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

(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 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 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 at December 31, 1998
         (unaudited) and September 30, 1998                                  4-5

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

         Statements of Cash Flows for the three months
         ended December 31, 1998 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 1     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                                                           15

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/A 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/A 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


<TABLE>
<CAPTION>
                                                                                     December 31,         September 30,
                                                                                         1998                 1998
                                                                                  -----------------    ------------------
                                                                                     (unaudited)
CURRENT ASSETS
<S>                                                                                   <C>                   <C>
      Cash and cash equivalents                                                       $     316,292         $     657,777
      Trade accounts receivables, less allowance for
         doubtful accounts of $117,002 and
         $108,575 at December 31, 1998 and
          September 30, 1998, respectively                                                3,469,338             3,350,970
      Current maturities of notes receivable                                                 35,675                35,675
      Investments in common stock                                                           242,739               242,739
      Inventories                                                                         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                                                     7,494,304             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                                                       1,751,694             1,680,266
                                                                                  -----------------    ------------------
                                                                                          2,401,555             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                                                 1,997,195             2,031,685
      Other                                                                                  98,455                98,455
                                                                                  -----------------    ------------------
                 Total other assets                                                       3,305,604             3,342,016
                                                                                  -----------------    ------------------
                                                                                        $13,201,463           $14,090,656
                                                                                  =================    ==================

</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>
                                                                                     December 31,         September 30,
                                                                                         1998                 1998
                                                                                  -----------------    ------------------
                                                                                     (unaudited)
CURRENT LIABILITIES
<S>                                                                                    <C>                  <C>
      Subordinated debentures                                                          $    909,465        $   1,401,429
      Line of credit                                                                      3,569,254            4,064,361
      Current maturities of long-term obligations                                         1,958,550            1,132,538
      Current maturities of capital leases                                                   69,621               69,621
      Accounts payable                                                                    2,675,417            2,926,797
      Accrued liabilities                                                                   476,818              389,889
                                                                                  -----------------    -----------------
                 Total current liabilities                                                9,659,125            9,984,635

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

CAPITAL LEASE OBLIGATIONS, less
      current maturities                                                                        809               22,333

DEFERRED INCOME TAXES                                                                       165,755              165,755
                                                                                  -----------------    -----------------
                 Total liabilities                                                        9,877,654           10,224,688

 STOCKHOLDERS' EQUITY
      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 at September 30, 1998                                          60,692               50,184
      Additional paid-in capital                                                         11,582,590           10,890,022
      Accumulated deficit                                                                (8,319,473)          (7,074,238)
                                                                                  -----------------    -----------------
                 Total stockholders' equity                                               3,323,809            3,865,968
                                                                                  -----------------    -----------------
                                                                                        $13,201,463          $14,090,656
                                                                                  =================    =================


</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
                                                                                                    December 31,
                                                                                               1998               1997
                                                                                        -----------------   ----------------
<S>                                                                                          <C>                <C>
Net sales                                                                                    $  4,757,839       $  3,904,717
Cost of sales                                                                                   4,591,218          3,055,373
                                                                                        -----------------   ----------------

      Gross profit                                                                                166,621            849,344


Operating expenses

      Sales and marketing                                                                          81,719             51,815
      Research and development                                                                    167,697             88,387
      General and administrative                                                                  768,733            602,029
      Depreciation and amortization                                                               126,617            114,275
                                                                                        -----------------   ----------------
                 Total operating expenses                                                       1,144,766            856,506
                                                                                        -----------------   ----------------

                 Operating loss                                                                  (978,145)            (7,162)


Other income (expense)

      Interest expense                                                                           (192,872)           (79,037)
      Other income, net                                                                           (74,218)            30,233
                                                                                        -----------------   ----------------
                 Total other income (expense)
                                                                                                 (267,090)           (48,804)
                                                                                        -----------------   ----------------


Loss before income taxes                                                                       (1,245,235)           (55,966)



Provision (benefit) for income taxes                                                                    0            (21,800)
                                                                                        -----------------   ----------------


Net loss                                                                                      $(1,245,235)      $    (34,166)
                                                                                        =================   ================


Loss per common share

      Basic and diluted (Note E)                                                           $        (0.22)     $       (0.01)
                                                                                        =================   ================


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

</TABLE>






              The accompanying notes are an integral part of these
                                  statements.

                                        6


<PAGE>



                             Pen Interconnect, Inc.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                      Three months ended
                                                                                         December 31,
                                                                                   1998               1997
                                                                               ------------       ------------
Increase (decrease) in cash and cash equivalents
  Cash flows from operating activities
<S>                                                                             <C>                <C>
  Net loss                                                                      $(1,245,235)       $   (34,166)
  Adjustments to reconcile net loss to net cash
    used in operating activities

          Depreciation and amortization                                             126,617            114,275
          Bad debts                                                                   8,427             14,036
          Contingent stock San Jose agreement                                             0            (40,000)
          Loss on disposal of equipment                                                   0             16,537
          Changes in asset and liabilities
               Trade accounts receivable                                           (126,795)          (857,006)
               Inventories                                                          460,092           (198,665)
               Prepaid expenses and other assets                                     98,978           (161,412)
               Accounts payable                                                    (251,380)          (133,502)
               Accrued liabilities                                                   86,929           (149,424)
               Income taxes                                                               0            (19,843)
                                                                               ------------       ------------
                  Total adjustments                                                 402,868         (1,415,004)
                                                                               ------------       ------------
                  Net cash used in
                     operating activities                                          (842,367)        (1,449,170)
                                                                               ------------       ------------


  Cash flows from investing activities
    Purchase of property and equipment                                              (22,433)           (81,605)
    Issuance of notes receivable                                                          0            (39,742)
    Collections on notes receivable                                                   1,922                  0
                                                                               ------------       ------------
                  Net cash used in
                     investing activities                                           (20,511)          (121,347)
                                                                               ------------       ------------
</TABLE>




                                   (Continued)

                                        7


<PAGE>



                             Pen Interconnect, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                             Three months ended
                                                                                                December 31,
                                                                                           1998               1997
                                                                                     -----------------   -----------------
  Cash flows from financing activities

<S>                                                                                   <C>                <C>
    Principal payments on long-term obligations                                                (69,988)           (524,412)
    Net change in line of credit                                                              (495,107)            402,653
    Principal payments on bridge loans                                                               0            (100,000)
    Principal payments on capital lease obligations                                            (21,524)            (79,697)
    Proceeds from issuance of long-term obligations                                            896,000             500,000
    Proceeds from issuance of subordinated debentures                                                0           1,000,000
    Proceeds from sale of common stock                                                         212,012             150,000
                                                                                     -----------------   -----------------
                        Net cash provided by
                           financing activities                                                521,393           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                                                                     $              0   $               0

</TABLE>

Noncash investing and financing activities
During the first quarter of FY 98,  subordinated  debentures  totaling  $491,064
were converted into 854,473 shares of common stock.




              The accompanying notes are an integral part of these
                                  statements.

                                        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).  The  merger  calls  for the
       acquisition of all assets and liabilities of LTI by issuing shares of Pen
       stock in exchange for shares of LTI stock. The definitive agreement calls
       for Pen to exchange  one share of its stock for a number of shares of LTI
       stock  calculated  by taking the market price of Pen's stock and dividing
       it by $0.50.  The Company is  currently  in the process of filing an Form
       S-4 with the SEC in completing this  transaction.  It is anticipated that
       the merger will be brought before LTI's  shareholders for a final vote in
       May of this year.  This merger is expected  to bring  approximately  $1.8
       million in cash to the Company to be used in funding operations.

       Cables To Go Inc.

       On January  29,  1999 the  Company  signed a purchase  agreement  to sell
       certain assets and transfer certain  liabilities of the Cable division to
       Cables  To Go Inc  (CTG).  CTG  purchased  certain  of  the  receivables,
       inventory,  machinery and equipment and assumed capital lease liabilities
       for $1,075,000.  The CTG transaction yielded a gain of $68,988;  however,
       assets  remaining with the Company after the transaction when written off
       resulted in a charge of $1,039,863 to income yielding a net loss from the
       transaction  of  $970,875.   Although  the  net  transaction   yielded  a
       substantial  loss,  the Company is expected to save  $62,000 per month in
       cash and operating  losses which  management feels is necessary to return
       the Company to profitable  operations on a monthly  basis.  The agreement
       with CTG also provides for royalty  payments  equal to 2 percent of sales
       to be paid  quarterly  up to an amount of $600,000  of which  $150,000 is
       guaranteed.

       Mobile Technology Inc.

       On  February  1, 1999 the  Company  signed a letter of intent with Mobile
       Technology  Inc. (MTI) to sell all assets and  liabilities of the MotoSat
       division.  The  purchase  price is $600,000  which will be supported by a
       note for said amount to paid at a rate of $60,000 for ten years. Payments
       against this note will be offset against  obligations  the Company has to
       pay Jim Pendleton,  principal  owner of MTI and former CEO of the Company
       for retirement  benefits under an employment  contract  entered into with
       the  Company.  The  agreement  requires  the Company to  maintain  and/or
       provide a $300,000  credit  facility  with the  Company's  major  lender.
       Inasmuch as MTI does not currently  have the working  capital to cash out
       the Company from its obligation  with its major lender,  the Company will
       retain  ownership of MotoSat  receivables  and inventory  which are being
       used  as  collateral  for  advances  to the  Company.  Future  sales  and
       purchases of inventory  will have to continue to be used as collateral to
       raise the cash needed to sustain  operations until independent  financing
       can be secured.  There is no guarantee  however that this  financing will
       ever be able to be secured.

                                       9

<PAGE>


                             PEN INTERCONNECT, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                   (UNAUDITED)





NOTE A - ACQUISITIONS/DISPOSITIONS - CONTINUED

       Transdigital Communications, Inc.

       The Company  signed a  definitive  agreement  to merge with  Transdigital
       Communications,  Inc. (TCC) in July of 1999.  The agreement,  which would
       result in a reverse merger with TCC management becoming the management of
       the new company,  stipulated  various closing conditions for both Pen and
       TCC.  As of  this  date,  it is  doubtful  that  the  closing  conditions
       stipulated  in the  agreement  will be met and both parties have mutually
       agreed to terminate the agreement,  although a writing to this effect has
       not been completed.


NOTE B - INVENTORIES

       Inventories consist of the following:
                                           December 31,      September 30,
                                               1998              1999
                                          --------------   ----------------
Raw materials (net of allowance)          $    2,276,309   $      2,252,933
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 1st  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 of 8
       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 $400,000 and are included in
       long-term obligations.



                                       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               Exercise                 Expiration
   warrants                 price                      date
------------------     ----------------       ----------------------
150,000                     $1.000                     October 2002
125,000                     $0.875                     October 2002
215,000                     $0.875                    November 2001


                                       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 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.

Potential  merger.  The  Company  signed a  definitive  agreement  to merge with
Transdigital  Communications,  Inc. (TCC) in July of 1999. The agreement,  which
would result in a reverse merger with TCC management  becoming the management of
the new company,  stipulated various closing conditions for both Pen and TCC. As
of this date,  it is doubtful  that the  closing  conditions  stipulated  in the
agreement  will be met and both parties have  mutually  agreed to terminate  the
agreement, although a writing to this effect has not been completed.


                                       12

<PAGE>





Results of Operations

Net sales.  Net sales for the Company  increased  $853,122 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 from an increase in the
Alaris contract at the InCirt division. Sales for this division during the first
three months of FY 99 were  $3,391,569  compared to $2,100,000  during the first
three  months in FY 98.  This  increase  is offset by a decline  in sales of the
Cable division of $350,000.


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
due to declining  sales in the cable division and no reduction in overhead costs
and a decrease  in the margins on the Alaris  contract  at the InCirt  division.
This decrease in prices  raised the  breakeven  point beyond where this division
has sustained sales.


Operating  expenses.  Operating  expenses  increased during the first quarter of
fiscal 1999 by approximately  $288,260.  This increase resulted in the following
areas:  (1)  Research and  development  of $79,310  associated  with new product
development costs in the PowerStream  Division;  (2) General and  Administrative
costs increased by $166,704 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 with the Alaris  contract;  and
(3) Sales and  marketing  expenses  increased by $29,904  primarily due to sales
efforts made to replace sales lost in the sale of the Cable division.

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 the result of increased  interest expense of $113,835 due
to an  increase  in the average  line of credit  outstanding  during the quarter
resulting  primarily from the Alaris  contract  expansion at the InCirt division
and the related  increase in  receivables  and  inventory  associated  with that
increase,  $40,000 of non-operating income from the TMCI settlement booked in FY
1998 but not  repeated  in FY 1999  and  $74,294  in  expenses  associated  with
interest  expense on the  subordinated  debentures  and with the Finova  line of
credit.

Net earnings (loss) and earnings (loss) per share. Net loss for the first fiscal
quarter  ended  December  31, 1999  totaled  ($1,245,235)  or ($0.22) per share,
compared  with losses of  ($34,166)  or ($0.01)  per share for the first  fiscal
quarter of 1998.  The  increase  in the loss per share of  ($0.21) is  primarily
caused by ($0.12) due to decreased margins on sales, ($0.01) from an increase in
research and development costs, ($0.03) from an increase in interest expense and
($0.02) from an increase in other expenses.

Liquidity and Capital Resources

During  the  first  three  months  of FY 99  the  Company  sustained  losses  of
$1,245,235  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  definitive
agreement with Jim Pendleton to sell the MotoSat  division.  With the selling of
the two  aforementioned  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.


                                       13

<PAGE>





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, based on the cash to be received from the merger
with LTI,  raised a total of $896,000 while the exercise of warrants  yielded an
additional $212,012.

The  Company  anticipates  increases  in  sales  and 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  Preferred  Convertible
stock for  approximately  $1 million and  additional  loans on the expected cash
from the LTI merger.

Management believes that these additional sources of funds will be sufficient to
sustain  operations  through the second  quarter and into the third quarter when
sales increases are expected. Management also believes that sales increases from
new  contracts  with  better  margins  is  necessary  to return  the  Company to
achieving  positive  earnings.  Management  cannot guarantee  however that these
efforts to raise funds nor the expected 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.


                                       14

<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 has been subpoenaed to
answer why an obligation of $79,000 to YC Intl.  has not been paid.  The Company
does not  dispute  the debt and  currently  does not have the  funds to pay this
obligation but intends to use funds from the issuance of  Convertible  Preferred
stock or additional bridge loans to satisfy this debt.

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

Warrants  to purchase  490,000  shares of Common  Stock were  issued  during the
quarter. The terms of these warrants and the exercise price are as follows:

    Number of               Exercise                  Expiration
    warrants                  price                      date
-----------------        ---------------       ------------------------
150,000                      $1.000                       October 2002
125,000                      $0.875                       October 2002
215,000                      $0.875                      November 2001


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.

Exhibits

         11  Calculation of earnings (loss) per share.

         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.


         September 14, 1999         By:  /s/ Stephen J. Fryer
                                         -----------------------------
                                    Stephen J. Fryer,
                                    President and CEO


         September 14, 1999         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 (LOSS) PER SHARE
                           FOR THE THREE MONTHS ENDED
                           DECEMBER 31, 1998 AND 1997



<TABLE>
<CAPTION>
                                                                                          1998              1997
                                                                                     ---------------   ---------------
<S>                                                                                  <C>               <C>
Loss available to common shareholders                                                $    (1,245,235)  $       (34,166)
                                                                                     ===============   ===============
     Basic EPS
Common shares outstanding  entire period                                                   5,018,437         4,072,863
Weighted averabe common shares issued during period                                          532,820            93,089
                                                                                     ---------------   ---------------

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

Loss per common share - basic                                                        $         (0.22)  $         (0.01)
                                                                                     ===============   ===============

     Diluted EPS
Weighted average common shares outstanding during period - basic                           5,551,257         4,122,863
Dilutive effect of stock operions and warrants                                                     0                 0
                                                                                     ---------------   ---------------

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

Loss per common share - diluted                                                      $         (0.22)  $         (0.01)
                                                                                     ===============   ===============
</TABLE>


                                       17