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     March 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 May 11,  1998,  the  issuer  had  4,627,149  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 March 31, 1998
       (unaudited) and September 30, 1997                           4-5

       Statements of Operations  for the
       Quarters Ended March 31, 1998 and 1997 and
       six month periods ended March 31, 1998 and 1997
       (unaudited)                                                  6

       Statements of Cash Flows for the six month
       periods ended March 31, 1998 and 1997 (unaudited)            7-9

       Notes to Condensed Financial Statements (unaudited)        10-15

Item 2 Management's Discussion and Analysis or Plan of Operation  16-18

PART II - OTHER INFORMATION

Item 1     Legal Proceedings                                        19

Item 2     Changes in the Securities and Use of Proceeds            19

Item 3     Defaults Upon Senior Securities                          19

Item 4     Submission of Matters to a Vote of Security Holders      19

Item 5     Other Information                                        19

Item 6(a). Exhibits

Item 6(b). Reports on Form 8-K                                      19

Signatures                                                          20



<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 March 31,  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
     March 31,  1998 and 1997,  and six month  periods  ended March 31, 1998 and
     1997,  and unaudited  condensed  statements of cash flows for the six month
     periods ended March 31, 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 six months  ended
     March 31, 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>
                                                                                  March 31,          September 30,
                                                                                    1998                  1997
                                                                               -------------         -------------
                                                                                (Unaudited)
CURRENT ASSETS
<S>                                                                             <C>                   <C>         
    Cash and cash equivalents                                                   $    111,311          $    272,148
    Receivables
        Trade accounts,  less  allowance  for doubtful  accounts 
            of $116,196 and $137,058 at March 31, 1998 and 
            September 30, 1997, respectively.                                      2,858,324             2,093,056
        Current maturities of notes receivable (Note A)                               27,978               357,006
    Investments in common stock (Note A)                                             740,000               400,000
Inventories (Notes B)                                                              4,319,519             3,355,871
    Prepaid expenses and other current assets                                        359,511               289,991
    Deferred income taxes                                                            160,832               141,324
                                                                               -------------         -------------

                    Total current assets                                           8,577,475             6,909,396


PROPERTY AND EQUIPMENT, AT COST
        Production equipment                                                       2,526,820             2,418,368
        Furniture and fixtures                                                       851,340               834,971
        Transportation equipment                                                      83,522                69,217
        Leasehold improvements                                                       368,137               368,137
                                                                                 -----------        --------------

                                                                                   3,829,819             3,690,693
        Less accumulated depreciation                                              1,447,938             1,303,063
                                                                                 -----------          ------------

                                                                                   2,381,881             2,387,630
OTHER ASSETS
    Notes receivable, less current maturities (Note A)                                86,512               607,524
    Investments in common stock  (Note A)                                            684,000                    -
    Deferred income taxes                                                          1,367,819             1,392,658
    Goodwill and other intangibles (net)                                           2,205,247             2,287,146
    Other                                                                            505,308               322,630
                                                                                ------------         -------------

                                                                                   4,848,886             4,609,958
                                                                                 -----------          ------------

                                                                                 $15,808,242           $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>
                                                                                   March 31,         September 30,
                                                                                      1998              1997
                                                                               -------------         -------------
                                                                            (Unaudited)
CURRENT LIABILITIES
<S>                                                                              <C>                   <C>        
    Notes payable                                                                $    66,603           $   641,505
    Bridge loan                                                                          -                 100,000
    Line of credit                                                                 2,891,491             2,237,690
    Current maturities of long-term obligations                                      314,643               263,255
    Current maturities of capital leases                                              66,464                66,464
    Accounts payable                                                               2,542,617             2,053,348
    Accrued liabilities                                                              302,200               481,356
                                                                                ------------               -------

                    Total current liabilities                                      6,184,018             5,843,618

LONG-TERM OBLIGATIONS, less current
    maturities      (Note C)                                                         985,679               681,722

CAPITAL LEASE OBLIGATIONS, less current
    maturities                                                                        40,777                70,889

SUBORDINATED DEBENTURES, less deferred
    interest on favorable conversion feature (Note D)                                736,350                     -

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

                    Total liabilities                                              8,112,579             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
        4,384,987  shares at March 31, 1998 and
        4,072,863  shares at September 30, 1997                                       43,850                40,729
    Additional paid-in capital                                                     9,507,004             8,733,126
    Accumulated deficit                                                           (1,855,191)           (1,628,855)
                                                                               --------------       ---------------

                    Total stockholders' equity                                     7,695,663             7,145,000
                                                                               -------------           -----------

                                                                                 $15,808,242           $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 March 31,                Six months ended March 31,
                                                                  1998               1997                   1998          1997
                                                            --------------    --------------           ------------   ------------
<S>                                                         <C>               <C>                      <C>            <C>         
Net sales                                                   $    3,698,727    $   5,482,251            $  7,603,444   $ 10,740,637
Cost of sales                                                    2,842,148        4,471,980               5,897,521      8,829,116
                                                            --------------    --------------           ------------   ------------
                 Gross profit                                      856,579         1,010,271              1,705,923      1,911,521

Operating expenses
       Sales and marketing                                         209,110           262,793                427,491        465,112
       Research and development                                    104,982            (4,939)               193,369         40,369
       General and administrative                                  204,079           390,793                639,542        725,151
       Depreciation and amortization                               127,662            96,389                241,937        188,678
                                                            --------------    --------------           ------------   ------------

                 Total operating expenses                          645,833           745,036              1,502,339      1,419,310
                                                            --------------    --------------           ------------   ------------
                 Operating income                                  210,746           265,235                203,584        492,211

Other income (expense)
       Interest expense (Note D)                                  (407,020)         (128,613)              (486,057)      (268,776)
       Gain on sale of division (Note A)                                -                  -                      -        611,912
       Other income (expense), net                                   4,104            41,414                 34,337         57,672
                                                            --------------    --------------           ------------   ------------

                 Total other income (expense)                     (402,916)          (87,199)              (451,720)       400,808
                                                            --------------    --------------           ------------   ------------

Earning (loss) before income taxes                                (192,170)          178,036               (248,136)       893,019

Income taxes (benefit) expense                                           -            76,049                (21,800)       361,600
                                                            --------------    --------------           ------------   ------------

Net earnings (loss)                                         $     (192,170)   $      101,987           $   (226,336)  $    531,419
                                                            ==============    ==============           ============   ============

Earnings (loss) per common share:
  Basic                                                     $        (0.05)   $         0.03           $      (0.05)  $       0.18
                                                            ==============    ==============           ============   ============
  Diluted                                                   $        (0.05)   $         0.03           $      (0.05)  $       0.13
                                                            ==============    ==============           ============   ============
Weighted average common and dilutive
    common equivalent shares outstanding
       Basic                                                     4,234,009         3,033,407              4,165,952      3,033,407
                                                            ==============    ==============           ============   ============
       Diluted                                                   4,234,009         3,880,407              4,165,952      4,040,407
                                                            ==============    ==============           ============   ============
</TABLE>




        The accompanying notes are an integral part of these statements.


                                        6



<PAGE>




                             Pen Interconnect, Inc.

                            STATEMENTS OF CASH FLOWS

                         For six months ended March 31,

                                   (Unaudited)


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

Increase (decrease) in cash and cash equivalents
    Cash flows from operating activities
<S>                                                                           <C>                   <C>           
        Net earnings(loss)                                                    $     (226,336)       $      531,419
        Adjustments to reconcile net earnings (loss)
            to net  cash used in operating activities
               Depreciation and amortization                                         241,937               188,678
               Amortization of deferred interest                                     231,350                     -
               Bad debts                                                              14,527               (22,807)
               Gain on sale of division                                                   -               (611,912)
               Contingent stock San Jose agreement                                   (40,000)                   -
               Loss on disposal of equipment                                          16,534                    -
               Deferred taxes                                                             -                 79,544
               Changes in assets and liabilities
                    Trade accounts receivable                                       (779,795)             (367,718)
                    Inventories                                                     (963,648)               57,050
                    Prepaid expenses and other assets                               (164,054)             (249,298)
                    Accounts payable                                                 489,269              (680,615)
                    Accrued liabilities                                             (263,156)             (203,414)
                    Income taxes                                                       5,331               269,328
                                                                                    --------         -------------

                        Total adjustments                                         (1,211,705)           (1,541,164)
                                                                                 -----------        ---------------

                        Net cash used in
                        operating activities                                      (1,438,041)           (1,009,745)
                                                                                 ------------       --------------

    Cash flows from investing activities
        Purchase of property and equipment                                          (158,967)             (274,210)
        Proceeds from sale of division                                                   -               2,000,000
        Issuance of notes receivable                                                 (72,760)              (34,305)
        Collections on notes receivable                                               22,800                    -
                                                                                 -----------      ---------------

                        Net cash (used in) or provided
                        by investing activities                                     (208,927)            1,691,485
                                                                                  -----------          -----------
</TABLE>







                                        7
                                   (Continued)


<PAGE>



                             Pen Interconnect, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                       For the six months ended March 31,


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

    Cash flows from financing activities
<S>                                                                                 <C>                          
        Principal payments on notes payable                                         (574,902)                   -
        Net change in line of credit                                                 653,801            (1,455,921)
        Proceeds from bridge loan                                                         -                700,000
        Principal payments on bridge loan                                           (100,000)                   -
        Principal payments on long-term obligations                                 (174,767)              (44,177)
        Proceeds from issuance of subordinated debentures                          1,000,000                    -
        Proceeds from issuance of long-term obligation                               500,000                    -
        Proceeds from sale of common stock                                           181,999                    -
                                                                                ------------     -----------------

                        Net cash (used in) or provided
                        by financing activities                                    1,486,131              (800,098)
                                                                               -------------         --------------

                        Net decrease in cash
                            and cash equivalents                                    (160,837)             (118,358)

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

Cash and cash equivalents at end of period                                    $      111,311        $       51,087
                                                                              ==============        ==============

Supplemental disclosures of cash flow information

    Cash paid during the period for
        Interest                                                            $       243,728           $   272,477
        Income taxes                                                                      -                     -
</TABLE>





                                        8
                                   (Continued)



<PAGE>



                             Pen Interconnect, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                For the six months ended March 31, 1998 and 1997

Non-cash investing and financing activities

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

       PowerStream 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
       six month  period ended March 31, 1997.  The balance  sheet  excludes the
       Division as of March 31, 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.

                                                    Six months  ended March 31,
                                                       (amounts in thousands,
                                                        except share data)
                                                        1997           1998
                Net sales                            $ 7,603        $ 10,455
                Operating income                         204             472
                Net earnings (loss)                     (226)            157
                Earnings (loss) per common share:
                    Basic                              (0.05)           0.05
                    Diluted                            (0.05)           0.04
                Weighted  average  common and 
                  dilutive  common  equivalent
                  shares outstanding:
                    Basic                          4,165,952       3,033,407
                    Diluted                        4,165,952       4,040,407



                                       11


<PAGE>



                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE B - INVENTORIES

Inventories consist of the following:
                                           March 31,         September 30,
                                             1998                 1997
                                        --------------       -------------
Raw materials (net of allowance)        $    3,161,423       $   2,531,235
Work-in-process                              1,102,710             736,928
Finished goods                                  55,386              87,708
                                        --------------       -------------

                                        $    4,319,519       $   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 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.

       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.

       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.


                                       12


<PAGE>
                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS



       NOTE D - SUBORDINATED DEBENTURES - CONTINUED

     

       As of March 31, 1998 the Company had issued  $1,100,000 of the $1,500,000
       convertible debentures and $320,000 had been converted to common stock at
       an average price of approximately $2.18 per share (Note F).

       In connection  with the  $1,100,000 in debentures,  the Company  recorded
       $275,000  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 24%. The
       Company  amortized  $231,350  of this  deferred  interest  in the  second
       quarter.

NOTE E - STOCK TRANSACTIONS

           1.   Stock issued

       In the second  quarter of fiscal  year 1998,  the Company  issued  89,990
       shares of common stock  associated with the exercise of certain  warrants
       and 147,092  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  following  table
      illustrates the effect on the Company of presenting EPS in accordance with
      SFAS No. 128.



                                       13
                                   (Continued)


<PAGE>



                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE E - STOCK TRANSACTIONS - CONTINUED

           2.   Earnings (loss) per share - continued

                                               Three months Ended March 31, 1998
                                                Earnings     Shares    Per-Share
                                               ----------   ---------  ---------
        Basic EPS:   Earnings available
          to common  shareholders              $(192,170)   4,234,009  $  (0.05)
                                                                       ========
        Effect of Dilutive Securites
          Stock options and warrants                   -            -
                                                  ------    ---------
        Diluted EPS: Earnings available
          to common shareholders               $(192,170)   4,234,009  $  (0.05)
                                               ==========   =========  ========



        Due to the above loss all outstanding  common stock warrants and options
      were excluded as they would decrease the loss per share (anti-dilutive).

                                               Three months Ended March 31, 1997
                                                Earnings     Shares    Per-Share
                                               ----------   ---------  ---------
        Basic EPS:   Earnings available
          to common  shareholders              $  101,987   3,033,407  $    0.03
                                                                       =========
        Effect of Dilutive Securites
          Stock options and warrants                    -     847,000
                                               ----------   ---------
        Diluted EPS: Earnings available
          to common shareholders               $  101,987   3,880,407  $    0.03
                                               ==========   =========  =========

                                                 Six months Ended March 31, 1998
                                                Earnings     Shares    Per-Share
                                               ----------   ---------  ---------
        Basic EPS:   Loss available
          to common  shareholders              $ (226,336)  4,165,952  $  (0.05)
                                                                       ========
        Effect of Dilutive Securites
          Stock options and warrants                   -            -
                                               ----------   ---------
        Diluted EPS: Loss available
          to common shareholders               $ (226,336)  4,165,952  $  (0.05)
                                               ==========   =========  =========

        Due to the above loss all outstanding  common stock warrants and options
      of  5,102,500  were  excluded  as they would  decrease  the loss per share
      (anti-dilutive).




                                       14



<PAGE>



                             Pen Interconnect, Inc.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE E - STOCK TRANSACTIONS - CONTINUED

           2.   Earnings (loss) per share - continued

                                                 Six months Ended March 31, 1997
                                                Earnings     Shares    Per-Share
                                               ----------   ---------  ---------
        Basic EPS:   Earnings available
          to common  shareholders              $  531,419   3,033,407  $    0.18
                                                                       =========
        Effect of Dilutive Securites
          Stock options and warrants                    -   1,007,000
                                               ----------   --------- 
        Diluted EPS: Earnings available
          to common shareholders               $  531,419   4,040,407  $    0.13
                                               ==========   =========  =========



Warrants  to  purchase  2,850,000  shares of common  stock at $6.50 a share were
outstanding  during  the  periods  presented.  They  were  not  included  in the
computation  of EPS because  their  exercise  price was greater than the average
market price of the common shares.



NOTE F - SUBSEQUENT EVENTS

       In April 1998, the Company  issued the remaining  $400,000 of convertible
debentures  and  received  proceeds  of  $363,000  (net of fees)  (Note  D).  In
addition,  another $330,000 of the original debentures were converted to 162,162
shares of common stock at an average  price of  approximately  $2.035 per share.
Deferred interest expense of $99,148 was recognized on the remaining $400,000 of
debentures which will be amortized over five months. (Note D).





                                       15


<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
six month periods ending March 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, 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 Tustin, California.






                                       16


<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 six months ended March 31,
1997.

Net sales. Net sales for the Company decreased approximately 33% and 29% for the
three and six  month  periods  ending  March 31,  1998 as  compared  to the same
periods in the prior year,  respectively.  These decreases  principally resulted
from the loss of a large  customer,  the move  out of  several  orders  into the
second  half 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.  However, the Company has received several significant orders to
be shipped within the next six month period.

Cost of sales.  Cost of sales as a  percentage  of net sales have  decreased  to
approximately  77% for the three months ended March 31, 1998, as compared to 82%
for the same  period in the prior  year.  Cost of sales as a  percentage  of net
sales have  decreased  to  approximately  78% for the six months ended March 31,
1998, as compared to 82% 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  six  month  period  to
correspond with the reduced sales levels.

Operating expenses.  Operating expenses have increased as a percent of net sales
to  approximately  17% and 20% for the three and six month  periods at March 31,
1998, respectively as compared to approximately 14% and 13% for the same periods
in the prior year.  These cost  increases  have  resulted in 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.  Other  operating  costs  (Sales and  marketing  and  General  and
Administrative) actually decreased when compared to the prior year but reflect a
increase  in relation  to sales due to the  decrease in sales.  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 the next
two quarters such reductions may not be necessary in the future.

Other  income  and  expenses.   Excluding  extracordinary  items  consisting  of
$611,912,  ($0.20) per share, from the gain on the sale of the San Jose Division
and $231,350,  ($0.05) per share,  of interest  expense related to the favorable
conversion  feature  of  issued  debentures,  other  income  and  expenses  as a
percentage of net sales have increased to  approximately 5% and 3% for the three
and six months ended March 31, 1998 as compared to approximately 2% for both the
three and six months  ended in the prior year.  This  increase is  primarily  in
interest  expense and is due to an increased sales order for the next six months
that required increased inventory levels to support these future sales.


                                       17


<PAGE>




Net earnings(loss) and earnings(loss) per share. Net losses for the three months
ended  March 31,  1998  totaled  $(192,170)  or $(0.05)  basic per share  (which
includes  $231,350  or $0.05  per share of  interest  expense  on the  favorable
conversion feature on debentures issued),  compared with $101,987 or $0.03 basic
per share  earnings  for the same period in the prior  year.  For the six months
ended March 31, 1998 the net loss was $(226,336) or $(0.05) basic per share loss
( which also includes  $231,350 or $(0.05) per share of interest  expense on the
favorable  conversion feature on debentures  issued),  compared with earnings of
$158,153 (net of gain on sale of division) or $0.05 basic per share earnings 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.

These  decreases  in  earnings  and  earning  per share as  compared to the same
periods in the prior year were due to  decreased  sales  levels and the inherent
fixed costs associated with a manufacturing  operation that could not be reduced
in the short-term to provide increased profits. As the sales rebound in the next
six months  such fixed costs  associated  with excess  capacity  should  provide
improved margins.


Liquidity and Capital Resources

Working  capital  increased to $2,393,457  on March 31, 1998 from  $1,065,778 on
September 30, 1997.  The increase is  principally  due to the proceeds  received
from the sale of debentures and from the additional term loan.

Management believes that existing cash balances,  borrowings available under the
line of credit and the  additional  $400,000 of  debentures  together  with cash
generated  from  operations  will be adequate to meet the Company's  anticipated
cash  requirements  during the next  twelve  months.  However,  in the event the
Company experiences  adverse operating  performance or above anticipated capital
expenditure requirements,  additional financing may be required. There can be no
assurance that such  additional  financing,  if required,  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.






                                       18


<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







                                       19


<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







                                       20