U.S. Securities and Exchange Commission
                              Washington, DC  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 March 31, 1998

              [  ]  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 0-27510

                            TMCI ELECTRONICS, INC.
                    (Exact name of registrant  as specified in its charter)

               Delaware                                  77-0413814
  (State or other jurisdiction of            (IRS Employer  Identification No.)
  incorporation or organization)

   1875  Dobbin  Drive,  San  Jose,  CA                        95133  
(Address  of principal executive offices)                   (Zip Code)

                               (408) 272-5700
                        Registrant's  telephone number


         (Former name, former address and former fiscal year, if changed
                               since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  report,  and  (2)  has  been  subject  to  such  filing
requirements for the past 90 days. Yes No X


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of  the  latest  practicable  date.  As of May 6,  1998  there  were
4,196,416 shares of Common Stock, par value $.001, issued and outstanding.


<PAGE>



                     TMCI ELECTRONICS, INC. AND SUBSIDIARIES


                                                                          Page

Part I -- FINANCIAL INFORMATION

   Item 1.  Financial Statements
       Historical Financial Statements

           Consolidated Balance Sheets
             December 31, 1997.........................................    3
             March 31, 1998  (Unaudited)...............................    3

           Consolidated Statements of Operations (Unaudited)
             Three Months Ended March 31, 1998 and 1997................    4

           Consolidated Statements of Cash Flows (Unaudited)
             Three Months Ended March 31, 1998 and  1997...............    5

           Notes to Consolidated Financial Statements  (Unaudited).....    6

       Item 2.  Management's Discussion and Analysis...................    9

Part II -- OTHER INFORMATION

       Item 6.  Exhibit and Reports on Form 8- K.......................   13

       Signature.......................................................   14



                                        2

<PAGE>



                           PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements

                       TMCI ELECTRONICS, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE  SHEETS

                                                        March 31,   December 31,
                                                         1 9 9 8       1 9 9 7
                                                       (Unaudited)
ASSETS:
Current Assets:
  Cash                                                 $  446,402   $   312,682
  Accounts Receivable, Net                              3,257,337     3,950,341
  Inventory                                            12,158,968     9,721,050
  Deferred Income Taxes                                   117,912       183,376
  Prepaid Expenses and Other Current Assets               722,223       182,968
  Notes Receivable - Stockholders                          43,383        39,312
                                                       ----------   -----------

   Total Current Assets                                16,746,225    14,389,729
                                                       ----------   -----------

Property and Equipment,  Net                            8,933,758     6,583,260
                                                       ----------   -----------

Other Assets:
  Notes Receivable - Stockholders                         144,293       144,293
  Due from Stockholders                                   111,984       111,984
  Due from Related Party                                  497,379       469,878
  Other Assets                                          1,043,370       277,438
  Goodwill, Net                                         7,203,367     6,766,564
                                                       ----------   -----------

  Total Other Assets                                    9,000,393     7,770,157
                                                       ----------   -----------

  Total Assets                                         $34,680,376  $28,743,146
                                                       ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
  Accounts Payable and Accrued Expenses                $3,403,595   $ 4,050,925
  Line of Credit                                        4,585,508     3,856,268
  Notes Payable - Current Portion                         747,384     2,055,256
  Promissory Note Stockholder                             312,348     1,313,493
                                                       ----------   -----------

  Total Current Liabilities                             9,048,835    11,275,942
                                                       ----------   -----------

Long Term Liabilities:
  Notes Payable - Net of Current Portion                7,410,603     3,607,877
  Convertible Debentures                                1,179,466            --
  Deferred Income Taxes                                   573,338       560,180
                                                       ----------   -----------

  Total Long-Term Liabilities                           9,163,407     4,168,057
                                                       ----------   -----------

  Total Liabilities                                    18,212,242    15,443,999
                                                       ----------   -----------

Commitment and Contingencies                                   --            --
                                                       ----------   -----------

Stockholders' Equity:
  Common Stock - $.001 par value, 25,000,000 shares
   authorized, 4,196,416 issued and outstanding as of 
   March 31, 1998 and 4,057,758 as of December 31,1997      4,196         4,057
  Additional Paid in Capital                           13,889,720    10,890,233
  Retained Earnings                                     2,574,218     2,404,857
                                                       ----------   -----------

  Total Stockholders' Equity                           16,468,134    13,299,147
                                                       ----------   -----------

  Total Liabilities and Stockholders' Equity           $34,680,376  $28,743,146
                                                       ===========  ===========

                  See notes to consolidated financial statements.

                                         3

<PAGE>



                       TMCI ELECTRONICS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     [UNAUDITED]


                                                          Three months ended
                                                               March 31,
                                                          1 9 9 8      1 9 9 7
                                                          -------      -------

Sales,  Net                                            $10,199,819  $ 7,442,688

Cost of Goods Sold                                      7,489,357     5,202,144
                                                       ----------   -----------

  Gross Profit                                          2,710,462     2,240,544

Operating Expenses                                      1,610,192     1,434,694
Depreciation                                              349,046       248,500
Amortization                                              166,595        41,456
                                                       ----------   -----------

  Income from Operations                                  584,629       515,894
                                                       ----------   -----------

Other Income [Expense]:
  Non-Cash Finance Charge                                (129,093)           --
  Interest Expense                                       (315,263)     (114,042)
  Other Income                                            145,404       108,137
  Interest Income  - Related Parties                        4,071         7,319
                                                       ----------   -----------

  Total Other [Expense]                                  (294,881)        1,414
                                                       ----------   -----------

  Income Before Provision for Income Taxes                289,748       517,308

  Provision for Income Taxes                              120,387       210,447
                                                       ----------   -----------

  Net Income                                           $  169,361   $   306,861
                                                       ==========   ===========

Basic Earnings Per Share                               $      .04   $       .09
                                                       ==========   ===========

Weighted Average Number of  Shares                      4,150,197     3,515,829
                                                       ==========   ===========

Diluted Earnings Per Share:
  Incremental Shares from Assumed Conversion of 
   Options and Warrants and Potential Common Shares 
   from Beneficial Conversion Feature                     814,963       439,484
                                                       ==========   ===========

Adjusted Weighted Average Number of  Shares             4,965,160     3,955,313
                                                       ==========   ===========

Fully Diluted Earnings Per Share                       $      .04   $       .08
                                                       ==========   ===========





                  See notes to consolidated financial statements.

                                         4

<PAGE>



                       TMCI ELECTRONICS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     [UNAUDITED]


<TABLE>
                                                              Three months ended
                                                                   March 31,
                                                              1 9 9 8      1 9 9 7
                                                              -------      -------

Operating Activities
<S>                                                        <C>          <C>        
  Net Income                                               $  169,361   $   306,861
                                                           ----------   -----------
  Adjustments to Reconcile Net Income to Net
   Cash From Operations:
   Depreciation                                               349,046       248,500
   Amortization                                               166,595        41,456
   Deferred Income Taxes                                       78,621        56,169
   Non-Cash Financing Charge                                  129,093            --
   Reversal of Bad Debt Provision                            (129,199)           --

  Charges in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable, Trade                             1,019,133      (177,488)
     Inventory                                             (2,265,337)   (1,167,523)
     Prepaid Expenses and Other  Current Assets              (559,042)      (47,812)

   Increase (Decrease) in:
     Accounts Payable and Accrued Expenses                   (712,057)     (512,008)
     Income Taxes Payable                                    (265,005)           --
                                                           ----------   -----------

   Total Adjustments                                       (2,188,152)   (1,558,706)
                                                           ----------   -----------

  Net Cash Provided by (Used In) Operating Activities      (2,018,791)   (1,251,845)
                                                           ----------   -----------

Investing Activities:
  Purchases Other Assets                                     (262,105)           --
  Purchase of Equipment                                      (480,865)     (224,163)
  Note Receivable - Other                                          --        50,000
  Business Acquisition,  Net of Cash Overdraft Assumed 
   and Acquired                                              (366,600)     (923,389)

  Net Cash Provided by (Used In)  Investing Activities     (1,109,570)   (1,097,552)
                                                           ----------   -----------

Financing Activities:
  Credit Line Advances                                      4,899,758     2,613,044
  Credit Line Repayments                                     (361,000)     (822,200)
  Debt  Repayment                                                  --       (65,952)
  Repayment of  Notes  Payable                             (10,389,471)          --
  Proceeds  from Convertible Debentures                     3,300,000            --
  Notes Payable Proceeds                                    5,812,794       541,596
                                                           ----------   -----------

  Net Cash Provided by (Used In)  Financing Activities      3,262,081     2,266,488
                                                           ----------   -----------

   Net Increase [Decrease] in Cash                            133,720       (82,909)

Cash - Beginning of Period                                    312,682       145,845
                                                           ----------   -----------

  Cash  - End of Periods                                   $  446,402   $    62,936
                                                           ==========   ===========

</TABLE>


                   See notes to consolidated financial statements

                                         5

<PAGE>



                    TMCI  ELECTRONICS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1) Basis of reporting

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and with the instructions to Form 10-Q. Accordingly,  they
do not include  all of the  information  and  footnotes  required  by  generally
accepted accounting principles for complete financial statements.

In  the  opinion  of  management,   such  statements   include  all  adjustments
(consisting only of normal recurring items) which are considered necessary for a
fair presentation of the financial  position of the Company as of March 31, 1998
and the results of its  operations  for the three month  period then ended.  The
results of operations for the periods  presented are not necessarily  indicative
of the results to be expected for the full year.

It is suggested that these financial  statements be read in conjunction with the
financial  statement and notes for the year ended  December 31, 1997 included in
the Company's Annual Report on Form 10-K.

The consolidated  financial statements include the accounts of TMCI Electronics,
Inc. ["TMCI"], and its wholly-owned subsidiaries,  Touche Manufacturing Company,
Inc.  ["Touche"],   Touche  Electronics  Inc.  ["TEI"],  Enterprise  Industries,
Inc.["EII"],  Trinity Electronics,  Inc., and Try-Die, Inc.  [collectively,  the
"Company"].  All significant  intercompany  balances and transactions  have been
eliminated in consolidation.

2) Income Per Share

Income per share of common  stock is based on weighed  average  number of common
shares  outstanding  and common stock  equivalents,  if dilutive for each period
presented.

3) Inventory

Inventory consists of the following:
                                                     March  31,
                                                       1 9 9 8

Raw Materials                                      $ 6,786,795
Work in process                                      4,640,489
Finished Goods                                         731,684
                                                    ----------

Total                                              $12,158,968

4)  Sale of Debentures

On  February  10,  1998,  the Company  closed an offering of 3 Units,  each Unit
consisting of 4 of its 5%, $275,000  principal amount  Convertible  Subordinated
Debentures due February 10, 2001 (the "Debentures") and 100,000 Class B Warrants
to purchase  common  stock of the Company (the  "Warrants")  for a total of $3.3
million.  Interest on the Debentures  accrues quarterly and is payable annually.
Proceeds from the sale of the Debentures  were used to repay the $1,000,000 note
issued in connection with the Trinity acquisition; the remainder of the proceeds
went to working capital.

The Debentures are convertible  into common stock at the option of the holder at
a variable  conversion  price ranging from $3.00 to $5.50 per share depending on
the market value of the common stock of the Company at the time of the notice of
conversion.  Accordingly,  the  Company  may be  required  to issue no less than
600,000 shares nor more than 1,100,000 shares of common stock upon conversion of
the Debentures.



                                        6

<PAGE>



                    TMCI  ELECTRONICS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2

4)  Sale of Debentures (Continued)

As a result of the above  transaction,  the  Company  recorded a discount on the
convertible   debentures  and  additional  paid-in  capital  in  the  amount  of
$1,412,534  in  connection  with  the  beneficial   conversion  feature  of  the
subordinated  debentures.  Accordingly,  the discount is being  amortized over 2
years when the  convertible  debentures are first  convertible at 70 percent the
market price of the common stock.

In  addition,  the Company is issuing  25,000  Warrants per  Debenture  for each
Debenture  outstanding as of the earlier to occur of the one year anniversary of
the  closing  date of the  sale  of the  Debentures  or the  date  three  months
following  the  registration  of the common stock usable upon  conversion of the
Debentures and upon the exercise of the Warrants.  The Warrants have an exercise
price of $5.50 per share,  subject to  adjustment  for dilutive  issuances.  The
Company is obligated to register the common stock  underlying the Debentures and
the Warrants with the Securities and Exchange Commission.

As a result of the above  transaction,  the  Company  recorded a discount on the
convertible  debentures and additional paid-in capital in the amount of $837,000
in connection with the value of the warrants. Accordingly, the discount is being
amortized over 3 years when the warrants expire.

The Company  recorded a non-finance  charge of $129,000 in  connection  with the
amortization of the beneficial conversion feature of the convertible  debentures
and the amortization associated with the value of the warrants.

In connection  with the foregoing  issuance,  the Company paid a finder's fee in
the amount of $176,000  in cash  pursuant  to terms of a Non  Circumvention  and
Finder's  Fee  Agreement  (the  "Agreement")  and a $66,000  credit  toward  the
purchase  of one  quarter  of one  Debenture.  The  Agreement  calls for (1) the
issuance of the number of shares of common stock to equal to 5% of the principal
amount  of the  securities  sold  divided  by the  greater  of  (a)  any  stated
conversion  price in the  Debenture  and (b) the  average of the closing bid and
asked  prices of the common stock of the Company for the five trading days prior
to the closing and,  (2) in this case, a number of warrants  equal to 10% of the
number of shares issuable based on the Stated Conversion Price as defined in the
Agreement,  to be determined between 60,000 and 110,000.  The warrants are to be
issued at 125% of the average of the closing of the bid and asked  prices of the
common stock of the Company for the five trading days preceding  their issuance,
are non callable and expire three years from their date of issuance.

The Agreement  also  provides  that upon exercise of any Warrants  issued in the
offering,  the  finders  shall  receive  a cash fee  equal  to 4% of the  amount
received upon  exercise of the Warrants;  common stock equal to 5% of the number
of shares issued upon such exercise;  and warrants equal to 10% of the number of
shares issued upon such exercise (excluding warrants exercised by the finders or
their  affiliates).  The  warrants  shall have an exercise  price of 125% of the
average of the bid and asked  prices for the Company on the five  trading  dates
preceding the transaction,  shall be non callable,  and shall expire three years
from the date of issuance.

5)  Fleet Capital Line of Credit

On March 2, 1998,  the Company  entered into a Loan and Security  Agreement with
Fleet Capital Corporation (the "Fleet Facility")  providing for borrowings of up
to $25,000,000 based on certain formulas  contained within the Loan and Security
Agreement.  The  Company  paid a  finder's  fee of  $250,000  and a loan  fee of
$250,000 in connection with the  transaction.  As of March 31, 1998, the Company
was eligible to borrow up to approximately  $13,260,000 under the Fleet Facility
and had  borrowed  $12,076,758.  Borrowings  were in the form of two Term  Loans
("Term  Loan A" and  "Term  Loan  B,"  respectively),  an  equipment  loan  (the
Equipment Loan,  together with the Term Loans,  the "Fixed Loans") and revolving
credit loans (the  "Revolving  Credit  Loans").  Term Loan A is in the principal
amount of $4.7 million and accrues interest at the rate of prime plus 0.5%. Term
Loan B is in the  principal  amount of $2.0 million and accrues  interest at the
rate of prime plus 1.5%. The Equipment  Loan is in the principal  amount of $4.0
million and accrues interest at the rate of prime plus 0.5%.



                                        7

<PAGE>



                    TMCI  ELECTRONICS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3

5)  Fleet Capital Line of Credit (Continued)

The Revolving  Credit Loans are in such amount as the Company elects,  up to the
borrowing base permitted by the Loan and Security  Agreement and accrue interest
at the rate of 0.25%  plus  prime.  The  Fixed  Loans  are  payable  in  monthly
installments  of principal and interest with principal  amortizing  over a seven
year period and the balance due on March 2, 2003; interest only on the Revolving
Credit Loans is payable  monthly with the principal due upon  termination of the
Loan and Security  Agreement.  Interest on the Fixed Loans and Revolving  Credit
Loans is adjusted daily. Interest on the Fixed Loans may be adjusted downward by
0.25% each year for two years if the Company meets certain performance  criteria
as  reflected  in its audited  financial  statements  for the fiscal years ended
December 31, 1998 and December 31, 1999, respectively. Interest on the Revolving
Credit Loan may be adjusted downward by 0.25% only once if the Company meets the
performance  criteria as reflected in its audited  financial  statements for the
fiscal year ended  December 31,  1998.  In  addition,  if the Company  meets the
conditions  specified  for December 31,  1998,  it may, at its option,  have the
interest rate on (1) the Revolving  Credit Loan  converted into LIBOR plus 2.5%;
(2) Term Loan A and the Equipment Loan converted into LIBOR plus 2.75%;  and (3)
Term Loan B converted into LIBOR plus 3.75%.

On March 26, 1998, the Company and Fleet entered into the First Amendment to the
Loan and Security  Agreement  (the "First  Amendment")  in  connection  with the
acquisition of Try-Die  Incorporated.  Among other things,  the First  Amendment
provides  that the  Company may elect to convert  the  interest  rate on (1) the
Revolving  Credit Loans into LIBOR plus 2.75%; (2) Term Loan A and the Equipment
Loans into LIBOR plus 3%; and (3) Term Loan B into LIBOR plus 4%.

Management believes that its current financial position, together with available
borrowings under the Company's  various credit  facilities will be sufficient to
meet the Company's anticipated operating needs and projected capital expenditure
requirements for the next twelve months.

6)  Acquisition of Try-Die, Inc.

Effective,  February 1, 1998, the Company  acquired 100% of the capital stock of
Try-Die, Inc., a metal stamping manufacturer, located in Los Angeles, California
for a total purchase  price of $1,000,000,  which included a payment of $250,000
in cash and $750,000 in common stock of TMCI,  based upon $5.409 per share for a
total number of shares of 138,658.  The  acquisition was accounted for utilizing
the  purchase  method and the  operations  of Try-Die,  Inc. are included in the
Company's result of operations from February 1, 1998. Try-Die,  Inc. will become
a wholly owned subsidiary of Enterprise Industries, Inc.


                                        8

<PAGE>



Item 2.  Management's Discussion and Analysis


General

The information in this discussion  contains  forward-looking  statements within
the meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the  Securities  Exchange Act of 1934, as amended.  Such  statements  are
subject to certain risks and  uncertainties  that could cause actual  results to
differ from those projected.  These risks and uncertainties include, but are not
limited to, those  described  below.  The Company  undertakes  no  obligation to
publicly  release  the  results  of  any  revisions  to  these   forward-looking
statements which may be made to reflect events or  circumstances  after the date
hereof or to reflect the occurrence of unanticipated events.

Overview

      On March 5, 1996, the Company  acquired Touche and TEI pursuant to certain
Stock Purchase Agreements executed on December 28, 1995. Prior to that time, the
Company had no operations.

      The  Company's  strategy  has been to  expand  its core  and  value  added
business to satisfy its customers and their growing demand for more  outsourcing
of contract  manufacturing  services.  On November 1, 1996, TEI acquired the San
Jose cable and  harness  manufacturing  division  of Pen  Interconnect,  Inc. On
January 1, 1997, the Company acquired Enterprise Industries, Inc.("Enterprise"),
a metal stamping  business.  Effective October 1, 1997, the Company acquired the
operations of Trinity Electronics,  Inc., ("Trinity"),  a passive distributor of
board level electronic  components;  Trinity formally merged with a wholly owned
subsidiary of the Company on December 22, 1997.  Effective February 1, 1998, the
Company  acquired  Try-Die  Incorporated  ("Try-Die"),  a metal stamping company
which will operate as a wholly owned subsidiary of Enterprise;  Try-Die formally
merged with a wholly owned subsidiary of the Company on April 23, 1998.

Results of Operations

      The results of operations  utilizes the consolidated  results from Touche,
TEI,  Enterprise,  Trinity and Try-Die after their  acquisition  by the Company,
eliminating  intercompany  transactions.  The discussion below should be read in
conjunction  with the  financial  statements  and the notes  thereto that appear
elsewhere in this report.

Net Sales

      Net sales increased by approximately $2,757,000 or 37% to $10,200,000 from
$7,443,000 for the quarter ended March 31, 1998 as compared to the quarter ended
March 31, 1997. The sales increase  resulted  primarily from the acquisitions of
Trinity and Try-Die,  Inc.,  offset by a decline in sales by Touche and TEI as a
result of a slowdown in the  semiconductor  test equipment  market segment.  The
slowdown  caused many Touche and TEI  customers to  reschedule  their orders for
delivery  in the second and third  quarters of the year.  The Company  currently
anticipates that the slowdown in the semiconductor test equipment market segment
will continue through at least the second and third quarters of 1998.

Gross Profit

      Gross profit  increased  approximately  $469,000 or 21% to $2,710,000 from
$2,241,000 for the quarter ended March 31, 1998 as compared to the quarter ended
March 31, 1997. As a percentage of sales,  gross profit decreased  approximately
3% to 27% from 30% for the  quarter  ended  March 31,  1998 as  compared  to the
quarter  ended March 31,  1997.  The gross profit of  $2,241,000  for the period
ended March 31, 1997 is different than the $2,838,943  reported in the Company's
10-QSB for the fiscal quarter ended March 31, 1997 as a result of a reallocation
of certain  items from  operating  expenses to cost of goods sold.  Gross profit
increased as a result of the acquisition of Trinity and Try-Die. Gross profit as
a  percentage  of sales  decreased  primarily as a result of the slowdown in the
semiconductor  test  equipment  industry.  In response to slowing  demand in the
semiconductor  test equipment  market,  Touche and TEI reduced their labor force
during the quarter ended March 31, 1998.


                                        9

<PAGE>




Operating Expenses

     General and administrative expenses increased approximately $401,000 or 19%
to $2,126,000  from  $1,725,000 for the quarter ended March 31, 1998 as compared
to the quarter ended March 31, 1997.  The operating  expenses of $1,725,000  for
the period ended March 31, 1997 is different than the $2,323,000 reported in the
Company's  10-Q for the fiscal  quarter  ended March 31, 1997 as a result of a
reallocation of certain items from operating  expenses to cost of goods sold. As
a  percentage  of sales,  the  Company's  general  and  administrative  expenses
decreased 2% to 21% from 23% for the quarter  ended March 31, 1998,  as compared
to the quarter  ended March 31, 1997.  The  increase in  operating  expenses was
primarily a result of an increase in amortization expense from goodwill, and the
addition  of  new   management   personnel  to  support  a  significant   growth
strategically planned through acquisitions.

Operating Income

      Operating income increased  approximately  $69,000 or 13% to $585,000 from
$516,000 for the quarter  ended March 31, 1998 as compared to the quarter  ended
March  31,  1997.  Operating  income  increased  as a result of an  increase  in
revenues  from  the  Company's  acquisition  offset  in part by an  increase  in
operating expenses.

Other income [expense]

      Other expenses increased approximately $294,000 to $295,000 from $1,000 in
the quarter  ended March 31, 1998 as compared  with the quarter  ended March 31,
1997.  The increase in other  expenses was  primarily  due to (1) an increase in
interest  paid  of  $201,000  resulting  from  increased  borrowings  under  the
Company's  credit  facility  in order to finance  inventory;  and (2) a non cash
finance  charge of $129,000  resulting  from the issuance of the  Company's  5%,
$275,000 in principal amount, Convertible Subordinated Debentures offset in part
by an increase of $30,000 in other income.

Net Income

       Net income  decreased by  approximately  $138,000 or 45% to $169,000 from
$307,000 for the quarter  ended March 31, 1998 as compared to the quarter  ended
March 31, 1997.  The decrease in net income was  primarily due to an increase in
interest paid to finance  inventory and non cash finance charges relating to the
debenture  placement,  which  was  partially  offset  by a gain in  income  from
operations.

Liquidity and Capital Resources

     The Company's  working  capital  increased by  approximately  $4,583,000 to
$7,697,000  from  $3,114,000  for the fiscal  quarter  ended  March 31,  1998 as
compared to the fiscal year ended  December  31,  1997.  The  increase  resulted
primarily from an increase in inventory of approximately $2,438,000, an increase
in cash of $134,000, an increase in prepaid expenses and other current assets of
$539,000, a decrease in accounts payable of $647,000, and a decrease in the note
due to the  stockholder  of  $1,001,000,  offset  primarily  by an  increase  in
borrowings  under the credit  facility of  $729,000,  and a decrease in accounts
receivable  of  $693,000.  The  increase in  inventory  is due to the  Company's
acquisitions  of Trinity  Electronics,  Inc.  in the fourth  quarter of 1997 and
Try-Die  Incorporated  during the first quarter of 1998, a change in product mix
to more electronics which require a greater  investment in raw materials as well
as the need to hold inventories for a longer than expected period as a result of
rescheduled orders by customers of Touche and TEI.

      The Company  required cash to fund operating  activities of  approximately
$2,019,000  in the fiscal  quarter  ended March 31, 1998 as compared to required
cash to fund  operating  activities  of  approximately  $1,252,000 in the fiscal
quarter ended March 31, 1997. The increase  resulted  primarily from an increase
in  inventory of  $2,265,000,  an increase in prepaid  expenses of $559,000,  an
increase in depreciation  of $101,000,  an increase in amortization of $125,000,
and a non cash  finance  charge of $129,000  related to the  Debentures,  offset
primarily by a decrease in accounts  payable of  $712,000,  a decrease in income
taxes payable of $265,000, and a reversal of a bad debt provision by the Company
in the amount of  $129,000.  Cash used in  investing  and  financing  activities
remained  relatively  constant with $1,109,000 used and included the purchase of
equipment  and  other  assets  as well as the  acquisition  of a metal  stamping
company (see Note 6, Acquisition of Business).

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      During the quarter  ended March 31, 1998 and March 31,  1997,  the Company
spent  approximately  $481,000 and $224,200,  respectively,  to purchase capital
equipment which was funded through long-term  borrowings and current operations.
Additionally,   management   expects  the  Company's  level  of  future  capital
expenditures  to  increase  at a level  that is  consistent  with the  Company's
projected  growth and  operational  projects.  Management has projected  capital
expenditure  requirements of approximately $1,800,000 for the fiscal year ending
December 31, 1998.  This increase will be supported by increased bank borrowings
and internal operations.

      Sale of  Debentures.  On February 10, 1998, the Company closed an offering
of 3 Units,  each Unit  consisting  of 4 of its 5%,  $275,000  principal  amount
Convertible Subordinated Debentures due February 10, 2001 (the "Debentures") and
100,000  Class  B  Warrants  to  purchase  common  stock  of  the  Company  (the
"Warrants")  for a total of $3.3  million.  Interest on the  Debentures  accrues
quarterly and is payable annually. Proceeds from the sale of the Debentures were
used to repay  the  $1,000,000  note  issued  in  connection  with  the  Trinity
acquisition; the remainder of the proceeds went to working capital.

      The  Debentures  are  convertible  into common  stock at the option of the
holder at a  variable  conversion  price  ranging  from $3.00 to $5.50 per share
depending  on the market value of the common stock of the Company at the time of
the notice of conversion.  Accordingly,  the Company may be required to issue no
less than  600,000  shares nor more than  1,100,000  shares of common stock upon
conversion of the Debentures.

      In addition, the Company is issuing 25,000 Warrants per Debenture for each
Debenture  outstanding as of the earlier to occur of the one year anniversary of
the  closing  date of the  sale  of the  Debentures  or the  date  three  months
following  the  registration  of the common stock usable upon  conversion of the
Debentures and upon the exercise of the Warrants.  The Warrants have an exercise
price of $5.50 per share,  subject to  adjustment  for dilutive  issuances.  The
Company is obligated to register the common stock  underlying the Debentures and
the Warrants with the Securities and Exchange Commission.

      In connection with the foregoing issuance, the Company paid a finder's fee
in the amount of $176,000 in cash pursuant to terms of a Non  Circumvention  and
Finder's  Fee  Agreement  (the  "Agreement")  and a $66,000  credit  toward  the
purchase  of one  quarter  of one  Debenture.  The  Agreement  calls for (1) the
issuance of the number of shares of common  stock to the finders  equal to 5% of
the principal  amount of the  securities  sold divided by the greater of (a) any
stated  conversion price in the Debenture and (b) the average of the closing bid
and asked  prices of the common  stock of the Company for the five  trading days
prior to the closing and, (2) in this case, a number of warrants equal to 10% of
the number of shares issuable based on the Stated Conversion Price as defined in
the Agreement,  to be determined between 60,000 and 110,000. The warrants are to
be issued at 125% of the average of the  closing of the bid and asked  prices of
the common  stock of the  Company  for the five  trading  days  preceding  their
issuance, are non callable and expire three years from their date of issuance.

      The Agreement  also provides that upon exercise of any Warrants  issued in
the  offering,  the finders  shall  receive a cash fee equal to 4% of the amount
received upon  exercise of the Warrants;  common stock equal to 5% of the number
of shares issued upon such exercise;  and warrants equal to 10% of the number of
shares issued upon such exercise (excluding warrants exercised by the finders or
their  affiliates).  The  warrants  shall have an exercise  price of 125% of the
average of the bid and asked  prices for the Company on the five  trading  dates
preceding the transaction,  shall be non callable,  and shall expire three years
from the date of issuance.

     Fleet Capital Line of Credit.  On March 2, 1998, the Company entered into a
Loan  and  Security  Agreement  with  Fleet  Capital   Corporation  (the  "Fleet
Facility")  providing  for  borrowings  of up to  $25,000,000  based on  certain
formulas  contained within the Loan and Security  Agreement.  The Company paid a
finder's  fee of  $250,000  and a loan fee of $250,000  in  connection  with the
transaction.  As of March 31,  1998,  the Company  was  eligible to borrow up to
approximately $13,260,000 under the Fleet Facility and had borrowed $12,076,758.
Borrowings  were in the form of two Term Loans ("Term Loan A" and "Term Loan B,"
respectively),  an equipment  loan (the Equipment  Loan,  together with the Term
Loans,  the "Fixed  Loans") and revolving  credit loans (the  "Revolving  Credit
Loans").  Term Loan A is in the  principal  amount of $4.7  million  and accrues
interest at the rate of prime plus 0.5%. Term Loan B is in the principal  amount
of $2.0  million  and  accrues  interest  at the rate of prime  plus  1.5%.  The
Equipment Loan is in the principal  amount of $4.0 million and accrues  interest
at the rate of prime plus 0.5%.

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      The Revolving Credit Loans are in such amount as the Company elects, up to
the  borrowing  base  permitted  by the Loan and Security  Agreement  and accrue
interest at the rate of 0.25% plus prime. The Fixed Loans are payable in monthly
installments  of principal and interest with principal  amortizing  over a seven
year period and the balance due on March 2, 2003; interest only on the Revolving
Credit Loans is payable  monthly with the principal due upon  termination of the
Loan and Security  Agreement.  Interest on the Fixed Loans and Revolving  Credit
Loans is adjusted daily. Interest on the Fixed Loans may be adjusted downward by
0.25% each year for two years if the Company meets certain performance  criteria
as  reflected  in its audited  financial  statements  for the fiscal years ended
December 31, 1998 and December 31, 1999, respectively. Interest on the Revolving
Credit Loan may be adjusted downward by 0.25% only once if the Company meets the
performance  criteria as reflected in its audited  financial  statements for the
fiscal year ended  December 31,  1998.  In  addition,  if the Company  meets the
conditions  specified  for December 31,  1998,  it may, at its option,  have the
interest rate on (1) the Revolving  Credit Loan  converted into LIBOR plus 2.5%;
(2) Term Loan A and the Equipment Loan converted into LIBOR plus 2.75%;  and (3)
Term Loan B converted into LIBOR plus 3.75%.

      On March 26, 1998, the Company and Fleet entered into the First  Amendment
to the Loan and Security  Agreement (the "First  Amendment") in connection  with
the acquisition of Try-Die Incorporated. Among other things, the First Amendment
provides  that the  Company may elect to convert  the  interest  rate on (1) the
Revolving  Credit Loans into LIBOR plus 2.75%; (2) Term Loan A and the Equipment
Loans into LIBOR plus 3%; and (3) Term Loan B into LIBOR plus 4%.

      Management  believes that its current  financial  position,  together with
available  borrowings  under the Company's credit facility will be sufficient to
meet the Company's anticipated operating needs and projected capital expenditure
requirements for the next twelve months.

Risks Inherent in the Company's Business

      Customer  Concentration;  Order Flow. The largest customers of the Company
are Lam Research Corporation and Tandem Computers  Incorporated.  Sales to these
customers  accounted  for 12% and  14%,  respectively,  of the  revenues  of the
Company for the year ended December 31, 1997. For the same period,  sales to the
Company's nine largest customers accounted for approximately 57% of net sales.

      The Company is dependent upon  continued  revenues from its top customers.
Any  material  delay,  cancellation  or  reduction of orders from these or other
significant  customers  could have an adverse  material  effect on the Company's
results  of  operations.  The  percentage  of the  Company's  sales to its major
customers may fluctuate from period to period.

      Fluctuations  in  Operating  Results.  A  number  of  factors  affect  the
company's  operating  results,  including  the mix of turnkey and  manufacturing
projects, capacity utilization, price competition, the degree of automation that
can be used in the assembly  process,  the efficiencies  that can be achieved by
the Company in managing  inventories and fixed assets, the timing of orders from
major  customers,  fluctuations in demand for customer  products,  the timing of
expenditures in  anticipation  of increased  sales,  customer  product  delivery
requirements,  increased costs and shortages of components or labor.  Changes in
any of these factors in any given period could  materially  impact the operating
results of the Company during that period.

      Dependence  Upon  Customer   Markets.   The  Company's   business  depends
exclusively  upon  contracts  and orders from original  equipment  manufacturers
("OEMs")   of   electronic   equipment.   These  OEMs   manufacture   computers,
semiconductor   test   equipment,   telecommunications   equipment  and  medical
equipment.  The markets for the products sold by these customers is particularly
volatile.  Further, the products  manufactured by these customers are subject to
rapid technological change and obsolescence.  Changes in the market for customer
products  have and will  continue  to  materially  impact  that  results  of the
Company. Accordingly, any material change in the markets serviced by the Company
could have a material effect on the Company's results.


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                           PART II - OTHER INFORMATION


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

(a) This  Report  contains  the  following  Exhibits  as required by Item 601 of
Regulation S-K.

Exhibit    Description

10.0       Loan and  Security  Agreement  dated  March 2, 1998 by and among TMCI
           Electronics,  Inc., its wholly owned  subsidiaries  and Fleet Capital
           Corporation (1)

10.1       First Amendment to Loan and Security Agreement dated March 2, 1998 by
           and among TMCI Electronics,  Inc., its wholly owned  subsidiaries and
           Fleet Capital Corporation. (2)


27.1       Financial Data Schedule

(b)  The Company filed one report on Form 8-K on January 6, 1998 with respect to
     its acquisition of Trinity Electronics, Inc. on December 22, 1997.







Notes:

(1)  Incorporated  by  reference  from  Registrant's  Form 10-K  filed  with the
     Securities and Exchange Commission on April 1, 1998.

(2) Available from the issuer upon request.



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                                   SIGNATURES

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


                                   TMCI Electronics, Inc.
                                    (Registrant)



Date:  May 14, 1998                By: /s/ Charles E. Shaw
                                      --------------------
                                      Charles E. Shaw, Chief Financial Officer
                                      (Principal Financial Officer)

                                       14
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