UNITED STATES
                        SECURITIES AND EXCHANGE COMMISION
                             WASHINGTON, D.C. 20549
                                 FORM 10-QSB/A-2

(Mark One)
   [ X ]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended     June 30, 1998

   [   ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT
         For the transition period from                  to
                                          Commission file number 1-14072

                             PEN INTERCONNECT, INC.
        (Exact name of small business issuer as specified in its charter)

           UTAH                                   87-0430260
(State or other jurisdiction of      (I.R.S. Employer Identification No)
incorporation or organization)

                 2351 South 2300 West, Salt Lake City, UT 84119
               (Address of Principal Executive Offices) (Zip Code)
                                 (801) 973-6090
                           (Issuer's telephone number)

                                       N/A

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

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS
         Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the  distribution of
securities under a plan confirmed by a court.
                                                      Yes No

                      APPLICABLE ONLY TO CORPORATE ISSUERS
         As of August 14, 1998,  the issuer had  4,773,910  shares of its common
stock, par value $0.01 per share, issued and outstanding.
         Transitional Small Business Disclosure Format (check one):

                                                     Yes No X




<PAGE>




                                   FORM 10-QSB

                             PEN INTERCONNECT, INC.

                                Table of Contents

                                                                           Page

PART I - FINANCIAL INFORMATION                                               3

Item 1 Financial Statements

                  Balance Sheets at June 30, 1998
                  (unaudited) and September 30, 1997                        4-5

                  Statements of Operations  for the
                  Quarters Ended June 30, 1998 and 1997 and the
                  nine month periods ended June 30, 1998 and 1997
                  (unaudited)                                                 6


                  Statements of Cash Flows for the ninth month
                  periods ended June 30, 1998 and 1997 (unaudited)          7-9

                  Notes to Condensed Financial Statements (unaudited)     10-16
 
Item 2            Management's Discussion and Analysis or
                  Plan of Operation                                       17-19

PART II - OTHER INFORMATION

Item 1            Legal Proceedings                                          20

Item 2            Changes in the Securities and Use of Proceeds              20

Item 3            Defaults Upon Senior Securities                            20

Item 4            Submission of Matters to a Vote of Security Holders        20

Item 5            Other Information                                          20

Item 6(a).        Exhibits

Item 6(b).        Reports on Form 8-K                                        20

Signatures                                                                   21




<PAGE>




                             PEN INTERCONNECT, INC.

                                     PART I

                              FINANCIAL INFORMATION


ITEM 1. INTERIM CONDENSED FINANCIAL STATEMENTS

     Pen  Interconnect,   Inc.  (the  "Company"),  has  included  the  unaudited
     condensed  balance  sheet of the  Company as of June 30,  1998 and  audited
     balance  sheet as of September 30, 1997 (the  Company's  most recent fiscal
     year),  unaudited condensed statements of operations for the quarters ended
     June 30,  1998 and 1997,  and nine month  periods  ended June 30,  1998 and
     1997, and unaudited  condensed  statements of cash flows for the nine month
     periods  ended June 30, 1998 and 1997,  together with  unaudited  condensed
     notes  thereto.  In the opinion of management  of the Company,  the interim
     condensed  financial  statements reflect all adjustments,  all of which are
     normal recurring  adjustments,  considered  necessary to fairly present the
     financial  condition,  results of operations  and cash flows of the Company
     for the interim periods  presented.  The financial  statements  included in
     this report on Form 10-QSB should be read in  conjunction  with the audited
     financial  statements of the Company and the notes thereto  included in the
     annual  report of the Company on Form  10-KSB for the year ended  September
     30,  1997.  The results of  operations  for the three and nine months ended
     June 30, 1998 may not be indicative of the results that may be expected for
     the year ending September 30, 1998.





                                        3


<PAGE>




                             Pen Interconnect, Inc.

                                 BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                  June 30,           September 30,
                                                                                    1998                  1997
                                                                               -------------         -------------
                                                                                (Unaudited)
CURRENT ASSETS
<S>                                                                             <C>                   <C>         
    Cash and cash equivalents                                                   $    994,397          $    272,148
    Receivables
        Trade accounts,  less  allowance  for doubtful  accounts 
            of $105,089 and $137,058 at June 30, 1998 and
            September 30, 1997, respectively.                                      3,721,930             2,093,056
        Current maturities of notes receivable (Note A)                               27,820               357,006
    Investments in common stock (Note A)                                             350,750               400,000
        Inventories (Notes B)                                                      5,661,634             3,355,871
    Prepaid expenses and other current assets                                        425,446               289,991
    Deferred income taxes                                                            180,693               141,324
                                                                               -------------         -------------

                    Total current assets                                          11,362,670             6,909,396


PROPERTY AND EQUIPMENT, AT COST
        Production equipment                                                       2,568,776             2,418,368
        Furniture and fixtures                                                       852,770               834,971
        Transportation equipment                                                      83,522                69,217
        Leasehold improvements                                                       368,137               368,137
                                                                                 -----------        --------------

                                                                                   3,873,205             3,690,693
        Less accumulated depreciation                                              1,523,349             1,303,063
                                                                                 -----------          ------------

                                                                                   2,349,856             2,387,630
OTHER ASSETS
    Notes receivable, less current maturities (Note A)                               103,105               607,524
    Investments in common stock  (Note A)                                            684,000                    -
     Deferred income taxes                                                         1,347,720             1,392,658
    Goodwill and other intangibles (net)                                           2,164,298             2,287,146
    Other                                                                            665,529               322,630
                                                                                ------------         -------------

                                                                                   4,964,652             4,609,958
                                                                                 -----------          ------------

                                                                                 $18,677,178           $13,906,984
                                                                                 ===========           ===========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                        4



<PAGE>




                             Pen Interconnect, Inc.

                           BALANCE SHEETS - CONTINUED

                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                                  June 30,           September 30,
                                                                                    1998                 1997
                                                                               -------------         -------------
                                                                                (Unaudited)
CURRENT LIABILITIES
<S>                                                                            <C>                     <C>        
    Notes payable                                                              $          -            $   641,505
    Bridge loan                                                                          -                 100,000
    Line of credit                                                                 3,795,541             2,237,690
    Current maturities of long-term obligations                                      314,643               263,255
    Current maturities of capital leases                                              66,464                66,464
    Accounts payable                                                               3,028,073             2,053,348
    Accrued liabilities                                                              310,561               481,356
                                                                                ------------               -------

                    Total current liabilities                                      7,515,282             5,843,618

LONG-TERM OBLIGATIONS, less current
    maturities      (Note C)                                                         927,178               681,722

CAPITAL LEASE OBLIGATIONS, less current
    maturities                                                                         8,377                70,889

SUBORDINATED DEBENTURES less deferred
interest on favorable conversion feature (Note D)                                  1,091,458                   -

DEFERRED INCOME TAXES                                                                165,755               165,755
                                                                                ------------           -----------

                    Total liabilities                                              9,708,050             6,761,984


STOCKHOLDERS' EQUITY (Notes A and E)
    Preferred stock, $0.01 par value, authorized
        5,000,000 shares, none issued                                                     -                     -
    Common stock, $0.01 par value, authorized
        50,000,000 shares, issued and outstanding
         4,773,910 shares at June 30, 1998 and
        4,072,863  shares at September 30, 1997                                       47,739                40,729
    Additional paid-in capital                                                    10,776,222             8,733,126
    Accumulated deficit                                                           (1,854,833)           (1,628,855)
                                                                               --------------       ---------------

                    Total stockholders' equity                                     8,969,128             7,145,000
                                                                               -------------           -----------

                                                                                 $18,677,178           $13,906,984
                                                                                 ===========           ===========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                        5


<PAGE>

                             Pen Interconnect, Inc.

                            STATEMENTS OF OPERATIONS
                                   (unaudited)


<TABLE>
<CAPTION>
                                                      Three months ended June 30,         Nine months ended June 30
                                                         1998              1997             1998             1997
                                                    -------------     -------------     -------------   -------------
<S>                                                 <C>               <C>               <C>             <C>          
Net sales                                           $   4,510,112     $   4,479,882     $  12,113,556   $  15,220,519
Cost of sales                                           3,534,452         4,083,240         9,431,973      12,912,356
                                                    -------------     -------------     -------------   -------------

                 Gross profit                             975,660           396,642         2,681,583       2,308,163

Operating expenses
       Sales and marketing                                192,071           230,040           619,562         695,152
       Research and development                            49,675            60,914           243,044         101,283
       General and administrative                         477,792           390,479         1,117,334       1,115,630
       Depreciation and amortization                      122,288            96,347           364,225         285,025
                                                    -------------     -------------     -------------   -------------

                 Total operating expenses                 841,826           777,780         2,344,165       2,197,090
                                                    -------------     -------------     -------------   -------------

                 Operating income (loss)                  133,834          (381,138)          337,418         111,073

Other income (expense)
       Interest expense (Note D)                         (217,556)         (134,763)         (703,613)       (403,539)
       Gain on sale of division (Note A)                        -                 -                 -         611,912
       Other income (expense), net                         84,318            19,522           118,655          77,194
                                                    -------------     -------------     -------------   -------------

                 Total other income (expense)            (133,238)         (115,241)         (584,958)        285,567
                                                    -------------     -------------     -------------   -------------

Earning (loss) before income taxes                            596          (496,379)        (247,540)         396,640

Income taxes (benefit) expense                                238          (198,500)          (21,562)        163,100
                                                    -------------     -------------     -------------   -------------

Net earnings (loss)                                 $         358     $    (297,879)    $    (225,978)  $     233,540
                                                    =============     =============     =============   =============

Earnings (loss) per common share:
       Basic                                        $        0.00     $       (0.09)    $       (0.05)  $        0.08
                                                    =============     =============     =============   =============
       Diluted                                      $        0.00     $       (0.09)    $       (0.05)  $        0.07
                                                    =============     =============     =============   ============= 
Weighted average common and dilutive
    common equivalent shares outstanding
       Basic                                            4,586,962         3,238,975         4,452,312       3,101,930
                                                    =============     =============     =============   =============
       Diluted                                          5,121,153         3,238,975         4,452,312       3,518,097
                                                    =============     =============     =============   =============
</TABLE>





        The accompanying notes are an integral part of these statements.


                                        6



<PAGE>




                             Pen Interconnect, Inc.

                            STATEMENTS OF CASH FLOWS

                         For nine months ended June 30,

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                   1998                  1997
                                                                            ----------------       ---------------

Increase (decrease) in cash and cash equivalents
    Cash flows from operating activities
<S>                                                                         <C>                     <C>           
        Net earnings (loss)                                                 $       (225,978)       $      233,540
        Adjustments to reconcile net earnings (loss)
            to net  cash used in operating activities
               Depreciation and amortization                                         364,225               285,025
               Amortization of deferred interest                                     336,506                     -
               Bad debts                                                               3,420               (19,314)
               Gain on sale of division                                                   -               (611,912)
               Contingent stock San Jose agreement                                   (40,000)                   -
               Loss on disposal of equipment                                          16,534                    -
               Deferred taxes                                                         27,112               131,000
               Changes in assets and liabilities
                    Trade accounts receivable                                     (1,632,294)              615,329
                    Inventories                                                   (2,305,763)              (15,587)
                    Prepaid expenses and other assets                               (306,138)             (369,942)
                    Accounts payable                                                 974,725              (703,410)
                    Accrued liabilities                                             (254,795)             (627,103)
                    Income taxes                                                    ( 21,543)               33,192
                                                                            ----------------       ---------------

                        Total adjustments                                         (2,838,011)           (1,282,722)
                                                                            ----------------       ---------------

                        Net cash used in
                        operating activities                                      (3,063,989)           (1,049,182)
                                                                            ----------------       ---------------

    Cash flows from investing activities
        Purchase of property and equipment                                          (202,353)             (207,994)
        Proceeds from sale of division                                                   -               2,000,000
        Proceeds from sale of investments                                            389,250                    -
        Issuance of notes receivable                                                 (89,195)              (35,435)
        Collections on notes receivable                                               22,800                    -
                                                                            ----------------       ---------------

                        Net cash provided
                        by investing activities                                      120,502             1,756,571
                                                                            ----------------       ---------------
</TABLE>





                                   (Continued)

                                        7

<PAGE>

                             Pen Interconnect, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED


                       For the nine months ended June 30,


<TABLE>
<CAPTION>
                                                                                   1998                  1997
                                                                            ----------------       ---------------
    Cash flows from financing activities
<S>                                                                         <C>                    <C>           
        Principal payments on notes payable                                 $       (641,505)      $            -
        Net change in line of credit                                               1,557,851            (2,009,864)
        Proceeds from bridge loan                                                         -              1,000,000
               Principal payments on bridge loan                                    (100,000)                   -
        Principal payments on long-term obligations                                 (265,668)              (76,842)
        Proceeds from issuance of subordinated debentures                          1,910,000                    -
        Proceeds from issuance of long-term obligation                               500,000                    -
        Proceeds from sale of common stock                                           705,058               225,000
                                                                            ----------------       ---------------

                        Net cash (used in) or provided
                            by financing activities                                3,665,736              (861,706)
                                                                            ----------------       ---------------

                        Net (decrease) increase in cash
                            and cash equivalents                                     722,249              (154,317)

Cash and cash equivalents at beginning of period                                     272,148               169,445
                                                                            ----------------       ---------------

Cash and cash equivalents at end of period                                  $        994,397       $        15,128
                                                                            ================       ===============

Supplemental disclosures of cash flow information

    Cash paid during the period for
        Interest                                                            $        370,028       $       390,157
        Income taxes                                                                      -                     -
</TABLE>





                                   (Continued)
                                        8


<PAGE>




                             Pen Interconnect, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                For the nine months ended June 30, 1998 and 1997

Non-cash investing and financing activities

During the third quarter of fiscal year 1998,  subordinated  debentures totaling
$480,000 were converted to 248,122 shares of common stock.

During the second quarter of fiscal year 1998,  subordinated debentures totaling
$320,000 were converted to 147,092 shares of common stock.

During the first quarter of fiscal year 1998, notes receivable totaling $900,000
plus accrued interest of $84,000 were converted to investments in common stock.

Effective  November  1, 1996,  the  Company  sold  substantially  all assets and
certain  liabilities  of the San Jose  Division  for $2  million  cash and other
consideration. Assets and liabilities sold were as follows:

       Accounts receivable                                      $   680,420
       Inventories                                                1,644,336
       Prepaid expenses                                              34,177
       Other assets                                                  26,099
       Property and equipment                                       638,373
       Accounts payable                                            (277,429)
       Accrued liabilities                                          (35,373)
       Capital leases                                               (22,515)
                                                                ------------

       Net assets sold                                            2,688,088

       Less non cash consideration received
               Notes                          $    900,000
               Stock                               400,000
                                               -----------
                                                                  1,300,000

       Cash consideration                                         2,000,000
                                                                ------------

       Gain on sale of division                                 $   611,912
                                                                ===========





        The accompanying notes are an integral part of these statements.

                                        9


<PAGE>




                             PEN INTERCONNECT, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE A - ACQUISITIONS/DISPOSITIONS

       POWER STREAM TECHNOLOGY

       Effective April 1, 1997, the Company  acquired  substantially  all of the
       assets,   and  assumed  certain   liabilities  and  the  operations,   of
       PowerStream Technology, Inc. ("PowerStream") by issuing 150,000 shares of
       common  stock  valued at $1.50 per share.  PowerStream  is a research and
       development  company  specializing in power recharging  devices and power
       supply products. In addition the Company entered into a 5 year Employment
       Agreement  with Daniele Reni, the President of  PowerStream.  The Company
       believes  that Mr.  Reni is an  expert  in the  area of power  recharging
       devices and power supply  products.  This  transaction  was accounted for
       using the purchase method of accounting. Accordingly the purchased assets
       and  liabilities  have been  recorded  at their fair value at the date of
       acquisition and the excess purchase price over fair value of net tangible
       assets acquired of $749,114 is being amortized over 15 years. The results
       of  operations  of  the  acquired  business  have  been  included  in the
       financial statements since the effective date of acquisition.

       SALE OF SAN JOSE DIVISION

           Effective November 1, 1996, the Company sold substantially all of the
       net  assets  used  by  the  San  Jose  Division  ("Division")  to  Touche
       Electronics,  Inc.  ("Touche"),  a subsidiary of TMCI  Electronics,  Inc.
       ("TMCI").  The  sales  price  for  the net  assets  of the  Division  was
       $3,300,000;  consisting  of  $2,000,000  in cash,  $900,000 in promissory
       notes,  and  53,669  shares of TMCI  common  stock  with an  agreed  upon
       guaranteed value of $400,000.  In addition,  the Company had the right to
       receive up to $700,000 in contingent  earnouts for a potential total sale
       price of  $4,000,000.  The Company  originally  purchased the Division in
       March  1995 for  approximately  $2,100,000.  As part of the  transaction,
       Touche and TMCI also  assumed  certain  liabilities  associated  with the
       operations of the Division.

                    In  February  1997,  TMCI  filed  a  notice  of  demand  for
       rescission of the purchase and sale of the Division.  The Company filed a
       counterclaim  against TMCI in May, 1997, alleging that TMCI had defaulted
       in  its  obligations  under  the  promissory  notes.  The  disputes  were
       subsequently submitted to arbitration in August, 1997.

                                   (Continued)

                                       10

<PAGE>

                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS





       NOTE A - ACQUISITIONS/DISPOSALS - CONTINUED

       In December  1997,  the Company and TMCI entered  into a  Settlement  and
       Release Agreement (the "Settlement  Agreement"),  releasing each other of
       any and all  respective  claims the  parties  may have had  against  each
       other. The Settlement Agreement provided, in part, that TMCI issue to the
       Company, 137,390 shares of TMCI's common stock to replace the $900,000 of
       promissory  notes and  related  accrued  interest  payable by TMCI to the
       Company.  The  Settlement  Stock is guaranteed to have a minimum value of
       $7.4532  per  share.  In the  event the  Settlement  Stock is sold by the
       Company at less than that  amount,  TMCI is  obligated to pay the Company
       the  difference  between the sales price and the  guaranteed  value.  The
       conclusion of the  disputes,  will allow the Company and TMCI to continue
       their joint sales and marketing arrangements.

               The results of operations include one month of operations for the
       nine month  period ended June 30, 1997.  The balance  sheet  excludes the
       Division as of June 30, 1998 and September 30, 1997.

           Pro forma data. The following  unaudited pro forma summary represents
       the combined  results of operations as if the disposition of the San Jose
       Division  had  occurred  on  October 1,  1996,  and do not  purport to be
       indicative of what would have occurred had the transactions  been made as
       of October 1, 1996, or of results which may occur in the future.  The pro
       forma  weighted  shares is reported as if outstanding at the beginning of
       the period.

                                                   Nine months  ended June 30,
                                                  (amounts in thousands, except
                                                           share data)
                                                       1998          1997
                                                   -----------     -----------
             Net sales                             $    12,114     $    14,935
             Operating income                              337              94
             Net earnings (loss)                          (226)           (378)
             Earnings (loss) per common share:
                Basic                                    (0.05)          (0.12)
                Diluted                                  (0.05)          (0.12)
             Weighted  average  common and 
               dilutive  common  equivalent
               shares outstanding:
                 Basic                                4,452,312      3,101,930
                 Diluted                              4,452,312      3,101,930

                                       11


<PAGE>




                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE B - INVENTORIES

Inventories consist of the following:
                                              June 30,            September 30,
                                                1998                   1997
Raw materials (net of allowance)           $    3,466,407          $   2,531,235
Work-in-process                                 2,123,110                736,928
Finished goods                                     72,117                 87,708
                                           --------------          -------------

                                           $    5,661,634          $   3,355,871
                                           --------------          -------------

       NOTE C - LOAN FROM CREDIT FACILITY

       On  December  8, 1997,  the  Company  obtained  the second term under its
       credit  facility with a bank in the principal  amount of $500,000,  which
       bears  interest at a fixed rate of 10.32% per annum.  The loan is payable
       in 36 monthly installments of $10,417,  including interest, with payments
       to begin in September 1998.

       NOTE D - SUBORDINATED DEBENTURES


       On June 16,  1998,  the Board of  Directors  of the Company  approved the
       issuance  of  up  to  $1,000,000  of  3%  convertible   debentures   (the
       "Debentures")  with a maximum  term of 24  months.  The  Debentures  will
       mature,  unless earlier  converted by the holders,  into shares of common
       stock of the  Company.  The  Company  has  agreed to file a  registration
       statement with the United States Securities and Exchange  Commission with
       respect to the Common Stock of the Company into which the  Debentures may
       be converted.

       The Debentures are  convertible by the holders thereof into the number of
       shares of common stock equal to the face amount of the  Debentures  being
       converted  divided  by the  lesser  of (i)  eighty  percent  (80%) of the
       closing bid price of the Company's common stock as reported on the NASDAQ
       Small Cap market on the day of conversion,  or (ii) $2.75. The Debentures
       may be converted in three equal installments  beginning on the earlier of
       (i) the 75th day of their issuance,  and continuing through the 135th day
       of their  issuance,  or (ii) the day following the effective  date of the
       Registration Statement, through the 60th day following the effective date
       of the Registration Statement. The Company may cause the Debentures to be
       converted  into shares of common stock after the 110th day  following the
       effective  date of the  Registration  Statement,  if the common stock has
       traded at or above $5.50 per share for twenty consecutive days.

                                       12



<PAGE>




                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

       NOTE D - SUBORDINATED DEBENTURES - CONTINUED

     Because of the favorable conversion feature of the debentures,  the Company
     has recognized interest expense relating to the price below market at which
     the debentures  can be converted into common shares of stock.  The interest
     is initially set up as a deferred  charge with an offset to additional Paid
     in Capital.  The deferred interest is amortized over a period corresponding
     to time restrictions as to when the debentures can be converted into stock.
     The resulting charge to interest expense  increases the effective  interest
     rate of the  debentures.  As of June 30,  1998 the  Company  had issued all
     $1,000,000 of the convertible debentures and none were converted.  Deferred
     interest  expense of $250,159 was recorded on the  $1,000,000 in debentures
     relative to the  favorable  conversion  feature and will be amortized  over
     four months.  This  interest  along with the stated 3% interest rate in the
     debentures results in an inherent interest rate of 31%.


       On October 22, 1997,  the Board of Directors of the Company  approved the
       issuance  of  up  to  $1,500,000  of  3%  convertible   debentures   (the
       "Debentures")  with a maximum  term of 24  months.  The  Debentures  will
       mature,  unless earlier  converted by the holders,  into shares of common
       stock of the  Company.  The  Company  has  agreed to file a  registration
       statement with the United States Securities and Exchange  Commission with
       respect to the Common Stock of the Company into which the  Debentures may
       be converted.


       As of June  30,  1998  the  Company  had  issued  all  $1,500,000  of the
       $1,500,000  convertible  debentures  and $800,000  had been  converted to
       common stock at an average price of  approximately  $2.03 per share.

       In connection  with the  $1,500,000 in debentures,  the Company  recorded
       $374,948  of  deferred   interest   expense  related  to  the  beneficial
       conversion  feature.  This  interest when added to the stated 3% interest
       rate of the  debenture  results in an inherent  interest rate of 28% over
       the debentures life of two years.  The Company has amortized  $336,506 of
       this deferred interest through the third quarter.

                                       13



<PAGE>


                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS



NOTE E - STOCK TRANSACTIONS

           1.   Stock issued

       In the second and third  quarters of fiscal year 1998, the Company issued
       89,990  shares of common  stock  associated  with the exercise of certain
       warrants  and  395,214  shares  of  common  stock   associated  with  the
       conversion of subordinated debentures.

       In the first  quarter of fiscal  year 1998,  the  Company  issued  75,000
       shares of common stock associated with the exercise of certain warrants.

           2.   Earnings (loss) per share
        In February  1997,  the  Financial  Accounting  Standards  Board  issued
      Statement of Financial  Accounting  Standard (SFAS) No. 128, "Earnings per
      Share." SFAS No. 128 is effective  for  financial  statements  for periods
      ending  after  December 15,  1997,  and requires  companies to report both
      "basic" and  "diluted"  earnings per share.  A "Basic"  earnings per share
      does not include the  addition of common stock  equivalents  to the shares
      outstanding.  "Diluted" earnings per share requires the addition of common
      stock equivalents to the shares outstanding. Average shares outstanding is
      the  denominator  used  in  "basic"   earnings  per  share   calculations.
      Accordingly,  "basic"  earnings  per share will be higher  than  "diluted"
      earnings per share. This statement  replaces  Accounting  Principles Board
      ("APB") Opinion No. 15,  "Earnings per Share." The effect of adopting SFAS
      128 did not  materially  effect the  Company's  earnings  per  share.  The
      following  tables show the amounts used in computing  earnings  (loss) per
      common share, including the weighted average number of shares and dilutive
      potential common shares

                                               Three months Ended June 30, 1998
                                             Earnings      Shares      Per-Share
                                            ----------   ----------   ----------

        Basic EPS:   Earnings available
          to common  shareholders           $      358    4,586,962   $     0.00
                                                                      ==========
        Effect of Dilutive Securites
          Stock options and warrants                 -      534,191
                                            ----------   ---------- 
        Diluted EPS: Earnings available
          to common shareholders            $      358    5,121,153   $     0.00
                                            ==========   ==========   ==========



                                   (Continued)

                                       14
<PAGE>


                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS





       NOTE E - STOCK TRANSACTIONS -Continued


                                               Three months Ended June 30, 1997
                                             (Loss)        Shares      Per-Share
                                            ----------   ----------   ----------

        Basic EPS:   Loss available
          to common  shareholders           $ (297,879)   3,238,975   $  ( 0.09)
                                                                      =========
        Effect of Dilutive Securites
          Stock options and warrants                -           n/a
                                            ----------   ----------
        Diluted EPS: Loss available
          to common shareholders            $ (297,879)   3,238,975   $   (0.09)
                                            ==========   ==========   =========


           2.   Earnings (loss) per share - Continued

                                               Nine months Ended June 30, 1998
                                             (Loss)        Shares      Per-Share
                                            ----------   ----------   ----------

        Basic EPS:   Earnings available
          to common  shareholders           $ (225,978)   4,452,312   $   (0.05)
                                                                      =========
        Effect of Dilutive Securites
          Stock options and warrants                 -          n/a
                                            ----------   ----------
        Diluted EPS: Loss available
          to common shareholders            $ (225,978)   4,452,312   $   (0.05)
                                            ==========   ==========   ==========

        Options and warrants to purchase  3,030,000  shares were not included in
      the  computation  of EPS because the  exercise  price was greater than the
      average market price of the common shares for the period.




                                       15

<PAGE>



                                               Nine months Ended June 30, 1997
                                             Earnings      Shares      Per-Share
                                            ----------   ----------   ----------
        Basic EPS:   Earnings available
          to common  shareholders           $  233,540    3,101,930   $     0.08
                                                                      ==========
        Effect of Dilutive Securites
          Stock options and warrants                 -      416,167
                                            ----------   ----------
        Diluted EPS: Earnings available
          to common shareholders            $  233,540    3,518,097   $     0.07
                                            ==========   ==========   ==========

        Options and warrants to purchase  3,527,000  shares were not included in
      the  computation  of EPS because the  exercise  price was greater than the
      average market price of the common shares for the period.





                                       16



<PAGE>




                                     ITEM 2.

            MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


 FORWARD-LOOKING   STATEMENTS.  This  report  contains  certain  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,
that involve risks and uncertainties.  In addition, the Company may from time to
time make oral forward-looking statements.  Actual results are uncertain and may
be  impacted  by  the  following  factors.  In  particular,  certain  risks  and
uncertainties  that may impact the  accuracy of the  forward-looking  statements
with  respect to  revenues,  expenses  and  operating  results  include  without
limitation,   cycles  of  customer  orders,  general  economic  and  competitive
conditions and changing consumer trends,  technological  advances and the number
and timing of new product  introductions,  shipments of products and  components
from foreign  suppliers,  and the timing of operating  and changes in the mix of
products  ordered  by  customers.  As a result,  the actual  results  may differ
materially from those projected in the forward-looking statements.

 Because of these and other  factors  that may affect  the  Company's  operating
results,  past  financial  performance  should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.

The following  discussion and analysis  provides certain  information  which the
Company's  management believes is relevant to an assessment and understanding of
the Company's  results of operations  and financial  condition for the three and
nine month periods ending June 30, 1998 and 1997. This discussion should be read
in conjunction  with the audited  financial  statements of the Company and notes
thereto included in the Annual Report of the Company on Form 10-KSB for the year
ended September 30, 1997.

General

Pen  Interconnect,  Inc.  (the  "Company"  or "Pen") is a total  interconnection
solution  provider  offering  internal  and  external  custom  cable and harness
interconnections,  mobile satellite  equipment,  EMSI (Electronic  Manufacturing
Service Industry)  manufacturing  (circuit board assembly) and custom design and
manufacturing  of battery  chargers,  power supplies and  Uninterruptible  Power
Supply UPS systems for original equipment manufactures ("OEMs") in the computer,
peripheral,  telecommunications,  instrumentation, medical and testing equipment
industries.  The Company was incorporated under the laws of the State of Utah on
September 30, 1985. The Company  maintains  divisions located in Salt Lake City,
and Orem, Utah and Irvine, California.

                                       17



<PAGE>




Results of Operations

Effective  March 24, 1995,  the Company  acquired the net assets of the San Jose
Division which has been  accounted for as a purchase.  This division was sold on
November 1, 1996 (Note A).  Therefore,  the statement of operations data include
the results of  operations  for only one month in the nine months ended June 30,
1997.

Net sales.  Net sales for the Company  remained  flat for the three month period
ended June 30, 1998 as compared to the same period in the prior year.  Net sales
have decreased  approximately 20% for the nine month period ending June 30, 1998
as compared  to the same period in the prior year.  The flat sales for the three
month period is the direct result of the start of a significant contract for our
InCirT Division which started during this most recent quarter.  The decrease for
the nine month period  principally  resulted from the loss of a large  customer,
the move out of several  orders into future  quarters of the year and  decreased
orders by several other significant customers.  Such move out and loss of orders
were not able to be replaced within the short-term.

Cost of sales.  Cost of sales as a  percentage  of net sales have  decreased  to
approximately  78% for the three months ended June 30, 1998,  as compared to 91%
for the same  period in the prior  year.  Cost of sales as a  percentage  of net
sales have  decreased  to  approximately  78% for the nine months ended June 30,
1998, as compared to 85% for the same period in the prior year.  These decreases
in costs resulted from reduced  materials  costs due to discounts  obtained from
vendors on several new contracts.  In addition,  the Company has reduced support
costs in cost of goods  sold  during  the  most  recent  nine  month  period  to
correspond with the reduced sales levels.

Operating  expenses.  Operating  expenses have  increased as a percentage of net
sales to  approximately  19% for the three and nine  month  periods  at June 30,
1998, respectively as compared to approximately 17% and 14% for the same periods
in the prior year.  These cost  increases  have  resulted from the following two
areas:  1) Research  and  Development  expenditures  in an effort to develop new
products with  improved  margins and 2)  depreciation  and  amortization  due to
amortization  of  goodwill  and other  intangible  assets  associated  with past
acquisitions.  Sales and marketing actually decreased when compared to the prior
year but reflect an increase in relation to sales due to the  decrease in sales.
General and  Administrative  expenses increased in the three month period due to
increased costs in public relations and the legal and accounting fees associated
with the merger  negotiations with TMCI. Due to the fixed components included in
the other  operating  costs  they  could  not be  significantly  reduced  in the
short-term  and due to the  expected  rebound in sales in future  quarters  such
reductions were not considered necessary.


                                       18

<PAGE>

Other income and expenses.  Excluding extraordinary items consisting of $611,912
or $0.20  per  share  from the  gain on the  sale of the San Jose  Division  and
$336,506,  or $0.08 per share from  interest  expense  related to the  favorable
conversion  feature  of  issued  debentures,  other  income  and  expenses  as a
percentage of net sales of  approximately  1% and 2% respectively  for the three
and nine  months  ended June 30,  1998 are  basically  unchanged  as compared to
approximately 2% for both the three and nine months ended in the prior year.

Net  earnings(loss)  and  earnings(loss)  per share.  Net  earnings  (net of the
$105,156 (before taxes), or $0.02 per share,  interest recorded on the favorable
conversion  feature of  debentures  issued) for the three  months ended June 30,
1998  totaled  $63,451  or  $0.01  basic  per  share,  compared  with a loss  of
($297,879)  or  ($0.09)  basic per share  loss for the same  period in the prior
year.  For the nine  months  ended June 30,  1998 the net  earnings  (net of the
$336,506 (before taxes), or $0.08 per share,  interest incurred on the favorable
conversion  feature of debentures  issued) were $53,400 or $0.01 basic per share
earnings,  compared  with a loss  (before  the  gain  on sale  of  division)  of
($215,272)  or  ($0.07)  basic per share  loss for the same  period in the prior
year. Net earnings were significantly reduced from those previously reported due
to a non-cash interest expense on the favorable conversion feature of debentures
issued in the fiscal year. See Note D to the Financial Statements.

The increase in earnings and earnings per share as compared to the prior periods
(excluding  the  gain  on the  sale of the  division)  is due in  large  part to
improved  pricing from several vendors and cost cutting  efforts  implemented by
management.

Liquidity and Capital Resources

Working  capital  increased to  $3,847,388  on June 30, 1998 from  $1,065,778 on
September 30, 1997.  The increase is  principally  due to the proceeds  received
from the sale of the debentures and from the additional term loan.

Management believes that existing cash balances,  borrowings available under the
line of credit together with cash generated from projected  operations should be
adequate to meet the Company's  anticipated  cash  requirements  during the next
twelve months. However; in the event the Company's operating performance is less
than projected the Company may be forced to seek additional financing. There can
be no assurance that such additional financing, if required, would be available;
and if available would be available on favorable terms.

Inflation and Seasonality

The Company does not believe  that it is  significantly  impacted by  inflation.
Historically,  the computer industry sales tend to decline in December, January,
July and August when  activity in the personal  computer  industry as a whole is
reduced.  However,  the Company has  recently  diversified  into the medical and
telecommunications  products  in an  effort  to offset  the  seasonality  in the
computer industry.
                                       19

<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1.  Legal Proceedings.

               From time to time the Company  has been a party to various  legal
          proceedings arising in the ordinary course of business. The Company is
          not currently a party to any material  litigation  and is not aware of
          any  litigation  threatened  against it that  could have a  materially
          adverse effect on its business.

Item 2.  Changes in the Securities and Use of Proceeds. None

Item 3.  Defaults Upon Senior Securities. None.

Item 4.  Submission  of Matters to a Vote of Security  Holders.  None during the
         quarter.

Item 5.  Other Information. None

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

     A.   Exhibits

         27  Financial Data Schedule.

     B.   Reports on Form 8-K.. None



                                       20


<PAGE>




                                   SIGNATURES

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


PEN INTERCONNECT, INC.

By:  /s/ James S. Pendleton            Date: September 30, 1998
   -------------------------                -------------------
James S. Pendleton,

CEO and Chairman


By: /s/ Wayne R. Wright                Date: September 30, 1998
   -------------------------                -------------------
Wayne R. Wright,
CFO, Principal Accounting
Officer and Vice-Chairman




                                       21