 
receiving prior approval from the Company) has acquired or obtained the 
right to acquire 20% or more of the Company's outstanding common stock.  The 
rights, which do not have voting rights, may be redeemed by the Company at a 
price of $.01 per right within ten days after the announcement that a person 
has acquired 20% or more of the outstanding common stock of the Company and 
the redemption period may be extended under certain circumstances.  In the 
event that the Company is acquired in a merger or other business combination 
transaction, provision shall be made so that each holder of a right shall 
have the right to receive that number of shares of common stock of the 
surviving company which at the time of the transaction would have a market 
value of two times the exercise price of the right.  150,000 shares of 
Series A Junior Participating Preferred Stock, $1 par value, are authorized.


Warrants

     In fiscal 1993, the Company exchanged a portion of its outstanding 
convertible debentures for stock and common stock purchase warrants, Series 
A.  The remaining 223,500 of these Series A warrants were exercised during 
fiscal 1996 at $1.42 per share. 

     In fiscal 1995, the Company issued 100,000 warrants, Series B, to 
purchase common stock at $1.31 per share to offshore investors in connection 
with an earlier offering of common stock.  These warrants were exercised in 
April 1996. 

     During fiscal 1996, the Company issued Series C, D, E, F, G and H 
common stock purchase warrants.  The provisions and activity of these 
warrants are as follows:

   1.  Series C warrants covering an aggregate of 455,000 shares were 
       issued to four parties, including an investment banking firm, for 
       consulting and financial advisory services.  These warrants are 
       exercisable at $3.50 until the warrant expiration date on 
       June 30, 2000.  Fifty-thousand of the Series C warrants were issued
       to an individual who was subsequently elected a director of the
       Company.  Substantially all of these warrants were granted in June
       and July 1995 and had no intrinsic value on the date of grant.

   2.  Series D warrants covering 50,000 shares were issued to the 
       Company's former general counsel as partial consideration for legal 
       services rendered under an agreement entered into in fiscal 1995.  
       These warrants are exercisable at $2.50 until the warrant expiration
       date on June 30, 2000.  The warrants had no intrinsic value on the
       date of grant. 

   3.  Series E warrants covering an aggregate of 1,500,000 shares were 
       issued to an investment banking firm which served as placement agent 
       for the 10% Senior Notes and the 10% Convertible Debentures.  The 
       Series E warrants are exercisable until their expiration on February 
       28, 2001, and provided for an original exercise price of $2.50 per 
       share, subject to adjustment in the event the Company issues new 
       common stock at an effective price less than the effective exercise 
       price on the Series E warrants.  The effective exercise price on the
       Series E warrants was $1.88 as of June 30, 1998.  The Series E
       warrants were granted in September 1995 contingent upon the placement
       of debt. The warrants had no intrinsic value on the measurement date. 

   4.  In February 1996, the Series F warrants covering an aggregate of 
       1,060,000 shares were issued as partial collateral for the 10% 
       Senior Notes.  These warrants were canceled effective June 30, 1997, 
       concurrent with the repayment of the 10% Senior Notes. 

   5.  As further described in Note 6, the Series G warrants covering an 
       aggregate of 595,872 shares were issued in March 1996 to certain 
       former officers, key employees and directors of the Company.  During
       fiscal 1998 and 1997, 26,808 and 144,646 Series G warrants,
       respectively, were exercised.  The remaining unexercised Series G
       warrants expired on June 1, 1998.  

   6.  Series H warrants covering an aggregate 300,000 shares were issued 
       to the Company's non-employee directors who served on the Company's 
       board without other compensation during the period from May 31, 1995 
       to June 30, 1996.  The Series H warrants are at $2.50 until the
       warrant expiration date on June 30, 2000.  There was no intrinsic
       value related to the warrants on the date of grant. 



Note 9 - OTHER FINANCIAL INFORMATION

Earnings (Loss) Per Share

      
     As the Company reported a net loss for the year ended June 30, 1997 
and a loss before extraordinary item for the year ended June 30, 1996, 
the shares used in computing diluted earnings (loss) per share for these 
years is equal to the weighted average number of common shares 
outstanding for the period and excludes the dilutive effect of options, 
warrants and convertible securities. 

     A reconciliation of the numerator and denominator used in the 
computation of fiscal 1998 diluted earnings per share follows:

                                                   Year ended   
                                                    June 30,
                                                      1998       
                                                     ------
   NUMERATOR:
Net income                                        $   493,000   
Add back net interest related to 
  convertible subordinated debentures                 134,000  
                                                   ----------
Net income for diluted earnings computation       $   627,000   
                                                   ==========

   DENOMINATOR:
Weighted average number of common
  shares outstanding                               29,026,467    
Assumed exercise of options and warrants
  net of shares assumed reacquired under 
  treasury stock method                               106,491 
Assumed conversion of convertible
  subordinated debentures                             310,206  
                                                   ----------   
Total diluted shares                               29,443,164   
                                                   ========== 


     Options and warrants to purchase 4,652,880 shares of common stock 
at prices ranging from $0.75 to $3.50 were outstanding during the year 
ended June 30, 1998, but were not included in the computation of diluted 
earnings per share because the option and warrant exercise prices were 
greater than the average market price of the common shares, and would 
therefore be antidilutive.



Information Relating to Consolidated Statements of Cash Flows

     "Net cash provided by operating activities" includes cash payments for 
interest (in thousands):

                                                 Year ended June 30
                                             ---------------------------
                                             1998        1997       1996
                                             ----        ----       ----

  Interest paid                           $ 1,294      $ 1,081    $   751
                                         
                                         
"Net increase in operating working capital, net of effects of business 
acquired" consists of the following (in thousands):
                 
                                                 Year ended June 30
                                             ---------------------------
                                             1998        1997       1996
                                             ----        ----       ----

(Increase) decrease in 
  accounts receivable                      $  (333)    $(3,565)   $   402
Increase in costs and estimated 
  earnings in excess of billings 
  on uncompleted contracts                  (1,624)       (135)      (726)
(Increase) decrease in inventories             846         993     (1,879)
(Increase) decrease in prepaid expenses         36         181        (86)
Increase (decrease)in accounts payable      (1,234)      1,220        259
Increase in accrued payroll     
  and employee benefits                         74         328         24
Increase (decrease) in other
  accrued liabilities                           57        (677)       676
                                            ------      ------     ------
Net increase                               $(2,178)    $(1,655)   $(1,330)
                                            ======      ======     ======



     Following is the supplemental schedule of non-cash investing and 
financing activities (in thousands):
                                                  Year ended June 30
                                              --------------------------
                                              1998       1997       1996
                                              ----       ----       ----

Capital expenditures financed by lease             
  obligations and notes payable             $   639    $1,221    $  689
Conversion of debt to equity                  2,100       223     3,667
Common stock issued as partial     
  consideration for purchase of SMTEK, Inc.      -         -        801
Common stock issued as debt placement fee        -        442       716 



Other Accrued Liabilities

     Other accrued liabilities consist of the following (in thousands):
    

                                             June 30 
                                        ------------------
                                        1998          1997
                                        ----          ----

Environmental liabilities             $  528        $  684
Accrued taxes payable                    810           794
Other                                  1,089         1,324
                                      ------        ------
                                      $2,427        $2,802
                                      ======        ====== 


Valuation and Qualifying Accounts and Reserves

     Following is the Company's schedule of valuation and qualifying 
accounts and reserves for the last three years (in thousands): 

                      Balance at   Charged to               Balance
                      beginning    costs and                 at end
                      of period    expenses    Deductions   of period
                      ---------    --------    ---------    ---------
Allowance for doubtful accounts:
-------------------------------
    Fiscal 1996          $186         $ 85        $(134)       $137
    Fiscal 1997           137           74          (48)        163
    Fiscal 1998           163           57          (53)        167

Inventory reserves  
------------------
    Fiscal 1996          $156         $250        $(158)       $248
    Fiscal 1997           248          443         (199)        492
    Fiscal 1998           492          386         (389)        489



Note 10 - COMMITMENTS AND CONTINGENCIES

Lease Commitments

     Future minimum lease payments at June 30, 1998 were as follows (in 
thousands): 

                                  Capital     Operating
                                  leases       leases
                                  ------       ------
Fiscal 1999                       $  467       $ 481
Fiscal 2000                          434         408
Fiscal 2001                          360          33
Fiscal 2002                          122          19
Fiscal 2003                           35          14
Thereafter                            -            9
                                   -----       -----
Total                              1,418       $ 964
                                               =====
Less:  Interest                     (203)             
                                   ----- 
Present value of minimum
 lease payments                   $1,215
                                  ======


     The capitalized cost of the related assets (primarily plant equipment), 
which are pledged as security under the capital leases, was $1,483,000 and 
$1,726,000 at June 30, 1998, and 1997, respectively. Accumulated 
amortization on assets under capital leases amounted to $447,000 and 
$264,000 at June 30, 1998 and 1997, respectively. 

     Rental expense for operating leases amounted to $524,000, $489,000 and 
$302,000 for fiscal 1998, 1997 and 1996, respectively. 

     SMTEK conducts its operations from a 45,000 square foot facility, which 
is leased from an unaffiliated party through May 31, 2000.  The monthly rent 
was approximately $30,000 during fiscal 1998 and is subject to a 4% increase 
each year.  SMTEK has the option to extend the lease term for three renewal 
periods of three years each.  The lease rate during the renewal periods is 
subject to adjustment based on changes in the Consumer Price Index for the 
local area.

     Jolt occupies an 8,400 square foot facility which is leased through 
October 31, 1998 for $7,100 per month.  Jolt management is currently in 
negotiations with the landlord concerning an extension of the lease, and 
management expects that the lease will be renewed for an additional one 
year term.  In the event the lease is not renewed, management believes that 
there is sufficient vacant industrial space in the local vicinity to enable 
Jolt to relocate without unduly disrupting its operations.


Government Grants

     Pursuant to government grant agreements with the Industrial Development 
Board for Northern Ireland ("IDB"), the Company's subsidiary, DDL 
Electronics Limited ("DDL-E"), has been reimbursed for a portion of 
qualifying capital expenditures and for certain employment and interest 
costs.  Approximately $966,000 of the government grants received by DDL-E 
are subject to repayment if the employment level at this subsidiary falls 
below 134 employees during the two year period beginning on January 1, 1997.  
At the present time, DDL-E has approximately 160 employees.  Management does 
not expect the employment at DDL-E to drop below the level that would give 
rise to a grant repayment obligation.

     In addition to the contingent grant repayment liability based on DDL-
E's employment level, the Company would be obligated to repay grants in the 
event that DDL-E ceases business, permanently discontinues production, or 
fails to pay to the IDB any amounts due under its mortgage note payable 
(Note 6).  DDL-E's contingent grant repayment obligations amount to 
approximately $1,175,000 at June 30, 1998.  Management does not expect that 
the Company will be required to repay any grants under these provisions.

Foreign Currency Exposure

     The Company's investment in its Northern Ireland subsidiaries is 
represented by operating assets and liabilities denominated in these 
subsidiaries' functional currency of British pounds sterling.  In addition, 
in the normal course of business these operating units enter into 
transactions denominated in European currencies other than British pounds 
sterling.  As a result, the Company is subject to transaction and 
translation exposure from fluctuations in foreign currency exchange rates.  
The Company uses a variety of strategies, including foreign currency forward 
contracts and internal hedging, to minimize or eliminate foreign currency 
exchange rate risk associated with substantially all of its foreign currency 
transactions.  Gains and losses on these hedging transactions, which were 
immaterial for 1998, 1997 and 1996, are generally recorded in earnings in 
the same period as they are realized, which is usually in the same period as 
the underlying or originating transactions.  The Company does not enter into 
speculative foreign currency transactions.  At June 30, 1998, the Company 
did not have any open foreign currency forward contracts.

Environmental Matters

     The Company is currently involved in certain remediation and 
investigative studies regarding soil and groundwater contamination at 
the site of a former printed circuit board manufacturing plant in 
Anaheim, California which was leased by one of the Company's 
subsidiaries, Aeroscientific Corp., which is now an inactive, 
insolvent subsidiary.  Management, based in part on consultations 
with outside environmental engineers and scientists, believes that 
the total remaining costs to clean up this site will not exceed 
$600,000.  The remaining costs to be incurred to remediate this site 
will be borne partially by the property owner under a cost sharing 
agreement entered into several years ago.  At June 30, 1998, the 
Company had a reserve of $528,000, which management believes is 
adequate to cover its share of future remediation costs at this site.  
It is possible, however, that these future remediation costs could 
differ significantly from the estimates, and that the Company's 
portion could exceed the amount of its reserve.  The Company's 
liability for remediation in excess of its reserve could have a 
material adverse impact on its business, financial condition and 
results of operations. 



Note 11 - BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in two primary industry segments providing 
electronic manufacturing services and printed circuit boards principally to 
the computer, communications, instrumentation and medical equipment markets.  
A summary of the Company's operations by segment follows (in thousands):

                                               Year ended June 30
                                        ------------------------------
                                        1998         1997         1996
                                        ----         ----         ----
Revenues:
  Electronic Manufacturing Services   $44,690      $41,335      $24,599
  Printed Circuit Boards                8,575       10,305       10,891
                                       ------       ------       ------
                                      $53,265      $51,640      $35,490
                                       ======       ======       ======

Operating income (loss):
  Electronic Manufacturing Services   $ 1,886      $   988      $   348
  Printed Circuit Boards                  677          589          (20)
  General Corporate                      (409)        (541)        (880)
  Acquisition expenses                   (609)         -            -
                                       ------       ------       ------
                                      $ 1,545      $ 1,036      $  (552)
                                       ======       ======       ======

Identifiable assets:
  Electronic Manufacturing Services   $25,205      $24,037      $21,732
  Printed Circuit Boards                5,712        5,881        5,266
  General Corporate                       913        3,751        2,500
                                       ------       ------       ------
                                      $31,830      $33,669      $29,498
                                       ======       ======       ======

Depreciation and amortization:
  Electronic Manufacturing Services   $ 2,482      $ 2,353      $ 1,427
  Printed Circuit Boards                  579          498          548
  General Corporate                         6          938          285
                                       ------       ------       ------
                                      $ 3,067      $ 3,789      $ 2,260
                                       ======       ======       ======

Capital expenditures: (1)
  Electronic Manufacturing Services   $   802      $ 1,306      $ 1,239
  Printed Circuit Boards                  617        1,060          586
  General Corporate                         5            6           -
                                       ------       ------       ------
                                      $ 1,424      $ 2,372      $ 1,825
                                       ======       ======       ======


(1) Capital expenditures include equipment additions financed with capital 
leases and notes payable.



     Revenues, operating income (loss), and identifiable assets by 
geographic area are as follows (in thousands): 


                                              Year ended June 30
                                        ------------------------------
                                        1998         1997         1996
                                        ----         ----         ----
Revenues:   
  United States                       $23,029      $21,891      $11,022
  Northern Ireland                     30,236       29,749       24,468
                                       ------       ------       ------
     Total                            $53,265      $51,640      $35,490
                                       ======       ======       ======


Operating income (loss):
  United States                       $  (202)    $    99       $  (133)
  Northern Ireland                      1,747         937          (419)
                                       ------       ------       ------
     Total                            $ 1,545     $ 1,036       $  (552)
                                       ======       ======       ======

Identifiable assets:
  United States                       $17,311     $19,214       $17,544
  Northern Ireland                     14,519      14,455        11,954
                                       ------      ------        ------
     Total                            $31,830     $33,669       $29,498
                                       ======      ======        ======


     The Company had sales to three customers which accounted for 19.9%, 
13.8% and 13.8% of revenues in fiscal 1998 and sales to two customers which 
accounted for 17.8% and 15.7% of revenues in fiscal 1997.  No single 
customer accounted for 10% or more of consolidated revenues in fiscal 1996.  




Note 12 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     Following is a summary of the quarterly results of operations (in 
thousands except per share amounts): 



                                         Quarter ended
                         -------------------------------------------------
                         Sep 30    Dec 31     Mar 31      Jun 30     Total
                         ------    ------     ------      ------     -----

Fiscal 1998:
  Revenues              $13,413    $12,820    $13,600     $13,432   $53,265
  
  Net income (loss)(1)  $   301    $   398    $   291     $  (497)  $   493
 
  Earnings (loss) per
   share                $  0.01    $  0.01    $  0.01     $ (0.02)  $  0.02
 

Fiscal 1997:
  Revenues              $10,413    $11,877    $14,387     $14,963   $51,640

  Net income (loss)     $  (594)   $ (315)    $   455     $  (414)  $  (868)

  Earnings (loss) per
   share                $ (0.02)   $(0.01)    $  0.02     $ (0.01)  $ (0.03)
 

(1)  Included in the net loss of $497,000 for the three months ended June 
30, 1998 are non-recurring acquisition expenses of $609,000 related to the 
acquisition of Jolt on June 30, 1998, as discussed in Note 2. 



                 DDL ELECTRONICS, INC. AND SUBSIDIARIES
                     Market and Dividend Information



     The Company's common shares are traded on the New York Stock Exchange 
and Pacific Exchange (ticker symbol "DDL").  The high and low closing sales 
prices for the common stock for the last two fiscal years, as reported on 
the composite tape, are set forth in the following table.

                              Fiscal 1998          Fiscal 1997
                             -------------        --------------
                             High     Low         High      Low
                             -----   -----        -----    -----
1st Quarter                  1-3/16  13/16        2        1-1/8

2nd Quarter                  1       11/16        1-1/4    15/16

3rd Quarter                  13/16     5/8        1-1/4      7/8

4th Quarter                  7/8       5/8        1-5/8    15/16




     There were approximately 1500 stockholders of record at August 21, 
1998. 

     The Company suspended dividend payments in 1989.  A resumption of 
dividend payments is not anticipated in the foreseeable future. 





                           Form 10-K Annual Report

     A copy of the Annual Report on Form 10-K (without exhibits) may be 
obtained free of charge upon written request to DDL Electronics, Inc., 2151 
Anchor Court, Newbury Park, California  91320. 




                                        DDL ELECTRONICS, INC. AND SUBSIDIARIES

               DIRECTORS, EXECUTIVE OFFICERS, OPERATING UNITS
                      AND OTHER CORPORATE INFORMATION





DIRECTORS                            EXECUTIVE OFFICERS 
Karen Beth Brenner                   Gregory L. Horton
Investment Manager                   President and Chief Executive Officer
Newport Beach, California

                                     Richard K. Vitelle
Charlene Gondek                      Vice President - Finance and 
Independent Businesswoman            Administration, Chief Financial Officer,
Aspen, Colorado                      Treasurer and Secretary


Gregory L. Horton                    OPERATING UNITS
Chairman of the Board,               SMTEK, Inc.
President and Chief                  Newbury Park, California
Executive Officer
DDL Electronics, Inc.                Jolt Technology, Inc. 
                                     Fort Lauderdale, Florida

Richard K. Vitelle                   DDL Electronics Limited
Vice President and                   Craigavon, Northern Ireland 
Chief Financial Officer              United Kingdom
DDL Electronics, Inc.                
                                     Irlandus Circuits Limited
                                     Craigavon, Northern Ireland
Thomas M. Wheeler                    United Kingdom
Chairman of the Board, 
TMW Enterprises, Inc. 
Troy, Michigan                       TRANSFER AGENT & REGISTRAR
                                     American Stock Transfer &
                                       Trust Company
                                     40 Wall Street
                                     New York, New York  10005

INDEPENDENT AUDITORS                 LEGAL COUNSEL
KPMG Peat Marwick LLP                Berry Moorman, PC
Los Angeles, California              Detroit, Michigan