<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                  ___________

                                   FORM 10-Q


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

                 For the Quarterly Period Ended March 31, 1998

                                      or

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

                 For the Transition Period From _____ To _____

                        Commission File Number: 0-25560

                            ACT Manufacturing, Inc.
                            -----------------------
             (Exact name of registrant as specified in its charter)

Massachusetts                                            04-2777507
-------------                                            ----------
(State or other jurisdiction of                      (IRS Employer ID. No.)
 incorporation or organization)                    
                                                   
 108 Forest Avenue                                         01749
Hudson, Massachusetts                                     ----------
---------------------                                     (Zip code)
(Address and zip code of      
principal executive offices)  
                              

Registrant's telephone number, including area code:   (978) 567-4000

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

Yes   x    No    
    -----     -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

         Common Stock                                   9,062,946 Shares
         ------------                                   -----------------
           (Class)                                (Outstanding on May 11, 1998)
            
<PAGE>
 
                            ACT MANUFACTURING, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
<S>                                                                                                         <C>
PART I.   FINANCIAL INFORMATION

ITEM 1--Financial Statements:
Condensed Consolidated Statements of Operations for the three months ended March 31, 1998 and 1997 .......       3
Condensed Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997..........................       4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997........       5
Notes to Consolidated Financial Statements................................................................       6
 
ITEM 2--Management's Discussion and Analysis of Financial Condition and Results of Operations.............       9
 
PART II.   OTHER INFORMATION
 
ITEM 6--Exhibits and Reports on Form 8-K..................................................................      18
 
Signatures................................................................................................      19
 
Exhibit Index.............................................................................................      20
 
Exhibit 11................................................................................................
 
Exhibit 27................................................................................................
</TABLE>

                                      -2-
<PAGE>
 
                        PART I.   FINANCIAL INFORMATION

                            ACT MANUFACTURING, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (UNAUDITED--IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED MARCH 31,
                                                  --------------------------------------------
                                                          1998                   1997
                                                  ---------------------  ---------------------
 
<S>                                               <C>                    <C>
Net sales.....................................        $   60,943                $   70,250
Cost of goods sold............................            58,971                    61,208
                                                      ----------                ----------
                                                                             
Gross profit..................................             1,972                     9,042
                                                                             
Selling, general and administrative expenses..             3,017                     2,892
                                                      ----------                ----------
                                                                             
Operating income (loss).......................            (1,045)                    6,150
                                                                             
Interest and other expense, net...............               832                       548
                                                      ----------                ----------
                                                                             
Income (loss) before provision for income
  taxes.......................................            (1,877)                    5,602
                                                                             
Provision (benefit) for income taxes..........              (751)                    2,241
                                                      ----------                ----------
                                                                             
Net income (loss).............................        $   (1,126)               $    3,361
                                                      ==========                ==========
                                                                             
Basic net income (loss) per common share......             $(.12)                     $.38
                                                      ==========                ==========
Diluted  net income (loss) per common share...             $(.12)                     $.37
                                                      ==========                ==========
Weighted average shares outstanding--basic....         9,062,946                 8,815,556
                                                      ==========                ==========
Weighted average shares outstanding--diluted..         9,062,946                 9,127,426
                                                      ==========                ==========
</TABLE> 
 
                  The accompanying notes are an integral part
             of these condensed consolidated financial statements.

                                      -3-
<PAGE>
 
                            ACT MANUFACTURING, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               UNAUDITED
                                                            MARCH 31, 1998         DECEMBER 31, 1997
                                                        -----------------------  ----------------------
ASSETS
CURRENT ASSETS:
<S>                                                     <C>                      <C>
  Cash and cash equivalents...........................         $  1,606                $  5,165
  Accounts receivable.................................           44,851                  42,362
  Inventory...........................................           44,266                  39,951
  Prepaid expenses and other assets...................            1,332                   1,195
  Income taxes refundable.............................            8,656                   8,417
  Deferred tax asset..................................            2,260                   1,509
                                                               --------                --------
                                                              
     Total current assets.............................          102,971                  98,599
                                                              
PROPERTY AND EQUIPMENT--Net...........................           10,101                   8,006
GOODWILL--Net.........................................            5,920                   6,129
OTHER ASSETS --Net....................................              849                     805
                                                               --------                --------
                                                              
TOTAL.................................................         $119,841                $113,539
                                                               ========                ========
                                                              
LIABILITIES AND STOCKHOLDERS' EQUITY                          
CURRENT LIABILITIES:                                          
  Note payable bank...................................         $ 28,997                $ 40,206
  Current portion of long-term debt...................              437                     442
  Accounts payable....................................           37,021                  18,557
  Accrued compensation and related taxes..............            1,657                   1,657
  Accrued expenses....................................            2,972                   2,689
                                                               --------                --------
                                                              
     Total current liabilities........................           71,084                  63,551
                                                               --------                --------
                                                              
LONG-TERM DEBT--Less current portion..................              618                     730
                                                               --------                --------
                                                              
CONTINGENCIES 
                                                              
STOCKHOLDERS' EQUITY:                                         
  Common stock........................................               91                      91
  Additional paid-in capital..........................           39,327                  39,327
  Accumulated other comprehensive income..............               11                       4
  Retained earnings...................................            8,710                   9,836
                                                               --------                --------
                                                              
     Total stockholders' equity.......................           48,139                  49,258
                                                               --------                --------
                                                              
TOTAL.................................................         $119,841                $113,539
                                                               ========                ========
 
 
</TABLE>
                 The accompanying notes are an integral part 
             of these condensed consolidated financial statements.

                                      -4-
<PAGE>
 
                            ACT MANUFACTURING, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                               THREE MONTHS
                                                                                   ------------------------------------
                                                                                             ENDED MARCH 31,
                                                                                   ------------------------------------
                                                                                         1998               1997
                                                                                   -----------------  -----------------
<S>                                                                                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income  (loss)...............................................................          $ (1,126)          $  3,361
                                                                                           --------           --------
Adjustments to reconcile net income to net cash provided by (used for) operating
  activities:
    Deferred taxes...............................................................              (751)                --
    Depreciation and amortization................................................               600                332
    Increase (decrease) in cash from:
     Accounts receivable--trade..................................................            (2,489)            (7,391)
     Inventory...................................................................            (4,315)             3,389
     Prepaid expenses and other assets...........................................              (137)               165
     Accounts payable............................................................            18,464              1,724
     Accrued expenses............................................................               283             (1,302)
     Income tax refundable.......................................................              (239)                --
                                                                                           --------           --------
      Total adjustments..........................................................            11,416             (3,083)
                                                                                           --------           --------
 
Net cash provided by operating activities........................................            10,290                278
                                                                                           --------           --------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of property and equipment.........................................            (2,486)              (425)
   (Increase) decrease in other assets...........................................               (44)                12
                                                                                           --------           --------
 
   Net cash used for investing activities........................................            (2,530)              (413)
                                                                                           --------           --------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings under line-of-credit agreements....................................            43,883             50,532
   Repayments under line-of-credit agreements....................................           (55,092)           (50,192)
   Repayments of long-term debt..................................................              (117)               (17)
   Net proceeds from sale of stock...............................................                --                  9
                                                                                           --------           --------
 
Net cash provided by (used for) financing activities.............................           (11,326)               332
                                                                                           --------           --------
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS..........................                 7                 --
                                                                                           --------           --------
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................            (3,559)               197
 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.....................................             5,165              5,054
                                                                                           --------           --------
 
CASH AND CASH EQUIVALENTS, END OF PERIOD.........................................          $  1,606           $  5,251
                                                                                           ========           ========
</TABLE>
                                                                                

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                      -5-
<PAGE>
 
                            ACT MANUFACTURING, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES

  The unaudited interim condensed consolidated financial statements furnished
herein reflect all adjustments, which in the opinion of management are of a
normal recurring nature, necessary to fairly state the Company's financial
position, cash flows and the results of operations for the periods presented and
have been prepared on a basis substantially consistent with the audited
financial statements.

  The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These interim condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the period ending
December 31, 1997 filed with the Securities and Exchange Commission.




                                      -6-
<PAGE>
 
2.   INVENTORIES

  Inventories consisted of the following at:

<TABLE>
<CAPTION>
                              MARCH 31, 1998       DECEMBER 31, 1997
                           --------------------  ----------------------
                                          (IN THOUSANDS)
<S>                        <C>                   <C>
  Raw material  .....................   $33,180                 $27,904
  Work in process  ..................    10,717                  11,370
  Finished goods  ...................       369                     677
                                        -------                 -------
     Total  .........................   $44,266                 $39,951
                                        =======                 =======
</TABLE>

   The inventories presented are based substantially on physical inventory 
procedures at both March 31, 1998 and December 31, 1997.  Inventories at March 
31, 1997 were computed using a standard costing methodology.  

3.   NET INCOME (LOSS) PER COMMON SHARE

   In the fourth quarter of 1997, the Company adopted SFAS No. 128, "Earnings
per Share."  This Statement requires dual presentation of net income per common
share-basic and diluted.  Basic net income per common share is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period.  Diluted net income per common
share reflects the potential dilution if common equivalent shares outstanding
(common stock options) were exercised or converted into common stock.  1997 
figures have been restated to conform to SFAS No. 128.


4.   NEW FINANCIAL ACCOUNTING STANDARDS

  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS
No. 130 establishes standards for reporting comprehensive income and its
components in the consolidated financial statements. SFAS No. 131 establishes
standards for reporting information on operating segments in interim and annual
financial statements. Both standards were adopted by the Company during the
first quarter of 1998 and did not have a material impact on the Company's
consolidated financial position and results of operations.  The comprehensive 
loss for the three months ended March 31, 1998 was $1,115,000.  


5.   INDEBTEDNESS

  The Company had operating losses for the first quarter of 1998 and the third
and fourth quarters of 1997.  As a result of such losses, the Company was in
default as of March 31, 1998 and December 31, 1997 with certain financial
covenants under its revolving credit facility.  The Company's banks have waived
compliance with such covenants as of December 31, 1997. The Company is presently
negotiating with its banks for compliance waivers as of March 31, 1998 and for
modification to the financial covenants under its revolving line of credit. Due
to the nature of the financial covenants, the Company reclassified all its long-
term bank debt of $29.0 million and $40.2 million at March 31, 1998 and December
31, 1997, respectively, to a current liability. Unless and until such
modifications are agreed to or additional waivers are obtained, the banks are
not obligated to lend additional amounts under the revolving credit facility and
there can be no assurance that the banks will not exercise their right to
require repayment of any or all outstanding indebtedness.

                                      -7-
<PAGE>
 
6.   CONTINGENCIES

  On February 27, 1998, the Company and certain of the Company's officers and
directors were named as defendants in a purported securities class action
lawsuit filed in the United States District Court for the District of
Massachusetts. The plaintiffs purport to represent a class of all persons who
purchased the Company's common stock between October 1, 1997 and February 25,
1998. The complaint alleges, among other things, that the defendants knowingly
made misstatements to the investing public about the Company's inventory and the
accuracy of its accounting practices. The Company believes the allegations in
the complaint are without merit and intends to vigorously contest them.

  Although the Company denies all material allegations of this complaint and
intends to vigorously defend against all claims brought against it, the ultimate
outcome, including amount of possible loss, if any, of litigation cannot be
determined at this time. No provision for any liability that may result from
this litigation has been made in the Condensed Consolidated Financial
Statements. While the Company does not believe that this litigation will have a
material adverse effect on the Company's business and results of operations,
given the preliminary stages of the litigation there can be no assurance as to
the ultimate outcome of these matters.


 

                                      -8-
<PAGE>
 
ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

  Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying financial
statements for the periods specified and the associated notes. Further reference
should be made to the Company's Annual Report on Form 10-K for the period ending
December 31, 1997.


OVERVIEW

  ACT Manufacturing, Inc. provides value-added electronics manufacturing
services for original equipment manufacturers ("OEMs") in the networking,
computer, telecommunications, industrial and medical equipment markets. The
Company provides OEMs with complex printed circuit board ("PCB") assembly
primarily utilizing advanced surface mount technology ("SMT"), mechanical and
molded cable and harness assembly, electro-mechanical sub-assembly, and total
system assembly and integration. The Company targets moderate-volume production
runs of the complex, leading-edge commercial market applications of emerging and
established OEMs, which generally require technologically-advanced and flexible
manufacturing as well as a higher degree of value-added services. These
applications are generally characterized by multiple configurations and high PCB
densities. As an integral part of its service to OEM customers, the Company
provides advanced manufacturing and test engineering, flexible materials
management, and comprehensive test services, as well as product repair,
packaging, order fulfillment and distribution services.

  The Company expanded the geographic scope of its operations through two
strategic acquisitions in June 1997. The Company acquired substantially all of
the assets and liabilities of Electronic Systems International, located in
Norcross, Georgia. Electronic Systems International provides electronics
manufacturing services to OEMs based primarily in the Southeastern United States
consisting of PCB assembly, electro-mechanical subassembly and total system
assembly. The Company also acquired SignMax Limited, located in Dublin, Ireland.
SignMax Limited provides electronics manufacturing services primarily consisting
of cable and harness assembly. The operating results of the acquired businesses
are included in the Company's Condensed Consolidated Statement of Operations for
the three months ended March 31, 1998, although excluded from the three months 
ended March 31, 1997.  

  The Company manufactures at six leased facilities having an aggregate of
258,000 square feet.  Four of the facilities are located in Massachusetts.  In
the first quarter of 1998, the Company occupied and began manufacturing in a
45,000 square foot addition to its Hudson, Massachusetts facilities.  In the
second quarter of 1997, the Company acquired operations with leased facilities
in Norcross, Georgia and Dublin, Ireland.  In the second quarter of 1998, the
Company expects to occupy and begin manufacturing in a new 45,000 square foot
leased facility in Dublin, Ireland and consolidate operations from the existing
Dublin facility into the new plant.

  As of March 31, 1998, the Company had 1,041 employees, up from 985 employees
at December 31, 1997.

  The Company typically recognizes revenue upon shipment to customers. The
Company generally does not obtain long-term purchase orders or commitments from
its customers, and, accordingly, works with its customers to anticipate delivery
dates and future volume of orders based on customer forecasts. The level and
timing of orders placed by the Company's OEM customers vary due to customer
attempts to manage inventory, changes in the OEM's manufacturing strategy and
variation in demand for customer products due to, among other things,
introduction of new products, product life cycles, competitive conditions or
industry or general economic conditions. The Company may source components for
product assemblies based on customer forecasts. However, the Company's policy is
that customers are responsible for materials and associated acquisition costs in
the event of a significant reduction, delay or cancellation of orders from the
forecasted amounts.

                                      -9-
<PAGE>
 
RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1998 AND 1997

  The Company experienced significant changes and events in the year ended
December 31, 1997 and the three months ended March 31, 1998 that adversely
affected its fiscal 1997 and first quarter 1998 results of operations.

  For the first quarter of 1998 and the third and fourth quarters of 1997, the
Company experienced a decrease in net sales on a comparable period basis. The
decline in net sales was principally due to a softness in demand from several
major customers resulting in the conversion of fewer forecasted orders than
anticipated as well as, in the case of the third quarter, orders and commitments
anticipated to ship prior to the end of the quarter that were received too late
for configuration and completion in the quarter.

  The Company identified a significant inventory shortfall as a result of its
1997 year-end physical inventory.  As a result of the shortfall, the Company
recorded a charge of approximately $13.1 million which was included in cost of
goods sold for 1997.  The shortfall was investigated by Company personnel and,
under the direction of the Audit Committee of the Board of Directors, by
independent external accounting specialists.  The ultimate cause of the
shortfall could not be finally determined, and accordingly the associated charge
was reported in the fourth quarter of 1997.  As a result of this shortfall, the
Company has reviewed and continues to review its security procedures and
operating and financial controls and, based upon such reviews, has implemented
and expects to continue to identify opportunities to implement enhanced
procedures and controls. The Company conducted a first quarter physical
inventory and expects to conduct quarterly inventories in the near future until
it can assess the long-term effectiveness of these measures.

  Net sales decreased 13% to $60.9 million for the three month period ended
March 31, 1998 from $70.3 million for the same period in 1997. The decline in
net sales was principally due to a softness in demand from several major
customers resulting in the conversion of fewer forecasted orders than
anticipated. Additionally, there was some weakness in the development of new
business opportunities that were expected to generate greater revenue during the
quarter.

  Gross profit decreased 78% to $2.0 million for the three months ended March
31, 1998 compared with $9.0 million for the same period in 1997. Gross margin
decreased to 3.2% for the three months ended March 31, 1998 from 12.9% for the
same period in 1997. This decrease was attributable to a change in product mix
with shipments of lower margin products higher than anticipated, lower than
anticipated shipments resulting in manufacturing overhead absorption issues, and
higher than normal manufacturing efficiency variances being incurred.

  Selling, general and administrative (SG&A) expenses increased 4.3% to $3.0
million, or 5.0% of net sales, for the three months ended March 31, 1998
compared with $2.9 million, or 4.1% of net sales, for the three months ended
March 31, 1997. The increase in SG&A expenses as a percentage of net sales for
the first quarter of 1998 compared with the same period in 1997 reflects the
full effect of acquisitions made in Ireland and Norcross, Georgia during the
second quarter of 1997, the additional investment in the sales and marketing
programs at the Company and the comparison of expense to a comparatively lower
net sales amount in the first quarter of 1998 compared to the first quarter of
1997.

  Operating income decreased with a loss of $1.0 million, or 1.7% of net sales,
for the three months ended March 31, 1998 compared with operating income of $6.2
million, or 8.8% of net sales, for the same period in 1997 as a result of the
above factors.

  Interest and other expense was $832,000 for the three months ended March 31,
1998 compared with $548,000 for the same period in 1997.  Interest and other
expense consisted principally of interest charges on debt.

  A tax benefit was recorded for the three months ended March 31, 1998 since the
Company currently believes that it will have taxable income for the year.  

                                      -10-
<PAGE>
 
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

  The Company had working capital of $31.9 million at March 31, 1998 compared
with $35.0 million at December 31, 1997. Operating activities provided $10.3
million of cash for the first three months of 1998 compared with $0.3 million of
cash for the same period in 1997. Cash provided from operating activities in the
first quarter of 1998 was used primarily to purchase equipment of $2.4 million
and to pay down net $11.2 million of the Company's bank line of credit.

  On a consolidated basis, the Company had secured revolving credit facilities
of $50.0 million at March 31, 1998, of which $29.0 million was then utilized.
Subject to the Company's ability to obtain compliance waivers as of March 31,
1998 and the banks agreement to lend additional amounts on existing terms as
discussed below, $7.7 million would be available for use as of March 31, 1998.
In addition, at March 31, 1998 the Company's equipment lease line of $20.0
million had $8.8 million available for use and $12.8 million utilized for
outstanding commitments.

  The Company had operating losses for the first quarter of 1998 and the third
and fourth quarters of 1997.  As a result of such losses, the Company was in
default as of March 31, 1998 and December 31, 1997 with certain financial
covenants under its revolving credit facility. The Company's banks have waived
compliance with such covenants as of December 31, 1997. The Company is presently
negotiating with its banks for compliance waivers as of March 31, 1998 and for
modification to the financial covenants under its revolving line of credit. Due
to the nature of the financial covenants, the Company reclassified all its long-
term bank debt of $29.0 million and $40.2 million at March 31, 1998 and December
31, 1997, respectively, to a current liability. Unless and until such a
modification is agreed to or additional waivers are obtained, the banks are not
obligated to lend additional amounts under the revolving credit facility and
there can be no assurance that the banks will not exercise their right to
require repayment of any or all outstanding indebtedness. If the Company is
unable to obtain compliance waivers as of March 31, 1998 and revise its credit
facility, or if the Company is unable to comply with any revised covenants, the
Company believes it could obtain alternative sources of financing, restructure
its debt or take other action to resolve the matter. However, there can be no
assurance that the Company will be able to secure additional waivers from the
banks, restructure the terms of its revolving credit facility, restructure its
debt or obtain alternative sources of financing, which failure would have a
material adverse effect on the Company's business, financial condition and
results of operations.


NEW FINANCIAL ACCOUNTING STANDARDS

  In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards Nos. 130 and 131, "Reporting Comprehensive
Income" and "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 130" and "SFAS 131," respectively). SFAS 130 provides
standards for reporting items considered to be comprehensive income and uses the
term "other comprehensive income" to refer to revenues, expenses, gains and
losses that under generally accepted accounting principles are included in
comprehensive income but excluded from net income. SFAS 131 requires new
standards for reporting information about operating segments. Both standards
were adopted by the Company during the first quarter of 1998 and did not have a
material impact on the Company's consolidated financial condition and results of
operations.


CAUTIONARY STATEMENTS

  The Private Securities Litigation Reform Act of 1995 (the "Act") contains
certain safe harbors regarding forward-looking statements. From time to time,
information provided by the Company or statements made by its employees may
contain "forward-looking" information which involve risk and uncertainties.
Any statements in this Quarterly Report on Form 10-Q that are not statements of
historical fact are forward-looking statements (including, but not limited to,
statements concerning the characteristics and growth of the Company's market and
customers, the Company's expectations, objectives and plans for future
operations, and the Company's expected results of operations, financial
condition, liquidity and capital resources). The following cautionary statements
should be considered carefully in evaluating the Company and its business. The
factors discussed in these cautionary statements, among other factors, could
cause actual results to differ materially from those contained in the forward-
looking statements made in this

                                      -11-
<PAGE>
 
Quarterly Report on Form 10-Q and presented elsewhere by management from time to
time. These cautionary statements are being made pursuant to the provisions of
the Act and with the intention of obtaining the benefits of the safe harbor
provisions of the Act.


Customer and Market Concentration; Dependence on Electronics Industry

  For the three months ended March 31, 1998, the Company's four largest
customers accounted for approximately 64% of the Company's net sales. Sales to
EMC, Bay Networks, Ascend and Prominet (acquired by Lucent Technologies) were
approximately 19%, 18%, 14% and 13%, respectively of the Company's net sales for
such period.  For the first three months of 1997, the Company's four largest
customers accounted for approximately 65% of the Company's net sales.  Sales to
Bay Networks, 3Com, Ascend and EMC were approximately 19%, 18%, 16% and 12%,
respectively of the Company's net sales for the same period in 1997.  The
Company's results will depend to a significant extent on the success achieved by
its OEM customers in marketing their products and the Company's ability to
diversify its customer base in order to reduce its reliance on particular
customers. There can be no assurance that the Company's principal customers will
continue to purchase products and services from the Company at current levels,
if at all. The loss of one or more major customers, a significant reduction in
purchases from such customers, discontinuance by any major customer of products
manufactured by the Company, or developments adverse to the Company's customers
or their products could have a material adverse effect on the Company's
business, financial condition and results of operations. For example, during
1997 the Company experienced a reduction in, and then a termination of, business
with 3Com. In addition, the Company could be adversely affected if a major
customer were unable or unwilling to pay for products and services on a timely
basis or at all.

  The Company's customer base has historically been concentrated in a limited
number of segments within the electronics industry. Net sales to customers
within the networking segment accounted for over 50% of the Company's net sales
in each of 1995, 1996 and 1997. These industry segments, and the electronics
industry as a whole, are subject to intense competition, consolidation, rapid
technological changes, significant fluctuations in product demand, relatively
short product life-cycles, and consequent product obsolescence. Developments
adverse to such industry segments could have a negative effect on the Company.
The industry segments served by the Company are also subject to economic cycles
and have in the past experienced, and are likely in the future to experience,
recessionary periods. A recessionary period or other event leading to excess
capacity or downturn affecting the electronics industry generally or one or more
of the industry segments served by the Company would likely result in
intensified price competition, reduced gross margins and a decrease in net
sales, all of which could have a material adverse effect on the Company's
business, financial condition and results of operations.


 Variability of Customer Requirements; Nature and Extent of Customer Commitments
on Orders

  The level and timing of orders placed by the Company's OEM customers vary due
to customer attempts to manage inventory, changes in the OEM's manufacturing
strategy and variation in demand for customer products due to, among other
things, introduction of new products, product life cycles, competitive
conditions or industry or general economic conditions. The Company generally
does not obtain long-term purchase orders or commitments from its customers and,
accordingly, works with its customers to anticipate delivery dates and future
volume of orders based on customer forecasts. The Company relies on its
estimates of anticipated future volumes when making commitments regarding the
levels of business that it will seek and accept, the timing of production
schedules, the purchase of inventory and the levels and utilization of personnel
and other resources. From time to time, the Company will purchase certain
components without a customer commitment to pay for them. The Company may source
components for product assemblies based on customer forecasts. However, the
Company's policy is that customers are responsible for materials and associated
acquisition costs in the event of a significant reduction, delay or cancellation
of orders from the forecasted amounts. In the event a customer is unwilling or
unable or not obligated to reimburse the Company for materials costs in the case
of a significant variance from forecast, the Company's business, financial
condition and results of operations could be materially and adversely affected.
A variety of conditions, both specific to the individual customer and generally
affecting the customer's industry, may 

                                      -12-
<PAGE>
 
cause customers to cancel, reduce or delay orders that were either previously
made or anticipated. Significant or numerous cancellations, reductions or delays
in orders by a customer or group of customers could have a material adverse
effect on the Company's business, financial condition and results of operations.


 Fluctuations in Operating Results

  The Company's operating results have varied and may continue to fluctuate
significantly from period to period, including on a quarterly basis. The
variability of the level and timing of orders from, and shipments to, major
customers may result in significant periodic and quarterly fluctuations in the
Company's results of operations. A substantial portion of net sales in a given
quarter may depend on obtaining and fulfilling orders for assemblies to be
manufactured and shipped in the same quarter in which those orders are received.
Further, a significant portion of net sales in a given quarter may depend on
assemblies configured, completed, packaged and shipped in the final weeks of
such quarter. In addition to the variability resulting from the short-term
nature of its customers' commitments, other factors have contributed, and may in
the future contribute, to such fluctuations. These factors include, among other
things, customers' announcement and introduction of new products or new
generations of products, evolutions in the life cycles of customers' products,
timing of expenditures in anticipation of future orders, effectiveness in
managing manufacturing processes, changes in cost and availability of labor and
components, efficiencies achieved by the Company in managing inventory and fixed
assets, a shift in the Company's product assembly mix which results in
fluctuating margins, capacity utilization, inventory obsolescence, currency
exchange rate movements, acquisitions and related charges and expenses,
competition in the electronics manufacturing services market, trends in the
electronics industry and changes or anticipated changes in economic conditions.
An interruption in manufacturing resulting from shortages of parts or equipment,
fire, earthquake or other natural disaster, equipment failure or otherwise could
have a material adverse effect on the Company's business, financial condition
and results of operations. Because the Company's operating expenses are based on
anticipated revenue levels and a high percentage of the Company's operating
expenses are relatively fixed, any unanticipated shortfall in revenue in a
quarter may have a material adverse impact on the Company's business, financial
condition and results of operations for that quarter. Results of operations in
any period should not be considered indicative of the results to be expected for
any future period.

  The Company had operating losses for the first quarter of 1998 and the third
and fourth quarters of 1997. As a result of such losses, the Company was in
default as of March 31, 1998 and December 31, 1997 with certain financial
covenants under its revolving credit facility. The Company's banks have waived
compliance with such covenants as of December 31, 1997. The Company is presently
negotiating with its banks for compliance waivers as of March 31, 1998 and for
modification to the financial covenants under its revolving line of credit. Due
to the nature of the financial covenants, the Company reclassified all its long-
term bank debt of $29.0 million and $40.2 million at March 31, 1998 and December
31, 1997, respectively, to a current liability. Unless and until such a
modification is agreed to or additional waivers are obtained, the banks are not
obligated to lend additional amounts under the revolving credit facility and
there can be no assurance that the banks will not exercise their right to
require repayment of any or all outstanding indebtedness. If the Company is
unable to obtain compliance waivers as of March 31, 1998 and revise its credit
facility, or if the Company is unable to comply with any revised covenants,
there can be no assurance that the Company will be able to secure additional
waivers from the banks, restructure the terms of its revolving credit facility,
restructure its debt or obtain alternative sources of financing, which failure
would have a material adverse effect on the Company's business, financial
condition and results of operations.

  As a result of the foregoing or other factors, it is possible that in some
future period the Company's results of operations will fail to meet the
expectations of securities analysts or investors, and the price of the Common
Stock would then be materially and adversely affected.


 Competition

  The electronics manufacturing services industry is highly competitive. The
Company competes against numerous U.S. and foreign electronics manufacturing
services providers with global operations. The Company also

                                      -13-
<PAGE>
 
faces competition from a number of electronics manufacturing services providers
who operate on a local or regional basis. In addition, current and prospective
customers continually evaluate the merits of manufacturing products internally.
Certain of the Company's competitors have substantially greater manufacturing,
financial, systems, sales and marketing resources than the Company. In addition,
these competitors may have the ability to respond more quickly to new or
emerging technologies, may adapt more quickly to changes in customer
requirements and may devote greater resources to the development, promotion and
sale of their services than the Company. The Company may be operating at a cost
disadvantage compared to manufacturers who have greater direct buying power from
component suppliers or who have lower cost structures. The Company's
manufacturing processes are generally not subject to significant proprietary
protection, and companies with significant resources or international operations
may enter the market. Increased competition could result in price reductions,
reduced margins or loss of market share, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company believes that the principal competitive factors in the
segments of the electronics manufacturing services industry in which it operates
are technology, service, manufacturing capability, quality, geographic location,
price, reliability, timeliness in delivering finished products and flexibility
in adapting to customers' needs. There can be no assurance that competition from
existing or potential competitors will not have a material adverse effect on the
Company's business, financial condition and results of operations.


 Management of Growth

  The Company has grown rapidly in recent years and expects to continue to
expand its operations. Such growth has placed, and will continue to place,
significant strain on the Company's management, operations, technical,
financial, systems, marketing and other resources. The Company's ability to
manage its growth will require it to continue to invest in its operational,
financial and management information systems, as well as to develop further the
management skills of its managers and supervisors and to retain, motivate and
effectively manage its employees. In addition, as a result of the inventory
shortfall occurring in 1997, the Company has reviewed and continues to review
its security procedures and operating and financial controls and, based upon
such reviews, has implemented and expects to continue to identify opportunities
to implement enhanced procedures and controls. If the Company's management is
unable to manage growth effectively, the quality of the Company's services and
products, its ability to retain key personnel and its results of operations
could be materially and adversely affected. Competition for personnel is
intense, and there can be no assurance that the Company will be able to attract,
assimilate or retain additional highly qualified employees in the future,
especially engineering and sales personnel. The failure to hire and retain such
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. See ''Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Cautionary Statements--Acquisitions and Geographic Expansion.''


 Dependence Upon Key Personnel and Skilled Employees

  The Company's future success will be largely dependent upon the skills and
efforts of John A. Pino, its President and Chief Executive Officer, and other
key executives as well as its managerial, sales and technical employees. None of
the senior management or other key employees of the Company is subject to any
employment contract or noncompetition agreement and the Company does not
maintain any key-man life insurance on any of its key executives. The loss of
services of any of its executives or other key personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, continued growth of the Company will require that,
despite significant competition, it attract, motivate and retain additional
skilled and experienced managerial, sales and technical personnel. There can be
no assurance that the Company will be able to attract, motivate and retain
personnel with the skills and experience needed to successfully manage the
Company's business and operations.

                                      -14-
<PAGE>
 
 Expansion of Facilities and Manufacturing Capacity

  The Company believes its long-term competitive position depends in part on its
ability to increase manufacturing capacity. The Company may obtain such
additional capacity through acquisitions or through expansion of its current
facilities. The Company expects to relocate its Dublin, Ireland operations to a
45,000 square foot facility currently under construction. There can be no
assurance that such relocation will be successfully completed on time or within
the Company's expected expense levels. In addition, the Company's lease for its
Norcross, Georgia facility expires in June 1998. There can be no assurance that
the lease will be renewed or that alternate space will be available on
acceptable terms. The acquisition and expansion of additional facilities from
time to time will require substantial additional capital, and there can be no
assurance that such capital will be available. Further, there can be no
assurance that the Company will be able to acquire sufficient capacity or
successfully integrate and manage such additional facilities. In addition, the
Company's expansion of its manufacturing capacity has significantly increased
and will continue to significantly increase its fixed costs, and the future
profitability of the Company will depend on its ability to utilize its
manufacturing capacity in an effective manner. The failure to obtain sufficient
capacity or to successfully integrate and manage additional manufacturing
facilities could adversely impact the Company's relationships with its
customers, limit the Company's growth opportunities and materially and adversely
affect the Company's business, financial condition and results of operations.


 Acquisitions and Geographic Expansion

  In June 1997, the Company acquired substantially all of the assets and
liabilities of Electronic Systems International, located in Norcross, Georgia.
The acquired company provides electronics manufacturing services, primarily
consisting of PCB assembly, electro-mechanical subassembly and total systems
assembly to customers based primarily in the Southeastern United States. Also in
June 1997, the Company completed the acquisition of SignMax Limited, located in
Dublin, Ireland. SignMax Limited provides electronics manufacturing services
primarily consisting of cable and harness assembly. The Company has limited
experience in managing geographically dispersed operations, in integrating
acquired companies into its operations, in expanding the scope of operations of
acquired businesses, and in operating in the Southeastern United States or
internationally. Therefore, there can be no assurance that the Company will
operate the acquired businesses profitably in the future.

  The Company may expand into other geographical areas within the United States
and internationally by acquiring additional electronics manufacturing services
providers or by establishing new manufacturing operations in such areas. The
Company may compete for acquisition and expansion opportunities with entities
having significantly greater resources than the Company. Any such transactions
may result in the potentially dilutive issuance of equity securities, the
incurrence of debt and amortization expenses related to goodwill and other
intangible assets, and other costs and expenses, all of which could materially
and adversely affect the Company's business, financial condition and results of
operations following such a transaction. Such transactions also involve numerous
business risks, including difficulties in the assimilation of the operations,
technologies and products of the acquired companies, the diversion of
management's attention from other business concerns and the potential loss of
key employees from the combined company. Therefore, there can be no assurance
that the key employees and businesses of acquired companies will be successfully
integrated with the Company, that any acquired business will contribute
significantly to the Company's sales or earnings, or that sales and earnings of
the Company will not be adversely effected by the integration process or other
factors.


 Availability of Key Components

  The Company and many of its customers rely on a single or limited number of
third-party suppliers for many components used in the assembly process. The
Company does not have any long-term supply agreements. Shortages of certain
electronic components have occurred from time to time. In addition, due to the
Company's utilization of just-in-time inventory techniques, the timely
availability of many components to the Company is dependent on the

                                      -15-
<PAGE>
 
Company's ability to continuously develop accurate forecasts of customer volume
requirements. Component shortages could result in manufacturing and shipping
delays or increased component prices which could have a material adverse effect
on the Company's business, financial condition and results of operations. To the
extent that the Company is unable to timely obtain key components for the
reasons cited above or otherwise, the Company's business, financial condition
and results of operations could be materially and adversely affected. See "Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Cautionary Statements--Risks of International Operations."


 Technological Change and Process Development

  The market for the Company's manufacturing services is characterized by
rapidly changing technology and evolving process development. The continued
success of the Company's business will depend in large part upon its ability to
maintain and enhance its technological capabilities, develop and market
manufacturing services which meet changing customer needs and successfully
anticipate or respond to technological changes in manufacturing processes on a
cost-effective and timely basis. Although management believes that the Company's
operations utilize the assembly and testing technologies and equipment currently
required by the Company's customers, there can be no assurance that the
Company's process development efforts will be successful or that the emergence
of new technologies, industry standards or customer requirements will not render
the Company's equipment, inventory or processes obsolete or noncompetitive. In
addition, to the extent that the Company determines that new assembly and
testing technologies and equipment are required to remain competitive, the
acquisition and implementation of such technologies and equipment may require
significant expense or capital investment by the Company.


 Risks of International Operations

  The Company recently acquired operations in Dublin, Ireland which it is
currently expanding, and may in the future expand into other geographic regions.
The Company also purchases a significant number of components manufactured in
foreign countries. Because of the scope of its international operations, the
Company is subject to numerous risks, including economic or political
disruptions and instability, transportation delays and interruptions, foreign
exchange rate fluctuations, employee turnover and labor unrest, longer payment
cycles, greater difficulty in collecting accounts receivable, and less developed
infrastructure, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. Changes in
policies by the U.S. or foreign governments resulting in, among other things,
increased duties, increased regulatory requirements, higher taxation, currency
conversion limitations, restrictions on the transfer of funds, the imposition of
tariffs, or limitations on imports or exports could also have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company could also be adversely affected if the current policies encouraging
foreign investment or foreign trade by its host countries were to be reversed.


 Litigation

  On February 27, 1998, the Company and certain of the Company's officers and
directors were named as defendants in a purported securities class action
lawsuit filed in the United States District Court for the District of
Massachusetts. The plaintiffs purport to represent a class of all persons who
purchased the Company's Common Stock between October 1, 1997 and February 25,
1998. The complaint alleges, among other things, that the defendants knowingly
made misstatements to the investing public about the Company's inventory and the
accuracy of its accounting policies. Although the Company denies all material
allegations of this complaint and intends to vigorously defend against all
claims brought against it, the ultimate outcome, including the amount of
possible loss, if any, of such litigation cannot be determined at this time. No
provision for any liability that may result from this litigation has been made
in the accompanying Condensed Consolidated Financial Statements. While the
Company does not believe that this litigation will have a material adverse
effect on the Company's business and results of operations, given the
preliminary stages of the litigation there can be no assurance as to the
ultimate outcome of these matters.

                                      -16-
<PAGE>
 
 Significant Influence of Principal Stockholder

  John A. Pino, the Company's President and Chief Executive Officer, and certain
trusts for the benefit of members of his family beneficially own approximately
60% of the outstanding Common Stock. As a result, Mr. Pino will be able to exert
significant influence over the Company through his ability to influence the
election of directors and all other matters that require action by the Company's
stockholders. The voting power of these stockholders under certain circumstances
could have the effect of preventing or delaying a change in control of the
Company.


 Environmental Compliance

  The Company is subject to a variety of environmental regulations relating to
the use, storage, discharge and disposal of hazardous chemicals used during its
manufacturing process. A failure by the Company to comply with present and
future regulations could subject it to future liabilities or the suspension of
production. Such regulations could also restrict the Company's ability to expand
its facilities or could require the Company to acquire costly equipment or to
incur other significant expenses to comply with environmental regulations.

                                      -17-
<PAGE>
 
                          PART II.   OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     11.  Weighted Shares Used in Computation of Earnings per Share

     27.  Financial Data Schedule

(b)  Reports on Form 8-K

     The Registrant did not file any reports on Form 8-K during the quarter
     ended March 31, 1998.

                                      -18-
<PAGE>
 
                                   SIGNATURES

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

May 15, 1998                        ACT MANUFACTURING, INC.
                                  
                                  /s/   Douglass  C. Greenlaw
                                  ---------------------------
                                  Douglass C. Greenlaw
                                  Vice President of Finance and Administration
                                  and Chief Financial Officer
                                  (Principal Financial and Accounting Officer)

                                      -19-
<PAGE>
 
                                 EXHIBIT INDEX


Exhibit No.
-----------


11.  Weighted Shares Used in Computation of Earnings Per Share

27.  Financial Data Schedule