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 QUARTER 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: 0-11877
                                                ----------

                               ELXSI CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           DELAWARE                                                77-0151523
--------------------------------------------------------------------------------
(State or other jurisdiction of                                 (I.R.S. employer
incorporation or organization)                               identification no.)

3600 RIO VISTA AVENUE, SUITE A, ORLANDO, FLORIDA                         32805  
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip code)

       Registrant's telephone number, including area code:  (407) 849-1090
                                                          ----------------------

--------------------------------------------------------------------------------
(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  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. [X] Yes No [ ]


On May 5, 1998, the registrant had outstanding 4,569,255 shares of Common Stock,
par value $0.001 per share.


<PAGE>


THIS  QUARTERLY  REPORT  ON FORM 10-Q  (THIS  "10-Q")  INCLUDES  FORWARD-LOOKING
STATEMENTS,  PARTICULARLY  IN  THE  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF
FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS"  SECTION  (ITEM  2  HEREIN).
ADDITIONAL  WRITTEN  OR  ORAL  FORWARD-LOOKING  STATEMENTS  MAY BE MADE BY OR ON
BEHALF OF THE COMPANY  FROM TIME TO TIME,  IN FILINGS  WITH THE  SECURITIES  AND
EXCHANGE  COMMISSION,  IN PRESS  RELEASES  AND  OTHER  PUBLIC  ANNOUNCEMENTS  OR
OTHERWISE.  ALL SUCH  FORWARD-LOOKING  STATEMENTS ARE WITHIN THE MEANING OF THAT
TERM IN SECTION 27A OF THE SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INCLUDE,
BUT NOT BE LIMITED TO  PROJECTIONS  OF REVENUE,  INCOME,  LOSSES AND CASH FLOWS,
PLANS FOR FUTURE CAPITAL AND OTHER  EXPENDITURES,  PLANS FOR FUTURE  OPERATIONS,
FINANCING  NEEDS OR PLANS,  PLANS  RELATING TO PRODUCTS OR  SERVICES,  ESTIMATES
CONCERNING THE EFFECTS OF LITIGATION OR OTHER DISPUTES,  AS WELL AS EXPECTATIONS
AND  ASSUMPTIONS  RELATING  TO ANY OR ALL  OF  THE  FOREGOING,  RELATING  TO THE
COMPANY, ITS SUBSIDIARIES AND/OR DIVISIONS.

ALTHOUGH THE COMPANY BELIEVES THAT ITS  FORWARD-LOOKING  STATEMENTS ARE BASED ON
EXPECTATIONS AND ASSUMPTIONS THAT ARE REASONABLE,  FORWARD-LOOKING STATEMENT ARE
INHERENTLY  SUBJECT  TO  RISKS  AND  UNCERTAINTIES,  SOME  OF  WHICH  CAN NOT BE
PREDICTED.  ACCORDINGLY,  NO ASSURANCE  CAN BE GIVEN THAT SUCH  EXPECTATIONS  OR
ASSUMPTIONS  WILL  PROVE TO HAVE BEEN  CORRECT,  AND  FUTURE  EVENTS  AND ACTUAL
RESULTS  COULD  DIFFER  MATERIALLY  FROM THOSE  DESCRIBED IN OR  UNDERLYING  THE
FORWARD-LOOKING STATEMENTS. AMONG THE FACTORS THAT COULD CAUSE FUTURE EVENTS AND
ACTUAL RESULTS TO DIFFER  MATERIALLY ARE: THE DEMAND FOR THE COMPANY'S  PRODUCTS
AND SERVICES AND OTHER MARKET  ACCEPTANCE  RISKS;  THE PRESENCE IN THE COMPANY'S
MARKETS OF  COMPETITORS  WITH  GREATER  FINANCIAL  RESOURCES,  AND THE IMPACT OF
COMPETITIVE  PRODUCTS  AND SERVICES  AND  PRICING;  THE LOSS OF ANY  SIGNIFICANT
CUSTOMERS  OR  GROUP  OF  CUSTOMERS;  GENERAL  ECONOMIC  AND  MARKET  CONDITIONS
NATIONALLY AND (IN THE CASE OF  BICKFORD'S) IN NEW ENGLAND;  THE ABILITY OF CUES
TO DEVELOP NEW PRODUCTS;  CAPACITY AND SUPPLY  CONSTRAINTS OR DIFFICULTIES;  THE
RESULTS  OF  THE   COMPANY'S   FINANCING   EFFORTS;   THE  EMERGENCE  OF  FUTURE
OPPORTUNITIES; AND THE EFFECT OF THE COMPANY'S ACCOUNTING POLICIES.

MORE DETAIL REGARDING THESE AND OTHER IMPORTANT  FACTORS THAT COULD CAUSE ACTUAL
RESULTS  TO  DIFFER   MATERIALLY   FROM  SUCH   EXPECTATIONS,   ASSUMPTIONS  AND
FORWARD-LOOKING  STATEMENTS  ("CAUTIONARY  STATEMENTS") MAY BE DISCLOSED IN THIS
10-K, OTHER SECURITIES AND EXCHANGE  COMMISSIONS FILING AND PUBLIC ANNOUNCEMENTS
OF THE  COMPANY.  ALL  SUBSEQUENT  WRITTEN AND ORAL  FORWARD-LOOKING  STATEMENTS
ATTRIBUTABLE TO THE COMPANY,  ITS SUBSIDIARIES OR DIVISIONS OR PERSONS ACTING ON
THEIR  BEHALF  ARE  EXPRESSLY  QUALIFIED  IN THEIR  ENTIRETY  BY THE  CAUTIONARY
STATEMENTS.

THE COMPANY  ASSUMES NO OBLIGATION TO UPDATE ITS  FORWARD-LOOKING  STATEMENTS OR
ADVISE OF CHANGES IN THE EXPECTATIONS, ASSUMPTIONS AND FACTORS ON WHICH THEY ARE
BASED.


                                        2
<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                                ELXSI CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)

                                   A S S E T S


                                                       March 31,   December 31,
                                                          1998         1997
                                                       ---------    ---------
                                                       Unaudited
Current assets:

     Restricted cash and cash equivalents              $   1,094    $   1,079

     Accounts receivable, net                              4,132        3,987

     Inventories, net                                      9,645       10,378

     Prepaid expenses and other current assets               251          203

     Deferred tax asset                                    4,560        5,024
                                                       ---------    ---------

         Total current assets                             19,682       20,671

Property, buildings and equipment, net                    29,606       29,681

Intangible assets, net                                     5,300        5,344

Deferred debt costs, net                                     136          155

Notes receivable - related party                           4,200        4,065

Deferred tax asset - noncurrent                            6,019        6,019

Other                                                        584          518
                                                       ---------    ---------

         Total assets                                  $  65,527    $  66,453
                                                       =========    =========




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


                                        3
<PAGE>


                                ELXSI CORPORATION
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                             (Dollars in Thousands)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                        March 31,   December 31,
                                                          1998         1997
                                                        ---------    ---------
                                                        Unaudited
Current liabilities
     Accounts payable                                   $   2,497    $   3,226
     Accrued expenses                                       5,072        5,005
     Capital lease obligations - current                       96          125
     Current portion of long-term debt                        479          220
                                                        ---------    ---------
         Total current liabilities                          8,144        8,576

Capital lease obligations - non current                     1,064        1,074
Long-term debt                                             10,576       10,935
Other non-current liabilities                               2,921        2,696
                                                        ---------    ---------

         Total liabilities                                 22,705       23,281

Commitments and contingencies                                  --           --

Stockholders' equity:
   Preferred stock, Series A Non-voting
     Convertible, par value $0.002 per share
       Authorized--5,000,000 shares
       Issued and outstanding--none                            --           --
   Common stock, par value $0.001 per share
       Authorized--160,000,000 shares
       Issued and outstanding--4,568,980 and
         4,660,980 at March 31, 1998 and
         December 31, 1997, respectively                        5            5
   Additional paid-in capital                             227,261      228,509
   Accumulated deficit                                   (184,195)    (185,133)
   Accumulated other comprehensive income                    (249)        (209)
                                                        ---------    ---------

         Total stockholders' equity                        42,822       43,172
                                                        ---------    ---------

         Total liabilities and stockholders' equity     $  65,527    $  66,453
                                                        =========    =========



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


                                        4
<PAGE>


                                ELXSI CORPORATION
                         CONSOLIDATED INCOME STATEMENTS
                  (Amounts in Thousands, Except Per Share Data)
                                   (Unaudited)



                                               Three Months Ended March 31,
                                               ----------------------------
                                                 1998               1997
                                               --------            --------

Net  sales                                     $ 23,421            $ 20,079

Costs and expenses:
     Cost of sales                               18,765              16,141
     General and administrative                   2,119               1,914
     Depreciation and amortization                  857                 787
                                               --------            --------

Operating income                                  1,680               1,237

Other income (expense):
     Interest income                                151                 375
     Interest expense                              (258)               (423)
     Other expense                                   (9)                 --
                                               --------            --------

Income before income taxes                        1,564               1,189

Provision for income taxes                         (626)               (249)
                                               --------            --------

Net income                                     $    938            $    940
                                               ========            ========

Net income per common share:
     Basic                                     $    .20            $    .20
                                               ========            ========
     Diluted                                   $    .18            $    .19
                                               ========            ========

Weighted average number of common
  and common equivalent shares:
       Basic                                      4,654               4,661
                                               ========            ========
       Diluted                                    5,225               4,827
                                               ========            ========





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


                                        5
<PAGE>


<TABLE>
<CAPTION>
                                                    ELXSI CORPORATION
                                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                                 (Amounts in Thousands)
                                                       (Unaudited)

                                                                                                          Accumulative
                                                           Common Stock        Additional      Accum-        Other
                                                    ------------------------    Paid-In        ulated     Comprehensive
                                                      Shares        Dollars     Capital        Deficit       Income
                                                    ----------    ----------   ----------    ----------    ----------

<S>                                                  <C>          <C>          <C>           <C>           <C>        
Balance at December 31, 1997                         4,660,980    $        5   $  228,509    $ (185,133)   $     (209)

Net income                                                  --            --           --           938            --

Purchase and retirement of
     Common Stock                                      (92,000)           --       (1,248)           --            --

Foreign currency translation
     adjustment                                             --            --           --            --           (40)
                                                    ----------    ----------   ----------    ----------    ----------

Balance at March 31, 1998                            4,568,980    $        5   $  227,261    $ (184,195)   $     (249)
                                                    ==========    ==========   ==========    ==========    ==========











The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                        6
<PAGE>


<TABLE>
<CAPTION>
                                         ELXSI CORPORATION
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (Dollars in Thousands)
                                            (Unaudited)

                                                                    Three Months Ended March 31,
                                                                  -------------------------------
                                                                     1998                   1997
                                                                  ---------               -------
CASH FLOWS USED IN OPERATING ACTIVITIES:

<S>                                                               <C>                     <C>    
Net income                                                        $     938               $   940
Adjustments to reconcile net income to net
  cash provided by operating activities:
   Depreciation and amortization                                        857                   787
   Amortization of deferred debt costs                                   19                    23
   Amortization of note receivable discount                              --                   (96)
   Other                                                                 --                    (3)

(Increase) decrease in assets:
   Accounts receivable                                                 (145)                  166
   Inventories                                                          733                   532
   Prepaid expenses and other current assets                            (48)                  (32)
   Deferred tax asset                                                   464                   (24)
   Other                                                               (106)                   42
Increase (decrease) in liabilities:
   Accounts payable                                                    (729)               (1,537)
   Accrued expenses                                                      67                   114
   Other liabilities                                                    225                   187
                                                                  ---------               -------
   Net cash used in operating activities                              2,275                 1,099
                                                                  ---------               -------

CASH FLOWS USED IN INVESTING ACTIVITIES:
   Purchase of property, building and equipment                        (738)                 (950)
   Investment in notes receivable - related party                      (135)                   --
   Proceeds from note receivable -  related party                        --                   800
                                                                  ---------               -------
   Net cash used in investing activities                               (873)                 (150)
                                                                  ---------               -------

CASH FLOWS USED IN FINANCING ACTIVITIES:
   Net borrowing of long-term debt                                     (100)                 (921)
   Purchase of Common Stock                                          (1,248)                   --
   Principal payments of capital lease                                  (39)                  (28)
                                                                  ---------               -------
   Net cash used in financing activities                          $  (1,387)              $  (949)
                                                                  ---------               -------





The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       7
<PAGE>


                                ELXSI CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                             (Dollars in Thousands)
                                   (Unaudited)



                                                  Three Months Ended March 31,
                                                   1998                  1997
                                                  -------               ------

Increase in cash and cash equivalents             $    15               $   --

Cash and cash equivalents, beginning of period      1,079                   --
                                                  -------               ------

Cash and cash equivalents, end of period          $ 1,094               $   --
                                                  =======               ======


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for:
    Income taxes                                  $   261               $  105
    Interest                                          264                  314













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


                                       8
<PAGE>


                                ELXSI CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1998
                                   (Unaudited)

NOTE 1.  THE COMPANY

GENERAL  The  information   contained  in  this  report  is  unaudited  but,  in
management's  opinion,  all adjustments  necessary for a fair  presentation have
been  included and were of a normal and  recurring  nature.  The results for the
three months ended March 31, 1998 are not  necessarily  indicative of results to
be expected for the entire year. These financial  statements and notes should be
read in conjunction with ELXSI Corporation's  Annual Report on Form 10-K for the
year ended December 31, 1997.

Prior to 1990, ELXSI Corporation (together with its subsidiaries, the "Company")
operated  principally  through its wholly-owned  California  subsidiary,  ELXSI.
During that period, the principal business of ELXSI was the design, manufacture,
sale and support of  minisupercomputers.  In July 1989, the Company  announced a
major restructuring of its computer  operations.  In September 1989, the Company
discontinued all computer operations.

On July 1, 1991,  ELXSI acquired thirty  Bickford's and twelve Howard  Johnson's
Restaurants,  which are located in Massachusetts,  Vermont, New Hampshire, Rhode
Island and Connecticut, from Marriott Family Restaurants, Inc.

Between  1992 and 1997,  ELXSI  sold six of its  Howard  Johnson's  Restaurants,
converted five others into Bickford's Restaurants,  opened eleven new Bickford's
Restaurants,  acquired 16 Abdow's Family  Restaurants  ("Abdow's"),  sold one of
these  Abdow's,  closed  another  of these  Abdow's  and  converted  nine of the
remaining  Abdow's into Bickford's  Restaurants.  During the first quarter ended
March 31,  1998,  ELXSI  opened one new  Bickford's  Restaurants  and closed one
under-performing  Abdow's  Restaurant.  As of March  31,  1998,  ELXSI  owned 56
Bickford's, 4 Abdow's and one Howard Johnson's Restaurants (the "Restaurants" or
Restaurant Division).

On October 30, 1992,  ELXSI acquired Cues, Inc. of Orlando,  Florida and its two
wholly owned  subsidiaries  Knopafex,  Ltd., a Canadian company and Cues B.V., a
Dutch company, (together referred to as "Cues").

Cues is engaged in the manufacture and servicing of video  inspection and repair
equipment  for  wastewater  and  drainage  systems  primarily  for  governmental
municipalities, service contractors and industrial users.

NOTE 2.  OTHER COMPREHENSIVE INCOME

The Company  adopted  SFAS 130,  "Reporting  Comprehensive  Income",  during the
quarter  ended  March  31,  1998.  SFAS 130  requires  the  Company  to  display
"Comprehensive  Income",  which includes net income and certain amounts recorded
directly to equity.


                                       9
<PAGE>


The  components  of  comprehensive  income,  net of related tax, for the quarter
ended March 31 are as follows:



                                                1998       1997
                                              -------    -------

Net income                                    $   938    $   940
Foreign currency translation adjustment,
  net of income taxes                             (40)        (3)
                                              -------    -------
Comprehensive income $                            898    $   937
                                              =======    =======

Accumulated other comprehensive income at March 31, 1998 and 1997, was comprised
solely of foreign currency translation adjustments.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

RESULTS OF OPERATIONS

The  Company's  revenues and expenses  result from the  operation of the ELXSI's
Restaurant   and  Cues   Divisions   and  the   Company's   corporate   expenses
("Corporate").

COMPARISON OF FIRST QUARTER 1998 RESULTS TO 1997 RESULTS

The first quarter sales increased  $3,342,000,  gross profit increased $718,000,
selling,  general and administrative expense increased $205,000 and depreciation
and amortization  increased $70,000 resulting in an operating income increase of
$443,000.  Interest expense decreased by $165,000,  interest income decreased by
$224,000,  other  expense  increased  by $9,000 and income  taxes  increased  by
$377,000 resulting in a decrease in net income of $2,000.

RESTAURANT  DIVISION Restaurant sales increased by $1,843,000 or 12.4% and gross
profit  increased by $242,000 or 10.1% in the first  quarter of 1998 compared to
the same period in the prior year.  Operating income increased $128,000 or 10.1%
after  deducting an increase in selling  general and  administrative  expense of
$55,000 and an increase in depreciation and  amortization of $59,000.  The sales
increase was mainly due to an increase in same store sales of $787,000,  or 7.4%
and sales from the opening of new Bickford's  Restaurants of $907,000.  Customer
counts at Restaurants  operated in both periods increased 4.5%.  Customer counts
at the nine converted and five remaining  Abdow's  Restaurants  were flat in the
first quarter of 1998 compared to 1997.

As a result of the sales  increase,  partially  offset by a 0.4% decrease in the
gross profit  percentage from 16.2% to 15.8%,  restaurant gross profit increased
by $242,000,  or 10.1% in the first  quarter of 1998 compared to the same period
in 1997. The decrease in the gross profit percentage was mainly the result of an
increase  in food costs of 0.4%  attributable  to the higher  cost of coffee and
dairy  products  compared to the first quarter of 1997; and an increase in labor
cost of 0.6%  attributable  to higher  levels of staffing  during peak  business
periods in order to provide better service to customers and to improve  customer
counts. These increases were partially offset by a decrease of 0.6% in fixed and
other expenses due to the higher sales resulting from increased  customers and a
higher average guest check during the quarter.


                                       10
<PAGE>


Restaurant  selling,  general and  administrative  expense  increased by $55,000
during the first quarter of 1998.

Restaurant  depreciation and amortization  increased by $59,000 during the first
quarter 1998. Restaurant depreciation and amortization will continue to increase
each year with the addition of new restaurants.

As a result of the above items,  operating income increased by $128,000 or 10.1%
in the first quarter of 1998.

CUES DIVISION Cues's sales increased by $1,499,000 or 28.4% in the first quarter
of 1998 compared to the same period in the prior year. Cues was able to increase
sales volume in the first quarter of 1998 without  resorting to price reductions
in the  face of  continuing  competitive  pressures.  Customers  recognized  the
benefits  of  Cues's  equipment,  thereby  permitting  the  Company  to be  more
selective on bidding.  As a result of the sales  increase and a 0.5% increase in
the gross profit  percentage from 29.3% in the first quarter of 1997 to 29.8% in
the first quarter of 1998, gross profit  increased by $476,000,  or 30.7% in the
first  quarter  of 1998.  Operating  income  increased  by  $377,000,  or 92.6%.
Included  in the  increase in  operating  income is the effect of an increase in
selling,  general  and  administrative  expense of $88,000  and an  increase  in
depreciation  and  amortization  expense of  $11,000.  Sales,  gross  profit and
operating income established new quarterly records for Cues in the first quarter
of 1998.

CORPORATE  Corporate general and  administrative  expenses  increased by $62,000
during  the first  quarter  of 1998  mainly as a result  of an  increase  in the
phantom stock option plan accrual for Bickford's  management.  Interest  expense
decreased  by $196,000 due to a lower  average debt balance in 1998.  During the
first quarter of 1998, the Company recorded interest income of $134,000 compared
to $372,000 in the same period of 1997.

The decrease in interest  income was primarily the result of recording  $327,000
of interest income in the first quarter of 1997 related to the December 30, 1996
financing transaction with Azimuth Corporation,  a related party. This financing
transaction  involved a loan from Bank of  America  National  Trust and  Savings
Association  (formerly Bank of America  Illinois)  ("BAI") and the purchase from
BAI (at a  discount),  of  certain  notes  payable  by  subsidiaries  of Azimuth
Corporation  ("Azimuth  Subsidiary  Notes").  ELXSI collected the balance of the
proceeds of the Azimuth Subsidiary Notes in June 1997 and retired the applicable
debt  payable  to BAI (see the  Company's  1997  Annual  Report on Form 10-K for
additional details).

Included in interest  expense was interest  payable to the BAI of  approximately
$109,000 directly  attributable to the purchase of the Azimuth Subsidiary Notes.
As a result of the Azimuth  Subsidiary  Notes, the Company recorded net interest
income of approximately $218,000 during the first quarter of 1997.

The first  quarter of 1998 did not contain any  interest  income  related to the
Azimuth Subsidiary Notes,  however the first quarter of 1998 did include $75,000
of interest on a related party note dated June 30, 1997.


                                       11
<PAGE>


Partially  offsetting  the  decrease in interest  income  related to the Azimuth
Subsidiary  Notes was a $75,000  increase  in interest  income  during the first
quarter of 1998 resulting from a related party note dated June 30, 1997 due from
Cadmus Corporation.

Income tax  expense  increased  from  $249,000  in the first  quarter of 1997 to
$626,000 in the first quarter of 1998. The increase in tax expense was primarily
attributable  to non-cash  expense  resulting from  calculating the deferred tax
provision in accordance with Financial  Accounting Standards Board Statement No.
109 "Accounting  For Income Taxes".  The Company will continue to pay taxes on a
cash  basis at the rate of  approximately  11%,  but  will  recognize  a 40% tax
expense on future quarterly and annual income statements.

EARNINGS PER SHARE Basic and diluted  earnings  per share for the quarter  ended
March  31,  1998 were  $0.20  and  $0.18,  respectively.  The basic and  diluted
weighted  average number of shares  outstanding  for the quarter ended March 31,
1998 were  4,654,000  and  5,225,000,  respectively.  This compares to basic and
diluted  earnings per share of $0.20 and $0.19 per share,  respectively  for the
corresponding  period in 1997 when there were basic and diluted weighted average
shares outstanding of 4,661,000 and 4,827,000, respectively. The increase in the
diluted  weighted  average  shares  outstanding  in the  first  quarter  of 1998
compared to the first  quarter of 1997  resulted  mainly from an increase in the
average  stock  market price  during the first  quarter of 1998  compared to the
corresponding  period in 1997.  The  average  stock  market  price for the first
quarter of 1998 was $12.43 compared to an average of $6.45 in the  corresponding
period of 1997.  An increase in the stock  price  results in a slightly  greater
number of shares  outstanding for purposes of determining  the weighted  average
shares outstanding used in the earnings per share calculation.

LIQUIDITY AND CAPITAL RESOURCES

AVAILABLE  RESOURCES The Company's  unrestricted  consolidated cash positions at
March 31, 1998 and December  31, 1997 was $0. The Company has a cash  management
system whereby cash  generated by operations is immediately  used to reduce bank
debt. The immediate  reduction of  outstanding  debt provides the Company with a
reduction in interest  expense  greater than the interest income that cash could
safely earn from  alternative  investments.  Working  capital  needs,  when they
arise, are met by daily borrowings.

During the first quarter of 1998,  the Company had cash flow from  operations of
$2,275,000.  The cash from operations funded the acquisition of property,  plant
and equipment totalling $738,000, the payment of long-term debt of $100,000, and
the repayment of capital  leases  obligations of $39,000 and the investment in a
related  party note  receivable  of $135,000.  During the first quarter of 1998,
current  assets  decreased by $989,000  primarily due to a $704,000  decrease in
Cues's inventory and a reduction in the deferred tax asset of $464,000 partially
offset by an increase in accounts receivable of $145,000.  Partially  offsetting
the decrease in current assets,  current  liabilities  decreased $432,000 mainly
due to a reduction in Bickford's  accounts  payable due to the timing of certain
payments.

During the first quarter of 1997,  the Company had cash flow from  operations of
$1,099,000.  The  cash  from  operations  and  the  proceeds  from  the  Azimuth
Subsidiary  notes  receivable of $800,000  funded the  acquisition  of property,
plant and  equipment  totalling  $950,000,  the  payment  of  long-term  debt of
$921,000 and the repayment of capital leases obligations of $28,000.  During the


                                       12
<PAGE>


first quarter of 1997,  current assets decreased by $666,000  primarily due to a
$540,000 decrease in Cues's inventory and the collection of the $225,000 Azimuth
Subsidiaries  closing fee,  which was classified as a receivable at December 31,
1996. Offsetting the decrease in current assets,  current liabilities (excluding
the current portion of long-term debt and capital leases)  decreased  $1,423,000
mainly due to a reduction in Cues's accounts payable.

FUTURE NEEDS FOR AND SOURCES OF CAPITAL Management  believes that cash generated
by operations is  sufficient to fund current  operations  including the interest
payments on the long-term debt.  With bank approval,  excess funds are available
under the Company's loan Agreement to finance additional acquisitions.

IMPACT OF  INFLATION  Inflationary  factors  such as increases in food and labor
costs directly affect the Company's operation.  Many of the Restaurant employees
are paid hourly rates  related to the federal  minimum  wage,  and  accordingly,
increases in the minimum wage will result in  increases in the  Company's  labor
costs.  In addition,  the cost of food  commodities  utilized by the Company are
subject to market supply and demand pressures. Shifts in these costs may have an
impact on the  Company's  food  cost.  The  Company  anticipates  that food cost
increases  can  be  offset  through  selective  price  increases,   although  no
assurances can be given that the Company will be successful in this regard.

Increases in interest rates could negatively affect the Company's operations.



                           PART II. OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.


The  Company's  annual  meeting will take place on May 19, 1998.  In  connection
therewith the Company  submitted the following  proposals to stockholders in the
annual proxy statement.

o   Nomination of the following  current  directors for re-election:  Farrokh K.
    Kavarana, Kevin P. Lynch, Alexander M. Milley, Denis M. O'Donnell and Robert
    C. Shaw.

o   Approval of the ELXSI Corporation 1998 Incentive Stock Option Plan.

o   Adoption of  amendments to the  Company's  Charter to reduce the  authorized
    shares of Common Stock of the Company.

ITEM 5.  OTHER INFORMATION - none

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits required by Item 601 of Regulation S-K

            27.1 Financial Data Schedule

     (b)  Reports on Form 8-K - none


                                       13
<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.


                                          ELXSI CORPORATION
                            --------------------------------------------------
                                            (Registrant)



Date: May 11, 1998          /s/   ALEXANDER M. MILLEY
                            --------------------------------------------------
                                  Alexander M. Milley,  Chairman of the Board,
                                  President and Chief Executive Officer
                                  (Principal Executive Officer)




Date: May 11, 1998          /s/   THOMAS R. DRUGGISH
                            --------------------------------------------------
                                  Thomas R. Druggish,  Vice President,
                                  Treasurer and Secretary (Chief Accounting
                                  Officer and Principal Financial Officer)













                                       14