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                     March 31, 1999               
                               -------------------------------------------------

                                       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. Yes [X] No [ ]

On May 12, 1999,  the  registrant  had  outstanding  4,453,500  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

<TABLE>
<CAPTION>

                                                    March 31,          December 31,
                                                      1999                 1998     
                                                 --------------        -------------
                                                   Unaudited
Current assets:

<S>                                              <C>                   <C>          
     Cash and cash equivalents                   $        1,856        $       1,587

     Accounts receivable, net                             3,489                3,493

     Inventories, net                                    11,376               10,114

     Prepaid expenses and other current assets              202                  292

     Deferred tax asset                                   5,484                5,484
                                                 --------------        -------------

         Total current assets                            22,407               20,970

Property, buildings and equipment, net                   31,891               31,888

Intangible assets, net                                    5,118                5,163

Deferred debt costs, net                                     98                  105

Notes receivable - related party                          4,200                4,200

Deferred tax asset - noncurrent                           3,177                3,532

Other                                                       844                  778
                                                 --------------        -------------

         Total assets                            $       67,735        $      66,636
                                                 ==============        =============
</TABLE>

                                        3

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

<PAGE>

                                ELXSI CORPORATION
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                          March 31,      December 31,
                                                             1999           1998     
                                                         ------------    ------------
                                                          Unaudited
<S>                                                      <C>             <C>         
Current liabilities:
     Accounts payable                                    $      4,521    $      3,526
     Accrued expenses                                           4,686           5,289
     Capital lease obligations - current                           47              52
     Current portion of long-term debt                          1,059             887
                                                         ------------    ------------
         Total current liabilities                             10,313           9,754

Capital lease obligations - non current                         1,029           1,037
Long-term debt                                                  6,265           6,689
Other non-current liabilities                                   3,846           3,596
                                                         ------------    ------------

         Total liabilities                                     21,453          21,076

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--4,453,466 and
         4,453,460 at March 31, 1999 and
         December 31, 1998, respectively                            5               5
   Additional paid-in capital                                 226,103         226,103
   Accumulated deficit                                       (179,596)       (180,343)
   Accumulated other comprehensive income                        (230)           (205)
                                                         ------------    ------------

         Total stockholders' equity                            46,282          45,560
                                                         ------------    ------------

         Total liabilities and stockholders' equity      $     67,735    $     66,636
                                                         ============    ============
</TABLE>


                                          4

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

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



                                                                  Three Months Ended March 31,
                                                                  ------------    ------------
                                                                      1999            1998    
                                                                  ------------    ------------

<S>                                                               <C>             <C>         
Net  sales                                                        $     23,512    $     23,421

Costs and expenses:
     Cost of sales                                                      18,909          18,765
     Selling, general and administrative                                 2,366           2,119
     Depreciation and amortization                                         942             857
                                                                  ------------    ------------

Operating income                                                         1,295           1,680

Other income (expense):
     Interest income                                                       148             151
     Interest expense                                                     (176)           (258)
     Other expense                                                          (8)             (9)
                                                                  ------------    ------------

Income before income taxes                                               1,259           1,564

Provision for income taxes                                                (512)           (626)
                                                                  ------------    ------------

Net income                                                                 747             938

Other comprehensive income net of tax:
   Foreign currency translation adjustment                                 (25)            (40)
                                                                  ------------    ------------

Comprehensive income                                              $        722    $        898
                                                                  ============    ============

Net income per common share:
     Basic                                                        $        .17    $        .20
                                                                  ============    ============
     Diluted                                                      $        .15    $        .18
                                                                  ============    ============

Weighted average number of common and common equivalent shares:
       Basic                                                             4,453           4,654
                                                                  ============    ============
       Diluted                                                           4,906           5,225
                                                                  ============    ============
</TABLE>


                                              5

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

<PAGE>
<TABLE>
<CAPTION>

                                                 ELXSI CORPORATION
                                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                               (Amounts in Thousands)
                                                    (Unaudited)

                                                                    Additional                   Accumulated
                                            Common Stock            Additional       Accum-         Other
                                   -----------------------------     Paid-In         ulated     Comprehensive
                                       Shares         Dollars        Capital         Deficit        Income 
                                   -------------  --------------  -------------  -------------  -----------
<S>                                    <C>        <C>             <C>            <C>            <C>         
Balance at December 31, 1998           4,453,460  $            5  $     226,103  $    (180,343) $      (205)

Foreign currency translation
     Adjustment, net of tax                   --              --             --             --          (25)

Issuance of fractional shares                  6              --             --             --           --

Net income                                    --              --             --            747           --
                                   -------------  --------------  -------------  -------------  -----------

Balance at March 31, 1999              4,453,466  $            5  $     226,103  $    (179,596) $      (230)
                                   =============  ==============  =============  =============  ===========

                                                        6

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

<PAGE>
<TABLE>
<CAPTION>

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

                                                      Three Months Ended March 31,
                                                      -----------------------------
                                                          1999           1998     
                                                      ------------    ------------
<S>                                                   <C>             <C>         
CASH FLOWS USED IN OPERATING ACTIVITIES:

Net income                                            $        747    $        938
Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation and amortization                             942             857
     Amortization of deferred debt costs                         6              19

(Increase) decrease in assets:
     Accounts receivable                                         4            (145)
     Inventories                                            (1,262)            733
     Prepaid expenses and other current assets                  90             (48)
     Deferred tax asset                                        355             464
     Other                                                     (91)           (106)
Increase (decrease) in liabilities:
     Accounts payable                                          995            (458)
     Accrued expenses                                         (603)             67
     Other non-current liabilities                             250             225
                                                      ------------    ------------
     Net cash provided by operating activities               1,433           2,546
                                                      ------------    ------------

CASH FLOWS USED IN INVESTING ACTIVITIES:
     Purchase of property, building and equipment             (899)           (738)
     Investment in notes receivable - related party             --            (135)
                                                      ------------    ------------
     Net cash used in investing activities                    (899)           (873)
                                                      ------------    ------------

CASH FLOWS USED IN FINANCING ACTIVITIES:
     Net payments of long-term debt                           (252)           (100)
     Purchase of Common Stock                                   --          (1,248)
     Principal payments of capital lease                       (13)            (39)
                                                      ------------    ------------
     Net cash used in financing activities            $       (265)   $     (1,387)
                                                      ------------    ------------
</TABLE>


                                         7

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

<PAGE>
<TABLE>
<CAPTION>

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



                                                          Three Months Ended March 31,       
                                                     ----------------------------------------
                                                          1999                      1998     
                                                     --------------             -------------

<S>                                                  <C>                        <C>          
Increase in cash and cash equivalents                $          269             $         286

Cash and cash equivalents, beginning of period                1,587                     2,287
                                                     --------------             -------------

Cash and cash equivalents, end of period             $        1,856             $       2,573
                                                     ==============             =============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for:
    Income taxes                                     $          418             $         261
    Interest                                                    140                       264
</TABLE>

                                        8


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

                                ELXSI CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                                   (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, 1999 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, 1998.

ELXSI  Corporation  (together  with  its  subsidiary,  the  "Company")  operated
principally  through its wholly-owned  California  subsidiary,  ELXSI.  Prior to
1990,  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  30  Bickford's  and  12  Howard  Johnson's
Restaurants,  which are located in Massachusetts,  Vermont, New Hampshire, Rhode
Island and Connecticut, from Marriott Family Restaurants, Inc.

Between  1991  and 1998  ELXSI  sold six of its  Howard  Johnson's  Restaurants,
converted  five others into  Bickford's  Restaurants,  opened 14 new  Bickford's
Restaurants,  acquired 16 Abdow's Family  Restaurants  ("Abdow's"),  sold one of
these Abdow's,  closed two Abdow's and converted  nine of the remaining  Abdow's
into Bickford's  Restaurants.  During the first quarter ended March 31, 1999 the
Howard  Johnson's  lease  expired  and the  restaurant  was  closed  and one new
Bickford's was opened in Somerville,  Massachusetts. As of March 31, 1999, ELXSI
owned 59 Bickford's and 4 Abdow'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. RECLASSIFICATION.  The company has recorded certain reclassifications in
prior  years  to be  consistent  with the  current  year's  presentation.  These
reclassifications had no effect on net income or stockholder's equity.

                                       9
<PAGE>

NOTE 3. SEGMENT REPORTING.

The Company has two  reportable  segments,  restaurant  operations and equipment
manufacturing.  The Company is primarily  organized into two strategic  business
units,  which have  separate  management  teams and  infrastructures  that offer
different  products and services.  Each  business  requires  different  employee
skills,  technology and marketing strategies.  The restaurant operations segment
includes  63  stores  located  in the New  England  States  operating  under the
Bickford's and Abdow's brand names. The equipment manufacturing segment produces
sewer inspection equipment for sale to municipalities,  contractors, and foreign
governments.

The Company  evaluates the performance of each segment based upon profit or loss
from operations before income taxes not including non-recurring gains and losses
and foreign exchange gains and losses.

There has been no significant  difference in the basis of segmentation or in the
measurement  of segment  profit since the  Company's  last annual report on Form
10-K for the year ended December 31, 1998.  The "Other" lines include  corporate
related items, results of insignificant operations and, as they relate to profit
and losses, income and expense not allocated to reportable segments.

Summarized  financial  information  by business  segment for the quarters  ended
March 31, 1999 and 1998 is summarized in the following table.

                                           1999                    1998      
                                     ----------------        ----------------
Revenues From External Customers:
     Restaurants                     $     17,079,000        $     16,636,000
     Equipment                              6,433,000               6,785,000
                                     ----------------        ----------------
                                     $     23,512,000        $     23,421,000
                                     ================        ================
Segment Profit:
     Restaurants                     $      1,249,000        $      1,393,000
     Equipment                                583,000                 784,000
     Other                                   (537,000)               (497,000)
                                     ----------------        ----------------
                                     $      1,295,000        $      1,680,000
                                     ================        ================
Segment Assets:
     Restaurants                     $     31,975,000        $     30,170,000
     Equipment                             22,249,000              20,234,000
     Other                                 13,511,000              15,123,000
                                     ----------------        ----------------
                                     $     67,735,000        $     65,527,000
                                     ================        ================

There were no inter-segment  sales or transfers during the first quarter of 1999
or 1998. Operating income by business segment excludes interest income, interest
expense, and other income and expenses.


                                       10

<PAGE>


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 1999 RESULTS TO 1998 RESULTS

The first quarter  sales  increased  $91,000,  gross profit  decreased  $53,000,
selling,  general and administrative expense increased $247,000 and depreciation
and amortization  increased $85,000 resulting in an operating income decrease of
$385,000.  Interest expense  decreased by $82,000,  interest income decreased by
$3,000, other expense decreased by $1,000 and income taxes decreased by $114,000
resulting in a decrease in net income of $191,000.

RESTAURANT DIVISION.  Restaurant sales increased by $443,000,  or 2.7% and gross
profit  decreased by $87,000,  or 3.3% in the first  quarter of 1999 compared to
the same period in the prior year. Operating income decreased $144,000, or 10.3%
after  deducting an increase in selling  general and  administrative  expense of
$11,000 and an increase in depreciation and  amortization of $46,000.  The sales
increase was mainly due to an increase in same store sales of $426,000, or 3.2%,
sales from the  opening of new  Bickford's  Restaurants  of  $675,000  partially
offset by a decrease in sales due to closed Restaurants of $472,000. The Company
was unable to renew the expiring Howard Johnson Restaurant lease and as a result
first quarter sales and operating  income were  negatively  impacted by $343,000
and  $49,000,  respectively  compared  to the same  period  in the  prior  year.
Customer counts at Restaurants operated in both periods decreased 0.3%.

As a result of the sales  increase,  partially  offset by a 0.9% decrease in the
gross profit  percentage from 15.8% to 14.9%,  restaurant gross profit decreased
by $87,000,  or 3.3% in the first quarter of 1999 compared to the same period in
1998.  The decrease in the gross profit  percentage  was mainly the result of an
increase  in labor cost of 0.8%  attributable  to higher  average  hourly  rates
caused by a  competitive  labor  market  and  inefficiencies  due to the  poorer
weather in 1999 compared to 1998. In addition, variable costs increased 0.5% due
to snow plowing and maintenance  costs related to the more severe winter weather
in 1999. A decrease in food costs of 0.4% attributable to the lower cost of eggs
and coffee  compared to the first  quarter of 1998  partially  offset the higher
labor and variable costs.

Restaurant selling,  general and administrative expense increased by $11,000, or
2.1% during the first quarter of 1999.

Restaurant  depreciation and amortization  increased by $46,000,  or 6.4% during
the  first  quarter  of 1999.  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 decreased by $144,000 or 10.3%
in the first quarter of 1999.


                                       11
<PAGE>

CUES DIVISION.  Cues's sales  decreased by $352,000 or 5.2% in the first quarter
of 1999  compared to the same period in the prior year.  The primary  reason for
the decrease resulted from a reduction in sales of truck mounted systems.  Sales
in the first  quarter of 1998 were 28.6%  higher than the first  quarter of 1997
and presented a difficult target to exceed in the first quarter of 1999. Despite
the  comparison  with the first  quarter of 1998,  sales in the first quarter of
1999 were lower than the previous four quarters.  However,  based on the current
volume of orders  management  believes  that the sale of truck  mounted  systems
during 1999 will recover as customers  continued to  recognized  the benefits of
Cues's  equipment.  As a result of the sales decrease and a 2.2% increase in the
gross profit  percentage from 29.8% in the first quarter of 1998 to 32.0% in the
first quarter of 1999, gross profit  increased by $34,000,  or 1.6% in the first
quarter of 1999. Operating income decreased by $201,000,  or 25.6%.  Included in
the  decrease  in  operating  income is the effect of an  increase  in  selling,
general  and  administrative  expense of  $196,000,  or 17.7% and an increase in
depreciation and amortization expense of $39,000, or 29.1%. Selling, general and
administrative  expense was approximately flat with the second, third and fourth
quarters of 1999. The increase in expenses in the first quarter of 1999 compared
to the  corresponding  period in the prior  year is  primarily  attributable  to
increases in wages resulting from both rate and headcount increases, an increase
in west coast  sales  efforts,  where a satellite  service and sales  office was
established and facility costs increases.

CORPORATE.  Corporate general and  administrative  expenses increased by $40,000
during the first quarter of 1999. Interest expense decreased by $83,000 due to a
lower average debt balance in 1999.  Interest income  increased by $8,000 in the
first quarter of 1999 compared to the same period in 1998.

Income tax  expense  decreased  from  $626,000  in the first  quarter of 1998 to
$512,000 in the first quarter of 1999. The decrease in tax expense resulted from
a decrease in pre-tax income.  Both periods include 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
first  quarters of 1999 and 1998  included  deferred tax expense of $355,000 and
$464,000,  respectively.  The Company will  continue to pay taxes 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, 1999 were $0.17 and $0.15 respectively. The basic and diluted weighted
average number of shares  outstanding  for the quarter ended March 31, 1999 were
4,453,000  and  4,906,000,  respectively.  This  compares  to basic and  diluted
earnings  per  share  of  $0.20  and  $0.18  per  share,  respectively  for  the
corresponding  period in 1998 when there were basic and diluted weighted average
shares outstanding of 4,654,000 and 5,225,000, respectively. The decrease in the
diluted  weighted  average  shares  outstanding  in the  first  quarter  of 1999
compared to the first  quarter of 1998  resulted  mainly from the  repurchase of
Common Stock during 1998 and to a lesser  extent a decrease in the average stock
market  price  during the first  quarter of 1999  compared to the  corresponding
period in 1998. The average stock market price for the first quarter of 1999 was
$10.42 compared to an average of $12.43 in the  corresponding  period of 1998. A
decrease  in the stock  price  results  in a  slightly  lesser  number of shares
outstanding for purposes of determining the weighted average shares  outstanding
used in the earnings per share calculation.


                                       12
<PAGE>

YEAR 2000 COMPLIANCE

The year 2000 issue is the result of computer  programs  being written using two
digits  rather  than four to  define  the  applicable  year.  As a result  these
programs may not properly  recognize  the year 2000 (and  subsequent  dates) and
errors may  result.  The  company has  instituted  a program to  identify  these
computer  programs and modify or replace its systems so that they will  function
properly in the year 2000 as well as any  non-information  technology systems in
place.

During 1998, the Restaurant  division  installed new accounting systems that are
fully operational and are year 2000 compliant.  Individual  restaurant locations
do not  currently  utilize  point  of  sale  registers  and  therefore  computer
programming  changes are not  required.  Peripheral  hardware  and  software and
equipment at each  restaurant  location and the Restaurant head office are being
evaluated for year 2000 compliance.

Cues is  currently  in the testing  phase of its  manufacturing  and  accounting
software,  which  is  the  critical  component  for  the  planning,  purchasing,
manufacturing and sale of its products.  All known functions within the software
have been rewritten to be year 2000 compliant. Within various departments,  Cues
also utilizes  computer  hardware and peripheral  programs that are separate and
distinct  from the  accounting  and  manufacturing  software.  Examples  include
programs related to engineering  design,  spreadsheets,  word processing,  sales
database  tracking,  etc.  While not as critical  to the  ongoing  nature of the
business,  Cues is currently  assessing the effect of year 2000 on each hardware
and software  component.  Cues does not utilize any computer aided  machinery in
its production process.

The Company is in the process of assessing formal communications with all of its
significant suppliers to determine the extent to which the Company is vulnerable
to potential third parties' failures to remediate their own year 2000 issues. It
is in the  interest of the  Company to use this  information  to mitigate  these
risks. However, because of the complexity of this issue, the Company can give no
assurances  that the systems of other companies on which the Company relies will
be  remedied  for the year 2000  issue on time or that a failure  to remedy  the
problem  by another  company  would not have a  material  adverse  effect on the
Company.  Plans are therefore under  development in order to attempt to mitigate
the extent of such potential adverse effects.

The Company is expensing the costs to modify or replace computer applications as
incurred,  the  majority of which are being  handled  internally  utilizing  its
normal  information  technology  budget  and  personnel.  The  Company  does not
anticipate any significant  increases in costs due to year 2000  conversions nor
does it  anticipate  any  decrease  in the  information  technology  budget upon
completion of the conversion efforts.  The Company will continue to incur salary
expense,  while the efforts of personnel will be directed  towards other ongoing
information technology projects in 2000. Based on the above, management does not
anticipate  that the cost of achieving year 2000 compliance will exceed $50,000,
and  therefore  will not have a  material  impact  on the  Company's  operation,
financial condition or liquidity.


                                       13
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

AVAILABLE RESOURCES. The Company's consolidated cash positions at March 31, 1999
and  December 31, 1998 was  $1,856,000  and  $1,587,000.  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 1999,  the Company had cash flow from  operations of
$1,433,000.  The cash from operations funded the acquisition of property,  plant
and equipment totaling  $899,000,  the payment of long-term debt of $252,000 and
the repayment of capital leases obligations of $13,000. During the first quarter
of 1999, current assets increased by $1,437,000  primarily due to an increase in
Cues's  inventory.  The inventory  increase resulted from an increase in work in
process  and  inventory  used for sales and  product  demonstrations.  Partially
offsetting  the  increase  in  current  assets,  current  liabilities  increased
$559,000 mainly due to an increase in accounts payable.

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  totaling  $738,000,  the  investment  in a  related  party  note
receivable  of  $135,000,  the  payment  of  long-term  debt  of  $100,000,  the
repurchase of Common Stock for  $1,248,000  and the repayment of capital  leases
obligations  of  $39,000.  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.

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 is
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.


                                       14

<PAGE>

                           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 27, 1999.  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 1999 Incentive Stock Option Plan.

o    Approval of an amendment to the Company's charter in order to effect: (i) a
     1-for-100 reverse stock split of the outstanding  shares of Common Stock in
     order to  cash-out  stockholders  holding  less than 100  shares,  and (ii)
     immediately  thereafter,  a 100-for-1  forward stock split resulting in the
     stock  ownership  of  all  non-cash  out  stockholders  being  restored  to
     pre-existing levels.

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

During the quarter ended March 31, 1999,  the Company filed with the  Securities
and Exchange  Commission,  on March 19,  1999,  a Form 8-K Current  Report dated
March  19,  1999,  under  which it made  Item 5 (Other  Events)  disclosure;  no
financial statements were included in the Form 8-K.


                                       15
<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, 1999                 /s/ Alexander M. Milley                    
                                   ---------------------------------------------
                                   Alexander M. Milley,  Chairman of the Board,
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)




Date: May 11, 1999                 /s/ Thomas R. Druggish                     
                                   ---------------------------------------------
                                   Thomas R. Druggish,  Vice President,
                                    Treasurer and Secretary (Chief Accounting
                                    Officer and Principal Financial Officer)

                                       16