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     June 30, 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)

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

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                                                         Yes X No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

         Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the  distribution of
securities under a plan confirmed by a court.

                                                          Yes No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         As of August 3, 1999 the  issuer  had  7,976,089  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 June 30, 1999
          (unaudited) and September 30, 1998                                4-5

          Statements of Operations  for the three months
          ended June 30, 1999 and 1998 (unaudited) and                        6
          nine month periods ended June 30, 1999 and
          1998 (unaudited)

          Statements of Cash Flows for the nine months
          ended June 30, 1999 and 1998 (unaudited)                          7-9

          Notes to Condensed Financial Statements (unaudited)             10-13

Item 2    Management's Discussion and Analysis or
          Plan of Operation                                               14-18

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                                    20

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

Item 5    Other Information                                                  20

Item 6(a).   Exhibits

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

Signatures                                                                   21


                                        2


<PAGE>



                             PEN INTERCONNECT, INC.

                                     PART I

                              FINANCIAL INFORMATION

                 ITEM 1. INTERIM CONDENSED FINANCIAL STATEMENTS


Pen  Interconnect,  Inc. (the "Company"),  has included the unaudited  condensed
balance  sheet of the Company as of June 30, 1999 and the audited  balance sheet
as of September 30, 1998 (the  Company's  most recent  fiscal  year),  unaudited
condensed  statements of operations for the three and nine months ended June 30,
1999 and 1998, and the unaudited condensed statements of cash flows for the nine
months ended June 30, 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 present  fairly the  financial  condition,  results of
operations and cash flows of the Company for the interim periods presented.  The
financial  statements  included in this report on Form 10-QSB  should be read in
conjunction with the audited  financial  statements of the Company and the notes
thereto included in the annual report of the Company on Form 10-KSB for the year
ended  September 30, 1998.  The results of operations  for the nine months ended
June 30, 1999 may not be  indicative of the results that may be expected for the
year ending September 30, 1999.









                                        3


<PAGE>


                             Pen Interconnect, Inc.

                                 BALANCE SHEETS

                                     ASSETS


<TABLE>
<CAPTION>
                                                                                       June 30,           September 30,
                                                                                         1999                 1998
                                                                                  ------------------   -------------------
                                                                                     (unaudited)
                                 CURRENT ASSETS
<S>                                                                                   <C>                   <C>
      Cash and cash equivalents                                                       $      26,478         $     657,777
      Receivables
      Trade accounts less allowance for
         doubtful accounts of $67,434 at June 30, 1999
         $108,575 at September 30, 1998, respectively                                     3,831,713             3,350,970
      Current maturities of notes receivable                                                765,390                35,675
      Investments in common stock                                                                 -               242,739
      Inventories                                                                         4,583,076             3,680,169
      Prepaid expenses and other current assets                                             345,804               261,375
      Deferred tax asset                                                                     41,324                41,324
                                                                                  ------------------   -------------------
                 Total current assets                                                     8,270,029             9,593,785


                         PROPERTY AND EQUIPMENT, AT COST
      Production Equipment                                                                1,288,623             2,624,513
      Furniture and fixtures                                                                165,596               837,594
      Transportation equipment                                                               22,149                83,522
      Leasehold improvements                                                                260,074               613,248
                                                                                  ------------------   -------------------
                                                                                          1,736,443             4,158,877
      Less accumulated depreciation                                                         219,854             1,680,266
                                                                                  ------------------   -------------------
                                                                                          1,516,589             2,478,611


                                  OTHER ASSETS
      Notes receivable, less current maturities                                               2,066                 3,989
      Investments in common stock                                                                 -               482,220
      Deferred income taxes                                                               1,326,903               725,667
      Goodwill and other intangibles, net                                                 2,012,565             2,031,685
      Assets transferred under contractual arrangement                                      454,742                     0
      Other                                                                                  14,864                98,455
                                                                                  ------------------   -------------------
                 Total other assets                                                       3,811,140            3,342,016
                                                                                  ------------------   -------------------
                                                                                       $ 14,921,514         $ 14,090,656
                                                                                  ==================   ===================
</TABLE>



              The accompanying notes are an integral part of these
                                  statements.

                                        4


<PAGE>



                             Pen Interconnect, Inc.

                           BALANCE SHEETS - CONTINUED

                       LIABILITIES AND STOCKHOLDERS EQUITY


<TABLE>
<CAPTION>
                                                                                       June 30,           September 30,
                                                                                         1999                 1998
                                                                                  ------------------   -------------------
                                                                                     (unaudited)
                               CURRENT LIABILITIES
<S>                                                                                <C>                    <C>
      Subordinated debentures                                                      $               -      $     1,401,429
      Line of credit                                                                      3,531,814             4,064,361
      Current maturities of long-term obligations                                         1,527,499             1,132,538
      Current maturities of capital leases                                                  109,054                69,621
      Dividends payable                                                                     146,148                     -
      Accounts payable                                                                    3,029,974             2,926,797
      Accrued liabilities                                                                   174,853               389,889
                                                                                  ------------------   -------------------
                 Total current liabilities                                                8,519,342             9,984,635

                            LONG TERM OBLIGATIONS, less current
                    maturities                                                               10,086                51,965

                                CAPITAL LEASE OBLIGATIONS, less
                    current maturities                                                      286,594                22,333

         LIABILITIES TRANSFERRED UNDER
         CONTRACTUAL ARRANGEMENTS                                                           514,813                     -

                                          DEFERRED INCOME TAXES                             165,755               165,755
                                                                                  ------------------   -------------------
                 Total liabilities                                                        9,496,590            10,224,688

                              STOCKHOLDERS' EQUITY
                    Preferred stock, $0.01 par value
                         authorized 5,000,000 shares, 1,800,000
                         issued and outstanding at March 31, 1999                                28                     -
                    Common stock, $0.01 par value,
                         authorized 50,000,000 shares, issued and
                         outstanding 6,864,838 shares at March 31,
                         1999 and 5,018,437 at September 30, 1998                            79,761                50,184
                    Additional paid-in capital                                           16,324,193            10,890,022
                    Accumulated deficit                                                 (10,832,910)           (7,074,238)
                    Dividends                                                              (146,148)                    -
                                                                                  ------------------   -------------------
                 Total stockholders' equity                                               5,424,924             3,865,968
                                                                                  ------------------   -------------------
                                                                                       $ 14,921,514          $ 14,090,656
                                                                                  ==================   ===================
</TABLE>



              The accompanying notes are an integral part of these
                                  statements.

                                        5


<PAGE>



                             Pen Interconnect, Inc.

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                        Three months ended                      Nine months ended
                                               ------------------------------------     ----------------------------------
                                               --------------------------------------     -----------------------------------
                                                    June 30,            June 30,              June 30,           June 30,
                                                      1999                1998                  1999               1998
                                               ------------------   -----------------     ----------------   ----------------

<S>                                                 <C>                 <C>                   <C>                <C>
Net Sales                                           $  5,098,525        $  4,510,112          $12,684,444        $12,113,556
Cost of sales                                          4,253,409           3,534,452           11,221,585          9,431,973
                                               ------------------   -----------------     ----------------   ----------------
                                                         845,116             975,660            1,462,859          2,681,583
      Gross profit

Operating expenses
      Sales and marketing                                 22,002             192,071              139,414             89,538
      Research and development                         (188,983)              49,675              303,650            243,044
      General and administrative                         509,943             477,792            2,564,985          1,647,358
      Depreciation and amortization                      110,592             122,288              301,898            364,225
                                               ------------------   -----------------     ----------------   ----------------
                 Total operating expenses
                                                         453,554             841,826            3,309,947          2,344,165
                                               ------------------   -----------------     ----------------   ----------------

      Operating income, (loss)                           391,562             133,834          (1,847,088)            337,418

Other income (expense)
      Interest expense                                  (96,947)           (163,699)            (485,437)          (690,287)
      Gain on sale of division                                 -                   -              196,628                  -
      Other income (expense) net                       (849,284)              84,318          (2,224,011)            118,655
                                               ------------------   -----------------     ----------------   ----------------
                 Total other income (expense)
                                                       (946,231)            (79,381)          (2,512,820)          (571,632)
                                               ------------------   -----------------     ----------------   ----------------

Earnings (loss) before income taxes                    (554,669)              54,453          (4,359,908)          (234,214)

Income tax expense (benefit)                           (601,236)              21,781            (601,236)               (19)
                                               ------------------   -----------------     ----------------   ----------------

                      Net earnings (loss)          $      46,567       $      32,672         $(3,758,672)      $   (234,195)
                                               ==================   =================     ================   ================

Earnings (loss) per common share
      Basic                                      $        (0.09)      $         0.01       $        (0.69)    $        (0.06)
      Diluted                                    $        (0.09)      $         0.01       $        (0.69)    $        (0.06)

Weighted average common shares outstanding
         Basic                                         7,693,650           4,234,009            6,538,820          4,165,952
         Diluted                                       7,693,650           6,486,509            6,538,820          4,165,952

</TABLE>



              The accompanying notes are an integral part of these
                                  statements.

                                        6


<PAGE>



                             Pen Interconnect, Inc.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                             Nine months ended
                                                                                     ----------------------------------
                                                                                     ------------------------------------
                                                                                         June 30,           June 30,
                                                                                           1999               1998
                                                                                     -----------------  -----------------
                Increase (decrease) in cash and cash equivalents
                      Cash flows from operating activities

<S>                                                                                   <C>               <C>
Net loss                                                                              $    (3,758,672)  $       (234,195)
        Adjustments to reconcile net loss to net cash
         used in operating activities

                Depreciation and amortization                                                 301,898            687,405
                Bad debts                                                                      99,625              3,420
                Stock issued in exchange for services                                         524,377                  -
                Interest on debenture conversion                                              104,861                  -
                Gain on sale of cable division                                               (196,628)                 -
                Provision for asset impairment                                              1,869,900                  -
                Deferred taxes                                                               (601,236)            27,112
                Contingent stock San Jose agreement                                                 -            (40,000)
                Loss on disposal of equipment                                                       -             16,534
                Changes in asset and liabilities
                     Trade accounts receivable                                             (1,071,674)        (1,632,294)
                     Inventories                                                           (1,471,476)        (2,305,763)
                     Prepaid expenses and other assets                                         82,182           (306,138)
                     Accounts Payable                                                         386,861            974,725
                     Accrued liabilities                                                     (175,886)          (254,795)
                                                                                     -----------------  -----------------
                        Total adjustments                                                    (147,196)         (2,829,794)
                                                                                     -----------------  -----------------
                        Net cash used in
                           operating activities                                            (3,905,868)        (3,063,989)
                                                                                     -----------------  -----------------


Cash flows from investing activities
        Purchase of property and equipment                                                  (751,860)           (202,353)
        Proceeds from sale of investments                                                          -             389,250
        Issuance of notes receivable                                                        (611,169)            (89,195)
        Collections on notes receivable                                                            -              22,800
                                                                                     ----------------   -----------------
                                                                                     -----------------  -----------------
                        Net cash used in
                           operating activities                                             (1,363,029)           120,502
                                                                                     -----------------  -----------------
</TABLE>



                                   (Continued)

                                        7


<PAGE>



                                          Pen Interconnect, Inc.

                                   STATEMENTS OF CASH FLOWS - CONTINED
                                               (Unaudited)


<TABLE>
<CAPTION>
                                                                                             Nine months ended
                                                                                     ----------------------------------
                                                                                     ------------------------------------
                                                                                         June 30,           June 30,
                                                                                           1999               1998
                                                                                     -----------------  -----------------


<S>                                                                                  <C>                <C>
Cash flows from financing activities

   Principal payments on notes payable                                                              -           (641,505)
   Proceeds from issuance of notes payable                                                    816,411                  -
   Net change in line of credit                                                               215,954          1,557,851
   Proceeds from bridge loan                                                                  900,000                  -
   Principal payments on bridge loan                                                         (900,000)          (100,000)
   Principal payments on long-term obligations                                                  8,586           (265,668)
   Proceeds from issuance of subordinated debentures                                                -          1,910,000
   Proceeds from issuance of long-term obligation                                             395,648            500,000
   Proceeds from sale of common stock                                                         400,999            705,058
   Proceeds from issuance of preferred stock                                                2,800,000                  -
                                                                                     -----------------  -----------------
                                                                                     -----------------  -----------------
                        Net cash provided by
                           financing activities                                             4,637,598          3,665,736
                                                                                     -----------------  -----------------
                                                                                     -----------------  -----------------
                              Net increase (decrease) in cash and cash equivalents           (631,299)          722,249
                                  Cash and cash equivalents at beginning of period            657,777            272,148
                                                                                     -----------------  -----------------
                                        Cash and cash equivalents at end of period             26,478             994,397
                                                                                     =================  =================

Supplemental  disclosures of cash flow  information
Cash paid during the period for:
     Interest expense                                                                $        380,576   $        370,028
     Income Tax expense                                                              $              -   $              -

</TABLE>

Noncash investing and financing activities
During the first nine months of FY 99 $1,401,429 of subordinated debentures were
converted  into 1,942,914  shares of common stock.  Along with the conversion on
the debentures,  $104,861 of unamortized interest on the subordinated debentures
was charged to interest expense.

During the second and third quarters of FY 99,  $1,800,000 of Series A Preferred
Stock and  $1,000,000  of Series B Preferred  Stock was issued.  Of this amount,
$900,000  was used  directly  to pay off  $900,000  of bridge  loans made to the
Company during the first quarter of FY 99.




                                   (Continued)

                                        8


<PAGE>



                             Pen Interconnect, Inc.

                       STATEMENTS OF CASH FLOWS - CONTINED
                                   (Unaudited)


The letter of intent for the sale of the MotoSat  division  to James  Pendleton,
Pen's former  Chairman and CEO,  states that all assets and  liabilities  of the
MotoSat  division  will be  transferred  to Mr.  Pendleton  in  exchange  for an
elimination  of  future  obligations  to  pay  retirement   benefits  under  Mr.
Pendleton's  employment contract.  If the transaction had been closed as of June
30,  1999 it would have  yielded a gain of $60,071,  representing  the excess of
liabilities  over assets to be transferred.  This gain is being deferred pending
the closing of this  transaction,  which is  anticipated  for summer 1999. As of
August 3, 1999  MotoSat has secured its own lending  source which is expected to
be finalized in the month of August.  When the credit agreement  between MotoSat
and their lender is finalized,  the risk of ownership  will pass to MotoSats new
owners and the journal entry reflecting the sale will be recorded.

During the first nine  months of FY 99, a  determination  was made that  certain
assets  and  liabilities  having a net book value of  $1,869,900  had lost their
value and benefit to the  corporation  and were written off. At the same time, a
valuation  allowance  of $601,236 to reduce the value of deferred  tax assets at
the end of FY 98 was adjusted based on current and projected earnings.

During the third quarter of FY 99 675,000  shares of common stock were issued to
outside consultants for services performed.  At the date of issuance, the market
value of the stock issued was $756,487.













              The accompanying notes are an integral part of these
                                  statements.

                                        9



<PAGE>


                             PEN INTERCONNECT, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS



NOTE A - ACQUISITIONS/DISPOSITIONS

       Laminating Technologies Inc.

       On December  23,  1998,  the Company  signed a  definitive  agreement  to
       acquire Laminating  Technologies Inc. (LTI). On April 2, 1999 the Company
       and LTI mutually terminated this definitive agreement.

       Cables To Go Inc.

       On January 29,  1999 the  Company  signed an  agreement  to sell  certain
       assets and transfer  certain  liabilities of the Cable division to Cables
       To Go Inc (CTG).  CTG purchased  certain of the  receivables,  inventory,
       machinery  equipment and assumed capital lease liabilities for $1,075,000
       thus  yielding the Company a gain on the sale of $196,628.  Concurrently,
       the Company  determined  that asset  relating to the Cable  division that
       were not purchased by CTG had no future value and were therefore  written
       off. The book value of the assets written off was $1,147,807.

       Mobile Technology Inc.

       On  February  1, 1999 the  Company  signed a letter of intent with Mobile
       Technology  Inc. (MTI) to sell all assets and  liabilities of the MotoSat
       division.  MTI's principal owner is James Pendleton,  Chairman and former
       CEO of the  Company.  The  letter of intent  calls for MTI to assume  all
       assets and liabilities of the MotoSat  division.  If the transaction were
       closed as of June 30,  1999,  it would yield a gain to the Company on the
       sale of $60,071.  Pending the closing of the sale, the Company has agreed
       to maintain  and/or provide a $300,000  credit  facility for MTI with the
       Company's major lender. The Company  anticipates  closing the transaction
       when MTI is able to  secure  independent  sources  of  financing.  In the
       interim,  MTI has assumed operational control of the MotoSat division but
       the Company retains ownership of the MotoSat  division's  receivables and
       inventory which are collateral for the Company's credit facility.

       Inasmuch  as the  Company is still at risk for the credit  facility  made
       available  to MTI,  on the  receivables  and  inventory  currently  being
       submitted to finance the current  operations of MotoSat,  the Company has
       recorded the position of financial condition as of the date of the letter
       of intent only  (February  1,  1999).  Assets and  liabilities  have been
       reclassified  as  "Assets  /Liabilities   Transferred  Under  Contractual
       Arrangements" on the balance sheet at June 30, 1999.

                                       10

<PAGE>


                             PEN INTERCONNECT, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS





NOTE A - ACQUISITIONS/DISPOSITIONS - CONTINUED

       Transdigital Communications Corporation

       In July 1999, the Company signed an agreement to merge with  Transdigital
       Communications Corporation (TCC). The agreement would result in a reverse
       merger with TCC  management  becoming the  management of the new company.
       The  Company's  management is continuing to monitor the progress of TCC's
       business  before   presenting  the  agreements  for  final  director  and
       shareholder approval.  The closing of the merger is conditioned upon such
       approval as well as other terms and conditions.


NOTE B - INVENTORIES

       Inventories consist of the following:
                                          June 30,            September 30,
                                           1999               1998
                                      ---------------     ------------------
Raw materials (net of allowance)      $     2,558,829     $        2,253,933
Work-in-process                             1,944,591              1,391,664
Finished goods                                 79,656                 35,572
                                      ---------------     ------------------
                                            4,583,076               3,680,169
                                      ===============     ==================


NOTE C - BRIDGE LOANS

       During the 1st  quarter of FY 1999 the Company  secured two bridge  loans
       both of which were to be repaid with funds to be received from the merger
       with LTI. The term of each loan was 90 days and carried an interest  rate
       of 8 percent.  One bridge loan was secured in November  for  $500,000 and
       the other in December for $400,000.  Both bridge loans were  subsequently
       repaid from proceeds  received from the issuance of preferred stock. (See
       Note E)


NOTE D - WARRANTS AND OPTIONS TO PURCHASE COMMON STOCK

       During the first nine  months of FY 1999 the Company  issued  warrants to
       purchase  1,230,000  shares of the Company's  common stock.  All warrants
       were issued at an  exercise  price which was equal to or above the market
       price at the time of issuance.  The following table outlines the features
       of these warrants:

                                       11

<PAGE>


                             PEN INTERCONNECT, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS





NOTE D - WARRANTS AND OPTIONS TO PURCHASE COMMON STOCK - CONTINUED

   Number of          Exercise                 Expiration
   Warrants            Price                      Date
---------------   ----------------       ----------------------
150,000                $1.000                     October 2002
125,000                $0.875                     October 2002
215,000                $0.875                    November 2001
100,000               $1.3700                    February 2002
125,000               $0.0875                     October 2003
160,000               $1.2800                    February 2002
160,000               $0.8600                       April 2002
25,000                $0.8000                         May 2001
20,000                $1.0000                        June 2003
25,000                $1.0000                        June 2002
125,000               $0.8000                      August 2004


       During the first nine months of FY 1999 the Company  issued non qualified
       options to  employees to purchase  335,000  shares of common  stock.  All
       options granted were at an exercise price which was equal to or above the
       market  price at the time of grant.  The  following  table  outlines  the
       features of these options:


   Number of               Exercise                 Expiration
    Options                 Price                      Date
----------------       ----------------       ----------------------
          60,000             $0.8000                    March 2004
         250,000             $0.8000                    April 2004
          25,000             $1.0000                     June 2004


NOTE E - 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
       but only 1,000  shares were  issued.  As mentioned in Note C, part of the
       funds  raised  from the  issuance  of this  stock  were used to repay the
       bridge  loans made  earlier in the fiscal  year.  After  repayment of the
       bridge  loans and  paying  $234,500  in fees and  expenses,  the net cash
       raised by the Company was  $1,665,500.  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.

                                       12

<PAGE>


                             PEN INTERCONNECT, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS



NOTE E - PREFERRED STOCK - CONTINUED

       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  for the Series A shares and 20 percent
       for the Series B shares (the Conversion  Price).  The maximum  Conversion
       Price  for the  Series A  Preferred  Stock is $1.17 per share and for the
       Series B Preferred stock is $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 F - 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 and nine  months  ended June 30,  1999,  net income  (loss)
       attributable to common shareholders  includes 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 loss per common share.
       The calculation of earnings per share is included in exhibit 11.

                                       13
<PAGE>



            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 and
nine months  ended June 30,  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, 1998.

General

Pen  Interconnect,  Inc. is a provider of contract  manufacturing  services  for
original  equipment  manufacturers.  It builds electronic systems and subsystems
for  customers  in  a  range  of  industries   including   computers,   consumer
electronics,  industrial and medical instrumentation,  avionics, communications,
and  semiconductor  applications.  Pen  Interconnect's  services include product
design and prototyping,  systems assembly, software duplication,  packaging, and
warehousing.

Pen  Interconnect,  Inc.  provides the total  manufacturing  solution  including
circuit  design,  board design from  schematic,  mechanical and product  design,
prototype  assembly,   volume  board  assembly,  system  services  and  end-user
distribution.  The Company was incorporated  under the laws of the State of Utah
on  September  30,  1985.  Pen  Interconnect,  Inc.  has  support  manufacturing
facilities in California, Utah and China.


                                       14

<PAGE>



During the three  months  ending June 30,  1999 the  Company's  InCirt  division
secured  contracts  with  two  new  customers.  One  contract  is  with  Imaging
Technologies  Corp.  (Itec) and the other is with Xtend Micro Products  (Xtend).
Itec  manufactures and sells printers to national and  international  companies.
The  Company's  contract  with Itec is to assemble  the  controller  board which
operates the printer,  install the controller  board and then provide  packaging
and shipping  services.  Xtend provides the  distribution of battery charges and
adapter  modules for laptop PC's.  At present,  the Company  would  assemble the
circuit boards for the chargers and adapter  modules and then provide  packaging
and  shipping  services.  The  packaging  and  shipping  services are new to the
Company's  InCirt division but is part of the overall contract of being the sole
manufacturer for both of these new contracts.

Merger and Acquisitions

In July  1999,  the  Company  signed an  agreement  to merge  with  Transdigital
Communications Corporation (TCC). The agreement would result in a reverse merger
with TCC management  becoming the  management of the new company.  The Company's
management  is  continuing  to monitor  the  progress of TCC's  business  before
presenting  the  agreements for final  director and  shareholder  approval.  The
closing of the merger is  conditioned  upon such approval as well as other terms
and conditions.

Results of Operations

Net sales.  Net sales for the Company  increased  $588,413 or  approximately  13
percent for the three month  period  ended June 30, 1999 as compared to the same
period in the prior year. This increase resulted primarily from sales related to
two new contracts acquired by the InCirt division during the third quarter of FY
99 of  approximately  $1,851,000.  These  sales more than  offset the decline in
sales of  $1,174,411  related  to the sale of the  Cable and  MotoSat  divisions
during the third quarter of the prior year. Sales for the nine months ended June
30, 1999 were  $570,888  or 5 percent  more than during the same period from the
prior fiscal year.  This increase was also primarily due to sales related to the
acquisition of two new contracts by the InCirt division during the third quarter
of  FY 99 of  $1,851,000  and  increases  in  sales  on  existing  contracts  of
approximately  $800,000  which  were  in  excess  of the  decline  in  sales  of
$2,041,630 due to the sale of the Cable and MotoSat divisions.

Cost of sales.  Cost of sales as a  percentage  of net sales have  increased  to
approximately 83 percent for the three months ended June 30, 1999 as compared to
78 percent for the same period in the prior year. This increase is due primarily
to an  increase  in fixed  manufacturing  costs in support of the new  contracts
acquired  by the  InCirt  division.  As sales for these  contracts  reach  their
projected  levels in the fourth  quarter of FY 99 the  Company  expects to see a
drop in the  percent  of cost of sales  to sales  ratio  inasmuch  as these  new
contracts  have more  favorable  margins than the existing  customer  base.  The
increase is also attributable to a decline in margins on an existing contract at
the  InCirt  division  which  were  necessary  to  accept  in  order  to  remain
competitive and retain the contract.  Cost of sales as a percentage of sales was
88 percent  for the nine months  ended June 30, 1999  compared to 78 percent for
the same period from the prior fiscal year.  This increase is also  attributable
to the increase in fixed  manufacturing  costs associated with the new contracts
acquired  by the  InCirt  division  and the  decrease  in  margins  on  existing
contracts mentioned previously.

                                       15

<PAGE>



Operating  expenses.  Operating  expenses decreased $27,060 or 3 percent for the
three  months  ending June 30,  1999  compared to the same period of time in the
prior fiscal year.  This  decrease is net of a positive  adjustment  of $361,212
related to the recording of development  costs  associated  with the PowerStream
division.  For the nine months ended June 31, 1999, operating expenses increased
$965,782 or 41 percent  compared to the same period in FY 98. This  increase was
mostly  associated  with an increase in general and  administrative  expenses of
$917,627.  The increases in general and administrative  expenses occurred mostly
during  the second  quarter  and  include  (1)  $208,599  in  professional  fees
associated  with the issuance of the Company's  Series A and B preferred  stock,
the negotiation of proposed merger agreements and agreements for the sale of the
Cable and Motosat divisions,  and Nasdaq compliance  hearings,  (2) $567,365 for
financial  representation  services,  and (3)  $97,000 in  supplemental  payroll
expenses associated with the termination of employees with the sale of the Cable
division.  Operating  expenses also  increased  due to  additional  research and
development costs at the PowerStream division.

Other income and expenses.  Other expenses  increased  $866,850 or 1,092 percent
for the three months ended June 30, 1999 compared to the same three month period
for the prior  fiscal  year.  This  increase is mostly due to a write off of the
Company's  investment in the stock of Touche  Manufacturing Inc. (TMCI) totaling
$724,959.  Other expenses also  increased due to interest  income in FY 98 which
does not exist in FY 99 and $124,325 in expenses associated with the issuance of
Series B Preferred Stock. These increased expenses are offset by higher interest
expense related to a favorable  conversion  feature associated with subordinated
debentures  which was  recorded  in FY 98 which  does not exist in FY 99.  Other
expenses increased  $1,941,188 or 340 percent for the nine months ended June 30,
1999  compared to the same period for the prior fiscal year.  In addition to the
items  discussed for the third quarter,  the Company also recorded a loss on the
impairment  of  assets  pertaining  to the sale of the Cable  division  totaling
$1,144,941  and incurred  expenses  associated  with the issuing of the Series A
preferred stock totaling $150,000 in the second quarter.

Net earnings  (loss) and earnings  (loss) per share.  Net earnings for the third
fiscal  quarter  ended June 30,  1999  totaled  $46,567 or $0.01 per basic share
before accrued dividends on preferred stock,  compared with a gain of $32,672 or
$0.01 per basic  share for the third  quarter of fiscal  1998.  Included  in the
earnings  per share for the third  quarter  is a loss per share of $0.09 for the
write off of the  investment of stock in TMCI stock and an increase per share of
$0.08 for the elimination on the valuation allowance for the deferred tax asset.
For the nine months ended June 30, 1999 the net loss of $3,758,672 resulted in a
loss per share of ($0.57)  before the accrual for  dividends on preferred  stock
compared to a loss per share of ($0.06) on a loss of  $234,195.  The decrease in
the loss per share of  ($0.51)  includes  ($0.29)  related  to the write down of
impaired  assets,  (0.14) related to the increase in general and  administrative
expenses,  ($0.19) related to the decline in margins on sales,  $0.03 related to
the gain on the sale of the Cable  division and $0.09 related to the  adjustment
of the valuation allowance for deferred tax assets.

                                       16

<PAGE>



Liquidity and Capital Resources

The Company has positive working capital of $1,074,443 at June 30, 1999 compared
to a working capital  deficit of ($668,388),  ($2,263,049)  and  ($1,714,606) at
March 31, 1999,  December 31, 1998 and at September 30, 1998  respectively.  The
increase in working  capital has resulted  from  increased  sales and  inventory
related to two new  contracts  secured  and  issuance  of the Series B Preferred
Stock by the Company during the third quarter of FY 99.

During the third quarter of FY99, the Company achieved  earnings from operations
of $391,562.  These  earnings were then impacted by a write off of an investment
in the stock of Touche  Manufacturing Inc. (TMCI) of $724,959.  During the first
quarter  of FY 99 TMCI  was  forced  into  receivership  by its  lender  for non
compliance with loan covenants The Company made an  unsuccessful  attempt to use
its shares as a means of acquiring  all or part of the  business of TMCI.  After
this  unsuccessful  bid, it was determined that the investment in TMCI stock was
of no value and was therefore  written off.  Earnings from  operations were also
impacted by the elimination of the valuation allowance on the deferred tax asset
of $601,236  established  at the end of FY 98. With the  acquisition  of the new
sales contacts at the InCirt division, the profits from operations earned during
the third quarter and the backlog of orders for sales, the Company believes that
the asset will begin to be utilized in FY 00.

The Company issued its A series and B series of Preferred  Stock in February and
April 1999  respectively.  The issuance of the Series A Preferred  Stock was for
$1,800,000  and  consisted  of 1,800  shares at $1,000 per  share.  The Series B
Preferred  Stock was for $1,000,000 and consisted of 1,000 shares also at $1,000
per share. Both issuances raised,  net of expenses  associated with the issuance
and repayment of bridge loans,  $1,665,500 to the Company which was used to fund
ongoing operations.

Management  believes that the new contracts secured at the InCirt division along
with new  contracts  expected  in the near  future  should  result in  continued
profitable  operations;  however,  there  can be no  assurance  that  additional
contracts can be secured or that the new contracts  which have been secured will
continue to perform as anticipated.

Despite the  improvement in earnings from operations for the current fiscal year
the  Company  still  faces  tight cash  constraints  due to  vendors'  requiring
advanced  payments  or low  credit  limits.  The  Company  is  looking  to raise
additional  funds in the  capital  markets to assist  with the  working  capital
requirements to fund this growth.  Pen's management estimates that approximately
$1 million may have to be raised to sustain the growth in  operations.  With the
raising of this additional  capital,  management believes that the cash supplied
from  operations  in the future will be  sufficient  to sustain  operations  and
reduce the dependency the Company has had on raising cash in the capital markets
to sustain  operations.  If the Company  cannot  raise the  additional  capital,
growth  will be  limited  and the  Company  may  again  incur  losses  from  its
operations.

                                       17

<PAGE>





Inflation and Seasonality

The Company does not believe that it is significantly impacted by inflation. The
Company has been marginally  influenced  with  seasonality of sales in the past.
With the sale of the Cable  and  MotoSat  divisions,  the  Company  is even less
impacted by seasonality than before.

Year 2000 Readiness

In general,  the Year 2000 issue  relates to computers  and other  systems being
unable to  distinguish  between  the years  1900 and 2000  because  they use two
digits,  rather than four, to define the applicable  year.  Systems that fail to
properly recognize such information will likely generate erroneous data or cause
a system to fail possibly resulting in a disruption of operations. The Company's
products do not incorporate such date coding so the Company's efforts to address
the Year  2000  issue  fall in the  following  three  areas:  (i) the  Company's
information  technology ("IT") systems; (ii) the Company's non-IT systems (i.e.,
machinery,  equipment and devices which utilize  technology  which is "built in"
such as embedded microcontrollers); and (iii) third-party suppliers. The Company
has completed  its  evaluation of its IT systems and believes that these systems
are Year 2000 compliant. The Company's non-IT systems are not date sensitive and
therefor pose no risk in relation to Year 2000 issues.

Third party  suppliers  and  customers  present a different  problem in that the
Company  cannot  control  the  efforts  of such  third  parties  to be Year 2000
compliant..  The Company is currently  requesting  confirmations  from  critical
third party suppliers that they are year 2000 compliant to avoid  disruptions of
services  and  supplies.  At present  the Company has  received  responses  from
approximately 40% of its critical vendors and is continuing to solicit responses
from the rest.  However,  any failure on the part of such  companies  to be year
2000  compliant on a timely basis may  adversely  affect the  operations  of the
Company.

                                       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 has had a judgement made
against it pertaining to an obligation of $79,000 to YC Intl. which has not been
paid.  Agreements  made  with the legal  counsel  of YC Intl.  call for  monthly
payments of $10,000 to be made. To date the Company has made payments of $50,000
towards this obligation.

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

1.     In April 1999, Pen Interconnect  Inc. issued 153,000 shares of its common
       stock to Richard S. Carpenter as payment for services.
2.     In April 1999, Pen Interconnect  Inc. issued 147,000 shares of its common
       stock to Jeffery M. Lamberson as payment for services.
3.     In April 1999, Pen Interconnect  Inc. issued 281,250 shares of its common
       stock to Liviakis Financial Communications, Inc. as payment for services.
4.     In April 1999, Pen  Interconnect  Inc. issued 93,750 shares of its common
       stock to Robert B. Prag as payment for services.
5.     In May 1999,  Pen  Interconnect  Inc.  issued 15,000 shares of its common
       stock to James Pendleton as compensation.
6.     In May 1999,  Pen  Interconnect  Inc.  issued 20,000 shares of its common
       stock to Dave Livingston as payment for services.
7.     In May 1999,  Pen  Interconnect  Inc.  issued 10,000 shares of its common
       stock to Corporate Development Group as payment for services.
8.     In May 1999,  Pen  Interconnect  Inc.  issued  7.000 shares of its common
       stock to Network Investor Communications as payment for services.
9.     In May 1999,  Pen  Interconnect  Inc.  issued  1,500 shares of its common
       stock to Robert Albrecht as compensation.
10.    In May 1999,  Pen  Interconnect  Inc.  issued  2,167 shares of its common
       stock to Stephen Fryer as compensation.
11.    In May 1999,  Pen  Interconnect  Inc.  issued  2,500 shares of its common
       stock to Mehrdad Mobasseri as compensation.
12.    In May 1999,  Pen  Interconnect  Inc.  issued  1,000 shares of its common
       stock to Owen Marsh as compensation.
13.    In May 1999,  Pen  Interconnect  Inc.  issued  1,000 shares of its common
       stock to Bill Day as compensation.

                                       19

<PAGE>



14.    In May 1999,  Pen  Interconnect  Inc.  issued  1,000 shares of its common
       stock to Steve Ngo as compensation.
15.    In May 1999,  Pen  Interconnect  Inc.  issued  1,000 shares of its common
       stock to Rafael Batista as compensation.
16.    In May 1999, Pen Interconnect  Inc. issued 400 shares of its common stock
       to Ronda Barboa as compensation.
17.    In May 1999, Pen Interconnect  Inc. issued 400 shares of its common stock
       to Heather Hungate as compensation.
18.    In May 1999, Pen Interconnect  Inc. issued 400 shares of its common stock
       to Irene Tafulu as compensation.
19.    In May 1999, Pen Interconnect  Inc. issued 400 shares of its common stock
       to Lien Hoang as compensation.
20.    In May 1999, Pen Interconnect  Inc. issued 400 shares of its common stock
       to Waldemar Dziurzynski as compensation.
21.    In May 1999, Pen Interconnect Inc. issued 171,195 of its shares of common
       stock to BNC Bach related to the  conversion of $100,000 of  subordinated
       debentures.
22.    In June 1999, Pen  Interconnect  Inc. issued 200,889 shares of its common
       stock to BNC Bach related to the  conversion of $125,000 of  subordinated
       debentures.


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

         11  Calculation of earnings per share

         27  Financial Data Schedule.

B.  Reports on Form 8-K  None

                                       20

<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.


Date_ August 18, 1999_


                                                     PEN INTERCONNECT, INC.

                                                     By:  /s/ Stephen J Fryer
                                                     Stephen J. Fryer
                                                     President and CEO

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


                                       21


<PAGE>


                                                                     Exhibit 11

                             Pen Interconnect, Inc.

                        CALCULATION OF EARNINGS PER SHARE
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                     Three months ended                       Nine months ended
                                                         June 30,            June 30,             June 30,             June 30,
                                                           1999                1998                 1999                 1998
                                                    -------------------  -----------------   -------------------   ----------------
<S>                                               <C>                    <C>                 <C>                   <C>
Earnings (loss) available to common shareholders
                                                         $   (688,758)      $      32,672         $ (4,531,082)      $   (234,195)
                                                    ===================  =================   ===================   ================
                                  Basic EPS
Common shares outstanding entire period
                                                             6,865,517          4,384,987             5,018,437          4,072,863
Weighted average common shares issued                          828,133            201,975             1,520,383            379,449
                                                    -------------------  -----------------   -------------------   ----------------
Weighted average commons shares outstanding
   during period                                             7,693,650          4,586,962             6,538,820          4,452,312
                                                    ===================  =================   ===================   ================
   Earnings (loss) per common share - basic                     (0.09)               0.01                (0.69)             (0.05)
                                Diluted EPS
Weighted average common shares outstanding
   during period - baxic                                     7,693,650          4,586,962             6,538,820          4,452,312
Dilutive effect of stock options and warrants
                                                                     -            534,191                     -                  -
                                                    -------------------  -----------------   -------------------   ----------------
Weighted average commons shares outstanding
   during period - diluted                                   7,693,650          5,121,153             6,538,820          4,452,312
                                                    ===================  =================   ===================   ================
Earnings (loss) per common share - diluted
                                                        $        (0.09)   $          0.01      $          (0.69)    $        (0.05)

</TABLE>