SECURITIES & EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) 
             OF THE SECURITIES EXCHANGE ACT OF 1934

            For the quarterly period ended June 30, 1998

          [ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) 
             OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)


                          Commission File No. 0-27210


                          Tech Electro Industries, Inc.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)


          Texas                                                    75-2408297
-------------------------------                               ------------------
(State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                2941 Main Street, Santa Monica, California 90405
                ------------------------------------------------
                     Address of principal executive office


                                 (310) 396-1782
                           -------------------------
                           Issuer's telephone number


Check  whether  the issuer has (1) filed all  reports  required by Section 13 or
15(d) of the  Exchange  Act during the past 12 months,  and (2) been  subject to
such filing requirements for the past ninety (90) days. Yes ( X )  No (   ) 


As of June 30, 1998, 4,143,026 shares of Common Stock were outstanding.









                                       1

<PAGE>



         THIS DOCUMENT IS PREPARED AND FILED UNDER THE REQUIREMENTS
         OF REGULATION S-B OF THE SECURITIES AND EXCHANGE COMMISSION,
         EFFECTIVE JULY 31, 1992.

                                      INDEX

Item                                                                 Page

Part I - Financial Statements

Item 1 - Financial Statements (unaudited)

         Condensed Consolidated Balance Sheet at
         June 30, 1998 and 1997........................................3

         Condensed Consolidated Statement of Income for
         the Periods Ended June 30, 1998 and
         and 1997......................................................5

         Condensed Consolidated Statement of Cash Flows
         for the Periods Ended June 30, 1998 and
         1997..........................................................6

         Notes to Condensed Consolidated Financial
         Statements....................................................7

Item 2 - Management's Discussions and
         Analysis of Financial Condition and
         Results of Operations........................................13

Part II - Other Information

         Item 1 - Legal Proceedings...................................20

         Item 2.  Changes in Securities...............................20

         Item 3.  Defaults Upon Senior Securities.....................20

         Item 4.  Submission of Matters to a
                    Vote of Securities Holders........................20

         Item 5.  Other Information...................................20

         Item 6.  Exhibits and Reports on Form 8-K....................20

Signatures............................................................21








                                       2

<PAGE>



PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.




                 Tech Electro Industries, Inc., and Subsidiaries
                           Consolidated Balance Sheet

                                     ASSETS

                                                  (Unaudited)
                                                  Jun 30,1998     Dec 31, 1997
                                                  -----------     ------------
CURRENT ASSETS
   Cash and cash equivalents                       $1,641,249       $1,918,604
   Marketable securities                              119,425           96,063
   Accounts and notes receivable
     Accounts receivable-trade, net of
        allowance for doubtful accounts of
        $489,730 and $16,000 respectively           2,584,765          974,604
     Notes                                            220,000          362,153
     Other                                             57,067           34,942
   Deferred sales costs                               193,448            --
   Inventories                                      3,855,688        1,801,034
   Prepaid expenses                                   634,806          211,351
                                                  -----------      -----------
TOTAL CURRENT ASSETS                                9,306,448        5,398,751
                                                  -----------      -----------

NET PROPERTY AND EQUIPMENT                            973,936          308,884
                                                  -----------      -----------
OTHER ASSETS
   Contract rights                                  5,300,146            --
   Deferred financing costs                           254,675            --
   Goodwill                                         3,904,821            --
   Notes receivable                                    70,936           49,997
     Deposit on future acquisition                     37,409          500,000
   Other assets                                       260,799              290
                                                  -----------       ----------
TOTAL OTHER ASSETS                                  9,828,786          550,287
                                                  -----------       ---------- 
TOTAL ASSETS                                      $20,109,170       $6,257,922
                                                  ===========       ==========


                 See Notes to Consolidated Financial Statements

                                       3

<PAGE>
                 Tech Electro Industries, Inc., and Subsidiaries
                           Consolidated Balance Sheet

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
                                                 (Unaudited)
                                               Jun 30, 1998    Dec 31, 1997
                                               ------------    ------------
CURRENT LIABILITIES:
     Current portion of credit 
        facility obligations                   $    251,001    $      --
     Current portion of notes payable               414,485         425,000
     Current portion of long term debt              164,147           --
     Accounts payable-trade                       2,931,034         467,822
     Accrued liabilities                            890,551         548,273
     Deferred service liability                   1,440,422           --
     Dividends payable                                --             28,432
                                               ------------    ------------
        TOTAL CURRENT LIABILITIES                 6,091,640       1,469,527

LONG TERM LIABILITIES:
   CREDIT FACILITY OBLIGATIONS                    7,206,019           --
   DEFERRED LEASE INCENTIVE                          33,634           --
   LONG TERM DEBT                                   115,911           --
   NOTE PAYABLE LONG TERM                            38,950           --
                                               ------------    ------------
        TOTAL LIABILITIES                        13,486,154       1,469,527

MINORITY INTEREST IN SUBSIDIARY                   2,130,987          29,202

STOCKHOLDERS' EQUITY:
   Preferred  stock,   $1.00  par  value;           193,140         319,934
        1,000,000 shares authorized, 65,000 Class
         B issued and outstanding on December 31,
         1997, liquidation preference of $341,250,
         zero shares outstanding on June 30, 1998;
         193,140 and 254,934 Class A issued and 
         outstanding on June 30, 1998 and
         December  31, 1997  respectively;  
         liquidation  preference $1,013,985 and 
         $1,338,404 respectively
   Common stock, $.01 par value;                     41,430          34,985
        10,000,000  shares authorized, 4,143,026  
         shares issued and outstanding on June 30, 
         1998 and 3,498,407 shares issued and 
         outstanding on December 31, 1997.
      Additional paid-in capital                  7,008,317       5,713,866
      Subscription receivable                      (222,500)          --
      Unrealized Gains (Losses) 
       on marketable securities                        (575)         24,624
      Retained Earnings Accumulated Deficit      (2,527,783)     (1,334,216)
                                               ------------    ------------
 Total stockholders' equity                       4,492,029       4,759,193
                                               ------------    ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY       $ 20,109,170     $ 6,257,922
                                               ============    ============

                 See Notes to Consolidated Financial Statements

                                       4
<PAGE>


                 Tech Electro Industries, Inc., and Subsidiaries
                      Consolidated Statement of Operations
                                   (Unaudited)
                  For the Periods Ended June 30, 1998 and 1997

                                       Three Month Ended          Year to Date
                                       -----------------          ------------
                                       1998         1997        1998      1997
                                       ----         ----       -----      ----

Sales and service revenues       $7,982,834  $1,483,230  $9,979,422  $2,569,794
Cost of sales and revenue and
   direct service expense         6,510,953   1,087,247   7,866,491   1,886,187
                                 ----------  ----------  ----------  ----------
Gross profit                      1,471,881     395,983   2,112,931     683,607

Selling, general and 
 administrative expenses          2,398,311     611,151   3,154,397   1,134,640
                                 ----------  ----------  ----------  ----------
Loss from operations               (926,430)   (215,168) (1,041,466)   (451,033)

Other income (expense):
   Interest income                   22,360      35,521      47,785      51,658
   Interest expense                (173,555)     (1,513)   (180,194)    (16,362)
                                 ----------  ----------  ----------  ----------
Total other income (expense)       (151,195)     34,009    (132,409)     35,296

Minority share of subsidiary loss    12,737       1,758      29,201      16,226

                                 ----------  ----------  ----------  ----------
Loss before provision for taxes  (1,064,888)   (179,402) (1,144,674)   (399,511)

Income tax expense:
   Current                            3,305        --         3,305        --
                                 ----------  ----------  ----------  ---------- 
Total income tax expense              3,305        --         3,305        --

                                 ----------  ----------  ----------  ----------
NET LOSS                        $(1,068,193) $ (179,402)$(1,147,979) $ (399,511)
                                ===========  ==========  ==========  ==========


Loss attributable to
          common stockholders   $(1,068,193)  $(212,252)$(1,147,979)  $(432,362)
                                ===========  ==========  ==========  ==========
Loss per share                  $     (0.27) $   (0.09)  $    (0.30) $    (0.23)
                                ===========  ==========  ==========  ==========
Number of weighted average
          shares of common shares
          outstanding             3,960,601   2,427,575   3,820,717  1,864,425
                                ===========  ==========  ==========  ==========

                 See Notes to Consolidated Financial Statements

                                       5
<PAGE>
                 Tech Electro Industries, Inc. and Subsidiaries
                      Consolidated Statement of Cash Flows
                                   (unaudited)
                                                 Jun 30 1998        Jun 30 1997
                                                -------------      ------------
CASH FLOW FROM OPERATING ACTIVITIES
  Net Loss                                        (1,147,979)          (399,512)
  Adjustments to reconcile net Loss to
   cash provided (used) by operations
    Depreciation and amortization adjustment         168,229             16,499
    Provision for slow moving inventory              291,916             15,000
    Minority interest share of subsidiary           (132,385)           (16,226)
    Deferred lease incentive                         (60,839)              --
  Changes in operating assets and liabilities 
  (Increase) decrease in:
    Acounts receivable-trade                         768,133           (507,437)
    Other receivables                                (22,125)           (69,725)
    Inventory                                       (572,974)          (215,553)
    Contract rights                                  135,901               --
    Other assets                                     (36,059)              --
    Deferred expenses                                 (3,012)              --
    Deferred sales costs                               3,133               --
    Prepaid expenses                                (184,549)          (140,533)
  Increase (decrease) in:
    Accounts payable                                 902,502            101,180
    Accrued liabilities                             (224,996)            84,303
    Deferred service liability                      (173,895)              --
                                                -------------     -------------
NET CASH USED BY OPERATING ACTIVITIES               (288,999)        (1,132,004)

CASH FLOWS FROM INVESTING ACTIVITES
    Additions to property and equipment             (110,879)           (76,908)
    Purchases of certificates of deposit                --             (697,249)
    Advances on note receivable                      121,214             17,922
    Sale (purchase) of marketable securities         (48,561)           584,690
    Capitalized merger and acquisition costs         (37,409)
    Business acquisition, net of cash acquired      (415,127)                 0
                                                -------------     -------------
NET CASH USED BY INVESTING ACTIVITIES               (490,762)          (171,545)

CASH FLOWS FROM FINANCING ACTIVITIES
    Credit facility obligations                      846,957                  0
    Proceeds from short term debt                       --               53,383
    Payments on short term debt                         --             (347,772)
    Repayment of long-term debt                     (700,083)                 0
    Proceeds from sale of preferred stock,
       common stock and warrants                     383,964          1,870,707
    Payments on related party borrowing                 --             (245,000)
    Dividends paid                                   (28,432)           (32,491)
                                                -------------     -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES            502,406          1,298,827
                                                -------------     -------------
NET DECREASE IN CASH 
  AND CASH EQUIVALENTS                              (277,355)            (4,722)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD        1,918,604            261,098
                                                -------------     -------------
CASH AND EQUIVALENTS AT END OF PERIOD              1,641,249            256,376
                                                =============     =============
                                       6
<PAGE>



                 Tech Electro Industries, Inc., and Subsidiaries
                   Notes to Consolidated Financial Statements


Note A - Basis of Presentation

         The accompanying  unaudited financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and  in  accordance  with  the  instructions  per  Item  310(b)  of
Regulation  SB.  Accordingly,  they do not  include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.

         In the opinion of  management,  all  adjustments  (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included. Operating results for the six month period ended June 30, 1998 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 1998.


Note B - Organization

         Tech Electro  Industries,  Inc.  ("TEI" or the "Company") was formed on
January 10, 1992 as a Texas corporation.  On January 31, 1992, TEI acquired 100%
of the outstanding  common stock of Computer  Components  Corporation  (CCC). In
February,  1996,  TEI filed a Form SB-2  Registration  Statement and completed a
public  offering  the net  proceeds of which  amounted to  $2,043,891  including
warrants.

         On June 1, 1996, pursuant to a Stock Exchange  Agreement,  TEI acquired
100% of the outstanding shares of Vary Brite Technologies, Inc. (VBT) by issuing
50,000 shares of its common stock.  The business  combination  was accounted for
using the pooling method. The historical  consolidated  statements of operations
prior to the date of the  combination  have not been  adjusted  to  include  the
operations  of  VBT as  these  operations  are  immaterial  to the  consolidated
operations of the Company. Accordingly, the accompanying consolidated statements
of operations  include,  the  operations  of VBT from June 1, 1996 forward.  The
assets and liabilities acquired were also immaterial to the consolidated balance
sheet of the Company.

         On October 29, 1996, TEI  incorporated  Universal  Battery  Corporation
(UBC) as a 67% owned subsidiary.

         Effective February 10, 1997, pursuant to Regulation S as promulgated by
the Securities and Exchange Commission,  TEI sold 1,100,000 shares of its common
stock and options to acquire  1,000,000  shares of common stock for  $1,870,000,
for a combined  price of $1.70 net to the Company.  The options were issued with
an exercise price of $2.15 per share and expire thirteen months from the date of
issuance.  In February 1998 the terms on the options were extended to March 1999
and the exercise price was increased to $2.50 per share.




                                       7

<PAGE>



Note C - Acquisition

         On March 19, 1998, the Company  completed the acquisition of 51% of the
issued and  outstanding  common stock of U.S.  Computer Group Inc ("USCG").  The
purchase  consideration  for the  interest  was  $1,000,000  paid in  cash.  The
acquisition  has been  accounted for as a purchase.  The excess of the aggregate
purchase  price over the fair market value of assets  acquired  and  liabilities
assumed of $3,984,815 will be amortized over 15 years.  Contract rights acquired
of $5,436,047  will be amortized on a  straight-line  basis over the  respective
contract lives.

The summary of the fair value of assets acquired and  liabilities  assumed is as
follows:

         Current assets                             $ 4,672,250
         Fixed assets                                   642,408
         Contract rights and other assets             5,912,160
         Goodwill                                     3,984,815
         Current liabilities                         (4,543,524)
         Long-term liabilities                       (7,433,939)
         Minority interest                           (2,234,170)
                                                     -----------
                                                    $ 1,000,000
                                                    ============

The  following  pro forma  consolidated  results  for the quarter and six months
ending June 30, 1998 and 1997 assumes USCG acquisition occurred as of January 1,
1997.


                       Three Months Ended                Six Months Ended

             June 30, 1998    June 30, 1997        June 30, 1998  June 30, 1997
             -------------    -------------        -------------  -------------
Revenues      $  5,924,379    $   6,013,189         $ 13,429,868   $ 13,454,754
Net loss      $   (333,679)   $   ( 522,198)        $ (1,052,780)  $ (1,913,623)

Loss per share
(Basic and 
  diluted)    $      (0.08)   $     (0.22)          $      (0.28)  $      (1.03)


Note D - Dividends

         Dividends were declared on May 20, 1998 for Class A Preferred  Stock at
$0.0975 per share.  This  dividend  was paid in the form of common  stock at the
rate of .0313  shares of common for each share of  preferred.  The  dividend was
payable on June 30, 1998 to  stockholders  of record at the close of business of
May 3, 1998. In addition,  dividends paid during the quarter ended June 30, 1998
was $7,678.  No  dividends  were paid for the quarter  ended June 30,  1997.  No
dividends were payable at June 30, 1998.



                                       8

<PAGE>



Note E - Inventories

Inventories consist of the following at June 30, 1998:

         Computer parts, electronic components and
            packing materials                                  $4,618,204
         Less valuation reserves                                  762,516
                                                                ---------
                                                               $3,855,688
                                                                =========

         The Company increased its inventory allowance by $120,000 in the second
quarter  due to  the  reduction  in  business  from  a  major  customer  by  its
subsidiary  Computer Components Corporation.  This inventory allowance  consists
of specialized inventory  the Company has in stock for this customer.

Note F - Property and Equipment

Property and equipment consists of the following at June 30, 1998:

         Machinery and equipment                        $ 1,211,183
         Leasehold improvements                             320,511
         Furniture and fixtures                             396,904
         Automobiles                                        312,250
                                                          ---------
                                                          2,240,848
         Less accumulated depreciation & amortization     1,266,912
                                                          ---------
                                                          $ 973,936
                                                          =========

         Included  in  property  and  equipment  at June 30, 1998 is $404,561 of
equipment and furniture acquired under capital leases.  Accumulated amortization
of such equipment and furniture was $219,488 at June 30, 1998.



Note G - Credit Facility Obligations

         At  June  30,  1998,  the  Company's  subsidiary,  USCG,  maintained  a
revolving loan ("the Agreement") with a financial institution,  with the maximum
borrowings  allowable equal to the lesser of $10,000,000  outstanding at any one
time or the sum of 80 percent of the amount of the USCG's eligible  receivables,
as defined in the  Agreement.  In  addition  to the  revolving  loan,  USCG also
maintains  a term  loan with the same  financial  institution  in the  principle
amount of $ 500,000  ("Term Loan") plus a term loan in the  principal  amount of
$500,000  (the "Term  Loan").  Borrowings  under the Agreement are secured by an
interest in all of the USCG's owned accounts receivable,  inventory,  equipment,
investment property and general intangibles.

         Borrowings  under the  agreement  bear  interest at a rate equal to the
prime  rate plus 2 percent  per year,  but in no event  less than 9 percent  per
year.  The revolving  loan matures on September  30, 2000,  subject to automatic
renewal terms of one year each. As of June 30, 1998,  $6,457,020 was outstanding
under the revolving loan.

                                       9

<PAGE>



         Interest on the Term Loan is payable  beginning  on October 31, 1998 in
equal  monthly  installments  of $14,000 plus a payment of the unpaid  principal
balance on September  30, 2000.  As of June 30, 1998,  $500,000 was  outstanding
under the term loan.

         The  terms of the  Agreement  provided  for  minimum  monthly  interest
charges,  an initial loan fee of 1 percent of the maximum  dollar  amount of the
loan,  an  anniversary  fee of .5 percent  of the  maximum  dollar  amount and a
quarterly facility fee of $5,000.  Certain financial and nonfinancial  covenants
are  required to be met. At June 30,  1998,  covenants  relating to tangible net
worth and audited financial  statement deadlines were in default,  however,  the
financial institution has provided waivers of such covenants.


         In addition,  the USCG has a "floorplan" credit line arrangement with a
finance  corporation  which provides for financing of up to $ 250,000 to support
inventory  purchases from a specific vendor. The floorplan credit line agreement
does not provide for  interest  terms as amount  outstanding  are required to be
paid timely.  As collateral  security of the payment  under the loan  agreement,
USCG granted the finance  corporation a security interest in the assets of USCG.
As of June 30, 1998, accounts payable includes  approximately $93,380 related to
this inventory financing.


Note H - Deferred Service Liability

         The  deferred  service  liability  of $ 1,440,422  on the  accompanying
consolidated  balance sheet represents  maintenance contract revenues billed but
not yet earned. The terms of the Company's service maintenance contracts provide
for a period  of  service  ranging  from one to  twelve  months.  Contracts  are
automatically renewed by the Company unless the customer provides 90 days notice
of termination.  The deferred service  liability is amortized on a straight-line
basis over the term of the related  contracts.  As of June 30, 1998, the Company
had  a  service   maintenance   contract  base  with  an  aggregate  balance  of
approximately $ 16,639,710.


Note I - Loss per Share

         The Company adopted SFAS NO. 128, "Earnings Per Share", in 1997, which,
requires the disclosure of basic and diluted net income (loss) per share.  Basic
net income  (loss) per share is computed by  dividing  net income  (loss) by the
weighted average number of common shares outstanding for the period. Diluted net
loss per share is computed by dividing net income (loss) by the weighted average
number of common shares and common stock equivalents outstanding for the period.
The Company's common stock  equivalents are not included in the diluted loss per
share for 1998 and 1997 as they are antidilutive.  Therefore,  diluted and basic
loss per share is  identical.  Net loss per share for the six months  ended June
30,1997 has been  increased for accrued  dividends on preferred  stock  totaling
$32,850. There were no accrued dividends as of June 30, 1998.




                                       10

<PAGE>



Note J - Long-Term Debt

As of June 30, 1998, long-term debt consists of the following:

         Capital lease obligations (a)                    $ 221,246
         Automobile loans (b)                                58,812
                                                          ---------
                                                          $ 280,058

         Less current installments of long-term debt        164,147
                                                          ---------
                                                          $ 115,911
                                                          =========

         a) Various capital lease  obligations  with interest ranging from 10 to
         12.22 percent payable in monthly  installments through August 2000. The
         capital  lease  obligations  are  secured  by  the  related  underlying
         equipment and furniture.

         b) Various  automobile  loans with interest  rates ranging from 9.89 to
         11.5 percent payable in monthly installments through February 2001. The
         monthly loan payments,  including interest,  range from $ 324 to $ 522.
         The automobile loans are secured by the related automobiles.


Note K - Minority Interest

         Minority  interest  of $  2,130,987  at June 30,  1998  represents  the
minority  interest in USCG's  series D and series E redeemable  preferred  stock
which remain outstanding at June 30, 1998.

         USCG's  series  D  preferred   stock   outstanding  of  $  133,814  are
cumulative,  non-voting  shares that were originally issued in connection with a
business acquisition. In September, 1997, a redemption agreement was signed with
the preferred  shareholder,  which calls for 14 monthly  payments of $ 33,452 or
22,668  shares  of  series  E  Preferred  stock  which  will  fully  redeem  all
outstanding preferred shares by October, 1998. Cumulative dividends of 8 percent
will continue to be paid on the remaining balance. The liquidation preference of
series  D  preferred  stock  is  equal  to  the  remaining  redemption  price of
$ 133,814.

         In connection  with the  acquisition of USCG by the Company,  USCG also
issued 2,000 shares of series E  redeemable preferred  stock with a par value of
$ 1,000  per  share.  Cumulative  dividends  are payable  on the stock  annually
beginning  December  31,  1998,  in cash at a rate of 7 percent  per share or 12
percent,  if paid in additional shares of series E preferred stock. The series E
preferred  stock is  redeemable  by the  Company  at any time.  The  liquidation
preference of the preferred stock is equal to the remaining  redemption price of
$ 2,000,000.




                                       11


<PAGE>



Note L - Warrants and Stock Options

         During  February 1997, in connection with common stock issued for cash,
the Company entered into an agreement which called for the reorganization of its
subsidiaries.  The agreement  provide that Tech Electro  Industries,  Inc. remit
eighty-four  percent of all proceeds  received from the exercise of warrants and
options existing at that time to its subsidiary,  CCC, for funding of expansions
and growth. At June 30, 1998,  1,945,000  warrants subject to the agreement were
outstanding with an exercise price of $3.30 per warrant.  The warrants expire on
January 26, 2000. In addition,  at June 30, 1998,  1,000,000  options subject to
the agreement were outstanding.  The options have an exercise price of $2.50 per
share and will expire on March 10, 1999. In December 1997, the Company issued an
additional  1,000,000 options to purchase common stock at $1.75 per share. These
option proceeds are not subject to remittance to CCC.


Note M - Subsequent Event

         On July 10, 1998,  the Company  entered  into an Agreement  and Plan of
Merger with DenAmerica  Corp.  (DEN) to acquire all of the  outstanding  capital
stock of DEN. Under the terms of the agreement, the holders of each share of DEN
will receive $4.00 in cash and newly issued preferred stock of the Company worth
$.90 per  share.  The  proposed  merger  is  subject  to  various  contingencies
including financing, regulatory approvals and other matters.






























                                       12

<PAGE>




Item 2.  Management's Discussion and Analysis or Plan of Operation.

         The following  discussion  and analysis  should be read in  conjunction
with the Company's  Consolidated Financial Statements and notes thereto included
elsewhere in this Form 10-QSB.  Except for the historical  information contained
herein,  the discussion in this Form 10-QSB  contains  certain  forward  looking
statements  that involve  risks and  uncertainties,  such as  statements  of the
Company's  plans,  objectives,   expectations  and  intentions.  The  cautionary
statements  made in this Form 10-QSB  should be read as being  applicable to all
related forward-looking statements wherever they appear in this Form 10-QSB. The
Company's  actual results could differ  materially  from those  discussed  here.
Factors that could cause or  contribute  to such  differences  include,  without
limitation, those factors discussed herein and in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997.

Recent Developments

         During  the  period  ended  June 30,  1998,  a number  of  developments
occurred  which had a significant  impact on the  operations  and results of the
Company, including the following:

         In May 1998, Computer Components Corporation, a wholly-owned subsidiary
of  the  Company (CCC),  was notified of  a reduction  in  business from a major
customer,  resulting in a $120,000 write-off from inventory (an increase of cost
of goods sold) for the month of June 1998.

         On April 8, 1998, the Company  commenced a private placement of 375,000
shares  of  Company  common  stock for  $750,000,   the  private  placement  was
completed in July 1998.

         On July 10, 1998,  the Company  entered  into an Agreement  and Plan of
Merger with DenAmerica  Corp.  (DEN) to acquire all of the  outstanding  capital
stock of DEN. Under the terms of the agreement, the holders of each share of DEN
will receive $4.00 in cash and newly issued preferred stock of the Company worth
$.90 per  share.  The  proposed  merger  is  subject  to  various  contingencies
including financing, regulatory approvals and other matters.

         In addition,  the  financial  results of the Company for the six months
ended June 30, 1998 were significantly impacted by the acquisition of a majority
interest in US Computer Group,  Inc.,  (USCG) which was consummated on March 19,
1998. Because the acquisition of USCG took place during the final portion of the
quarter  ended  March 31,  1998,  the period  ending  June 30, 1998 is the first
period  in  which  the  operations  of USCG  are  reflected  in the  results  of
operations of the Company.


THREE-MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE-MONTHS ENDED JUNE 30, 1997



                                       13

<PAGE>



Results of Operations

         As noted above,  the  Company's  results of  operations  for the second
quarter of 1998,  compared  to the second  quarter of 1997,  were  significantly
impacted by the operations of USCG,  which was acquired after the second quarter
of 1997,  and for which there are no comparable  results in the first quarter of
1997.

Revenues

         For the three month period ending June 30, 1998,  the Company had sales
of $7,982,834,  an increase of $6,499,604 (438.21%) from sales of $1,483,230 for
the three month period ending June 30, 1997. The  significant  increase in sales
was due to  sales  originated  by  USCG  and its  subsidiaries,  which  together
contributed  sales of $5,913,279  to the Company's  revenues for the three month
period  ending  June 30,  1998.  Neither  USCG nor its  subsidiaries  had  sales
contributing  to the  Company's  revenues  in the  comparable  period  in  1997.
Excluding sales of USCG, the Company recorded sales of $2,069,555, for the three
month period ending June 30, 1998,  or an increase of $586,325 (39.53%) from the
three month period ending June 30, 1997.

         The Company  recognized a loss from operations of $926,430  (unaudited)
for the three month period ending June 30, 1998,  compared to a loss of $215,168
during the same  period in the prior  year,  an  increase  in losses of $711,262
(330.56%).  The Company's  increased  loss was due to increases in cost of goods
sold and general  and  administrative  expenses.  The cost of goods sold rose to
$6,510,953 in the second  quarter of 1998 from  $1,087,247 in the second quarter
of  1997,  an  increase  of  5,423,706  (498.85%).  The  Company's  general  and
administrative  expenses  rose to  $2,398,311  for the three month period ending
June 30,  1998  from  $611,151  for the same  period  in 1997,  an  increase  of
1,787,160  (292.43%).  The  increase  in  cost  of  goods sold and a substantial
portion of the increase in general and administrative expenses can be attributed
to the consolidation of  the operations of  USCG  and  its  subsidiaries,  which
contributed  cost  of  goods  sold of  $4,903,494 and general and administrative
expenses of $1,181,427 for the  second quarter  of 1998, with no contribution in
the  same  period  in 1997.  Additionally,  in  May  1998,  Computer  Components
Corporation,  a wholly owned subsidiary of the Company (CCC) was advised  that a
major customer had experienced a change in certain management.  This development
caused CCC  to  record a reduction  in  inventory of $120,000 in June 1998.  The
Company  expects  that the loss of this customer  will  result  in  a  reduction
of  sales  of  $1,000,000  during  the remainder of the Company's fiscal year.

Cost of Goods Sold

         The Company's  cost of goods sold,  consisting  primarily of inventory,
rose to $6,510,953 in the second  quarter of 1998 from  $1,087,247 in the second
quarter of 1997, an increase of $5,423,706  (498.85%).  A substantial portion of
the increase was  due  to  the  impact  of  USCG  and  its  subsidiaries,  which
contributed cost of goods sold of  $4,903,492  for  the second  quarter of 1998,
with no  contribution  in the same period in 1997.  Excluding cost of goods sold
of USCG, the Company recorded cost  of goods of $1,607,459 in the second quarter
of 1998, or an increase of $520,212 (47.85%) from the second quarter of 1997. As
mentioned above,  CCC  recorded  an additional $120,000  to  cost  of  goods  in
June 1998 due to the write-off of inventory from the reduction in business  from
a major customer.

                                       14

<PAGE>



         Cost of goods as a  percentage  of sales  rose to 81.56% in the  second
quarter of 1998 from  73.30% in the second  quarter of 1997.  This  increase  is
attributable  to USCG and its  subsidiaries,  for  which  the cost of goods as a
percentage of sales was 82.92% in the second quarter of 1998.  Excluding cost of
goods sold of USCG,  the cost of goods as a percentage  of sales for the rest of
the Company  rose to 77.67% in the  second quarter  of 1998  from  73.30% in the
second  quarter of 1997.   Again,  this  increase was substantially due to CCC's
additional  $120,000  to cost of goods in June 1998  due  to  the  write-off  of
inventory from the reduction in business from a major customer.

General and Administrative Expenses

         The Company's general and administrative expenses, consisting primarily
of wages, benefits and related expenses,  rose to $2,398,311 for the three month
period  ending  June 30,  1998 from  $611,151  for the same  period in 1997,  an
increase  of  $1,787,160  (292.43%).   The  increase  was due primarily to costs
associated with operations of USCG  and  its  subsidiaries,   which  contributed
general  and  administrative  expenses  of $1,181,427 for the second  quarter of
1998,  with no  contribution in the same period in 1997.  Excluding  general and
administrative expenses of USCG, the Company recorded general and administrative
expenses of $1,216,884 in the second quarter of 1998, or an increase of $605,733
(99.11%) from  the  second  quarter of 1997.  Such increase was due primarily to
the  cost  associated  with the DEN acquisition and the integration of USCG into
the Company.

Purchase Order Backlog

         At June 30, 1998,  Company's  purchase order backlog was  approximately
$2,231,389,  compared to $1,861,570 at June 30, 1997, an increase of 19.87%.  Of
the  $2,231,389  purchase order backlog at June 30, 1998,  $119,024  (5.33%) was
attributable to USCG and $2,112,365 (94.67%) was attributable to the rest of the
Company.  Generally, order backlog represents orders received from customers but
not shipped  typically at the request of the customer.  The Company monitors its
purchase  backlog  to help  analyze  sales  trends  and to  gauge  future  sales
potential.

Interest Expense

         The Company  incurred  $173,555 in interest expense in the second three
months of 1998,  compared to $1,513  during the second three months of 1997,  an
increase of $172,042 (11,370.92%).  The significant increase in interest expense
is  attributable  to USCG  and its  subsidiaries,  which  incurred  $162,037  in
interest expense in the second three months of 1998.

Income Tax Expense

         The Company  incurred  $3,305 in income tax expense in the second three
months of 1998,  compared  to $0 during the  second  three  months of 1997.  The
increase in income tax expense was due to the  Company's  franchise  tax for the
state of Texas.


SIX-MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX-MONTHS ENDED JUNE 30, 1997





                                       15

<PAGE>



Results of Operations

         The Company's  results for operations for the first six months of 1998,
compared  to the first six months of 1997,  were  significantly  impacted by the
operations of USCG,  which was acquired during the first six months of 1998, and
for which there are no comparable results in the first six months of 1997.

Revenues

         For the six month period ending June 30, 1998, the Company had sales of
$9,979,422,  an increase of $7,409,628 (or approximately  288.33%) from sales of
$2,569,796  for the six month  period  ending  June 30,  1997.  The  significant
increase  in sales  was due to sales  originated  by USCG and its  subsidiaries,
which together contributed sales of $5,913,279 to the Company's revenues for the
six month period  ending June 30, 1998.  Neither USCG nor its  subsidiaries  had
sales contributing to the Company's revenues in the comparable period in 1997.

         The Company recognized a loss from operations of $1,041,466 (unaudited)
for the six month period  ending June 30,  1998,  compared to a loss of $451,033
during the same  period in the prior  year,  an  increase  in losses of $590,433
(130.91%).  The Company's  increased  loss was due to increases in cost of goods
sold and general  and  administrative  expenses.  The cost of goods sold rose to
$7,866,491 in the first half of 1998 from  $1,886,187 in the first half of 1997,
an increase of 5,980,304  (317.06%).  The Company's  general and  administrative
expenses rose to  $3,154,397  for the six month period ending June 30, 1998 from
$1,134,640 for the same period in 1997, an increase of 2,019,757 (178.01%).  The
increase in both cost of goods sold and general and administrative  expenses can
be  attributed  to  the  consolidation  of  USCG  and  its  subsidiaries,  which
contributed  cost of goods sold  of  $4,903,494  and  general and administrative
expenses of $1,181,427 for the first half of 1998,  with no contribution  in the
same  period  in 1997.  Additionally,  CCC  contributed  an additional  $120,000
to cost of goods in June 1998 due to the write-off of inventory from the loss of
a major customer.

Cost of Goods Sold

         The Company's  cost of goods sold,  consisting  primarily of inventory,
rose to $7,866,491  in the first half of 1998 from  $1,886,187 in the first half
of 1997, an increase of 5,980,304 (317.06%).  The increase was due to the impact
of USCG and its subsidiaries, which contributed cost of goods sold of $4,903,494
for the first half of 1998,  with no  contribution  in the same  period in 1997.
Additionally,  CCC  contributed an additional  $120,000 to cost of goods in June
1998 due to the write-off of inventory from the loss of a major customer.

         Cost of goods as a percentage of sales rose to 78.83% in the first half
of 1998 from 72.87% in the first half of 1997.  This increase is attributable to
USCG and its subsidiaries,  for which the cost of goods as a percentage of sales
was 82.92% in the first half of 1998.






                                       16

<PAGE>



General and Administrative Expenses

         The Company's general and administrative expenses, consisting primarily
of wages,  benefits and related  expenses,  rose to $3,154,397 for the six month
period  ending June 30,  1998 from  $1,134,640  for the same period in 1997,  an
increase of 2,019,757  (178.01%).  The increase was due to costs associated with
operations  of  USCG  and  its  subsidiaries,   which  contributed  general  and
administrative  expenses  of  $1,181,427  for the  first  half of 1998,  with no
contribution in the same period in 1997.

Interest Expense

         The Company incurred  $180,194 in interest expense in the first half of
1998,  compared to $16,362  during the first six months of 1997,  an increase of
$163,832   (1001.30%).   The  significant   increase  in  interest   expense  is
attributable to USCG and its  subsidiaries,  which incurred $162,037 in interest
expense in the first half of 1998.

Income Tax Expense

         The  Company  incurred  $3,305 in income  tax  expense in the first six
months of 1998, compared to $0 during the first six months of 1997. The increase
in income tax expense was due to the  Company's  franchise  tax for the state of
Texas.

Liquidity

         As of June 30,  1998,  the  Company  had cash and cash  equivalents  of
$1,641,249 and marketable  securities of $119,425.  At June 30, 1997 the Company
had cash of  $256,315,  certificates  of  deposit  of  $697,249  and  marketable
securities  of  $698,625.  The  change  in the  Company's  investment  in  cash,
certificates of deposit, and securities reflects the liquidation of certificates
of  deposit  to fund  cash  needs  of the  Company,  as well  as cash  and  cash
equivalents held by USCG. The Company expects to use these funds as required for
maintenance and expansion of existing operations of CCC, UBC and VBT.

         On  September  9,  1997,  USCG  entered  into a loan  agreement  with a
financial  institution  which  provides  for a  revolving  loan with the maximum
borrowings  allowable equal to the lesser of $10,000,000  outstanding at any one
time  or the  sum  of 80  percent  of  the  amount  of  the  Company's  eligible
receivables,  as defined in the loan agreement,  other than maintenance contract
receivables,  plus 4.25 times the average  total  monthly  computer  maintenance
contract collections to be calculated on a trailing twelve month moving average,
plus a term loan in the principal amount of $500,000.  Borrowings under the loan
agreement are secured by an interest in all of USCG's owned accounts receivable,
inventory, equipment, investment property and general intangibles. The revolving
loan matures on September 30, 2000,  subject  to  automatic renewal terms of one







                                       17

<PAGE>



year each. The interest on the Term Loan is payable  beginning  on  October  31,
1998 in equal  monthly installments  of  $14,000  plus a payment  of the  unpaid
principal  balance on September 30, 2000.   As  of  June 30, 1998,  $500,000 was
outstanding under the term  loan  and another  $500,000 was outstanding  under a
bridge term loan extended to USCG shortly after its acquisition  by the Company,
for a total of $1,000,000 outstanding.

         In addition, the Company has a "floorplan" credit line arrangement with
a finance  corporation which provides for financing of up to $250,000 to support
inventory  purchases from a specific vendor. The floorplan credit line agreement
does not provide for interest  terms as amounts  outstanding  are required to be
paid in approximately thirty days. As collateral security for the payments under
the loan  agreement,  the Company  granted the  finance  corporation  a security
interest in the assets of the Company.

         On April 8, 1998, the Company  commenced a private placement of 375,000
shares of Company  common stock for $750,000,  which  placement was completed in
July 1998. The proceeds from this private  placement are expected to be used for
working capital.

         On  April  17,  1998,  USCG  announced  that  it  had  entered  into  a
non-binding  letter of intent to raise up to $20  million  in a firm  commitment
initial public  offering of its common stock.  The proceeds of the offering will
be  used  to,  among  other  things,   finance  selected   acquisitions,   repay
indebtedness and provide working capital.

         On July 15,  1998,  the Company  announced  that it had entered  into a
definitive  merger  agreement  with  DenAmerica  Corp.  (DEN),   the  owner  and
franchisor of the Black-eyed Pea  restaurant  chain and a leading  franchisee of
Denny's  restaurants,  providing  for the merger of  DEN  into the Company.  The
merger  agreement  terms are similar to those of the  letter of intent signed by
the two  companies  on April 30,  1998.   The  transaction  is  expected  to  be
consummated in November 1998.

         Under the terms of the  definitive  agreement,  DEN  shareholders  will
receive $4.00 in cash and $0.90 in newly-issued  preferred stock of the Company.
The Company is expected   to  retain  most  of  the  management,  administrative
and operations  personnel of DEN.  The consummation of the merger is  contingent
upon  satisfactory  completion  of mutual  due  diligence efforts, financing and
other conditions.  Should the merger not occur due to the DEN Board of Directors
executing a transaction with another purchaser,   a $3 million breakup fee would
be paid to the Company.

         The Company expects to fund the cash portion of the  consideration  for
the merger from debt secured by assets of DEN,  subordinated debt of the Company
or combination of those two and other sources.

Inflation

         The Company has not been  materially  effected by inflation,  while the
Company  does not  anticipate  inflation  affecting  the  Company's  operations,
increases in labor and supplies could impact the Company's ability to compete.

                                       18

<PAGE>



Year 2000

         As has been widely reported,  there is worldwide concern that Year 2000
technology problems may materially and adversely impact a variety of businesses,
local,  national and global economies.  The Company, in response to this effort,
has  commenced  a process of  identifying  operating  and  application  software
systems  that will be  impacted  by the Year  2000.  The  Company's  preliminary
analysis  indicates  that the Company  will require  enhancement  of software in
older systems,  as well as updating and enhancing  various  accounting and other
systems.  The Company  believes that it will complete  upgrades of its operating
and application  software systems prior to the Year 2000,  although  competition
for goods and services  relating to such upgrades,  including computer equipment
and  installation  expertise,  may cause delays in  implementation.  The Company
currently   anticipates   that  the  cost  to  the  Company  of  such   software
enhancements,  including  installation  costs and related  expenses,  will total
approximately  $50,000 to  $100,000,  which  will be funded  out of the  working
capital of the Company.  This expense is not  anticipated  to be material to the
Company's financial position or future results of operations, although there can
be no assurance that presently unforeseen computer programming difficulties will
arise.

         The Company has not conducted a systematic  evaluation of the Year 2000
compliance of its vendors and  customers.  As a result,  it is possible that the
Company's future  performance may be adversely impacted by payment and financial
difficulties  experienced  by  customers,  and  by  shipping,   fulfillment  and
accounting difficulties experienced by vendors. The Company believes that it has
sufficient  resources,  including  cash  reserves  and  inventory  supplies,  to
maintain  operations  during  delays in payments  or  supplies  of  inventories.
However,  the Company is aware that extended  difficulties  by larger vendors or
customers may have a significant impact; however, it is unable, at this time, to
anticipate the extent of any such impact, were it to occur.























                                       19

<PAGE>



PART II - OTHER INFORMATION.

Item 1.  Legal Proceedings.

         None.

Item 2.  Changes in Securities.

         On April 8, 1998, the Company  commenced a private placement of 375,000
shares of  Company  common  stock for  $750,000,  which  private  placement  was
completed in July 1998.  All shares were sold through  officers and directors of
the Company to less than 35  accredited investors  in  reliance upon Rule 506 of
the Securities Act of 1933, as amended and all proceeds  will go to the Company.

Item 3.  Defaults Upon Senior Securities.

         None.

Item 4.  Submission of Matters to a Vote of Securities Holders.

         None.


Item 5.  Other Information.

         None.

Item 6.  Exhibits and Reports on Form 8-K.

         (a)      Exhibits.

                  None.

         (b)      Reports on Form 8-K.

                  1. The Company  filed an  Amendment  to the Current  Report on
                  Form 8-K,  originally  filed on February 13, 1998,  clarifying
                  its  response  to  Item  4  regarding  changes  in  certifying
                  accountant.

                  2. The Company filed  Amendment No. 1 to the Current Report on
                  Form 8-K,  originally  filed  on  March  19,  1998,  providing
                  financial  statements  and pro forma  financial  statements of
                  USCG.









                                       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.


                                                 Tech Electro Industries, Inc.
                                                 -----------------------------



Date: August 14, 1998                            /s/ DAVID KAYE
                                                 ----------------------
                                                 David Kaye
                                                 Chief Financial Officer and
                                                 Principal Accounting Officer






























                                       21