UNITED STATES
                        SECURITIES AND EXCHANGE COMMISION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB
(Mark One)
   [ X ]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended  December 31, 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                I.R.S. Employer Identification No)
of incorporation or organization) (

     1601 Alton Parkway, Irvine CA                     92606
   (Address of Principal Executive Offices)         (Zip Code)

                                 (949) 798-5800
                           (Issuer's telephone number)

    2351 South 2300 West, Salt Lake City, UT           84119

              (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 February 10, 1999, the issuer had 6,069,160  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

Item 1      Financial Statements
            --------------------

            Financial Information                                          3

            Balance Sheets as of December 31, 1998
               (unaudited) and September 30, 1998                         4-5

            Statements of Operations for the three months ended
               December 31, 1998 (unaudited) and 1997 (unaudited)           6

            Statements of Cash Flows for the three months ended
               December 31, 1998 (unaudited) and 1997 (unaudited)          7-8

            Notes to Condensed Financial Statements (unaudited)           9-11

Item 2      Management's Discussion and Analysis or Plan of Operation    12-14
            ---------------------------------------------------------


PART II - OTHER INFORMATION

Item I     Legal Proceedings                                               15

Item 2     Changes in the Securities and Use of Proceeds                   15

Item 3     Defaults Upon Senior Securities                                 15

Item 4     Submission of Matters to a Vote of Security Holders             15

Item 5     Other Information                                               15

Item 6(a)  Exhibits

Item 6(b)  Reports on Form 8-K                                             15

Signatures                                                                 16

                                       2
<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 December 31, 1998 and audited  balance sheet
as of September 30, 1998 (the  Company's  most recent  fiscal  year),  unaudited
condensed  statements of operations for the three months ended December 31, 1998
and 1997, and unaudited condensed  statements of cash flows for the three months
ended  December  31, 1998 and 1997,  together  with  unaudited  condensed  notes
thereto. In the opinion of management of the Company,  the 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, 1998.  The results of operations for the three months ended
December 31, 1998 may not be  indicative of the results that may be expected for
the year ending September 30, 1999.




                                       3
<PAGE>
                             Pen Interconnect, Inc.

                                 BALANCE SHEETS


                                     ASSETS

                                                     December 31,  September 30,
                                                          1998         1998
                                                      (unaudited)
                                                    ---------------  -----------

CURRENT ASSETS
    Cash and cash equivalents ......................   $   316,292   $   657,777
    Receivables
       Trade accounts, less allowance for doubtful
         accounts of $117,002 and $108,575 at
         December 31, and September 30, 1998,
          respectively .............................     3,505,613     3,350,970
       Current maturities of notes receivable ......        35,675        35,675
    Investments in common stock ....................       242,739       242,739
    Inventories (Note B) ...........................     3,220,077     3,680,169
    Prepaid expenses and other current assets ......       168,859       261,375
    Deferred tax asset .............................        41,324        41,324
                                                       -----------   -----------

           Total current assets ....................     7,530,579     8,270,029
                                                       -----------   -----------


PROPERTY AND EQUIPMENT, AT COST
    Production equipment ...........................     2,973,903     2,624,513
    Furniture and fixtures .........................       772,258       837,594
    Transportation equipment .......................        83,522        83,522
    Leasehold improvements .........................       323,566       613,248
                                                       -----------   -----------
                                                         4,153,249     4,158,877
    Less accumulated depreciation ..................     1,737,374     1,680,266
                                                       -----------   -----------

                                                         2,415,875     2,478,611
 OTHER ASSETS
    Notes receivable, less current maturities ......         2,067         3,989
    Investments in common stock ....................       482,220       482,220
    Deferred income taxes ..........................       725,667       725,667
    Goodwill and other intangibles (net) ...........     2,020,945     2,031,685
    Other ..........................................        98,455        98,455
                                                       -----------   -----------

                                                         3,329,354     3,342,016
                                                       -----------   -----------

                                                       $13,275,808   $14,090,656
                                                       ===========   ===========


        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>
                             Pen Interconnect, Inc.

                           BALANCE SHEETS - Continued


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                    December 31,   September 30,
                                                         1998            1998
                                                     ------------  -------------
                                                     (unaudited)
CURRENT LIABILITIES
    Subordinated debentures ....................   $    909,465    $  1,401,429
    Line of credit .............................      3,749,860       4,064,361
    Current maturities of long-term obligations       1,062,550       1,132,538
    Bridge loans (Note C) ......................        896,000            --
    Current maturities of capital leases .......         69,621          69,621
    Accounts payable ...........................      2,662,960       2,926,797
    Accrued liabilities ........................        443,172         389,889
                                                   ------------    ------------

           Total current liabilities ...........      9,793,628       9,984,635

LONG-TERM OBLIGATIONS, less current
   maturities ..................................         51,965          51,965


CAPITAL LEASE OBLIGATIONS,
   less current maturities .....................            810          22,333


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

           Total liabilities ...................     10,012,158      10,224,688

STOCKHOLDERS' EQUITY (Note D)
    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 6,069,160 shares at
     December 31, 1998 and 5,018,437 shares
     at September 30, 1998 .....................         60,692          50,184
    Additional paid-in capital .................     11,582,590      10,890,022
    Accumulated deficit ........................     (8,379,632)     (7,074,238)
                                                   ------------    ------------

           Total stockholders' equity ..........      3,263,650       3,865,968
                                                   ============    ============

                                                   $ 13,275,808    $ 14,090,656
                                                   ============    ============





        The accompanying notes are an integral part of these statements.



                                       5
<PAGE>
                             Pen Interconnect, Inc.

                            STATEMENTS OF OPERATIONS

                         Three months ended December 31,
                                   (unaudited)



                                                      --------------------------
                                                         1998             1997
                                                      ------------- ------------
Net sales ..........................................  $ 4,757,839   $ 3,904,717
Cost of sales ......................................    4,567,468     3,055,373
                                                      -----------   -----------
                                                      -----------   -----------

           Gross profit ............................      190,371       849,344

Operating expenses
    Sales and marketing ............................       81,719       218,381
    Research and development .......................      312,028        88,387
    General and administrative .....................      722,631       435,463
    Depreciation and amortization ..................      112,297       114,275
                                                                    -----------
                                                                    -----------

           Total operating expenses ................    1,228,675       856,506
                                                      -----------   -----------

           Operating loss ..........................   (1,038,304)       (7,162)

Other income (expense)
    Interest expense ...............................     (192,872)      (79,037)
    Other income  (expense), net ...................      (74,218)       30,233
                                                      -----------   -----------

           Total other income (expense) ............     (267,090)      (48,804)
                                                      -----------   -----------

           Loss before income taxes ................   (1,305,394)      (55,966)

Provision (benefit) for income taxes ...............         --         (21,800)
                                                      -----------   -----------

           NET LOSS ................................  $(1,305,394)  $   (34,166)
                                                      ===========   ===========


Loss per common share - basic ......................  $     (0.24)  $     (0.01)
                      - diluted ....................        (0.24)        (0.01)

Weighted-average common shares outstanding - basic .    5,551,257     4,122,863
                                           - diluted    5,551,257     4,122,863



        The accompanying notes are an integral part of these statements.



                                       6
<PAGE>
                             Pen Interconnect, Inc.

                            STATEMENTS OF CASH FLOWS

                         Three months ended December 31,
                                   (unaudited)



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

Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
   Net loss ....................................    $(1,305,394)    $   (34,166)
   Adjustments to reconcile net loss to net
     cash used in operating activities
       Depreciation and amortization ...........        112,297         114,275
       Bad debts ...............................          8,427          14,036
       Contingent stock San Jose agreement .....           --           (40,000)
       Loss on disposal of equipment ...........           --            16,537
       Changes in assets and liabilities
           Trade accounts receivable ...........       (163,070)       (857,006)
           Inventories .........................        460,092        (198,665)
           Prepaid expenses and other
             current assets ....................         92,516        (161,412)
           Accounts payable ....................       (263,837)       (133,502)
           Accrued liabilities .................         53,283        (149,424)
           Income taxes ........................           --           (19,843)
                                                    -----------     -----------

              Total adjustments ................        299,708      (1,415,004)
                                                    -----------     -----------
                                                    -----------     -----------

              Net cash used in
                operating activities ...........     (1,005,686)     (1,449,170)
                                                    -----------     -----------
                                                    -----------     -----------

Cash flows from investing activities
   Purchase of property and equipment ..........        (38,821)        (81,605)
   Issuance of notes receivable ................           --           (39,742)
   Collection on notes receivable ..............          1,922            --
                                                    -----------     -----------

              Net cash used in
                investing activities ...........        (36,899)       (121,347)
                                                    -----------     -----------

                                   (Continued)



                                       7
<PAGE>
                             Pen Interconnect, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                         Three months ended December 31,
                                   (unaudited)



                                                    ----------------------------
                                                           1998          1997
                                                     --------------  -----------
   Cash flows from financing activities
    Principal payments on notes payable .............      (69,988)    (524,412)
    Net change in line of credit ....................     (314,501)      402,653
    Principal payments on bridge loans ..............         --       (100,000)
    Principal payments on long-term obligations .....      (21,523)     (79,697)
    Proceeds from issuance of term loans ............         --         500,000
    Proceeds from issuance of bridge loans ..........      896,000          --
    Proceeds from issuance of subordinated debentures         --       1,000,000
    Proceeds from sale of common stock ..............      211,112       150,000
                                                       -----------   -----------

                  Net cash provided by
                    financing activities ............      701,100     1,348,544
                                                       -----------   -----------
                                                       -----------   -----------

                  Net decrease in cash
                    and cash equivalents ............     (341,485)    (221,973)

Cash and cash equivalents at beginning of period ....      657,777       272,148
                                                       ===========   ===========

Cash and cash equivalents at end of period ..........  $   316,292   $    50,175
                                                       ===========   ===========


Supplemental disclosures of cash flow information
    Cash paid during the period for
       Interest .....................................  $   192,872   $    63,188
       Income taxes .................................         --             100


Noncash investing and financing activities

During the first quarter of fiscal year 1998,  subordinated  debentures totaling
$491,064 were converted into 854,473 shares of common stock.


                                       8
<PAGE>
                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)




NOTE A - ACQUISITIONS/DISPOSITIONS

       Laminating Technologies, Inc.

       On December 23, 1998, the Company signed a definitive  agreement to merge
       with  Laminating  Technologies,  Inc. (LTI) which is expected to close in
       the second or third quarter of fiscal year 1999. Under the Agreement, LTI
       would merge into Pen  Laminating,  Inc.,  a newly  created,  wholly-owned
       subsidiary  of the Company in exchange  for the issuance of shares of the
       Company's  common  stock to the  shareholders  of LTI.  Each share of LTI
       common  stock will be  converted  into a number of the  Company's  common
       stock  based upon a  calculation  which is equal to $0.50  divided by the
       closing  price of the  Company's  common stock on the fifth day following
       the  effective  date of the  registration  statement  covering the merger
       transaction.

       Cables To Go Inc.

       Effective  January 29, 1999,  the Company sold  substantially  all of the
       assets and  liabilities of its custom cable and harness  interconnections
       business to Pen Cabling Technologies,  LLC, a wholly-owned  subsidiary of
       CTG,  Inc.  of  Dayton,  Ohio.  The sales  price was  $1,075,000  and the
       assumption of certain related lease obligations.  Additional payments may
       be made by the purchaser  based upon a post-closing  valuation of certain
       assets  transferred  in the  transaction.  In addition,  the Company will
       receive  royalties  equal to two  percent  on  future  sales of the Cable
       Divisions  products up to an amount of $600,000.  Assets and  liabilities
       sold were as follows:

               Receivables, net ..................  $   310,467
               Inventories .......................      361,880
               Property and equipment, net .......    1,386,267
               Prepaid expenses ..................       19,757
               Other assets ......................       32,390
               Capital leases ....................      (64,886)
                                                    -----------

                          Net assets sold ........    2,045,875
               Cash received .....................    1,075,000
                                                    ===========

                          Loss on sale of Division  $  (970,875)
                                                    ===========

       Mobile Technology Inc.

       On February 1, 1999, the Company entered into a letter of intent with the
       Company's  former CEO for the sale of the MotoSat  division.  The Company
       anticipates the sale will be completed during the second or third quarter
       of fiscal year 1999.  The proposed sale provides for the  acquisition  of
       substantially  all of the assets,  assumption of all  liabilities and the
       operations  of the  division.  The proposed  sale will not generate  cash
       proceeds to the Company.


                                       9
<PAGE>
                             Pen Interconnect. Inc.

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (unaudited)

NOTE A - ACQUISITIONS/DISPOSITIONS - CONTINUED

       Transdigital Communications Inc.

       In December 1998, the Company signed a nonbinding  Letter of Intent (LOI)
       to reverse merge with  Transdigital  Communications  Inc. (TCC). TCC is a
       privately held developer of  entertainment  and database  systems for the
       transportation  markets which includes narrow bodied commercial  aircraft
       and cruise ships. The Company believes that its manufacturing  capability
       will provide vertical integration to TCC as it begins production of these
       database  systems  for their  customers  while  giving  the  Company  the
       opportunity to diversify its product base.


NOTE B - INVENTORIES

       Inventories consist of the following:

                                            December 31,  September 30,
                                               1998             1998
                                          --------------- -------------
           Raw material (net of allowance)   $2,276,309   $2,253,933
           Work-in-process                      903,433    1,391,664
           Finished goods                        40,335       35,572
                                             ==========   ==========
                                             $3,220,077   $3,680,169
                                             ==========   ==========


NOTE C - BRIDGE LOANS

       During the first quarter of FY 1999, the Company secured two bridge loans
       both of which were to be repaid with funds to be received from the merger
       with LTI. The term of each loan was 90 days and carried an interest  rate
       of eight percent.  If the merger with LTI is not  consummated,  the loans
       will be repaid by the issue of  warrants.  One bridge loan was secured in
       November for $500,000 and the other in December for $396,000.

                                       10
<PAGE>
                            Pen Interconnect. Inc.

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (unaudited)


NOTE D - WARRANTS TO PURCHASE COMMON STOCK

       During the first  quarter of FY 1999,  the  Company  issued  warrants  to
       purchase  490,000  shares of the Company's  common  stock.  The following
       table outlines the features of these warrants:

         Number of warrants                Exercise Price       Expiration Date
      -------------------------------    ------------------   ------------------
               150,000                        $1.00                October 2002
               125,000                        $0.875               October 2002
               215,000                        $0.875              November 2001

       Also  during the quarter  ended  December  31,  1999 the  Company  issued
       196,250  shares of common stock in  association  with the  conversion  of
       warrants in existence at the beginning of the quarter and 854,473  shares
       in association with the conversion of subordinated debentures.




                                       11
<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 months
ended December 31, 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, 1998.

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.

Results of Operations

Net sales.  Net sales for the Company  increased  $855,122 or  approximately  22
percent for the three month  period  ended  December 31, 1998 as compared to the
same period in the prior year. This increase resulted primarily from an increase
in sales to one  significant  customer  at the InCirt  Division.  Sales for this
division  increased  41  percent  during  the first  three  months of FY 99 from
$3,391,569 to $2,406,744 during the first three months in FY 98.

Cost of sales.  Cost of sales as a  percentage  of net sales have  increased  to
approximately  96 percent for the three  months  ended  December  31,  1998,  as
compared to 78 percent for the same period in the prior year.  This  increase is
primarily  due to  declining  sales in the  Cable  Division  with  delays in the
reduction of  manufacturing  overhead costs,  and a decrease in the margins on a
contract with a major  customer at the InCirt  Division.  This decrease in price
raised the level of sales required for this division to cover its  manufacturing
and overhead costs before generating profits; a level of sales that the division
was not able to meet during the period.

                                       12
<PAGE>
Operating  expenses.  Operating  expenses  increased during the first quarter of
fiscal 1999 by approximately $372,168. This increase resulted from the following
areas:  (1)  Research  and  development  costs of $223,641  associated  with new
product development at the PowerStream Division;  (2) General and Administrative
costs increased by $287,167 primarily due to legal and audit fees to support the
merger and divestiture discussions and increased overhead expenses at the InCirt
division to support the increased  level of sales  associated  with the contract
expansion with a major customer;  (3) sales and marketing  expenses  declined by
$136,662  due to cash  flow  constraints  and an  inability  to fund  sales  and
marketing programs.

Other income and expenses.  Other income and expenses increased $218,286 for the
three months ended December 31, 1998 as compared to the same period in the prior
year.  This  increase is primarily the result of increased  interest  expense of
$113,835 due to an increase in the average line of credit outstanding during the
quarter over the previous year, from borrowed funds needed to finance a contract
expansion with a major customer at the InCirt division and the related  increase
in  receivables  and  inventories  associated  with that  increase;  $40,000  of
non-operating  income  from  the  TMCI  settlement  recorded  in FY 1998 but not
repeated in FY 1999 and $74,294 in expenses  associated with interest expense on
the subordinated debentures.

Net loss and loss per  share.  Net  loss  for the  first  fiscal  quarter  ended
December 31, 1999 totaled $1,305,394 or $0.24 per share, compared with losses of
$ 34,166 or $0.01 per share for the first fiscal quarter of 1998.  This increase
in the loss per share consists  primarily of ($0.16) due to decreased margins on
sales,  ($0.05) from an increase in research and development costs, ($0.03) from
an increase in  interest  expense and ($0.02)  from an increase in the number of
weighted  average  shares of 1,428,394 for the first three months of fiscal year
1999 over the same period in fiscal year 1998.

Liquidity and Capital Resources

During  the  first  three  months  of FY 99  the  Company  sustained  losses  of
$1,305,394  which  continued the trend of FY 98.  Management  has taken steps to
correct this trend by signing a purchase  agreement  with Cables To Go as of the
date of this filing to sell the Cable division and by signing a letter of intent
to sell the MotoSat division.  With the selling of the these two divisions,  the
Company expects to save approximately  $170,000 per month in operating costs and
interest.  The Company has also signed a definitive  agreement  with  Laminating
Technologies  Inc.  (LTI) to merge with Pen being the  surviving  company.  This
merger will bring additional funds of approximately $1.8 million to the Company.

As a result of these  losses,  the  Company  has had to raise cash  through  two
bridge loans and the exercise of warrants from a re-strike of the purchase price
of the stock.  The bridge loans raised a total of $896,000 while the exercise of
warrants yielded an additional $211,112.

As of the date of this report, it appears that the Company's net tangible assets
will fall below the  amount of $4  million  required  for  continued  listing on
NASDAQ. The Company is currently engaged in acquisition and financing activities
previously  mentioned which the Company's  management  believes will restore the
required level of net tangible assets. However, not all of these activities have
been  completed  as of the date  hereof and there can be no  assurance  that the
Company  will  acquire  sufficient  net  tangible  assets to maintain its NASDAQ
National Market listing.  In such event, the Company's stock might be listed for
trading on the NASDAQ Small Cap Market.

                                       13
<PAGE>
The  Company  anticipates  increases  in  sales  and  new  contracts  with  more
profitable margins  generating a return to profitability  beginning in the third
quarter of FY 99. Until such time,  it is estimated  that between $1 million and
$2  million  will have to be  raised  to  sustain  operations.  These  funds are
expected  to be  raised  from  the  sale  of  convertible  Preferred  Stock  for
approximately  $1  million  and  additional  cash  from  the  LTI  merger.   The
dispositions of the two divisions,  the anticipated  increases in sales from the
remaining divisions and the anticipated return to profitability  should generate
sufficient  cash to fund operations of the Company for the rest of calendar year
1999. Management cannot assure however that these efforts to raise funds nor the
anticipated increases in sales will materialize.

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.

Year 2000 Readiness

In general,  the Year 2000 issue  relates to computers  and other  systems being
unable to  distinguish  between  the years  1900 and 2000  because  they use two
digits,  rather than four, to define the applicable  year.  Systems that fail to
properly recognize such information will likely generate erroneous data or cause
a system to fail possibly resulting in a disruption of operations. The Company's
products do not incorporate such date coding so the Company's efforts to address
the Year  2000  issue  fall in the  following  three  areas:  (1) the  Company's
information  technology  (IT) systems;  (2) the Company's  non-IT systems (i.e.,
machinery,  equipment and devices which utilize  technology  which is "built-in"
such as embedded mirocontrollers); and (3) third-party suppliers. Management has
initiated a program to prepare for  compliance  in these three areas and expects
such  programs  to be  implemented  and  completed  by July 1999.  Costs will be
expensed as incurred and currently are not expected to be material.

The Company  believes its current IT systems,  with a few  exceptions  which are
being addressed, are year 2000 compliant. The Company is currently conducting an
inventory  of non IT  systems  which may have  inadequate  date  coding and will
commence  efforts  to remedy  any  non-compliant  systems by the end of June 30,
1999.  Third party suppliers and customers  present a different  problem in that
the  Company  cannot  control  the  efforts of such third  parties.  The Company
anticipates  requesting  confirmations  from third party suppliers that they are
year 2000 compliant to avoid disruptions of services and supplies.  However, any
failure on the part of such companies with whom the Company  transacts  business
to be year 2000 compliant on a timely basis may adversely  affect the operations
of the Company.

                                       14
<PAGE>



                                     PART II

                                OTHER INFORMATION



Item 1.  Legal Proceedings.   None

Item 2.  Changes in the Securities and Use of Proceeds.

         Warrants to purchase  490,000 shares of Common Stock were issued during
         the quarter ended  December 31, 1998.  The terms of these  warrants and
         the  exercise  price  are  described  in  Note  D of the  Notes  to the
         Financial Statements which are included in this report.

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


            Exhibit           SEC Reference
             Number               Number                Title of Document
       ------------------   ----------------------   ---------------------------
               1                    (11)          Calculation of loss per share
               2                    (27)            Financial Data Schedule


B.       Reports on Form 8-K.   None





                                       15
<PAGE>
                                   SIGNATURES



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


                             PEN INTERCONNECT, INC.

         Dated:  February 22, 1999          By:  /s/ Stephen J. Fryer
                                                ---------------------
                                                Stephen J. Fryer,
                                                CEO


                                           By: /s/ Robert J. Albrecht
                                           --------------------------
                                              Robert J. Albrecht
                                           CFO, Principal Accounting Officer 
                                           and Vice President



                                       16
<PAGE>
                                   Exhibit 11

                             PEN INTERCONNECT, INC.

                        CALCULATION OF EARNINGS PER SHARE
                           FOR THE THREE MONTHS ENDED
                           DECEMBER 31, 1998 AND 1997



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


   Loss to common shareholders                         $(1,305,394)  $  (34,166)
                                                       ===========   ===========


                            Basic EPS
                            ---------

Shares

    Common shares outstanding entire period              5,018,437     4,072,863

    Weighted-average common shares issued
      during period                                        532,820        50,000
                                                       -----------   -----------

    Weighted-average common shares outstanding
      during period - basic                              5,551,257     4,122,863
                                                       ===========   ===========

Loss per common share                                  $     (0.24)  $    (0.01)
                                                       ===========   ===========


                            Diluted EPS
                            -----------

Shares

    Weighted-average common shares outstanding
      during period - basic                              5,551,257     4,122,863

    Diluted effect of stock options and warrants              --            --
                                                       -----------   -----------

    Weighted-average common shares outstanding
      during period - diluted                            5,551,257     4,122,863
                                                       ===========   ===========

Loss per common share - assuming dilution              $     (0.24)  $    (0.01)
                                                       ===========   ===========


For the three  months ended  December 31, 1998 and 1997,  all of the options and
warrants that were outstanding,  were not included in the computation of diluted
EPS because to do so would have been anti-dilutive.