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

(Mark One)
   [ X ]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended     December 31, 1999
                                                 ---------------------

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

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

         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 December 31, 1999 the issuer had  9,913,114  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


PART I - FINANCIAL INFORMATION

Item 1   Financial Statements

                  Financial Information                                     3

                  Balance Sheets at December 31, 1999
                  (unaudited) and September 30, 1999                      4-5

                  Statements of Operations  for the three months
                  ended December 31, 1999 and 1998 (unaudited)              6

                  Statements of Cash Flows for the three months
                  ended December 31, 1999 and 1998 (unaudited)            7-8

                  Notes to Condensed Financial Statements (unaudited)    9-10

Item 2            Management's Discussion and Analysis or
                  ---------------------------------------
                  Plan of Operation                                     11-13
                  -----------------

PART II - OTHER INFORMATION

Item 1            Legal Proceedings                                        14

Item 2            Changes in the Securities and Use of Proceeds            14

Item 3            Defaults Upon Senior Securities                          14

Item 4            Submission of Matters to a Vote of Security Holders      14

Item 5            Other Information                                        14

Item 6(a).        Exhibits                                                 14

Item 6(b).        Reports on Form 8-K                                      14

Signatures                                                                 15

                             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, 1999 and audited
     balance  sheet as of September 30, 1999 (the  Company's  most recent fiscal
     year),  unaudited  condensed  statements of operations for the three months
     ended  December 31, 1999 and 1998,  and unaudited  condensed  statements of
     cash flows for the three months ended December 31, 1999 and 1998,  together
     with unaudited condensed notes thereto. In the opinion of management of the
     Company, the financial statements reflect all adjustments, all of which are
     normal recurring  adjustments,  considered  necessary to fairly present the
     financial  condition,  results of operations  and cash flows of the Company
     for the interim periods  presented.  The financial  statements  included in
     this report on Form 10-QSB should be read in  conjunction  with the audited
     financial  statements of the Company and the notes thereto  included in the
     annual  report of the Company on Form  10-KSB for the year ended  September
     30, 1999. The results of operations for the three months ended December 31,
     1999 may not be indicative of the results that may be expected for the year
     ending September 30, 2000.

<PAGE>


                             Pen Interconnect, Inc.
                                 BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                                   December 31,       September 30,
                                                                                       1999               1999
                                                                                 ----------------   ------------------
                                                                                   (unaudited)
CURRENT ASSETS
<S>                                                                                     <C>                 <C>
      Cash and cash equivalents                                                         $ 56,409            $ 177,214
      Trade accounts receivables, less allowance for
         doubtful accounts of $1,890,576 and
         $1,890,576 at December 31, 1999 and
         September 30, 1999 respectively                                               3,039,422            2,708,567
      Current maturities of notes receivable                                             585,587              575,112
      Inventories (Note B)                                                             4,200,948            4,250,661
      Prepaid expenses and other current assets                                            9,718              130,977
                                                                                 ----------------   ------------------

                 Total current assets                                                  7,892,084            7,842,531


PROPERTY AND EQUIPMENT, AT COST
      Production equipment                                                             1,452,667            1,450,494
      Furniture and fixtures                                                             167,169              167,169
      Transportation equipment                                                            22,149               22,149
      Leasehold improvements                                                             273,733              273,733
                                                                                 ----------------   ------------------

                                                                                       1,915,718            1,913,545

      Less accumulated depreciation                                                      431,137              376,681
                                                                                 ----------------   ------------------

                                                                                       1,484,581            1,536,864

OTHER ASSETS
      Notes receivable, less current maturities                                          150,000              150,000
      Other                                                                                4,860                    0
                                                                                 ----------------   ------------------

                 Total other assets                                                      154,860              150,000
                                                                                 ----------------   ------------------

                                                                                      $9,531,525           $9,529,395
                                                                                 ================   ==================
</TABLE>


        The accompanying notes are an integral part of these statements.
                                       4

<PAGE>


                             Pen Interconnect, Inc.

                           BALANCE SHEETS - CONTINUED

                      LIABILITIES AND STOCKHOLDERS' DEFICIT


<TABLE>
<CAPTION>
                                                                                   December 31,       September 30,
                                                                                       1999               1999
                                                                                 ----------------   ------------------
                                                                                   (unaudited)
CURRENT LIABILITIES
<S>                                                                                    <C>                  <C>
      Line of credit                                                                   4,140,160            4,436,562
      Current maturities of long-term obligations                                      1,615,151            1,682,478
      Current maturities of capital leases                                               123,249              122,759
      Accounts payable                                                                 4,920,145            3,961,412
      Accrued liabilities (Note D)                                                       846,780              837,261
                                                                                 ----------------   ------------------

                 Total current liabilities                                            11,645,485           11,040,472


CAPITAL LEASE OBLIGATIONS, less
      current maturities                                                                 255,898              299,051
                                                                                 ----------------   ------------------

                 Total liabilities                                                    11,901,383           11,339,523

STOCKHOLDERS' EQUITY
      Convertible Preferred stock, $0.01 par value
           authorized 5,000,000 shares,
           Series A; issued and outstanding 1,800 shares                                      18                   18
           Series B; issued and outstanding 1,000 shares                                      10                   10
      Common stock, $0.01 par value,  authorized  50,000,000 shares,  issued and
           outstanding 9,913,114 shares at December 31,
           1999 and 9,638,114 at September 30, 1999                                       99,131               96,381
      Additional paid-in capital (Note C)                                             17,527,625           17,447,876
      Accumulated deficit (Notes C & D)                                              (19,996,642)         (19,354,413)
                                                                                 ----------------   ------------------

                 Total stockholders' deficit                                          (2,369,858)          (1,810,128)
                                                                                 ----------------   ------------------

                                                                                      $9,531,525           $9,529,395
                                                                                 ================   ==================
</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,
                                                                                       ----------------------------------
                                                                                            1999               1998
                                                                                       ----------------   ---------------

<S>                                                                                     <C>                   <C>
Net sales                                                                               $     4,409,348        $4,757,839
Cost of sales                                                                                 4,196,459         4,591,218
                                                                                       ----------------   ---------------

      Gross profit                                                                              212,889           166,621

Operating expenses
      Sales and marketing                                                                             0            81,719
      Research and development                                                                   87,423           167,697
      General and administrative                                                                436,550           768,733
      Depreciation and amortization                                                              54,455           126,617
                                                                                       ----------------   ---------------

                 Total operating expenses                                                       578,428         1,144,766
                                                                                       ----------------   ---------------

                 Operating loss                                                                (365,539)         (978,145)

Other income (expense)
      Interest expense                                                                         (176,211)         (192,872)
      Other income, (expense) net                                                                11,523           (74,218)
                                                                                       ----------------   ---------------

              Total other income (expense)                                                     (164,688)         (267,090)
                                                                                       ----------------   ---------------

Loss before income taxes                                                                       (530,227)       (1,245,235)

Provision (benefit) for income taxes                                                                  0                 0
                                                                                       ----------------   ---------------

Net loss                                                                               $       (530,227)  $    (1,245,235)
                                                                                       ================   ===============

Loss per common share
      Basic and diluted (Note E)                                                       $           (.05)  $         (0.22)
                                                                                       ================   ===============

Weighted average common shares outstanding -
     basic and diluted                                                                        9,668,670         5,551,257
                                                                                       ================   ===============

</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,
                                                                                   ---------------------------------
                                                                                        1999              1998
                                                                                   ---------------   ---------------

Increase (decrease) in cash and cash equivalents
    Cash flows from operating activities
<S>                                                                                 <C>                 <C>
        Net loss                                                                    $     (530,227)      $(1,245,235)
        Adjustments to reconcile net loss to net cash
            Depreciation and amortization                                                   54,455           126,617
            Bad debts                                                                            0             8,427


            Changes in asset and liabilities
                 Trade accounts receivable                                                (330,855)         (126,795)
                 Inventories                                                                49,713           460,092
                 Prepaid expenses and other assets                                         116,399            98,978
                 Accounts payable                                                          958,733          (251,380)
                 Accrued liabilities                                                         9,518            86,929
                                                                                   ---------------   ---------------

                       Total adjustments                                                   857,963           402,868
                                                                                   ---------------   ---------------
                  Net cash used in operating activities                                    327,736          (842,367)
                                                                                   ---------------   ---------------
    Cash flows from investing activities
        Purchase of property and equipment                                                  (2,173)          (22,433)
        Issuance of notes receivable                                                       (10,475)                0
        Collections on notes receivable                                                          0             1,922
                                                                                   ---------------   ---------------

                   Net cash used in investing activities                                   (12,648)          (20,511)
                                                                                   ---------------   ---------------

</TABLE>





                                   (Continued)
                                       7



<PAGE>


                             Pen Interconnect, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                          Three months ended
                                                                                             December 31,
                                                                                   ---------------------------------
                                                                                        1999              1998
                                                                                   ---------------   ---------------

    Cash flows from financing activities
<S>                                                                                       <C>               <C>
        Principal payments on long-term obligations                                       (67,327)          (69,988)
        Net change in line of credit                                                     (296,402)         (495,107)
        Accrued dividends on preferred shares                                            (112,000)                0
        Principal payments on capital lease obligations                                   (42,663)          (21,524)
        Proceeds from issuance of long-term obligations                                         0           896,000
        Discount on exercised common shares options                                        45,650                 0
        Proceeds from sale of common stock                                                 36,851           212,012
                                                                                   ---------------   ---------------

                  Net cash provided by financing activities                              (435,893)          521,393
                                                                                   ---------------   ---------------

Net decrease in cash and cash equivalents                                                (120,805)         (341,485)

Cash and cash equivalents at beginning of period                                          177,214           657,777
                                                                                   ---------------   ---------------

Cash and cash equivalents at end of period                                                 56,409       $   316,292
                                                                                   ===============   ===============

Supplemental  disclosures of cash flow  information
Cash paid during the period for:
   Interest                                                                          $    176,211       $   192,872
   Income taxes                                                                      $          0       $         0

</TABLE>


Non-cash 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>


NOTE A - GOING CONCERN

       The accompanying  financial  statements have been prepared  assuming that
       the  Company  will  continue  as a going  concern.  The  Company  has had
       recurring  losses,  $530,227 for the quarter  ended  December 31, 1999, a
       deficit  of  $2,369,858  in  stockholders'  equity and  negative  working
       capital of $3,753,401 for the period ended December 31, 1999. The Company
       plans to satisfy its operating and debt service  requirements through the
       sale  of  its  InCirT  division.  The  Company  is in  negotiations  with
       potential buyers of the division, but has not yet secured a buyer. If the
       Company  is unable  to sell its  InCirT  division,  it will have to raise
       additional  capital to fund its negative cash flow. These factors,  among
       others,  raise  substantial doubt about the Company's ability to continue
       as a going concern.

NOTE B - ACQUISITIONS/DISPOSITIONS

       PowerStream Division

       On December  28, 1999 the Company  signed a letter of intent with Mark W.
       Lund of Lund Instrument  Engineering,  Inc. ("Lund") of Orem, UT. to sell
       certain assets and to assume certain liabilities of PowerStream Division.
       The transaction closed on January 21st, 2000. Lund remitted $74,324.00 to
       the  Company  and  received  assets  with a book  value of  approximately
       $239,350,  customer  contracts  and  general  intangibles;   and  assumed
       liabilities and customer advances of approximately  $411,000. The Company
       is to receive for three years royalties of a) sixteen (16) percent of the
       gross  profits  generated  from sales  generated  from a contract with L3
       Communications,  less any  customer  advances and b) eight (8) percent of
       gross profits on all other sales contracts in place at closing.

       InCirT Division

       On December  23,  1999 the Company  signed a letter of intent to sell the
       InCirT  division  to a  contract  manufacturer.  The  parties  decided to
       discontinue   any  further   negotiations.   The  Company  is   currently
       negotiating with other potential buyers of the InCirT Division and/or its
       assets.

NOTE C - INVENTORIES
       Inventories consist of the following:
<TABLE>
<CAPTION>
                                                  December 31,       September 30,
                                                      1999               1999
                                                ----------------   ----------------
<S>                                            <C>                <C>
        Raw materials (net of allowance)       $      2,525,699   $      2,684,238
        Work-in-process                               1,615,934          1,507,108
        Finished goods                                   59,315             59,315
                                                ----------------   ----------------
                                               $      4,200,948   $      4,250,661
                                                ================   ================
</TABLE>

NOTE D - OPTIONS TO PURCHASE COMMON STOCK

       Options  representing  275,000  common shares were exercised in December,
       1999 at a price of $.134 per share.  The option  shares  were  originally
       priced at $.30 per share.  Proceeds ($36,850) were utilized for corporate
       operations.

                                       9
<PAGE>


NOTE E - ACCRUED PREFERRED STOCK DIVIDENDS

       The  Company  accrued   $112,000  for  dividends   payable  to  preferred
shareholders during the quarter.

Note F - Preferred Stock

         The  Company  has issued two series of  Preferred  Stock.  Series A was
issued in February 1999  consisting of 1,800 shares,  par value $0.01 per share,
for $1,000  per  share.  Series B was issued in April 1999 at the same price and
par value but only 1,000  shares were  issued.  Both series of  Preferred  Stock
carry a 16  percent  dividend  rate  which  is paid  quarterly.  If and when the
Company's  stock is listed  again on  NASDAQ  the  dividend  rate will drop to 8
percent.

                  Both issuances of Preferred Stock are convertible  into shares
of the  Company's  Common  Stock.  Each  share of  Series A  Preferred  Stock is
convertible into an amount of shares of Pen Common Stock equal to $1,000 divided
by the average of the two lowest  closing bid prices for Pen Common Stock during
the period of 22  consecutive  trading  days  ending  with the last  trading day
before the date of conversion, after discounting that market price by 15 percent
(the  "Conversion  Price").  The  maximum  Conversion  Price  for the  Series  A
Preferred  Stock is $1.17 per share.  The shares of Series B Preferred Stock are
convertible  into  Common  Stock at the same  Conversion  Price as the  Series A
Preferred  Stock  except  for a maximum  Conversion  Price of $0.79  per  share.
Warrants to acquire  320,000 shares of Common Stock at prices ranging from $0.86
to $1.28 per share were also issued to the purchasers of the Series A and Series
B Preferred Stock. The Warrants expire three years from date the Preferred Stock
and warrants were initially issued.

Note G - Earnings (loss) per share

         Basic  earnings  (loss) per common  share is computed  by dividing  net
earnings (loss) available to common  shareholders by the weighted average number
of common shares  outstanding  during each period.  Diluted  earnings (loss) per
common share are similarly  calculated,  except that the weighted average number
of common shares  outstanding  includes common shares that may be issued subject
to  existing  rights  with  dilutive  potential  except  for  periods  when such
calculations would be anti-dilutive.

         For the three ended December 31, 1999, net earnings (loss) attributable
to common  shareholders  includes accrued  dividends at the stated dividend rate
from  date  of  issuance  and a  non-cash  imputed  dividend  to  the  preferred
shareholders  related to the beneficial  conversion feature on the 1999 Series A
and B  Preferred  Stock  and  related  warrants.  (See Note E).  The  beneficial
conversion feature is computed as the difference between the market value of the
common stock into which the Series A and B Preferred  Stock can be converted and
the  value  assigned  to the  Series  A and B  Preferred  Stock  in the  private
placement.  The  imputed  dividend  is a one-time  non-cash  charge  against the
earnings  (loss) per common share.  The calculation of earnings (loss) per share
is included in Exhibit 11.

                                       10
<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, 1999 and 1998. 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, 1999.

General

Pen  Interconnect,  Inc.  (the  "Company" or "Pen") is a contract  manufacturing
provider offering 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 Orem,  Utah and Irvine,
California.

On  December  28,  1999  the  Company  signed  a letter  of  intent  to sell the
PowerStream division to a private investor. The division's sale was completed in
January, 2000. The Company is currently negotiating with potential buyers of the
InCirT Division and/or its assets.

The Company's lender,  Finova,  has withheld advances to reduce the over-advance
situation with the Company's  line of credit.  This has restricted the Company's
ability to pay vendors and obtain raw materials to meet shipping schedules.  The
Company's  InCirT Division has had to contract with a competitor to purchase raw
materials for Alaris, InCirT's and the Company's major customer.

                                       11
<PAGE>


Pen is seeking to relieve the  liquidity  problems  by pursuing  the sale of its
remaining  division.   However,  additional  capital  would  still  probably  be
necessary to fund the  operations of a new business,  after the sale of InCirT's
operations.  The Company has  withdrawn  from active  pursuit of new business to
acquire,  pending the sale of InCirT.  There can be no assurance that management
may  be  able  to  raise  additional  capital  for  the  Company's  planned  new
businesses.

Results of Operations

Net sales. Net sales for the Company  decreased  $348,491 or  approximately  7.3
percent for the three month  period  ended  December 31, 1999 as compared to the
same period in the prior year. This decrease  resulted from credit  difficulties
with certain  suppliers,  thereby  restricting  production against sales orders.
Sales  during the first  three  months of FY 2000 were  $4,409,348  compared  to
$4,757,839 during the first three months in FY 99.

Cost of  sales.  Cost of sales  as a  percentage  of net  sales  have  decreased
slightly to  approximately  95.2 percent for the three months ended December 31,
1999,  as compared to 96.5  percent for the same period in the prior year.  This
decrease is due to a combination of factors,  which considered  individually are
each immaterial.

Operating  expenses.  Operating  expenses  decreased during the first quarter of
fiscal 2000 by approximately  $611,988.  This decrease resulted in the following
areas:  (1)  Research and  development  of $80,274  associated  with new product
development costs in the PowerStream  Division;  (2) General and  Administrative
costs decreased by $332,182 primarily due to the sale of the Company's Cable and
MotoSat  divisions  during  the prior  year;  (3) Sales and  marketing  expenses
declined by $81,719 due to an  inability  to finance  any sales  growth;  and 4)
Depreciation  and amortization  costs decreased by $72,162  primarily due to the
sale of the Company's Cable and MotoSat divisions during the prior year;.

Other income and expenses.  Other income and expenses decreased $102,402 for the
three months ended December 31, 1999 as compared to the same period in the prior
year. This decrease is the result of decreased  interest  expense of $16,661 due
to a decrease in the  average  line of credit  outstanding  and in the term loan
during the quarter with Finova.  Other income represents accrued interest income
on certain  notes  receivable  and money market  interest  income.  In the first
quarter  of FY  99  other  expenses  were  incurred  associated  with  financing
transactions which were non-recurring.

Net earnings (loss) and earnings (loss) per share. Net loss for the first fiscal
quarter  ended  December  31,  1999  totaled  ($530,227)  or ($0.05)  per share,
compared with losses of  ($1,245,235)  or ($0.22) per share for the first fiscal
quarter  of FY 1999.  The  decrease  in the loss per share of $0.17 is caused by
($0.005) due to increased margins on sales, ($0.05) from a decrease in sales and
marketing,  in research and development and in general administrative  expenses,
($0.01) from a decrease in interest expense and other expense and an increase in
interest income.  Approximately ($.10) of per share improvement is the result of
a 74% increase in the number of outstanding common shares.

                                       12
<PAGE>


Liquidity and Capital Resources

During  the  first  three  months  of FY 2000 the  Company  sustained  losses of
$530,227.  Management  has taken  steps to correct  this  trend by  selling  the
PowerStream  division  during the second  quarter of FY 2000,  which incurred an
operating loss of approximately  $215,000 during the first quarter.  The Company
has previously  announced its intention to seek a buyer for the InCirT Division,
which  incurred an operating  loss of  approximately  $119,000  during the first
quarter.

As a result of these losses and the Company's  lender  restricting loan advances
due to increased  ineligibility  of two of the  Company's  customers  failing to
remit  according  to sales  terms,  the Company has had to raise cash  ($36,850)
through the exercise of options  from a re-strike  of the purchase  price of the
stock  (275,000  common  shares).  The  Company  has been  procuring  parts  for
production,  as a result of Finova's  restrictive  loan advance  policy with the
Company,  by  maximizing  its open account  activity  with vendors and by having
customers purchase or consign parts for the Company in order to meet sales order
requirements.  This has resulted in a significant  increase in accounts  payable
due vendors/customers.  If the Company is unable to sell its InCirT division, it
will have to raise additional capital to fund its negative cash flow.

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.

                                       13

<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.  As of the date of this
filing,  the  Company  and it's CEO,  Steve  Fryer,  are being  sued by a former
officer of the Company for fraud and misrepresentation.  Per the Company's legal
counsel,  there are no grounds for the lawsuit and there is no expectation  that
any judgement will be made against the Company.

         During the quarter two  lawsuits  were filed  against the  Company.  In
January 2000,  McBride Electric Inc. obtained a judgment against the Company for
$2,963.  On October  28, 1999 Color Savvy  Systems,  Ltd.  filed suit to recover
$165,750 in past due uncontested vendor obligations.

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

            Options   representing  275,000  common  shares  were  exercised  in
December,  1999 at a price of $.134 per share. The option shares were originally
priced  at $.30 per  share.  Proceeds  ($36,850)  were  utilized  for  corporate
operations.

Item 3.  Defaults Upon Senior Securities.
         --------------------------------

         In October of 1999 the Company  received notice from its primary lender
(Finova)  that  they are  placing  the  Company's  loan in  default  status  for
non-compliance  with loan  covenants.  The  Company was  originally  given until
December 18, 1999 to pay off the loan balance.  Finova has extended the deadline
to February 28, 2000.

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.    None
         --------------------------------

A.       Exhibits

         11  Calculation of earnings (loss) per share.

         27  Financial Data Schedule.

B.       Reports on Form 8-K.         None

                                       14
<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.


         February 14, 2000                   By:  /s/ Stephen J. Fryer
                                                 ---------------------
                                                 Stephen J. Fryer,
                                                 CEO,Chairman and
                                                 Principal Accounting Officer



<PAGE>


Exhibit 11

                             Pen Interconnect, Inc.

                    CALCULATION OF EARNINGS (LOSS) PER SHARE
                           FOR THE THREE MONTHS ENDED
                           DECEMBER 31, 1999 AND 1998



<TABLE>
<CAPTION>
                                                                                        1999             1998
                                                                                    --------------   -------------


<S>                                                                                <C>               <C>
Loss available to
   common shareholders                                                              $     (530,277)  $  (1,245,235)
                                                                                    ==============   =============

                Basic EPS
-------------------------------------------

Common shares outstanding entire period                                                  9,638,114       5,018,437

Weighted average common shares issued
   during period                                                                            30,556         532,820
                                                                                    --------------   -------------

Weighted average commons shares
   outstanding during period                                                             9,668,670       5,551,257
                                                                                    ==============   =============

Loss per common share - basic                                                       $         (.05)  $       (0.22)
                                                                                    ==============   =============


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

Weighted average common shares
   outstanding during period - basic                                                     9,668,670       5,551,257

Dilutive effect of stock options and
   warrants                                                                                      0               0
                                                                                    --------------   -------------

Weighted average common shares
   outstanding during period - diluted                                                   9,668,670       5,551,257
                                                                                    ==============   =============


Loss per common share -
   diluted                                                                          $         (.05)  $       (0.22)
                                                                                    ==============   =============
</TABLE>