<PAGE>
                       U. S. SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                                           
                                      FORM 10-Q
                                           
                                           
(Mark One)


    /X/       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934
              For the quarterly period ended September 30, 1997

    / /       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

                           COMMISSION FILE NUMBER: 0-25844
                                           

                           TAITRON COMPONENTS INCORPORATED
                (Exact Name of Registrant as Specified in Its Charter)
                                           

               CALIFORNIA                                  95-4249240
      (State Or Other Jurisdiction of                   (I.R.S. Employer
       Incorporation Or Organization)                  Identification No.)


                                   25202 ANZA DRIVE
                            SANTA CLARITA, CALIFORNIA 91355
                       (Address Of Principal Executive Offices)
                                           
                                    (805) 257-6060
                 (Registrant's Telephone Number, Including Area Code)
                                           
                                        NONE
         (Former Name, Address and Fiscal Year, if Changed Since Last Report)
                                           
Check whether the registrant: (1) has filed all reports required to be filed 
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 
preceding 12 months (or for such shorter period that the registrant was 
required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.

              YES     X                     NO 
                  ---------                    ---------

State the number of shares outstanding of each of the issuer's classes of 
common equity as of the latest practicable date:

Class A Common Stock, $.001 par value, 5,774,312 shares outstanding as of
November 10, 1997
Class B Common Stock, $.001 par value, 762,612 shares outstanding as of 
November 10, 1997

<PAGE>
                                           
                                  TABLE OF CONTENTS
                                           
                                           
 ITEM                                                                   PAGE NO.
 ----                                                                   -------

PART I.   FINANCIAL INFORMATION                                             3

 Item 1.  Financial Statements                                              3

 Item 2.  Management's Discussion and Analysis of Financial Condition 
          and Results of Operations                                         8

PART II.  OTHER INFORMATION                                                12

 Item 6.  Exhibits and Reports on Form 8-K                                 12


                                 Page 2 of 13

<PAGE>

PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

                        TAITRON COMPONENTS INCORPORATED

                                Balance Sheets
                            (Dollars in Thousands)


                                                    SEPTEMBER 30,   DECEMBER 31,
                 ASSETS                                 1997            1996
                                                    ------------    ------------
                                                    (Unaudited)
Current assets:
  Cash and cash equivalents                                $79            300
  Trade accounts receivable, net                         5,892          4,109
  Inventory                                             35,852         35,168
  Prepaid expenses and other current assets                387            443
                                                    ------------    ------------
        Total current assets                            42,210         40,020


Property and equipment, net                              1,674          1,660
Deferred income taxes                                      748            612
Other assets                                               393             23
                                                    ------------    ------------
        Total assets                                   $45,025         42,315
                                                    ------------    ------------
                                                    ------------    ------------

  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt                         17         10,017
  Trade accounts payable                                 5,990          3,737
  Accrued liabilities                                      780            948
  Income taxes payable                                      --              7
                                                    ------------    ------------
        Total current liabilities                        6,787         14,709
                                                    ------------    ------------

Long-term debt, less current portion                    13,929          3,493
                                                    ------------    ------------

Shareholders' equity:
  Preferred stock, $.001 par value.  
    Authorized 5,000,000 shares; none issued 
    or outstanding                                          --             --
  Common stock, no par value.  Authorized 
    10,000,000 shares;  none issued and 
    outstanding.                                            --             --
  Class A common stock, $.001 par value.  
    Authorized 20,000,000 shares; issued and 
    outstanding 5,774,312 shares at 9/30/97 and
    6,167,341 shares at 12/31/96                             6              6
  Class B common stock, $.001 par value.  
    Authorized, issued and outstanding 
    762,612 shares                                           1              1
  Additional paid-in capital                            13,260         14,531
  Retained earnings                                     11,042          9,575
                                                    ------------    ------------
        Total shareholders' equity                      24,309         24,113
                                                    ------------    ------------
        Total liabilities and shareholders' 
          equity                                       $45,025         42,315
                                                    ------------    ------------
                                                    ------------    ------------

See accompanying notes to financial statements


                                 Page 3 of 13

<PAGE>

                        TAITRON COMPONENTS INCORPORATED

                            Statements of Earnings
               (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                 ------------------------------------------------------
                                                                     Three months ended            Nine Months ended
                                                                        September 30,                September 30,
                                                                 ------------------------------------------------------
                                                                    1997          1996           1997            1996
                                                                 ----------    ----------    ----------       ---------
                                                                        (Unaudited)                   (Unaudited)
<S>                                                              <C>           <C>           <C>              <C>

Net sales                                                        $   8,675     $    6,944   $    25,193       $  22,832

Cost of goods sold                                                   6,343          4,828        17,898          15,618
                                                                 ----------    ----------    ----------       ---------
Gross profit                                                         2,332          2,116         7,295           7,214

Selling, general and administrative expenses                         1,639          1,116         4,166           3,717
                                                                 ----------    ----------    ----------       ---------

    Operating earnings                                                 693          1,000         3,129           3,497

Interest expense, net                                                  223            310           679             604
Other expense (income), net                                              6              7            (4)             23
                                                                 ----------    ----------    ----------       ---------

    Earnings before income taxes                                       464            683         2,454           2,870

Income tax expense                                                     187            274           987           1,152
                                                                 ----------    ----------    ----------       ---------
    Net earnings                                                      $277           $409        $1,467          $1,718
                                                                 ----------    ----------    ----------       ---------
                                                                 ----------    ----------    ----------       ---------
Net earnings per share                                                $.04           $.06          $.22            $.25
                                                                 ----------    ----------    ----------       ---------
                                                                 ----------    ----------    ----------       ---------

Weighted average common shares outstanding                        6,658,000     6,930,000     6,638,000       6,939,000
                                                                 ----------    ----------    ----------       ---------
                                                                 ----------    ----------    ----------       ---------

</TABLE>

See accompanying notes to financial statements


                                 Page 4 of 13

<PAGE>

                        TAITRON COMPONENTS INCORPORATED

                           Statements of Cash Flows
                            (Dollars in thousands)

                                               NINE MONTHS ENDED SEPTEMBER 30,
                                               -------------------------------
                                                     1997           1996      
                                                    ------         ------     
                                                         (Unaudited)

Cash flows from operating activities:
   Net earnings                                     $ 1,467        $ 1,718 
                                                    -------        ------- 

   Adjustments to reconcile net earnings to 
      net cash used in operating activities:
   Depreciation and amortization                        128             87
   Deferred income taxes                               (136)          (160)
   Changes in:
      Trade accounts receivable                      (1,783)          1026 
      Inventory                                        (684)        (7,546)
      Prepaid expenses and other current assets          56            (10)
      Other assets                                     (370)           (23)
      Trade accounts payable                          2,253        (10,702)
      Accrued liabilities                              (168)          (177)
      Income taxes payable                               (7)          (152)
                                                    -------        ------- 
         Total adjustments                             (711)       (17,657)
                                                    -------        ------- 
         Net cash provided by (used in) 
            operating activities                        756        (15,939)
                                                    -------        ------- 

Cash flows from investing activities  - 
  acquisitions of property and  equipment              (142)          (144)
                                                    -------        -------

Cash flows from financing activities:
   Net borrowings (repayments) of notes payable         450         12,200
   Proceeds from issuance of Convertible, 
      subordinated note                                              3,000
   Repurchase of Class A Common Stock                (1,271)            --
   Payments on long-term debt                           (14)           (12)
                                                    -------        ------- 
         Net cash provided by (used in) 
            financing activities                       (835)        15,188
                                                    -------        ------- 

         Net increase (decrease) in cash 
            and cash equivalents                       (221)          (895)

Cash and cash equivalents, beginning of period          300          1,145
                                                    -------        ------- 
Cash and cash equivalents, end of period            $    79            250
                                                    -------        ------- 
                                                    -------        ------- 

Supplemental disclosure of cash flow information:
   Cash paid for interest                           $   759            556
                                                    -------        ------- 
                                                    -------        ------- 
   Cash paid for income taxes                       $ 1,180          1,464
                                                    -------        ------- 
                                                    -------        ------- 


See accompanying notes to financial statements


                                 Page 5 of 13

<PAGE>

                           TAITRON COMPONENTS INCORPORATED
 
                            Notes to Financial Statements
 
 (All amounts are unaudited except the balance sheet as of December 31, 1996)


(1) BASIS OF PRESENTATION

    The financial information furnished herein is unaudited, but, in the
    opinion of the management of Taitron Components Incorporated, includes all
    adjustments (all of which are normal, recurring adjustments) in conformity
    with the accounting principles reflected in the financial statements
    included in the Annual Report on Form 10-KSB filed with the Securities and
    Exchange Commission for the year ended December 31, 1996.  The results of
    operations for interim periods are not necessarily indicative of results to
    be achieved for full fiscal years.

    The accompanying unaudited financial statements have been prepared in
    accordance with the instructions to Form 10-Q and, therefore, do not
    include all information and footnotes necessary for a fair presentation of
    financial position, results of operations and cash flows in conformity with
    generally accepted accounting principles.  The financial statements and
    notes should, therefore, be read in conjunction with the financial
    statements and notes thereto in the Annual Report on Form 10-KSB for the
    year ended December 31, 1996.


(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

    REVENUE RECOGNITION

    Revenue is recognized upon shipment of the merchandise.  Reserves for sales
    allowances and customer returns are established based upon historical
    experience and management's estimates as shipments are made. Sales returns
    for the quarters ended September 30, 1997 and 1996 aggregated $255,000 and
    $403,000, respectively and for the nine months ended September 30, 1997 and
    1996 aggregated $756,000 and $1,351,000 respectively.

    ALLOWANCE FOR SALES RETURNS AND DOUBTFUL ACCOUNTS 

    The allowance for sales returns and doubtful accounts at September 30, 1997
    and December 31, 1996 aggregated $129,000 and $135,000, respectively.

    INVENTORY

    Inventory, consisting principally of products for resale, is stated at the
    lower of cost or market, using the first-in, first-out method.  The value
    presented is net of valuation allowances of $1,176,000 and $988,000 at
    September 30, 1997 and December 31, 1996, respectively.


(3) NET EARNINGS PER SHARE

    Net earnings per share is based on the weighted average number of shares of
    common stock and common stock equivalents outstanding during each period. 
    Common stock equivalents consist of outstanding stock options and warrants
    to purchase stock that have a dilutive effect on earnings per share.  The
    difference between primary and fully diluted earnings per share is
    immaterial for all periods presented.  The average number of shares of
    common stock outstanding has been reduced by 397,863 shares repurchased by
    the Company during the first nine months of 1997 at an average price of
    $3.21 per share.


                                 Page 6 of 13

<PAGE>

(4) SHAREHOLDERS' EQUITY

    In March 1995, the Board of Directors authorized the filing of a
    registration statement for an initial public offering of the Company's
    common stock.  In connection with the initial public offering, the Company
    recorded a .891-for-1 reverse stock split of its common stock outstanding
    at December 31, 1994.  Accordingly, all references to the number of shares
    outstanding have been adjusted to give effect to the aforementioned reverse
    stock split.

    Additionally, the Company:
    -     Authorized the issuance of up to 5,000,000 shares of Preferred
          Stock, par value $.001 per share.  The terms of the shares are
          subject to the discretion of the Board of Directors.

    -     Authorized the issuance of up to 20,000,000 shares of Class A
          Common Stock, par value $.001 per share.  Each holder of Class A
          Common Stock is entitled to one vote for each share held.

    -     Authorized the issuance of 762,612 shares of Class B Common
          Stock, par value $.001 per share.  Each holder of Class B Common
          Stock is entitled to ten votes for each share held.  The shares
          of Class B common stock are convertible at any time at the
          election of the shareholder into one share of Class A common
          stock, subject to certain adjustments.

    -     Reclassified all of the shares of the Company's common stock
          outstanding at December 31, 1994 for an equal number of shares of
          Class A Common Stock.

    -     Authorized the exchange of all Class A Common Stock (762,612
          shares) held by the Chief Executive Officer/Director for an equal
          number of shares of Class B Common Stock.  This exchange was
          effected during 1995.

    On April 19, 1995, the Company sold 2,530,000 shares of Class A Common
    Stock at $5.25 per share in connection with its initial public offering. 
    The net proceeds from this offering aggregated approximately $11.3 million,
    net of approximately $2 million of issuance costs, which proceeds were used
    to pay off the previous bank line of credit, to retire long-term debt, to
    expand inventory and for general corporate purposes.
    
    During the nine months ended September 30, 1997 the Company repurchased
    397,863 shares of Class A Common Stock, reducing the Additional paid in
    capital by $1,270,000 from the balance at December 31, 1996.
    
(5) BORROWINGS
     
    Long-term debt consists of the following:
    
                                                    SEPTEMBER 30,  DECEMBER 31,
                                                        1997           1996
                                                     -----------   -----------

    Second trust deed loan payable, bearing 
        interest at 6.359%, due December 1, 2013     $   496,000   $   510,000
    Revolving line of credit, maximum of 
        $20 million, Expires June, 1999               10,450,000    10,000,000
    Convertible subordinated debentures, 
        bearing interest at 8%, due May 18, 2001       3,000,000     3,000,000
                                                     -----------   -----------
                                                      13,946,000    13,510,000
                                                     -----------   -----------
    Less current portion                                  17,000    10,017,000
                                                     -----------   -----------
                                                    $ 13,929,000   $ 3,493,000
                                                     -----------   -----------
                                                     -----------   -----------
   
    On May 6, 1997 the Company entered into a revolving line of credit 
    agreement which provided the Company up to $16 million for operating 
    purposes and up to an additional $4 million for business acquisition 
    purposes.  Both credit facilities are provided by Comerica Bank - 
    California and mature on June 2, 1999.  The agreement governing these 
    credit facilities contains covenants that require the Company to be in 
    compliance with certain financial ratios.  As of September 30, 1997, the 
    Company was in compliance with all of the loan covenants.


                                   Page 7 of 13


<PAGE>

(6) NON-RECURRING EXPENSE FROM IMPAIRMENT OF ASSET
    
During the quarter ended September 30, 1997, management made a decision 
to discontinue using its computer application software,  "Tolas", 
developed by Transcomm Data Systems Incorporated a division of ADP,  due 
to several factors including integrity of the systems' data base files.  
Included in Selling, General and Administrative expenses on the Statement 
of Earnings is a non-recurring impairment of asset expense of $163,000 to 
write-off costs previously capitalized on the balance sheet.  In early 
November, 1997, the Company filed a lawsuit for breach of contract naming 
ADP, Transcomm Data Systems Incorporated and GSI Transcomm.
     
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS

The Company distributes a wide variety of transistors, diodes and other 
semiconductors and optoelectronic devices and beginning in 1997 passive 
components to other electronic distributors and to original equipment 
manufacturers that incorporate them in their products.

The following table sets forth, for the periods indicated, certain operating 
amounts and ratios as a percentage of net sales:

<TABLE>
<CAPTION>

                                                THREE MONTH PERIOD ENDED          NINE MONTH PERIOD ENDED
                                                     SEPTEMBER  30,                   SEPTEMBER  30,     
                                                ------------------------          -----------------------
(Dollars in thousands)                           1997              1996            1997            1996  
----------------------                          ------            ------          -------         -------
<S>                                             <C>               <C>             <C>             <C>

Net sales                                       $8,675            $6,944          $25,193         $22,832 

Cost of goods sold                               6,343             4,828           17,898          15,618 

Gross profit                                     2,332             2,116            7,295           7,214 
    % of net sales                               26.9%             30.5%            29.0%           31.6%

Selling, general and administrative expenses     1,639             1,116            4,166           3,717 
    % of net sales                               18.9%             16.1%            16.5%           16.3%

Operating earnings                                 693             1,000            3,129           3,497 
    % of net sales                                8.0%             14.4%            12.4%           15.3%

Interest expense, net                              223               310              679             604 
     % of net sales                               2.6%              4.5%             2.7%            2.6%

Net earnings                                    $  277            $  409          $ 1,467         $ 1,718 
     % of net sales                               3.2%              5.9%             5.8%            7.5%


</TABLE>


                                 Page 8 of 13


<PAGE>

THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTH PERIOD
ENDED SEPTEMBER 30, 1996

Net sales for the three months ended September 30, 1997 were $8,675,000, 
compared with net sales for the three months ended September 30, 1996 of 
$6,944,000, an increase of $1,731,000 or 24.9%.  This increase was 
attributable to a 31.3% increase in domestic sales volume, and a 55.8% 
increase in export sales volume. Additionally, sales of the new line of 
passive components reached an annualized sales level of $1,100,000 in the 
quarter ended September 30, 1997.  The increase in sales volume was 
partially offset by a decrease in selling prices as a result of intense price 
competition in the market place.  The average selling price to domestic 
customers decreased causing a decrease in revenue of 13.6% for similar 
products sold in the three months ended September 30, 1997 compared to the 
same period in 1996.  Also, the mix of products sold had a slight effect on 
the average selling price as certain products such as passive components 
normally sell at lower prices.  Gross margins decreased due to the reduction 
of average selling prices and to lower margins on export sales for the three 
months ended September 30, 1997 compared to the same period in 1996.  The 
Company is extremely reliant on UPS service for shipping to its customers.  
During the strike in August the Company was able to find alternative means of 
shipping and management does not believe that a significant amount of sales 
were lost as a result of the strike.

Cost of goods sold increased by $1,515,000 to $6,343,000 for the three months 
ended September 30, 1997, an increase of 31.4% from the three month period 
ended September 30, 1996.  Cost of goods sold as a percentage of net sales 
was 73.1% in the three months ended September 30, 1997, an increase from 
69.5% for the same period in 1996.   Gross profits increased by $216,000 to 
$2,332,000 for the three months ended September 30, 1997 from $2,116,000 for 
the same period in 1996 principally as a result of the increase in volume.  

Selling, general and administrative expenses increased by $523,000 or 46.9% 
for the three months ended September 30, 1997 compared to the same period of 
1996. $163,000 or 31.2% of this increase is attributable to the write-off of 
the computer application software.  Other factors causing the increase in 
selling, general and administrative expenses are costs associated with 
investing in three regional sales executives dedicated to expand revenues 
through key OEM's, one National Distributor Manager dedicated to work with 
key distribution customers and costs associated with the new office in 
Taiwan.  Also, the Company has expanded the engineering department to assist 
customers with technical issues and to direct the process of obtaining ISO 
9000 certification showing that the Company meets international quality 
standards.  These costs, as a percentage of net sales, increased to 18.9% for 
the three months ended September 30, 1997 from 16.1% for the three months 
ended September 30, 1996.  

For the reasons discussed above, operating earnings decreased by $307,000 or 
30.7% for the three months ended September 30, 1997 compared to the same 
period in 1996, and declined as a percentage of sales from 14.4% to 8.0%.

Interest expense, net of interest income for the three months ended September 
30, 1997 decreased $87,000 compared to the three months ended September 30, 
1996.  This decrease is due to lower average outstanding borrowings during 
the three months ended September 30, 1997 compared to the three months ended 
September 30, 1996.

Income taxes were $187,000 for the three months ended September 30, 1997, 
representing an effective tax rate of 40.3%, compared to $274,000 for the 
same period of 1996, an effective tax rate of 40.1%.

The Company had net earnings of $277,000 for the three months ended September 
30, 1997 as compared with net earnings of $409,000 for the three months ended 
September 30, 1996, a decrease of $132,000 or 32.3% as a result of all the 
reasons discussed above.  Net earnings as a percentage of net sales decreased 
to 3.2% from 5.9%.

NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTH PERIOD 
ENDED SEPTEMBER 30, 1996

Net sales for the nine months ended September 30, 1997 were $25,193,000, 
compared with the nine months ended September 30, 1996 of $22,832,000, an 
increase of $2,361,000 or 10.3%.  This increase was attributable to a 17.8% 
increase in domestic sales volume, and a 161.0% increase in export sales 
volume. Additionally, sales of the new line of passive components reached an 
annualized sales level of $1,100,000 in the quarter ended September 30, 1997. 
The increase in sales was partially offset as a result of intense price 
competition in the market place.  The average selling price to domestic 
customers decreased causing a decrease in revenue of 11.1%. Also, the mix of 
products sold has a slight effect on the average selling price as certain 
products such as passive components normally sell at lower prices.  Gross 
margins decreased due to the reduction of average selling prices and to lower 
margins on export sales for the nine months ended September 30, 1997 compared 
to the same period in 1996.

                                 Page 9 of 13

<PAGE>

Cost of goods sold increased by $2,280,000 to $17,898,000 for the nine months 
ended September 30, 1997, an increase of 14.6% from the nine month period 
ended September 30, 1996.  Cost of goods sold , as a percentage of sales was 
71.0% in the first nine months of 1997 and 68.4% in the same period of 1996.  
Gross profits increased by $81,000 to $7,295,000 for the nine months ended 
September 30, 1997 from $7,214,000 for the same period in 1996 principally as 
a result of the increase in volume. 

Selling, general and administrative expenses increased by $449,000 or 12.1% 
for the nine months ended September 30, 1997 compared to the same period of 
1996. $163,000 or 36.3 % of this increase is attributable to the write-off of 
the computer application software.  Other factors causing the increase in 
selling, general and administrative expenses are costs associated with 
investing in three regional sales executives dedicated to expand revenues 
through key OEM's, one National Distributor Manager dedicated to work with 
key distribution customers and costs associated with the new office in 
Taiwan.  Also, the Company has expanded the engineering department to assist 
customers with technical issues and to monitor the process of obtaining ISO 
9000 certification showing that the Company meets international quality 
standards.  These costs, as a percentage of net sales, were 16.5% for the 
nine months ended September 30, 1997 and 16.3% for the nine months ended 
September 30, 1996.  

For the reasons discussed above, operating earnings decreased by $368,000 or 
1.6% for the period ended September 30, 1997 compared to the same period of 
1996 and decreased as a percentage of net sales to 12.4% from 15.3%.

Interest expense, net of interest income, for the nine months ended September 
30, 1997 increased $75,000 compared to the nine months ended September 30, 
1996. This increase is due primarily to higher average outstanding borrowings 
during the first nine months of 1997 compared to the first nine months of 
1996.  The higher outstanding borrowings occurred principally in the first 
three months of 1997 compared to the same period of 1996.

Income taxes were $987,000 for the nine months ended September 30, 1997, 
representing an effective tax rate of 40.2% compared to $1,152,000 for the 
nine months ended September 30, 1996, an effective tax rate of 40.1%. 

The Company had net earnings of $1,467,000 for the nine months ended 
September 30, 1997 compared to net earnings of $1,718,000 for the same period 
in 1996, a decrease of $251,000 or 14.6% for the reasons discussed above.  
Net earnings as a percentage of net sales decreased to 5.8% for the nine 
months ended September 30, 1997 compared to 7.5% for the same period in 1996.

SUPPLY AND DEMAND ISSUES

For most of 1995 and continuing into early 1996, the demand for discrete 
semiconductors, in general, was greater than the supply.  Beginning in the 
second quarter of 1996 the supply of most discrete semiconductors was greater 
than the demand for these products. The Company believes that after the 
second half of 1997 that the demand has finally caught up with the supply and 
the lead time for purchasing some discrete components has increased.

BUSINESS STRATEGY AND NEW OPPORTUNITIES

Based upon the Company's perception of this trend, it initiated an expansion 
of its nationwide sales force and reorganized its sales department to better 
handle the needs of the customer.  This reorganization will allow the sales 
department to handle customer service and potential customers more 
efficiently and at the same time focus more experienced salespersons on 
solidifying relationships with and providing support to existing key OEM's 
and key distributors who have more complex needs.  From May through August, 
the Company hired three regional sales executives assigned to work with 
strategic OEM's in regions where they reside and to provide technical support 
to the Company's network of independent sales representatives.  In September, 
the Company added a position of National Distributor Manager dedicated to 
work with key distribution customers.

                                 Page 10 of 13

<PAGE>

Additionally, in the third quarter the Company opened an office in Taiwan to 
strengthen relationships with suppliers in the Far East and to expand export 
sales along with the Company's office in Brazil.  It has reorganized its 
marketing department to focus on its newest product lines of opto electronic 
devices introduced in 1994, passive devices introduced in 1996 and power 
transistors which the Company has just recently started selling.  The 
engineering department has been expanded to improve technical assistance to 
customers and to monitor the process of obtaining ISO 9000 certification. ISO 
9000 demonstrates that a company meets international quality standards.  This 
process is targeted for completion by the end of 1998.  

The Company recently signed an agreement with Oracle Corporation to purchase 
its database tools and application software to replace the "Tolas" 
application software.  Conversion to Oracle is targeted for completion in the 
first half of 1998.

During 1996, the Company test marketed passive components, such as resistors, 
capacitors and inductors, a type of discrete component manufactured with 
non-semiconductor materials.  The results of the test marketing was 
encouraging, although the sales volume was not significant in 1996.  In 1997, 
sales of passive components has reached an annualized sales level of 
approximately $1,100,000. The Company believes that both passive components 
and discrete semiconductors compliment each other and can be marketed through 
existing channels, which in turn will reinforce the Company's current 
relationship with its customers.

LIQUIDITY AND CAPITAL RESOURCES

Since 1993, the Company has satisfied its liquidity requirements principally 
through cash generated from operations, short-term commercial loans and the 
sale of equity securities, including its initial public offering in April 
1995.  A summary of the Company's cash flows provided by (used in) operating, 
investing and financing activities for the nine months ended September 30, 
1997 and 1996 were as follows:


                                               NINE MONTHS ENDED SEPTEMBER 30,
                                               -------------------------------
                                                     1997            1996     
                                                     ----            ----
                                                        (In thousands)
         
           Operating activities.............       $ 756           $(15,939)
           Investing activities.............        (142)              (144)
           Financing activities.............        (835)            15,188
         

In positioning itself as a "Discrete Superstore", the Company has been 
required to significantly increase its inventory levels over the past several 
years.  The Company expects that inventory levels may increase as the Company 
adds new lines of product, such as passive components, and new suppliers.

The discrete semiconductor products distributed by the Company are mature 
products, used in a wide range of commercial and industrial applications.  As 
a result, the Company has not experienced any material amounts of product 
obsolescence.  The Company also attempts to control its inventory risks by 
matching large customer orders with simultaneous orders to suppliers. 
Nonetheless, the high levels of inventory carried by the Company increase the 
risks of price fluctuations and product obsolescence.

On May 6, 1997 the Company entered into a revolving line of credit agreement 
which provided the Company up to $16 million for operating purposes and up to 
an additional $4 million for business acquisition purposes.  Both credit 
facilities are provided by Comerica Bank - California and mature on June 2, 
1999.  The agreement governing these credit facilities contains covenants 
that require the Company to be in compliance with certain financial ratios.  
As of September 30, 1997, the Company was in compliance with all of the loan 
covenants.


                                 Page 11 of 13

<PAGE>

As of September 30, 1997 the Company's unused sources of funds consisted of 
approximately $9.6 million in cash and borrowing capacity under the Company's 
$16 million and $4 million revolving lines of credit.  Both of these credit 
facilities bear interest rates based on Comerica Bank - California's prime or 
"Base Rate" as set by the bank from time to time, or at the option of the 
Company at a fixed rate in excess of LIBOR.  Both lines of credit are secured 
by substantially all of the Company's assets, other than real property, which 
is subject to a Trust Deed.

The Company believes that funds generated from operations and the bank 
revolving lines of credit will be sufficient to finance its working capital 
and capital expenditure requirements for the foreseeable future.

This document contains forward-looking statements regarding the intent, 
belief and current expectations of the Company, its directors and its 
officers, including statements with respect to trends affecting the Company's 
financial condition and results of operations. Readers are cautioned that 
such forward-looking statements are not guarantees of future performance and 
involve risks and uncertainties and that actual results may differ materially 
from those anticipated in these forward-looking statements as a result of 
various factors.

PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits:

         27   Financial Data Schedule 

(b)  Reports on Form 8-K:

         None


                                 Page 12 of 13

<PAGE>

SIGNATURES


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

                                       TAITRON COMPONENTS INCORPORATED


Date:    November 13, 1997             By:       /s/ David M. Batt            
                                          ----------------------------------- 
                                            David M. Batt
                                            Chief Financial Officer
                                            (Principal Financial Officer)
                                            (Chief Accounting Officer)


                                 Page 13 of 13