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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001032210-01-501362.txt : 20020410
<SEC-HEADER>0001032210-01-501362.hdr.sgml : 20020410
ACCESSION NUMBER:		0001032210-01-501362
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20010930
FILED AS OF DATE:		20011114

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TAITRON COMPONENTS INC
		CENTRAL INDEX KEY:			0000942126
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065]
		IRS NUMBER:				954249240
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-25844
		FILM NUMBER:		1785650

	BUSINESS ADDRESS:	
		STREET 1:		25202 ANZA DR
		CITY:			SANTA CLARITA
		STATE:			CA
		ZIP:			91355
		BUSINESS PHONE:		8052576060

	MAIL ADDRESS:	
		STREET 1:		25202 ANZA DR
		CITY:			SANTA CLARITA
		STATE:			CA
		ZIP:			91355
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

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

               For the quarterly period ended September 30, 2001


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

                        Commission File Number 0-25844

                        TAITRON COMPONENTS INCORPORATED
               (Name of Registrant as specified in its charter)

                  California                             95-4249240
      (State or Other Jurisdiction of                (I.R.S. Employer
      Incorporation or Organization)                Identification No.)


                          28040 West Harrison Parkway
                        Valencia, California 91355-4162
                   (Address Of Principal Executive Offices)

                                (661) 257-6060
             (Registrant's Telephone Number, Including Area Code)

                                     NONE
     (Former Name, Address and Fiscal Year, if Changed Since Last Report)

Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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  ( )

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:

               Class                     Outstanding on October 15, 2001
- -----------------------------------      -------------------------------
Class A Common Stock, $.001 par value               4,890,037
Class B Common Stock, $.001 par value                 762,612

<PAGE>

PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

                        TAITRON COMPONENTS INCORPORATED

                     Condensed Consolidated Balance Sheets
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                             September 30,            December 31,
                                                                                 2001                     2000
                                                                         -------------------      -------------------
                              Assets                                         (Unaudited)
<S>                                                                      <C>                      <C>
Current assets:
 Cash and cash equivalents                                               $               125      $               190
 Trade accounts receivable, net                                                        2,748                    4,809
 Inventory, net                                                                       28,933                   30,609
 Prepaid expenses                                                                        277                      355
 Deferred income taxes                                                                   602                      694
 Other current assets                                                                    127                      251
                                                                         -------------------      -------------------
      Total current assets                                                            32,812                   36,908

Property and equipment, net                                                            6,882                    7,205
Other assets                                                                             296                      287
                                                                         -------------------      -------------------

      Total assets                                                       $            39,990      $            44,400
                                                                         ===================      ===================

               Liabilities and Shareholders' Equity
Current liabilities:
 Revolving line of credit                                                $            12,430      $            13,930
 Current portion of long term debt                                                        23                       22
 Trade accounts payable                                                                1,307                    2,495
 Accrued liabilities and other                                                           189                      902
                                                                         -------------------      -------------------
      Total current liabilities                                                       13,949                   17,349

Long-term debt, less current portion                                                     394                      412
                                                                         -------------------      -------------------

      Total liabilities                                                               14,343                   17,761
                                                                         -------------------      -------------------

Commitments                                                                               --                       --

Shareholders' equity:
 Preferred stock, $.001 par value.  Authorized 5,000,000 shares.
   None issued or outstanding.                                                            --                       --
 Class A common stock, $.001 par value.  Authorized 20,000,000
  shares; issued and outstanding 4,891,837 and 4,983,975 shares as                         5                        5
  of September 30, 2001 and December 31, 2000, respectively.
  Class B common stock, $.001 par value.  Authorized, issued and
   outstanding 762,612, shares as of September 30, 2001 and                                1                        1
   December 31, 2000.
 Additional paid-in capital                                                           10,823                   11,062
 Accumulated comprehensive income                                                        (53)                     (45)
 Retained earnings                                                                    14,871                   15,616
                                                                         -------------------      -------------------

      Total shareholders' equity                                                      25,647                   26,639
                                                                         -------------------      -------------------

      Total liabilities and shareholders' equity                         $            39,990      $            44,400
                                                                         ===================      ===================
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                    Page 2
<PAGE>

                        TAITRON COMPONENTS INCORPORATED

                Condensed Consolidated Statements of Operations
               (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                          Three months ended September 30,          Nine months ended September 30,
                                             2001                 2000               2001                 2000
                                        --------------       --------------      -------------       --------------
                                          (Unaudited)         (Unaudited)         (Unaudited)           (Unaudited)
<S>                                   <C>                 <C>                  <C>                   <C>
Net sales                               $        3,726       $        8,663      $      13,402       $       25,837

Cost of goods sold                               2,621                5,915              9,394               17,699
                                        --------------       --------------      -------------       --------------
Gross profit                                     1,105                2,748              4,008                8,138

Selling, general and administrative
 expenses                                        1,263                1,711              4,280                5,047
                                        --------------       --------------      -------------       --------------

     Operating earnings (loss)                    (158)               1,037               (272)               3,091

Interest expense, net                              188                  243                634                  659
Other expense (income), net                         24                  (26)               (29)                 (58)
                                        --------------       --------------      -------------       --------------

     Earnings (loss) before income
      taxes                                       (370)                 820               (877)               2,490

Income tax provision (benefit)                     (63)                 297               (132)                 981
                                        --------------       --------------      -------------       --------------

     Net earnings (loss)                $         (307)      $          523      $        (745)      $        1,509
                                        ==============       ==============      =============       ==============

Earnings (loss) per share
     Basic                              $         (.05)      $          .09      $        (.13)      $          .26
                                        ==============       ==============      =============       ==============
     Diluted                            $         (.05)      $          .09      $        (.13)      $          .25
                                        ==============       ==============      =============       ==============

Weighted average shares outstanding
     Basic                                   5,664,460            5,781,310          5,690,161            5,809,372
                                        ==============       ==============      =============       ==============
     Diluted                                 5,664,460            6,069,675          5,690,161            6,088,807
                                        ==============       ==============      =============       ==============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                    Page 3
<PAGE>

                        TAITRON COMPONENTS INCORPORATED
                Condensed Consolidated Statements of Cash Flows
                             (Dollars in thousands

<TABLE>
<CAPTION>
                                                                                 Nine months ended September 30,

                                                                         --------------------------------------------
                                                                                2001                     2000
                                                                         -------------------      -------------------
                                                                           (Unaudited)              (Unaudited)
<S>                                                                      <C>                      <C>
Cash flows from operating activities:
 Net earnings (loss)                                                     $              (745)     $             1,509
                                                                         -------------------      -------------------

 Adjustments to reconcile net earnings (loss) to net cash provided
  by operating activities:
 Depreciation and amortization                                                           421                      366
 Gain on sale of assets                                                                   (7)                      --
 Deferred income taxes                                                                    92                        2
 Changes in Assets and Liabilities:
   Trade accounts receivable                                                           2,061                   (1,073)
   Inventory                                                                           1,676                   (1,181)
   Prepaid expenses                                                                       78                       81
   Other current assets                                                                  124                      (42)
   Other assets                                                                           (9)                    (197)
   Trade accounts payable                                                             (1,188)                   1,008
   Accrued and other liabilities                                                        (713)                     785
                                                                         -------------------      -------------------
       Total adjustments                                                               2,535                     (251)
                                                                         -------------------      -------------------
       Net cash provided by operating activities                                       1,790                    1,258
                                                                         -------------------      -------------------

Cash flows from investing activities:
   Acquisitions of property and equipment                                                (98)                  (1,230)
   Proceeds from sale of assets                                                            7                       --
                                                                         -------------------      -------------------
       Net cash used in investing activities                                             (91)                  (1,230)
                                                                         -------------------      -------------------

Cash flows from financing activities:
 Borrowings on long term debt                                                          3,955                   11,226
 Payments on long term debt                                                           (5,472)                 (11,031)
 Repurchase of Class A Common Stock                                                     (294)                    (383)
 Exercise of stock options                                                                55                       97
                                                                         -------------------      -------------------
       Net cash used in financing activities                                          (1,756)                     (91)
                                                                         -------------------      -------------------

Impact of changes in exchange rates on cash                                               (8)                     (43)
                                                                         -------------------      -------------------

       Net decrease in cash and cash equivalents                                         (65)                    (106)

Cash and cash equivalents, beginning of period                                           190                      274
                                                                         -------------------      -------------------

Cash and cash equivalents, end of period                                 $               125      $               168
                                                                         ===================      ===================

Supplemental disclosure of cash flow information:
 Cash paid for interest (net of capitalized interest of none and
  $31 in 2001 and 2000, respectively)                                    $               682      $               749
                                                                         ===================      ===================
 Cash paid for income taxes                                              $               309      $               211
                                                                         ===================      ===================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                    Page 4
<PAGE>

                        TAITRON COMPONENTS INCORPORATED

             Notes to Condensed Consolidated Financial Statements
         As of and for the quarterly period ending September 30, 2001
  (All amounts are unaudited, except for the balance sheet as of December 31,
                                     2000)

(1)  Basis of Presentation


     The condensed consolidated financial information furnished herein is
     unaudited and, in the opinion of management, includes all adjustments
     (consisting of normal recurring adjustments and accruals) in conformity
     with the accounting principles reflected in the financial statements
     included in the Annual Report on Form 10-K filed with the Securities and
     Exchange Commission for the year ended December 31, 2000. The results of
     operations for interim periods are not necessarily indicative of results to
     be achieved for full fiscal years.

     The accompanying unaudited condensed consolidated financial statements have
     been prepared in accordance with the instructions to Form 10-Q and,
     therefore, do not include all information and footnotes necessary for a
     fair presentation of financial position, results of operations and cash
     flows in conformity with generally accepted accounting principles. The
     unaudited condensed consolidated financial statements and notes should,
     therefore, be read in conjunction with the financial statements and notes
     thereto in the Annual Report on Form 10-K for the year ended December 31,
     2000.

(2)  Summary of Significant Accounting Policies

     Principles of Consolidation

     The unaudited condensed consolidated financial statements include the
     accounts of the Company and its majority-owned subsidiary. All significant
     intercompany transactions have been eliminated in consolidation.

     Revenue Recognition

     Revenue is recognized upon shipment of the merchandise. Reserves for sales
     allowances and customer returns are established based upon historical
     experience and management's estimates as shipments are made. Sales returns
     for the quarters ended September 30, 2001 and 2000 aggregated to $89,000
     and $175,000, respectively and for the nine months ended September 30, 2001
     and 2000 aggregated to $280,000 and $421,000, respectively.

     Allowance for Sales Returns and Doubtful Accounts

     The allowance for sales returns and doubtful accounts at September 30, 2001
     and December 31, 2000 aggregated $102,000 and $120,000, respectively.

     Inventory

     Inventory, consisting principally of products for resale, is stated at the
     lower of cost or market, using the first-in, first-out method. The value
     presented is net of valuation allowances of $1,436,000 and $1,326,000 at
     September 30, 2001 and December 31, 2000, respectively.

     Net Earnings (Loss) Per Share

     Common equivalent shares are excluded from the computation of diluted
     earnings (loss) per share for the three month period ended September 30,
     2001 and for the nine month period ended September 30, 2001, as their
     effect is anti-dilutive.

     Reclassification

     Certain amounts in the 2000 financial statements have been reclassified to
     conform with the current 2001 financial statement presentation.

                                    Page 5
<PAGE>

(3)  Revolving Line of Credit

     During the quarter ended September 30, 2001, the Company renewed its
     revolving line of credit facility which provides up to $16 million for
     operating purposes and up to an additional $4 million for business
     acquisition purposes, extending the maturity date to May 18, 2003. The
     agreement governing this credit facility contains covenants that require
     the Company to be in compliance with certain financial ratios. Borrowings
     on the line of credit are secured by substantially all of the Company's
     assets.





Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

Results of Operations

The following table sets forth, for the periods indicated, certain operating
amounts and ratios as a percentage of net sales.

<TABLE>
<CAPTION>
                                                      Three Month                      Nine Month
                                             Period  Ended  September 30,      Period Ended September 30,
                                            -------------------------------  ------------------------------
                                                 2001             2000            2001            2000
                                            -------------     -------------  -------------    -------------
                                               (Unaudited)      (Unaudited)     (Unaudited)     (Unaudited)
                                                 ( Dollars in thousands)         ( Dollars in thousands)
<S>                                         <C>               <C>            <C>              <C>
Net sales                                   $       3,726     $      8,663   $      13,402    $     25,837

Cost of goods sold                                  2,621            5,915           9,394          17,699

Gross profit                                        1,105            2,748           4,008           8,138
        % of net sales                               29.7%            31.7%           29.9%           31.5%

Selling, general and administrative
 expenses                                           1,263            1,711           4,280           5,047
        % of net sales                               33.9%            19.8%           31.9%           19.5%

Operating earnings (loss)                            (158)           1,037            (272)          3,091
        % of net sales                               (4.2)%           12.0%           (2.0)%          12.0%

Interest expense, net                                 188              243             634             659
        % of net sales                                5.0%             2.8%            4.7%            2.6%

Net earnings (loss)                         $        (307)    $        523   $        (745)   $      1,509
        % of net sales                               (8.2%)            6.0%           (5.6)%           5.8%
</TABLE>

                                    Page 6
<PAGE>

Three month Period Ended September 30, 2001 Compared To The Three month Period
Ended September 30, 2000.

     Net sales for the three months ended September 30, 2001 were $3,726,000,
compared with net sales for the three months ended September 30, 2000 of
$8,663,000, a decrease of $4,937,000 or 57%.  The decrease is primarily due to
an industry wide decrease in demand for discrete semiconductors.  Passive
component sales decreased by $1,255,000 during the quarter ended September 30,
2001 and export sales decreased to $441,000 from $847,000, comparing the same
periods.  The average unit selling price increased to 2.2 cents for the current
period from 1.6 cents during the same period last year.

     Cost of goods sold for the quarter ended September 30, 2001 decreased to
$2,621,000 from $5,915,000 for the same period last year, a decrease of 55.7% or
$3,294,000.  Consistent with the decrease in net sales, cost of goods sold
decreased, however at a slower rate, resulting in gross profits decreasing as a
percentage of net sales to 29.7% for the quarter ended September 30, 2001 from
31.7% for the same period last year.  Gross profits decreased by $1,643,000 to
$1,105,000 for the quarter ended September 30, 2001 from $2,748,000 for the same
period in 2000.

     Selling, general and administrative ("SG&A") expenses decreased by $448,000
or 26.2% for the quarter period ended September 30, 2001 compared to the same
period of 2000.  The decrease is primarily attributable to reducing personnel-
related expenses and commissions paid to independent sales representatives
resulting from lower net sales.  These costs, as a percentage of net sales,
increased to 33.9% for the three months ended September 30, 2001 as compared to
19.8% for the three months ended September 30, 2000, which was primarily
attributable to the overall decrease in net sales.

     Operating loss was $158,000 for the quarter ended September 30, 2001 as
compared to operating earnings of $1,037,000 for the same period ended September
30, 2000.  Operating earnings decreased primarily due to the decrease in net
sales, as discussed above.

     Interest expense, net of interest income for the quarter ended September
30, 2001 decreased by $55,000 compared to the same period last year.  The
decrease is primarily due to lower effective average borrowing rates incurred
during the current quarter at 5.6%, when compared to 8.0% for the same period
last year.

     Income tax benefit was $63,000 during the quarter ended September 30, 2001,
as compared to income tax expense of $297,000 for the same period in 2000.  The
change is a direct result of the Company recording operating losses during the
quarter ended September 30, 2001 as compared to operating earnings during the
same period last year.

     Net loss was $307,000 for the quarter ended September 30, 2001 as compared
with net earnings of $523,000 for the same period last year, resulting from the
reasons discussed above.

                                    Page 7
<PAGE>

Nine month Period Ended September 30, 2001 Compared To The Nine month Period
Ended September 30, 2000.

    Net sales for the nine months ended September 30, 2001 were $13,402,000
compared with net sales for the nine months ended September 30, 2000 of
$25,837,000, a decrease of $12,435,000 or 48.1%.  The decrease is primarily due
to an industry wide decrease in demand for discrete semiconductors.  Passive
component sales decreased by $1,951,000 during the nine months ended September
30, 2001 and export sales decreased to $1,493,000 from $2,270,000, comparing the
same periods.  The average unit selling price increased to 2.2 cents for the
current nine month period from 1.8 cents during the same period last year.

    Cost of goods sold decreased by $8,305,000 to $9,394,000 for the nine months
ended September 30, 2001, a decrease of 46.9% from the same period in 2000.
Consistent with the decrease in net sales, cost of goods sold decreased, however
at a slower rate, resulting in gross profits decreasing as a percentage of net
sales to 29.9% for the first nine months of this year from 31.5% for the same
period last year.  Gross profits decreased by $4,130,000 to $4,008,000 for the
nine months ended September 30, 2001 from $8,138,000 for the same period in
2000.

    SG&A expenses decreased by $767,000 or 15.2% for the nine months ended
September 30, 2001 compared to the same period in 2000. The decrease is
primarily attributable to reducing personnel-related expenses and commissions
paid to independent sales representatives resulting from lower net sales.  SG&A
expenses, as a percentage of net sales, increased to 31.9% for the nine months
ended September 30, 2001 from 19.5% for the same period in 2000, due from the
overall decrease in net sales.

    Operating loss was $272,000 for the nine months ended September 30, 2001 as
compared to operating earnings of $3,091,000 for the same period ended September
30, 2000.  Operating earnings decreased primarily due to the decrease in net
sales, as discussed above.

    Interest expense, net of interest income for the nine months ended September
30, 2001 decreased by $25,000 compared to the nine months ended Sept 30, 2000.
The decrease is due to a decrease in borrowing levels as compared to the same
period last year and lower effective average borrowing interest rates incurred
during the nine month period of 6.2%, compared to 7.8% for the same period last
year.

    Income tax benefit was $132,000 in the current nine month period ended
September 30, 2001, as compared to income tax expense of $981,000 for the same
period in 2000.  The change is a direct result of the Company recording
operating losses during the nine months ended September 30, 2001 as compared to
operating earnings during the same period last year.

    Net loss was $745,000 for the nine months ended September 30, 2001 compared
to net earnings of $1,509,000 for the same period in 2000, a decrease of
$2,254,000 resulting from the same reasons discussed above.

                                    Page 8
<PAGE>

Supply and Demand Issues

   The demand for discrete semiconductors in the U.S. market decreased from 1996
through the middle of 1999. Since then until late 2000, demand had increased as
a result of industry wide shortages creating significant price increases.
However, the industry wide shortage began to diminish towards the end of 2000
with economic conditions worsening resulting in weaker demand in 2001.

   The Company's core strategy is to maintain a substantial inventory of
discrete semiconductors purchased at prices generally lower than those commonly
available to its competitors. This strategy allows the Company to fill customer
orders immediately from stock held in inventory. During 2000, the Company took
advantage of the strong demand in the discrete semiconductor market, as such,
inventory levels increased throughout the year to $30,609,000 at December 31,
2000. Since demand started to weaken towards the end of 2000 and continued to be
weak through the end of September 30, 2001, the Company expects to continue
lowering inventory balances throughout 2001. There are no assurances that demand
in the discrete semiconductor market will increase and that market conditions
will improve in 2001.

   Readers are cautioned that the foregoing statements are forward looking and
are necessarily speculative.  There can be no guarantee that a recovery in the
discrete semiconductor market will take place.  Also, if prices of components
held in our inventory decline or if new technology is developed that displaces
products distributed by us and held in inventory, our business could be
materially adversely affected.  See "-Cautionary Statement Regarding Forward
Looking Information".


Liquidity and Capital Resources

   We have satisfied our liquidity requirements principally through cash
generated from operations and short-term commercial loans.  A summary of our
cash flows resulting from our operating, investing and financing activities for
the nine months ended September 30, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                Nine months ended September 30,
                                                                -------------------------------
                    (Dollars in thousands)                         2001                2000
                                                                -----------         -----------
                                                                (Unaudited)         (Unaudited)
           <S>                                                  <C>                 <C>
           Operating activities...........................        $ 1,790             $ 1,258
           Investing activities...........................            (91)             (1,230)
           Financing activities...........................         (1,756)                (91)
</TABLE>

   Cash flows provided by operating activities increased to $1,790,000 during
the nine months ended September 30, 2001, as compared to $1,258,000 during the
nine months ended September 30, 2000.  The change is primarily due to the
overall decline in business and net sales which caused a decrease in net income
by $2,254,000 to a net loss of $745,000.  Also contributing to the increase in
operating cash flow was a decrease in accounts receivable and inventory of
$2,061,000 and $1,676,000, respectively, during the first nine months of 2001,
as compared to an increase of $1,073,000 and $1,181,000, respectively, during
the same period last year. Conversely, the overall increase in operating cash
flow was partially offset by a decrease in accounts payable and accrued and
other liabilities of $1,188,000 and $713,000, respectively, during the first
nine months of 2001, as compared to an increase of $1,008,000 and $785,000,
respectively, during the same period last year.

   Cash flows used in investing activities was $91,000 during the nine months
ended September 30, 2001 compared to $1,230,000 during the nine months ended
September 30, 2000.  The decrease is primarily due to the completion of
construction in December 2000 of interior improvements to our new 55,000 square
foot warehouse and headquarters.

                                    Page 9
<PAGE>

     Cash flows used in financing activities increased to $1,756,000 from
$91,000 during the nine months ended September 30, 2001, as compared to the same
period in 2000, primarily due to increased net re-payments to our bank revolving
line of credit during the current period in 2001, as compared to the same period
in 2000.

     During the quarter ended September 30, 2001, the Company renewed its
revolving line of credit facility which provides up to $16 million for operating
purposes and up to an additional $4 million for business acquisition purposes,
extending the maturity date to May 18, 2003. The agreement governing this credit
facility contains covenants that require the Company to be in compliance with
certain financial ratios. Borrowings on the line of credit are secured by
substantially all of the Company's assets.

     We believe that funds generated from operations and our bank revolving
lines of credit should be sufficient to finance our working capital and capital
expenditure requirements for the foreseeable future.

     As of the date of this Report, we had no commitments for other equity or
debt financing or other capital expenditures.


Cautionary Statement Regarding Forward Looking Information

     Several of the matters discussed in this document contain forward looking
statements that involve risks and uncertainties. Such forward looking statements
are usually denoted by words or phrases such as "believes," "expects,"
"projects," "estimates," "anticipates," "will likely result," or similar
expressions. We wish to caution readers that all forward looking statements are
necessarily speculative and not to place undue reliance on such forward looking
statements, which speak only as of the date made, and to advise readers that
actual results could vary due to a variety of risks and uncertainties. Factors
associated with the forward looking statements that could cause the forward
looking statements to be inaccurate and could otherwise impact our future
results are set forth in detail in our most recent annual report on Form 10-K.
In addition to the other information contained in this document, readers should
carefully consider the information contained in our Form 10-K for the year ended
December 31, 2000 under the heading "Cautionary Statements and Risk Factors."

Year 2000

     In 1999, we completed our remediation and testing of our systems. Because
of those planning and implementation efforts, we experienced no significant
disruptions in critical information technology and non-information technology
systems and those systems have successfully responded to the Year 2000 date
change. We did not incur any significant expenses during 1999 in connection with
remediating our systems. We are not aware of any material problems resulting
from Year 2000 issues, either with our products, internal systems, or the
products and services of our third parties. We will continue to monitor our
critical computer applications and those of our suppliers and vendors throughout
the year 2001 to ensure any latent Year 2000 matters arising are addressed
promptly.

                                    Page 10
<PAGE>

     PART II. OTHER INFORMATION

Item 1. through Item 5.

Not applicable

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits:

        10.18  Amendment to Business Loan Agreement and Master Revolving Note,
               dated May 18, 2001, between the Registrant and Comerica Bank -
               California.


(b)  Reports on Form 8-K:

        None



SIGNATURES



     In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



                                     TAITRON COMPONENTS INCORPORATED



Date: November 08, 2001                     By:  /s/ Stewart Wang
                                                -----------------
                                            Stewart Wang
                                            Chief Executive Officer
                                            and Director



Date: November 08, 2001                     By:  /s/ Steven H. Dong
                                                -------------------
                                            Steven H. Dong
                                            Chief Financial Officer
                                            (Principal Accounting Officer)

                                    Page 11

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>3
<FILENAME>dex1018.txt
<DESCRIPTION>AMENDMENT TO BUSINESS LOAN AGREEMENT
<TEXT>
<PAGE>

                                                                  EXHIBIT 10.18

                      AMENDMENT TO BUSINESS LOAN AGREEMENT
                           AND MASTER REVOLVING NOTE

     This Amendment to Business Loan Agreement and Master Revolving Note (this
"Amendment"), effective as of May 18, 2001, is entered into by and between
Comerica Bank-California ("Bank") and Taitron Components Incorporated, a
California corporation ("Borrower").

     Bank and Borrower are parties to that certain Business Loan Agreement dated
as of May 6, 1997 (as heretofore amended, together with the Addendum attached to
and made a part thereof, the "Business Loan Agreement").  In connection with the
Business Loan Agreement, Borrower entered into that certain Master Revolving
Note dated May 6, 1997 in the maximum principal amount of $16,000,000 (the
"Revolving Note") and that certain Addendum to Master Revolving Note dated as of
May 6, 1997 (the "Note Addendum").

     Borrower has requested, and Bank has agreed, to make certain amendments to
the Business Loan Agreement, as set forth below.

     For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower agree as follows:

     1. Section 1B of the Business Loan Agreement is amended and restated to
        read in full as follows:

          1B.  Term Loan.  The Loan also includes a facility pursuant to which
               ---------
     Bank may provide Borrower with one or more term loans (each a "Term Loan"),
     each of which shall be in a principal amount of not less than one million
     dollars ($1,000,000) and the aggregate principal amount of which shall not
     exceed FOUR MILLION Dollars ($4,000,000) (the "Term Commitment Limit").
     The Term Loan facility shall expire on May 18, 2003, whereupon Borrower
     shall no longer be permitted to request, and Bank shall have no further
     commitment to fund, Term Loans.  Borrower shall pay to Bank an unused
     commitment fee in the amount of $2,000 on each of May 18, 2002 and May 18,
     2003, in the event that no Term Loan has been funded as of each such date.
     Each Term Loan shall be evidenced by a Term Note on Bank's standard form (a
     "Term Note"), dated the date on which such Term Loan is advanced and in an
     original principal amount equal to the amount of such Term Loan.  Each Term
     Loan shall bear interest at Bank's Base Rate (as defined in the Term Note)
     in effect from time to time or, at Borrower's option, 6-month LIBOR (as
     defined in the Term Note) plus 165 basis points (1.65%).  Each Term Note
     shall provide for monthly payments of interest and principal on the Term
     Loan thereunder, with principal payments amortized based upon a maturity
     equal to four years from the date of funding of such Term Loan.
     Notwithstanding such amortization or the scheduled maturity of any Term
     Note, all outstanding Term Notes shall automatically and immediately become
     due and payable upon the expiration or termination (whether at scheduled
     maturity, by acceleration or otherwise) of the Revolving Loan.   The
     proceeds of each Term Loan shall be used by Borrower exclusively for the
     acquisition of a business entity or division (or substantially all assets
     thereof) engaged in the same lines of business as Borrower.  The funding of
     each Term Loan shall be subject to receipt by Bank of a written notice from
     Borrower at least thirty (30) days prior to the date of the proposed
     funding, which notice shall (a) describe the acquisition to be financed
     with the requested Term Loan, (b) state the proposed funding date, (c)
     state the amount of the requested Term Loan, (d) contain representations
     and warranties by Borrower to the effect that Borrower will be in
     compliance with all of the financial covenants and ratios set forth in this
     Agreement on a pro-forma basis after giving effect to the proposed
     acquisition and Term Loan (including, without limitation, Section 2(d) of
     the Addendum hereto), and (e) certify to and attach a pro-forma balance
     sheet of Borrower giving effect to the proposed acquisition and Term Loan.
     As a further condition to the funding of any Term Loan, Bank shall have
     received such documents and instruments as it may request, duly executed
     and delivered by Borrower, to ensure that Bank has
<PAGE>

     a valid and perfected first priority security interest in all of the assets
     (other than real property) being acquired by Borrower directly or
     indirectly in connection with the proposed acquisition. Each Term Loan
     shall be subject to prepayment solely upon the terms and conditions set
     forth in the applicable Term Note.

     2. Section 2(a) of the Addendum to the Business Loan Agreement is hereby
        amended and restated to read in full as follows:

          (a) Tangible Effective Net Worth in an amount not less than (i)
     $25,750,000 at any time prior to December 31, 2001 and (ii) from and after
     December 31, 2001, the sum of $25,750,000 plus 100% of net income for each
     fiscal year, commencing with fiscal year 2000 (net income being determined
     in accordance with GAAP, but excluding stock repurchases and dividends,
     provided that in no event shall such net income be deemed to be less than
     zero).

     3. The following new definitions are hereby added to Section 1 to the
        Addendum to the Business Loan Agreement, in the appropriate alphabetical
        locations:

          Cash Flow as used in this Agreement means for any applicable period of
          ---------
     determination, the net income (as later defined) (after deduction for
     income taxes and other taxes of Borrower or its subsidiaries, determined by
     reference to income or profits of Borrower or its subsidiaries) for such
     period, plus, to the extent deducted in computation of such net income, the
     amount of depreciation and amortization expense and the amount of deferred
     tax liability during such period, all as determined in accordance with
     GAAP.
          Cash Flow Coverage Ratio means the ratio, as of any applicable period
          ------------------------
     of determination, the numerator of which is net income plus depreciation
     plus amortization plus (or minus) the increase (or decrease) in the
     deferred tax liability minus dividends and S-Draws, if an S-Corp, at the
     greater of actual draws or net income times the highest prevailing personal
     tax rate, and the denominator of which is the current portion of long term
     debt plus the current portion of capital lease payments for the same period
     of determination.

     4. The following new Section 2(d) is hereby added to the Addendum to the
        Business Loan Agreement:

          (d)  At any time following a funding of the Term Loan, a Cash Flow
     Coverage Ratio of not less than 1.5 : 1.0, determined at the end of each
     fiscal quarter for the period of four consecutive fiscal quarters then
     ended.

     5. The Revolving Note is amended by replacing the Maturity Date of "May 18,
        2002" with the Maturity Date of "May 18, 2003".

     6. Borrower and Bank hereby affirm that each of the Business Loan
        Agreement, the Revolving Note and the Note Addendum remains in full
        force and effect without modification except as expressly provided in
        this Amendment.

IN WITNESS WHEREOF, Borrower and Bank have duly executed and delivered this
Amendment as of the date first written above.

TAITRON COMPONENTS INCORPORATED      COMERICA BANK-CALIFORNIA

By: /s/ Stewart Wang                    By: /s/Jason Brown
Name:  Stewart Wang                     Name:  Jason Brown
Title: CEO and President                Title: Vice President

</TEXT>
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