SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

For the fiscal year ended..........................................June 30, 2002


           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
     For the transition period from __________________to_________________


                         Commission File Number 0-5896


                             JACO ELECTRONICS, INC.
             (Exact name of registrant as specified in its charter)

          New York                                     11-1978958
(State or other jurisdiction of
incorporation or organization)             (I.R.S. Employer Identification No.)
                145 Oser Avenue, Hauppauge, New York       11788
               (Address of principal executive offices) (Zip Code)

        Company's telephone number, including area code: (631) 273-5500


        Securities registered pursuant to Section 12(b) of the Act: None


          Securities registered pursuant to Section 12(g) of the Act:


                          Common Stock, $0.10 per share
                                (Title of Class)

     Indicate  by check mark  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 by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]


     The aggregate  market value of Common Stock held by  non-affiliates  of the
Company,  computed by reference to the closing  price on September  23, 2002 was
$15,496,307.


     Number of shares outstanding of each class of Common Stock, as of September
23, 2002: 5,807,432 shares (excluding 618,300 treasury shares).


                                            DOCUMENTS INCORPORATED BY REFERENCE:


         Part III: Definitive Proxy Statement to be filed on or before October
         28, 2002, under Regulation 14A, in connection with the Company's 2002
         Annual Meeting of Shareholders.

<PAGE>


Forward-Looking Statements


     This  report  contains  forward-looking  statements  with  respect  to  the
financial  condition,  results of operations  and business of Jaco  Electronics,
Inc. You can find many of these statements by looking for words like "believes,"
"expects," "anticipates," "estimates" or similar expressions in this document or
in documents incorporated by reference.


     These forward-looking statements are subject to numerous assumptions, risks
and  uncertainties.  Factors that may cause actual results to differ  materially
from those contemplated by the forward-looking statements include, among others,
the following:

o    Dependence on a limited  number of suppliers for products  which generate a
     significant portion of our sales.

o    Absence of long-term contracts.

o    Strikes or delays in air or sea  transportation  and possible future United
     States legislation with respect to pricing and/or import quotas on products
     imported from foreign countries.

o    Terrorist attacks may create  instability and uncertainty in the electronic
     components industry.

o    General economic downturns in the electronic  components industry which may
     have an adverse economic effect upon manufacturers, end-users of electronic
     components and electronic components distributors.

o    Volatile pricing of electronic components.

o    Competitive  pressures in the industry may increase  significantly  through
     industry   consolidation   and  entry  of  new  competitors.

o    Costs  or  difficulties   related  to  the  integration  of  newly-acquired
     businesses may be greater than expected.

o    Limited  allocation  of products by suppliers  may reduce  availability  of
     certain products.

o    Adverse changes may occur in the securities markets.

     Because forward-looking  statements are subject to risks and uncertainties,
actual results may differ  materially  from those  expressed or implied by them.
You are cautioned not to place undue reliance on these  statements,  which speak
only as of the date of this Report.

     We do not undertake any obligation to release publicly any revisions to any
forward-looking  statements to reflect events or circumstances after the date of
this Report or to reflect the occurrence of unanticipated events.





                                       2
<PAGE>




                                     PART I

Item 1.  Business.


     Jaco Electronics,  Inc. was organized in the State of New York in 1961. Our
principal executive offices are located at 145 Oser Avenue,  Hauppauge, New York
11788, and our telephone number is (631) 273-5500.


Our Company

         We are a leading distributor of electronic components to industrial
OEMs and contract manufacturers throughout North America. We also provide
contract manufacturing services to our industrial OEM customers. We distribute
products such as semiconductors, capacitors, resistors, electromechanical
devices, flat panel displays and monitors and power supplies, which are used in
the manufacture and assembly of electronic products, including:


o telecommunications equipment             o computers and office equipment
o medical devices and instrumentation      o industrial equipment and controls
o military/aerospace systems               o automotive and consumer electronics

         We have two distribution centers and 16 strategically located sales
offices throughout the United States. We distribute more than 35,000 products
from over 75 vendors, including such market leaders as Kemet Electronics
Corporation, Samsung Semiconductor, Inc. and Vishay Intertechnology, Inc., to a
base of over 6,000 customers through a dedicated and highly motivated sales
force. To enhance our ability to distribute electronic components, we provide a
variety of value-added services including automated inventory management
services, integrating and assembling various custom components with flat panel
displays to customer specifications, assembling stock items for our customers
into pre-packaged kits and providing contract manufacturing services. Our core
customer base consists primarily of small and medium-sized manufacturers that
produce electronic equipment used in a wide variety of industries.


Our Industry


         The electronic components distribution industry has become an
increasingly important sales channel for component manufacturers. Electronic
components distributors relieve component manufacturers of a portion of the
costs and personnel needed to warehouse and sell their products. Distributors
market manufacturers' products to a broader range of OEMs than such
manufacturers could economically serve with their direct sales forces. Today,
distributors have become an integral part of their customers' purchasing and
inventory process. Distributors offer their customers the ability to outsource
their purchasing and warehousing responsibilities. Electronic Data Interchange
("EDI") permits distributors to receive timely scheduling of component
requirements from customers enabling them to provide these value-added services.
Distributors also work with their suppliers to ensure that manufacturers'
components are integrated into the design of new products.


                                       3
<PAGE>

Products


         We currently distribute over 35,000 stock items. Our management
believes that it is necessary for us to carry a wide variety of items in order
to fully service our customers' requirements. Our products fall into two broad
categories: "active" and "passive" components. Historically active components
and passive components each represented approximately 50% of our net
distribution sales. With the additional suppliers added as a result of the
acquisition of Interface Electronics Corp., active components represented
approximately 59% of our net distribution sales, and passive components
represented approximately 41% during the fiscal years ended June 30, 2002 and
2001.

         Active components principally include semiconductors. Semiconductors
consist of such items as integrated circuits, microprocessors, transistors,
diodes, dynamic random access memory ("RAM"), static RAMs, video RAMs and metal
oxide field effect transistors. Computer subsystems are an integral part of
personal computers and computer workstations and incorporate such items as flat
panels and flat panel monitors, touchscreens and controllers. Passive components
consist primarily of capacitors, electromechanical devices, and resistors.


Value-Added Services

         We also provide a number of value-added services which are intended to
attract new customers, to maintain and increase sales to existing customers and,
in the case of flat panel system integration and contract manufacturing, to
generate revenues from new customers. Value-added services include:

o                 Automated Inventory Management Services. We offer
                  comprehensive, state-of-the-art solutions that effectively
                  manage our customers' inventory reordering, stocking and
                  administration functions. These services reduce paperwork,
                  inventory, cycle time, and the overall cost of doing business
                  for our customers.

o                 Flat Panel Systems Integration. Our display sales specialists
                  and corporate product engineers configure highly customized
                  solutions to meet specific flat panel display requirements. We
                  provide technical services and integrate, test and deliver
                  complete flat panel display products for both business and
                  consumer applications.

o                 Kitting. Kitting consists of assembling to a customer's
                  specifications two or more of our 35,000 stock items into
                  pre-packaged kits ready for use in the customer's assembly
                  line. Kitting services allow us to provide a partial or
                  complete fill of a customer's order and enable the customer to
                  more efficiently manage its inventory.

o                 Contract Manufacturing. We also provide contract manufacturing
                  services to our OEM customers which include procurement of
                  customer specified components and raw materials from our
                  network of suppliers and other suppliers, assembly of
                  components on printed circuit boards ("PCBs"), and post
                  assembly testing. Our manufacturing process consists of both
                  advanced surface mount technology ("SMT") as well as
                  conventional pin-through-hole ("PTH") interconnection
                  technologies. The SMT process allows for more miniaturization,
                  cost savings and shorter lead paths between components (which
                  results in greater signal speed).


                                       4
<PAGE>

Sales and Marketing


         We believe we have developed valuable long-term customer relationships
and an in-depth understanding of our customers' needs and purchasing patterns.
Our sales personnel are trained to identify our customers' requirements and to
actively market our entire product line to satisfy those needs. We serve a broad
range of customers in the computer, computer-related, telecommunications, data
transmission, defense, aerospace, medical equipment and other industries. We
have established specific sales and marketing programs to address the unique
needs of the contract manufacturing sector. None of our customers individually
represented more than eight percent of net sales in any of the fiscal years
ended June 30, 2002, 2001 and 2000.

         As an authorized distributor for key manufacturers, we are able to
offer our customers engineering support as well as a variety of supply chain
management programs. Engineering, support and supply chain management services
enhance our ability to attract new customer contracts. Many of today's services
revolve around the use of software automation and computer to computer
transactions through EDI and internet based solutions and through technically
competent product managers and a team of display sales specialists. We provide
design support and technical assistance to our customers with detailed data
solutions employing the latest technologies.

         Sales are made throughout North America from the sales departments
maintained at our two distribution facilities located on the East and West
Coasts of the United States in New York and California and from 16 strategically
located sales offices. Sales are made primarily through personal visits by our
employees and by a staff of trained telephone sales personnel who answer
inquiries and receive and process orders from customers. In addition, we utilize
the services of independent sales representatives whose territories include
parts of North America and several foreign countries. These independent sales
representatives operate under agreements which are terminable by either party
upon 30 days' notice and prohibit them from representing competing product
lines. Independent sales representatives are authorized to solicit sales of all
of our product lines.


Suppliers

         Manufacturers of electronic components are increasingly relying on the
marketing, customer service and other resources of distributors who market their
product lines to customers not normally served by the manufacturer, and to
supplement the manufacturer's direct sales efforts in other accounts often by
providing value-added services not offered by the manufacturer. Manufacturers
seek distributors who have strong relationships with desirable customers, are
financially strong, have the infrastructure to handle large volumes of products
and can assist customers in the design and use of the manufacturers' products.
Currently, we have non-exclusive distribution or master inventory agreements
with many manufacturers, including Dallas Semiconductor Corporation, Johanson
Dielectrics, Inc., Kemet Electronics Corporation, LG Philips LCD, North American
Capacitor Company, Samsung Semiconductor, Inc., TDK Corporation of America, 3 M
Touch Systems, Inc., Vishay Intertechnology, Inc. and Vitesse Semiconductor
Corporation. We continuously seek to identify potential new suppliers and obtain
additional distributorships for new lines of products. We believe that such
expansion and diversification will increase our sales and market share.


                                       5
<PAGE>


         We generally purchase products from manufacturers pursuant to
non-exclusive distributor agreements. As an authorized distributor, we are able
to offer our suppliers marketing support.

         Most of our distributor agreements are cancelable by either party,
typically upon 30 to 90 days' notice. These agreements typically provide for
price protection, stock rotation privileges and the right to return inventory.
Price protection is typically in the form of a credit to us for any inventory in
our possession for which the manufacturer reduces its prices. Stock rotation
privileges typically allow us to exchange inventory in an amount up to five
percent of a prior period's purchases. Upon termination of a distributor
agreement, the right of return typically requires the manufacturer to repurchase
our inventory at our adjusted purchase price. We believe that the
above-described provisions of our distributorship agreements generally have
served to reduce our exposure to loss from unsold inventory. Because price
protection, stock rotation privileges and the right to return inventory are
limited in scope, there can be no assurances that we will not experience
significant losses from unsold inventory in the future.

Acquisitions

         In June 2000, we acquired Interface Electronics Corp. ("Interface"). We
paid $15.4 million in cash and assumed $3.3 million in bank debt and were
obligated to make deferred payments during the two year period following June
2000, which totaled $5.0 million. Interface is a distributor of electronic
components, primarily in the Northeast and Southeast United States. As a result
of the Interface acquisition, we have acquired distribution rights for certain
significant vendor lines in the United States.


Operations


         Component Distribution. Inventory management is critical to a
distributor's business. We constantly focus on a high number of resales or
"turns" of existing inventory to reduce exposure to product obsolescence and
changing customer demand.

         Our central computer system facilitates the control of purchasing and
inventory, accounts payable, shipping and receiving, and invoicing and
collection information of our distribution business. Our distribution software
system includes financial systems, EDI, customer order entry, purchase order
entry to manufacturers, warehousing and inventory control. Each of our sales
departments and offices is electronically linked to our central computer systems
which provides fully integrated on-line real-time data with respect to our
inventory levels. Our inventory management system was developed internally and
is considered proprietary. We track inventory turns by vendor and by product,
and our inventory management system provides immediate information to assist in
making purchasing decisions and decisions as to which inventory to exchange with
suppliers under stock rotation programs. Our inventory management system also
uses bar-code technology along with scanning devices, which we supply to certain
customers, and is networked to the facilities of such customers. In some cases,
customers use computers that interface directly with our computers to identify
available inventory and rapidly process orders. Our computer system also tracks
inventory turns by customer. We also monitor supplier stock rotation programs,
inventory price protection, rejected material and other factors related to
inventory quality and quantity. This system enables us to more effectively
manage our inventory and to respond more quickly to customer requirements for
timely and reliable delivery of components. Our inventory turnover was
approximately three times for the fiscal year ended June 30, 2002.



                                       6
<PAGE>

         Contract Manufacturing. We conduct our contract manufacturing
operations through our wholly owned subsidiary Nexus Custom Electronics, Inc.,
at two locations. The first location is an approximately 32,000 square foot
facility located in Brandon, Vermont. The second location is an approximately
30,000 square foot facility located in Woburn, Massachusetts. Nexus provides
contract manufacturing services to our OEM customers, which includes procurement
of customer specified components and raw materials from our network of suppliers
and other suppliers, assembly of components on PCBs and post-assembly testing.
OEMs then incorporate the PCBs into finished products. In assembling PCBs, Nexus
is capable of employing both PTH and SMT. PTH is a method of assembling PCBs in
which component leads are inserted and soldered into plated holes in the board.
SMT is a method of assembling PCBs in which components are fixed directly to the
surface of the board, rather than being inserted into holes.

         Both Nexus' Brandon, Vermont and Wooburn, Massachusetts manufacturing
facilities are ISO 9002 certified by the Geneva-based organization dedicated to
the development of worldwide standards for quality management guidelines and
quality assurance. Management believes sophisticated customers increasingly are
requiring their manufacturers to be ISO 9002-certified for purposes of quality
assurance.


Competition


         The electronic components distribution industry is highly competitive,
primarily with respect to price and product availability. We believe that the
breadth of our customer base, services and product lines, our level of technical
expertise and the quality of our services generally are also particularly
important. We compete with large national distributors such as Arrow
Electronics, Inc. and Avnet, Inc., as well as regional and specialty
distributors, such as All American Semiconductor, Inc. and Reptron Electronics,
Inc., many of whom distribute the same or competitive products. Many of our
competitors have significantly greater name recognition and greater financial
and other resources than we do.


         The electronics contract manufacturing industry is highly fragmented
and is characterized by relatively high levels of volatility, competition and
pricing and margin pressure. Many large contract manufacturers operate
high-volume facilities and primarily focus on high-volume product runs. In
contrast, certain contract manufacturers, such as Nexus, focus on low-to-medium
volume and service-intensive products.


Backlog


         As the trend toward outsourcing increases, customers have been entering
into just-in-time contracts with distributors, instead of placing orders with
long lead times. Orders constituting our backlog are subject to delivery
rescheduling, price negotiations and cancellations by the customer, sometimes
without penalty or notice. Therefore, our backlog is not necessarily indicative
of future sales for any particular period.


Employees


         At June 30, 2002, we had a total of 363 employees, of which 114 were
employed by Nexus. Of our total employees, nine were engaged in administration,
48 were managerial and supervisory employees, 150 were in sales and 156
performed warehouse, manufacturing and clerical functions. Of these employees,
Nexus employed two in administration, 15 in management and supervisory
positions, two in sales and 95 in warehouse, manufacturing and clerical
functions. There are no collective bargaining contracts covering any of our
employees. We believe our relationship with our employees is satisfactory.


                                       7
<PAGE>

Item 2.  Properties.



         All of our facilities are leased except for the Brandon, Vermont
property which is owned by Nexus. We currently lease 19 facilities strategically
located throughout the United States, two of which are multipurpose facilities
used principally as administrative, sales, and purchasing offices, as well as
warehouses, one of which is used for contract manufacturing and the remainder of
which are used principally by us as sales offices. Our satellite sales offices
range in size from approximately 500 square feet to approximately 4,000 square
feet. Base rents for such properties range from approximately $1,300 per month
to approximately $10,000 per month. Depending on the terms of each particular
lease, in addition to base rent, we may also be responsible for portions of real
estate taxes, utilities and operating costs, or increases in such costs over
certain base levels. The lease terms range from two years to as long as five
years. All facilities are linked by computer terminals to our Hauppauge, New
York headquarters. The following table sets forth certain information regarding
our four principal leased facilities:

<TABLE>

                                                                                                          Lease
                                             Base Rent                                                 Expiration
               Location                      Per Month         Square Feet             Use                Date
               --------                      ---------         -----------             ---                ----

<S>           <C>                             <C>                 <C>                                   <C>   <C>
Hauppauge, NY (1)                             $56,300             72,000       Administrative,          12/31/03
                                                                               Sales and
                                                                               Warehouse

Franklin, MA                                  $18,600             11,700       Sales                     3/31/05

Woburn, MA                                    $14,300             30,000       Manufacturing             7/31/05

Westlake Village, CA                          $11,500             11,000       Administrative,           4/30/03
                                                                               Sales and
                                                                               Warehouse

</TABLE>

(1)  Leased from a partnership  owned by Joel H. Girsky and Charles B. Girsky at
     a current  monthly  rent which the  Company  believes  represents  the fair
     market value for such space.

         Nexus owns and occupies an approximately 32,000 square foot facility
located in Brandon, Vermont, that is used for manufacturing, storage and office
space.

         We believe that our present facilities will be adequate to meet our
needs for the foreseeable future.


                                       8
<PAGE>

Item 3.  Legal Proceedings.



         We are a party to legal matters arising in the general conduct of
business. The ultimate outcome of such matters is not expected to have a
material adverse effect on our results of operations or financial position.


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



         No response to this Item is required.





                                       9
<PAGE>




                                     PART II

Item 5.  Market For the  Company's  Common  Stock and  Related  Security  Holder
     Matters.


(a)            Our common stock is traded on the Nasdaq National Market under
               the symbol "JACO." The stock prices listed below represent the
               high and low sale prices of the common stock, as reported by the
               Nasdaq National Market, for each fiscal quarter beginning with
               the first fiscal quarter of the fiscal year ended June 30, 2001.
               Stock prices prior to July 25, 2000 have been adjusted to give
               effect to a 3-for-2 stock split which was effective on July 24,
               2000.


<TABLE>
                                                                                 High                    Low

Fiscal Year 2001:
<S>                                    <C> <C>                                    <C>                    <C>
         First quarter ended September 30, 2000.....................              $19.67                 $10.75
         Second quarter ended December 31, 2000.....................               16.88                   6.13
         Third quarter ended March 31, 2001.........................               10.75                   5.69
         Fourth quarter ended June 30, 2001.........................                8.09                   4.66

Fiscal Year 2002:
         Fiscal quarter ended September 30, 2001....................              $ 6.39                 $ 3.25
         Second quarter ended December 31, 2001.....................                5.98                   3.51
         Third quarter ended March 31, 2002.........................                6.74                   4.66
         Fourth quarter ended June 30, 2002.........................                6.56                   4.70

Fiscal Year 2003:
         (through September 23, 2002)...............................               $5.39                  $3.30

</TABLE>

(b)            On September 23, 2002, the last reported sale price of our common
               stock on the Nasdaq National Market was $3.36 per share (which
               gives effect to the 3-for-2 stock split which was effective on
               July 24, 2000). As of September 9, 2002, there were approximately
               142 holders of record of our common stock. We believe our stock
               is held by more than 3,500 beneficial owners.

(c)            We have never declared or paid any cash dividends on our common
               stock. We intend for the foreseeable future to retain future
               earnings for use in our business. The amount of dividends we pay
               in the future, if any, will be at the discretion of our Board of
               Directors and will depend upon our financial condition, operating
               results and other factors as the Board of Directors, in its
               discretion, deems relevant. In addition, our credit facility
               prohibits us from paying cash dividends on our common stock.

                                       10
<PAGE>

Equity Compensation Plan Disclosure

         The following table summarizes equity compensation plans approved by
security holders and equity compensation plans that were not approved by
security holders as of June 30, 2002:

<TABLE>
                                                                                                             (c)
                                                 (a)                                                Number of Securities
                                         Number of Securities                (b)                   Remaining Available for
                                          To be Issued Upon           Weighted-Average          Future Issuance Under Equity
                                       Exercise of Outstanding        Exercise Price of         Compensation Plans (Excluding
                                        Options, Warrants and       Outstanding Options,                 Securities
Plan category                                   Rights               Warrants and Rights          Reflected in Column (a))
-----------------------------------    -------------------------   ------------------------   ----------------------------------
<S>                                            <C>                          <C>                            <C>
Equity compensation plans (stock
options) approved by stockholders              822,048                      $4.57                          364,250

Equity compensation plans not
approved by stockholders                       22,500                       $2.75                            -0-
                                       -------------------------   ------------------------   ----------------------------------

Total                                          844,548                      $4.52                          364,250
                                               =======                      =====                          =======
</TABLE>

Item 6.   Selected Consolidated Financial Data.

The selected consolidated financial data set forth below contains only a portion
of our financial statements and should be read in conjunction with the
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Report. The historical results are not necessarily indicative
of results to be expected for any future period. The share and per share data
have been adjusted to give effect to a 3-for-2 stock split which was effective
on July 24, 2000.
<TABLE>

                                                                            Year Ended June 30,
                                                      ----------------------------------------------------------------
                                                         2002         2001         2000         1999         1998
                                                         ----         ----         ----         ----         ----
                                                                   (in thousands, except per share data)
Consolidated Statement of Operations Data:
<S>                                                     <C>          <C>          <C>          <C>          <C>
Net sales.........................................      $194,106     $350,222     $209,325     $140,711     $153,674
Cost of goods sold................................       166,133      283,382      162,443      113,335      121,796
                                                         -------      -------      -------      -------      -------

Gross profit......................................        27,973       66,840       46,882       27,376       31,878
Selling, general and administrative expenses......        33,562       46,098       34,523       27,642       28,707
                                                          ------       ------       ------       ------       ------

  Operating (loss) profit.........................       (5,589)       20,742       12,359        (266)        3,171
Interest expense..................................         2,223        4,120        1,559        1,309        1,140
                                                           -----        -----        -----        -----        -----

  (Loss) earnings before income taxes.............       (7,812)       16,622       10,801      (1,575)        2,031
Income tax (benefit) provision                           (2,768)        6,772        4,425        (418)          847
                                                         ------         -----        -----        ----           ---

Net (loss) earnings...............................      $(5,044)      $ 9,850      $ 6,376    $ (1,157)      $ 1,184
                                                         ======       =======      =======    ========       =======
Net (loss) earnings per common share
  Basic...........................................      $ (0.88)       $ 1.74       $ 1.16     $ (0.21)       $ 0.21
                                                        =======        ======       ======     =======        ======
  Diluted.........................................      $ (0.88)       $ 1.59       $ 1.11     $ (0.21)       $ 0.20
                                                        =======        ======       ======     =======        ======
Weighted average number of common and
common equivalent shares outstanding
Basic.............................................         5,713        5,670        5,498        5,547        5,755
Diluted...........................................         5,713        6,179        5,766        5,547        5,882


                                       11
<PAGE>


                                               At June 30,
                              --------------------------------------------------
                               2002      2001         2000      1999        1998
                               ----      ----         ----      ----        ----
                                            (in thousands)
Consolidated Balance Sheet:

Working capital .........   $ 52,134   $ 78,308   $ 58,384   $ 41,998   $ 42,481
Total assets ............    110,635    136,315    126,329     72,931     73,419
Short-term debt .........        897      1,082        807        792        663

Long-term debt ..........     34,880     56,128     40,941     18,886     17,037

Shareholders' equity ....     48,668     53,251     42,790     34,868     36,625


</TABLE>



Item 7. Management's  Discussion and Analysis of Financial Condition and Results
     of Operations.
     ---------------------------------------------------------------------------


Critical Accounting Policies

         Financial Reporting Release No. 60 recommends that all companies
include a discussion of critical accounting policies used in the preparation of
their financial statements. The Securities and Exchange Commission defines
critical accounting policies as those that are, in management's view, most
important to the portrayal of the Company's financial condition and results of
operations and those that require significant judgments and estimates. The
Company continuously evaluates a combination of historical results and
anticipated future events to make assumptions and estimates related to its
consolidated financial statements. The Company believes that given the current
facts and circumstances, it is unlikely that applying any other reasonable
judgments or estimates methodologies would cause a material effect on the
Company's financial statements. Actual results may differ from those estimates.

         The accounting policies identified as critical are as follows:

Valuation of Receivables - The Company performs ongoing credit evaluations of
its customers and adjusts credit limits based upon payment history and the
customer's current credit worthiness. The Company continuously monitors payments
from customers and a provision for estimated uncollectable amounts is maintained
based upon historical experience and any specific customer collection issues,
which have been identified. While such uncollectable amounts have historically
been within the Company's expectations and provisions established, if a
customer's financial condition were to deteriorate, additional reserves may be
required. Concentration of credit risk with respect to accounts receivable is
generally mitigated due to the large number of entities comprising the Company's
customer base, their dispersion across geographic areas and industries, along
with the Company's policy of maintaining credit insurance.

Valuation of Inventories - Inventories are valued at the lower of cost or
market. Cost is determined by using the first-in, first-out and average cost
methods. The Company's inventories are comprised of high technology components
sold to rapidly changing and competitive markets whereby such inventories may be
subject to early technological obsolescence.

The Company evaluates inventories for excess, obsolescence, or other factors
rendering inventories as unsellable at normal gross profit margins. Write-downs
are recorded so that inventories reflect the approximate market value and take
into account the Company's contractual provisions with its suppliers governing
price protections and stock rotations. Due to the large number of transactions
and complexity of managing the process around price protections and stock
rotations, estimates are made regarding the valuation of inventory at market
value.

                                       12
<PAGE>

In addition, assumptions about future demand, market conditions, and decisions
to discontinue certain product lines can impact the decision to write-down
inventories. If assumptions about future demand change and/or actual market
conditions are different than those projected by management, additional
write-downs of inventories may be required. In any case, actual results may be
different than those estimated.


Goodwill and Other Intangible Assets - The purchase method of accounting for
acquisitions requires extensive use of accounting estimates and judgments to
allocate the excess of the purchase price over the fair value of identifiable
net assets of acquired companies allocated to goodwill. Other intangible assets
primarily represent a franchise agreement and non-compete covenants.

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS 142"). Under SFAS 142, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized but are subject to additional
impairment tests whenever indicators of impairment are present, and at least
annually. Other intangible assets with finite lives are amortized over those
useful lives. We implemented SFAS 142 on July 1, 2001. SFAS 142 requires that
the first of two impairment tests be completed within six months of adoption. We
performed a transitional fair value-based impairment test during the second
quarter of fiscal 2002 and determined that no impairment existed as of July 1,
2001.

We evaluate long-lived assets used in operations, including goodwill and
purchased intangible assets. The allocation of the acquisition cost to
intangible assets and goodwill has a significant impact on our future operating
results as the allocation process requires the extensive use of estimates and
assumptions, including estimates of future cash flows expected to be generated
by the acquired assets. An impairment review is performed whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. Factors we consider important which could trigger an impairment
review include, but are not limited to, significant under-performance relative
to historical or projected future operating results, significant changes in the
manner of use of the acquired assets or the strategy for our overall business,
and significant industry or economic trends. When impairment indicators are
identified with respect to previously recorded intangible assets, the values of
the assets are determined using discounted future cash flow techniques.
Significant management judgment is required in the forecasting of future
operating results which are used in the preparation of the projected discounted
cash flows and should different conditions prevail, material write downs of net
intangible assets and goodwill could occur.


                                       13
<PAGE>


Results of Operations


         The following table sets forth certain items in our statement of
operations as a percentage of net sales for the periods shown:

                                                     2002       2001      2000
                                                     ----       ----      ----
Net Sales .......................................   100.0%     100.0%    100.0%
Cost of goods sold ..............................    85.6       80.9      77.6
                                                     ----       ----      ----
Gross profit ....................................    14.4       19.1      22.4
Selling, general and administrative expenses ....    17.3       13.2      16.5
                                                     ----       ----      ----
Operating (loss) profit .........................    (2.9)       5.9       5.9
Interest expense ................................     1.1        1.2       0.8
                                                      ---        ---       ---
(Loss) earnings before income taxes .............    (4.0)       4.7       5.1
Income tax (benefit) provision ..................    (1.4)       1.9       2.1
                                                     ----        ---       ---
Net (loss) earnings .............................    (2.6)%      2.8%      3.0%
                                                     ====        ===       ===

     Comparison of Fiscal Year Ended June 30, 2002  ("Fiscal  2002") with Fiscal
     Year Ended June 30, 2001("Fiscal 2001")

         Net sales for Fiscal 2002 were $194.1 million, a decrease of 44.6%, as
compared to $350.2 million for Fiscal 2001. The electronics industry continues
to be impacted by weak demand for components worldwide. Our customers have not
increased their production to levels that will utilize the excess inventory
maintained by such customers. For Fiscal 2002 flat panel display ("FPD") sales
represented approximately 14% of our total distribution sales. Passive
components represented approximately 41% of our distribution sales and active
components, including FPD's, represented approximately 59% of our distribution
sales during Fiscal 2002.

         Gross profit was $28.0 million, or 14.4% for Fiscal 2002, as compared
to $66.8 million, or 19.1% for Fiscal 2001. The Fiscal 2002 gross profit
includes inventory write-downs of approximately $2.1 million, of which
approximately $1.1 million was provided for in the fourth quarter of Fiscal
2002. The gross profit margin decrease reflects both the continued pressure on
component pricing due to weak demand throughout the industry allowing customers
to negotiate lower prices and a higher percentage of sales of product that
historically sells at lower margins. We do not anticipate any material increase
in our gross profit margin for the foreseeable future.

         Selling, general and administrative ("SG&A") expenses were $33.6
million in Fiscal 2002, a decrease of $12.5 million, or 27.2% compared to $46.1
million in Fiscal 2001. The decrease is attributable to a reduction in the
number of employees, discretionary spending and a decrease in variable
costs. We have implemented a plan to reduce costs while business conditions do
not improve. Variable costs have been reduced as a result of the reduction in
sales and gross profit since most of our sales personnel receive a portion of
their compensation based upon a percentage of gross profit.

         Interest expense decreased to $2.2 million in Fiscal 2002, as compared
to $4.1 million in Fiscal 2001, representing a decrease of $1.9 million, or 46%.
The reduction reflects lower borrowing levels as a result of decreases in
accounts receivable and inventory. Additionally, interest rates declined during
the fiscal year. We do not expect any substantial increase in borrowings for the
foreseeable future to support operations.

     Net loss for  Fiscal  2002 was $5.0  million,  or $.88 per  diluted  share,
compared  to net  earnings  during  Fiscal  2001 of $9.9  million,  or $1.59 per
diluted share. The net loss was primarily  attributable to the weak condition of
the electronics  industry resulting in a decrease in net sales. The reduction in
net sales was  partially  offset by a decrease  in SG&A  expenses  and  interest
expense.



                                       14
<PAGE>

Comparison  of Fiscal  Year Ended June 30,  2001 with Fiscal Year Ended June 30,
2000 ("Fiscal 2000")

         Net sales for Fiscal 2001 were $350.2 million, an increase of 67.3%, as
compared to $209.3 million for Fiscal 2000. Our net sales benefited from both a
strong demand for components throughout the electronics industry for the first
six months and additional sales generated from the acquisition of Interface
Electronics Corp. (Interface). Interface brought a new customer base as well as
additional suppliers to sell to our existing customers. During the last two
quarters of Fiscal 2001, the demand for components was greatly reduced. As a
result, we experienced a decrease in sales sequentially.

         Gross Profit was $66.8 million in Fiscal 2001, an increase of $19.9
million, or 42.6%, compared to Fiscal 2000. Gross profit margins as a percentage
of net sales were 19.1% during Fiscal 2001 compared to 22.4% during Fiscal 2000.
The decrease in gross profit margins was as a result of the weakening in demand
for electronic components toward the end of Fiscal 2001 and an increase in
semiconductor sales due to the new suppliers that were added by the acquisition
of Interface.

         Selling, general and administrative ("SG&A") expenses were $46.1
million in Fiscal 2001, an increase of $11.6 million, or 33.5%, compared to
$34.5 million in Fiscal 2000. As a percentage of net sales, SG&A, expenses
decreased in Fiscal 2001 to 13.2% compared to 16.5% in Fiscal 2000. The increase
in spending is attributable to higher staffing levels that was required to
support the increase in net sales, an increase in variable costs such as
commissions paid to sales personnel, and the additional costs associated with
the acquisition of Interface. The decrease in SG&A expenses as a percentage of
net sales reflects operating efficiencies realized by higher sales.

         Interest expense increased to $4.1 million in Fiscal 2001, as compared
to $1.6 million in Fiscal 2000. The increase was primarily attributable to the
additional borrowings needed for the acquisition of Interface, and capital
required due to the increase in accounts receivable and inventory that were
necessary to support the growth in sales.

         Net earnings for Fiscal 2001 were $9.9 million, or $1.59 per share
diluted compared to net earnings for Fiscal 2000 of $6.4 million, or $1.11 per
share diluted. The increase in net earnings was attributable to the increase in
net sales, the operating efficiencies realized by the increase in net sales, and
the successful integration of Interface during the fiscal year.


Liquidity and Capital Resources


         Our agreement with our banks, as amended, expires on March 14, 2004. As
part of the amendment, the line of credit facility was reduced from $70 million
to $45 million. This reflects our lower borrowing requirements. The credit
facility is based principally on eligible accounts receivable and inventories as
defined in the agreement. The interest rate on the credit facility was based on
the average 30-day LIBOR rate plus 1.00% to 2.25% for the fiscal year ended June
30, 2002. As amended, effective October 1, 2002, the rate will convert to the
average 30-day LIBOR rate plus 2.25% to 2.75%. The agreement, as amended as of
September 23, 2002, contains provisions for the maintenance of certain financial
covenants and prohibits the payment of cash dividends. The agreement also
provided a waiver for non-compliance on one of the financial covenants. The
outstanding balance on the credit facility was $33.8 million at June 30, 2002.


         For Fiscal 2002, our net cash provided by operating activities was
approximately $21.9 million, as compared to net cash used in operating
activities of $8.7 million for the same period last fiscal year. The increase in


                                       15
<PAGE>

net cash provided is primarily attributable to a decrease in accounts receivable
and inventory. The decrease in accounts receivable and inventory was the result
of the decrease in net sales for the fiscal year ended June 30, 2002, as
compared to the same period last year. Net cash used in investing activities
decreased to $0.3 million for the fiscal year ended June 30, 2002, as compared
to $6.2 million for the fiscal year ended June 30, 2001. The decrease is
primarily attributable to deferred payments related to the acquisition of
Interface Electronics Corp. of $0.2 million for the fiscal year ended June 30,
2002, as compared to $3.8 million for the fiscal year ended June 30, 2001. Net
cash used in financing activities was $21.3 million for the fiscal year ended
June 30, 2002 as compared to net cash provided by financing activities of $14.4
million for the comparable period last fiscal year. The increase in net cash
used is primarily attributable to the decrease in the outstanding balance on the
revolving line of credit facility from $54.6 million as of June 30, 2001 to
$33.8 million as of June 30, 2002, which was a result of the decreases in
accounts receivable and inventory.


         For Fiscal 2002 and Fiscal 2001, our inventory turnover was 3.2x and
4.9x, respectively. The average days outstanding of our accounts receivable at
June 30, 2002 was 58 days, as compared to 42 days at June 30, 2001.


         We believe that cash flow from operations and funds available under our
credit facility will be sufficient to fund our capital needs for the foreseeable
future. However, our cash expenditures may vary significantly from current
levels, based on a number of factors, including, but not limited to future
acquisitions, if any. Historically, we have been able to obtain amendments to
our existing credit facility to satisfy financial covenants. While there can be
no assurances that such financing or future amendment if needed, will be
available, management believes we will be able to continue to obtain financing
on acceptable terms.


Inflation


         Inflation has not had a significant impact on our operations during the
last three fiscal years.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.



         We are exposed to interest rate changes with respect to our credit
facility which bears interest at the higher of the prime rate or the federal
funds rate plus 0.5%, or at our option, at a rate equal to the average 30-day
LIBOR rate plus 2.25% to 2.75% depending on our performance for the immediately
preceding four fiscal quarters measured by a certain financial ratio, and may be
adjusted quarterly. At August 31, 2002, $32.2 million was outstanding under the
credit facility. Changes in the LIBOR interest rate during Fiscal 2003 will have
a positive or negative effect on our interest expense. Each 1.0% fluctuation in
the LIBOR interest rate will increase or decrease interest expense for us by
approximately $0.3 million based on outstanding borrowings at August 31, 2002.

         The impact of interest rate fluctuations on other floating rate debt is
not material.



Item 8.  Financial Statements and Supplementary Data.

         For an index to the financial statements and supplementary data, see
Item 14(a).




                                       16
<PAGE>

Item 9.  Changes  in  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.


         No response to this Item is required.





                                       17
<PAGE>




                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.


         Incorporated herein by reference is the information to appear under the
caption "Election of Directors" in the Company's definitive proxy statement for
its Annual Meeting of Shareholders which will be filed with the Securities and
Exchange Commission not later than October 28, 2002.


Item 11.  Executive Compensation.


         Incorporated herein by reference is the information to appear under the
caption "Executive Compensation" in the Company's definitive proxy statement for
its Annual Meeting of Shareholders which will be filed with the Securities and
Exchange Commission not later than October 28, 2002.


Item 12.  Security Ownership of Certain Beneficial Owners and Management.


         Incorporated herein by reference is the information to appear under the
caption "Principal Shareholders; Share Held by Management" in the Company's
definitive proxy statement for its Annual Meeting of Shareholders which will be
filed with the Securities and Exchange Commission not later than October 28,
2002.


Item 13.  Certain Relationships and Related Transactions.


         Incorporated herein by reference is the information to appear under the
caption "Certain Transactions" in the Company's definitive proxy statement for
its Annual Meeting of Shareholders which will be filed with the Securities and
Exchange Commission not later than October 28, 2002.


Item 14.  Controls and Procedures.


There have been no  significant  changes in the Company's  internal  controls or
other factors that could  significantly  affect those controls since the date of
the Company's last evaluation of its internal  controls,  and there have been no
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses in such controls.





                                       18
<PAGE>

<TABLE>



                                     PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.


                                                                                                             Page

<S>      <C>                                                     <C>
(a)      (1)      Financial Statements included in Part II, Item 8, of this Report:

                  Index to Consolidated Financial Statements and Schedule                                     F-1

                  Report of Independent Certified Public Accountants                                          F-2

                  Consolidated Balance Sheets                                                                 F-3 - F-4

                  Consolidated Statements of Operations                                                       F-5

                  Consolidated Statement of Changes in Shareholders' Equity                                   F-6

                  Consolidated Statements of Cash Flows                                                       F-7

                  Notes to Consolidated Financial Statements                                                  F-8 - F-32


         (2)      Financial Statement Schedule included in Part IV of this Report:

                  Report of Independent Certified Public Accountant on Schedule II                             F-33

                  Schedule II - Valuation and Qualifying Accounts                                              F-34

</TABLE>


                                       19
<PAGE>
Exhibit No.       Exhibit

3.1  Restated Certificate of Incorporation adopted November,  1987, incorporated
     by reference to the Company's  definitive  proxy  statement  distributed in
     connection  with the  Company's  annual  meeting  of  shareholders  held in
     November,  1987,  filed with the SEC on November  3, 1986,  as set forth in
     Appendix A to the aforesaid proxy statement.


3.1.1Certificate  of  Amendment of the  Certificate  of  Incorporation,  adopted
     December, 1995, incorporated by reference to the Company's Annual Report on
     Form 10-K for the year ended June 30,  1996 ("the  Company's  1996  10-K"),
     Exhibit 3.1.1.


3.2  Restated  By-Laws  adopted June 18, 1987,  incorporated by reference to the
     Company's Annual Report on Form 10-K for the year ended June 30, 1987 ("the
     Company's 1987 10-K"), Exhibit 3.2.


4.1  Form  of  Common  Stock  Certificate,  incorporated  by  reference  to  the
     Company's  Registration Statement on Form S-1, Commission File No. 2-91547,
     filed June 9, 1984, Exhibit 4.1.


10.1 Sale and leaseback with Bemar Realty Company (as assignee of Hi-Tech Realty
     Company),  incorporated by reference to the Company's Annual Report on Form
     10-K for the year ended June 30, 1983, Exhibit 10(1), pages 48-312.


10.2 Amendment No. 1 to Lease  between the Company and Bemar Realty  Company (as
     assignee of Hi-Tech  Realty  Company),  incorporated  by  reference  to the
     Company's  Registration Statement on Form S-1, Commission File No. 2-91547,
     filed June 9, 1984,  Exhibit  10.2.  10.2.2  Lease  between the Company and
     Bemar Realty Company,  dated January 1, 1996,  incorporated by reference to
     the Company's 1996 10-K, Exhibit 10.2.2.


10.6 1993  Non-Qualified  Stock  Option Plan,  incorporated  by reference to the
     Company's 1993 10-K, Exhibit 10.6.


10.6.1 1993  Non-Qualified  Stock Option Plan, as amended (filed as Exhibit A to
     the Company's  Definitive Proxy  Statement,  dated November 3, 1997 for the
     Annual Meeting of Shareholders held on December 9, 1997.


10.6.2 1993  Non-Qualified  Stock Option Plan, as amended (filed as Exhibit A to
     the Company's  Definitive Proxy  Statement,  dated November 2, 1998 for the
     Annual Meeting of Shareholders held on December 7, 1998.


10.7 Stock  Purchase  Agreement,  dated as of  February 8, 1994 by and among the
     Company and Reilrop,  B.V. and Guaranteed by Cray Electronics Holdings PLC,
     incorporated  by reference  to the  Company's  Current  Report on Form 8-K,
     dated March 11, 1994.
<PAGE>


10.8 1993 Stock Option Plan for Outside Directors,  incorporated by reference to
     the Company's  Annual Report on Form 10-K for the year ended June 30, 1994,
     Exhibit 10.8.


10.10Authorized Electronic Industrial Distributor Agreement,  dated as of August
     24, 1970 by and between AVX and the Company,  incorporated  by reference to
     the Company's  Annual Report on Form 10-K for the year ended June 30, 1995,
     Exhibit 10.10.


10.11Electronics Corporation Distributor Agreement,  dated November 15, 1974, by
     and  between  KEMET  and the  Company,  incorporated  by  reference  to the
     Company's  Annual  Report on Form 10-K for the year  ended  June 30,  1995,
     Exhibit 10.11.


10.12Restricted  Stock  Plan  (filed as  Exhibit B to the  Company's  Definitive
     Proxy  Statement,  dated  November  3,  1997  for  the  Annual  Meeting  of
     Shareholders held on December 9, 1997).


10.12.1 Form of Escrow Agreement under the Restricted  Stock Plan,  incorporated
     by  reference to the  Company's  Registration  Statement  on Form  S-8/S-3,
     Commission File No. 333 -49877, filed April 10, 1998 Exhibit 4.2.


10.12.2 Form of Stock  Purchase  Agreement  under  the  Restricted  Stock  Plan,
     incorporated by reference to the Company's  Registration  Statement on Form
     S-8/S-3, Commission File No. 333 - 49877, filed April 10, 1998 Exhibit 4.3.


10.12.3 Form  of  Stock  Option  Agreement,  incorporated  by  reference  to the
     Company's Registration  Statement on Form S-8/S-3,  Commission File No. 333
     -49877, filed April 10, 1998 Exhibit 4.4.


10.12.4 Restricted  Stock Plan (filed as Exhibit B to the  Company's  Definitive
     Proxy  Statement,  dated  November  2,  1998  for  the  Annual  Meeting  of
     Shareholders held on December 7, 1998).


10.13Employment  agreement between Joel Girsky and the Company,  incorporated by
     reference to the  Company's  Quarterly  Report on Form 10-Q for the quarter
     ended September 30, 1998, Exhibit 10.13.


10.13.1  Amendment  No. 1 to  Employment  Agreement  between Joel Girsky and the
     Company,  incorporated by reference to the Company's  Annual Report on Form
     10-K for the year ended June 30, 2001, Exhibit 10.13.1.


10.14Employment  agreement between Charles Girsky and the Company,  incorporated
     by reference to the Company's Quarterly Report on Form 10-Q for the quarter
     ended September 30, 1998, Exhibit 10.14.


10.15Employment agreement between Jeffrey D. Gash and the Company,  incorporated
     by reference to the Company's Quarterly Report on Form 10-Q for the quarter
     ended September 30, 1998, Exhibit 10.15.
<PAGE>


10.15.1 Amendment No. 1 to the Employment  Agreement between Jeffrey D. Gash and
     the Company,  incorporated  by reference to the Company's  Annual Report on
     Form 10-K for the year ended June 30, 2001, Exhibit 10.15.1


10.16Employment  Agreement,  dated June 6, 2000,  between the Company and Joseph
     Oliveri,  incorporated by reference to the Company's Current Report on Form
     8-K, filed June 12, 2000, Exhibit 10.16.


10.16.1 Amendment No. 1 to the Employment  Agreement  between Joseph Oliveri and
     the Company,  incorporated  by reference to the Company's  Annual Report on
     Form 10-K for the year ended June 30, 2001, Exhibit 10.16.1


10.17Stock  Purchase  Agreement by and among Jaco  Electronics,  Inc. and all of
     the  Stockholders of Interface  Electronics  Corporation as of May 4, 2000,
     incorporated  by reference  to the  Company's  Current  Report on Form 8-K,
     filed May 15, 2000, Exhibit 2.1.


10.17.1  Amendment  No. 1 to the Stock  Purchase  Agreement  by and  among  Jaco
     Electronics,  Inc. and all of the  Stockholders  of  Interface  Electronics
     Corp. as of May 4, 2000,  dated June 6, 2000,  incorporated by reference to
     the Company's Current Report on Form 8-K, filed June 12, 2000, Exhibit 2.2.


10.18Agreement between the Company and Gary Giordano,  incorporated by reference
     to the  Company's  Annual  Report on Form 10-K for the year  ended June 30,
     2001, Exhibit 10.18.


10.19Employment  Agreement between Joel H. Girsky and the Company,  incorporated
     by reference to the Company's Annual Report on Form 10-K for the year ended
     June 30, 2001, Exhibit 10.19.


10.20Employment  Agreement between Charles Girsky and the Company,  incorporated
     by reference to the Company's Annual Report on Form 10-K for the year ended
     June 30, 2001, Exhibit 10.20.


21.1 Subsidiaries of the Company.


23.1 Consent of Grant Thornton LLP.


99.1 General Loan and Security  Agreement  dated  January 20, 1989,  between the
     Company  as  borrower  and The  Bank  of New  York  Commercial  Corporation
     ("BNYCC") as secured  party,  incorporated  by  reference to the  Company's
     Current Report on Form 8-K, filed January 31, 1989, Exhibit 28(1).


99.2 Loan and Security  Agreement - Accounts  Receivable  and  Inventory,  dated
     January 20, 1989, between the Company and BNYCC,  incorporated by reference
     to the Company's Current Report on Form 8-K filed January 31, 1989, Exhibit
     28(2).

<PAGE>

99.3 Letter of Credit and Security  Agreement,  dated January 20, 1989,  between
     the Company and BNYCC,  incorporated by reference to the Company's  Current
     Report on Form 8-K filed January 31, 1989, Exhibit 28(3).


99.4 Amendment to Term Loan Notes (the "Term Notes")  executed by the Company in
     favor of BNYCC dated  January 13,  1992,  together  with  Letters from R.C.
     Components,  Inc., Quality  Components,  Inc.,  Micatron,  Inc. and Distel,
     Inc.,  each a subsidiary of the Company and a guarantor of the  obligations
     evidenced by the Term Notes,  to BNYCC  acknowledging  the amendment to the
     Term  Notes for the  extension  of the  maturity  date of each  such  note,
     incorporated by reference to the Company's 1992 10-K, Exhibit 28.4.


99.5 Amendment  Nos.  1 through 4 to Loan and  Security  Agreement  between  the
     Company and BNYCC, incorporated by reference to the Company's Annual Report
     on Form 10-K for the year ended June 30, 1994. Exhibit 99.5.


99.6 $1,500,000  Additional Term Loan Note,  executed by the Company in favor of
     BNYCC,  dated March 11, 1994,  incorporated  by reference to the  Company's
     Annual Report on Form 10-K for the year ended June 30, 1994, Exhibit 99.5.


99.7 Restated  and Amended Loan and  Security  Agreement,  dated April 25, 1995,
     among the Company, Nexus and BNYCC, together with an Amendment to Term Loan
     Note executed by the Company in favor of BNYCC and Letter  executed by R.C.
     Components,  Inc., Quality Components,  Inc., Micatron,  Inc., Distel, Inc.
     and Jaco Overseas,  Inc., incorporated by reference to the Company's Annual
     Report on Form 10-K for the year ended June 30, 1995, Exhibit 99.7.


99.8 Second Restated and Amended Loan and Security Agreement dated September 13,
     1995 among the Company,  Nexus Custom Electronics,  Inc., BNYCC and NatWest
     Bank,  N.A.  ("Second  Restated and Amended Loan and Security  Agreement"),
     incorporated by reference to the Company's  Registration  Statement on Form
     S-2, Commission File No. 33-62559, filed October 13, 1995, Exhibit 99.8.


99.8.1 Amendment to the Second Restated and Amended Loan and Security Agreement,
     dated as of April 10, 1996, incorporated by reference to the Company's 1996
     10-K, Exhibit 99.8.1.


99.8.2 Amendment to the Second Restated and Amended Loan and Security Agreement,
     dated as of August 1, 1997,  incorporated  by  reference  to the  Company's
     Annual Report on Form 10-K for the year ended June 30, 1998, Exhibit 99.8.2


99.8.3 Amendment to Second  Restated  and Amended  Loan and  Security  Agreement
     dated July 1, 1998,  incorporated  by reference to the Company's  Quarterly
     Report on Form 10-Q for the  quarter  ended  September  30,  1998,  Exhibit
     99.8.3.


99.8.4 Amendment to Second  Restated  and Amended  Loan and  Security  Agreement
     dated  September  21,  1998  incorporated  by  reference  to the  Company's
     Quarterly  Report on Form 10-Q for the quarter  ended  September  30, 1998,
     Exhibit 99.8.4.

<PAGE>

99.8.5 Amendment to Second  Restated  and Amended  Loan and  Security  Agreement
     dated  October  26,  1999,  incorporated  by  reference  to  the  Company's
     Quarterly  Report on Form 10-Q for the quarter  ended  September  30, 1999,
     Exhibit 99.8.5.

99.8.6 Amendment to Second  Restated  and Amended  Loan and  Security  Agreement
     dated  December  31,  1999,  incorporated  by  reference  to the  Company's
     Quarterly  Report on Form 10-Q for the quarter  ended  December  31,  1999,
     Exhibit  99.8.6.  99.8.7  Amendment to Second Restated and Amended Loan and
     Security  Agreement  dated June 6, 2000,  incorporated  by reference to the
     Company's  Annual  Report on Form 10-K for the  fiscal  year ended June 30,
     2000, Exhibit 99.8.7.

99.8.8 Amendment to Second  Restated  and Amended  Loan and  Security  Agreement
     dated  September  28, 2000,  incorporated  by  reference  to the  Company's
     Quarterly  Report on Form 10-Q for the quarter  ended  September  30, 2000,
     Exhibit 99.8.8

99.8.9 Amendment to Second  Restated  and Amended  Loan and  Security  Agreement
     dated  January  29,  2001,  incorporated  by  reference  to  the  Company's
     Quarterly  Report on Form 10-Q for the quarter  ended  December  31,  2000,
     Exhibit 99.8.9

99.8.10  Amendment to Second  Restated  and Amended Loan and Security  Agreement
     dated June 12, 2001,  incorporated  by reference  to the  Company's  Annual
     Report on Form 10-K for the year ended June 30, 2001, Exhibit 99.8.10

99.8.11  Amendment to Second  Restated  and Amended Loan and Security  Agreement
     dated July 1, 2001,  incorporated  by  reference  to the  Company's  Annual
     Report on Form 10-K for the year ended June 30, 2001, Exhibit 99.8.11

99.8.12  Amendment to Second  Restated  and Amended Loan and Security  Agreement
     dated  November  14,  2001,  incorporated  by  reference  to the  Company's
     Quarterly  Report on Form 10-Q for the quarter  ended  September  30, 2001,
     Exhibit 99.8.12

99.8.13  Amendment to Second  Restated  and Amended Loan and Security  Agreement
     dated  February  6,  2002,  incorporated  by  reference  to  the  Company's
     Quarterly  Report on Form 10-Q for the quarter  ended  December  31,  2001,
     Exhibit 99.8.13

99.8.14  Amendment to Second  Restated  and Amended Loan and Security  Agreement
     dated September 23, 2002.

99.9 Certification  pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002

99.10Certification  pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002

(b)      Reports on Form 8-K

                  None



<PAGE>


                              INDEX TO CONSOLIDATED
                        FINANCIAL STATEMENTS AND SCHEDULE

                                                                        PAGE
                                                                        ----


Report of Independent Certified Public Accountants                      F-2


Financial Statements

      Consolidated Balance Sheets                                    F-3 - F-4

      Consolidated Statements of Operations                             F-5

      Consolidated Statement of Changes in Shareholders' Equity         F-6

      Consolidated Statements of Cash Flows                             F-7

      Notes to Consolidated Financial Statements                     F-8 - F-32

      Report of Independent Certified Public Accountants
         on Schedule                                                    F-33

      Schedule II - Valuation and Qualifying Accounts                   F-34






                                      F-1
<PAGE>






REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




Board of Directors and Shareholders
    Jaco Electronics, Inc.


We have audited the accompanying consolidated balance sheets of Jaco
Electronics, Inc. and Subsidiaries (the "Company") as of June 30, 2002 and 2001
and the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the three years in the period ended June 30,
2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jaco Electronics,
Inc. and Subsidiaries as of June 30, 2002 and 2001, and the consolidated results
of their operations and their consolidated cash flows for each of the three
years in the period ended June 30, 2002 in conformity with accounting principles
generally accepted in the United States of America.




GRANT THORNTON LLP

Melville, New York
September 19, 2002






                                      F-2
<PAGE>

<TABLE>
<CAPTION>



                                                Jaco Electronics, Inc. and Subsidiaries

                                                      CONSOLIDATED BALANCE SHEETS

                                                               June 30,



                                     ASSETS                                                2002                  2001
                                                                                       -------------          -------

CURRENT ASSETS
<S>                                                                                   <C>                   <C>
    Cash and cash equivalents                                                         $      324,447        $       89,523
    Marketable securities                                                                    650,267               771,406
    Accounts receivable, less allowance for doubtful
       accounts of $1,609,000 in 2002 and $1,695,000
       in 2001                                                                            29,095,269            37,820,946
    Inventories                                                                           42,611,225            62,212,121
    Prepaid expenses and other                                                             1,183,043               824,121
    Prepaid and refundable income taxes                                                    2,440,055               486,325
    Deferred income taxes                                                                  2,017,000             2,190,000
                                                                                       -------------         -------------

         Total current assets                                                             78,321,306           104,394,442


PROPERTY, PLANT AND EQUIPMENT - AT COST, NET                                               6,708,828             8,389,651


DEFERRED INCOME TAXES                                                                        434,000               436,000


GOODWILL, less accumulated amortization of $2,121,000
    in 2002 and 2001                                                                      22,363,296            20,095,844


OTHER ASSETS                                                                               2,807,451             2,998,902
                                                                                       -------------         -------------

                                                                                        $110,634,881          $136,314,839
                                                                                         ===========           ===========





        The accompanying notes are an integral part of these statements.

</TABLE>


                                      F-3
<PAGE>


<TABLE>
<CAPTION>

                                                Jaco Electronics, Inc. and Subsidiaries

                                                CONSOLIDATED BALANCE SHEETS (continued)

                                                               June 30,


                                 LIABILITIES AND
                              SHAREHOLDERS' EQUITY                                         2002                  2001
                                                                                        ------------          -------

 CURRENT LIABILITIES
<S>                                                                                    <C>                   <C>
    Accounts payable                                                                   $  20,818,256         $  21,035,641
    Current maturities of long-term debt and
       capitalized lease obligations                                                         897,419             1,081,905
    Accrued compensation                                                                     998,927             2,335,614
    Accrued expenses                                                                       1,372,808             1,407,803
    Deferred acquisition costs                                                             2,099,563               225,000
                                                                                        -------------         -------------

         Total current liabilities                                                        26,186,973            26,085,963


 LONG-TERM DEBT AND CAPITALIZED LEASE
    OBLIGATIONS                                                                           34,879,766            56,128,243


 DEFERRED COMPENSATION                                                                       900,000               850,000


 COMMITMENTS AND CONTINGENCIES


 SHAREHOLDERS' EQUITY
    Preferred stock - authorized, 100,000 shares, $10
       par value; none issued
    Common stock - authorized, 20,000,000 shares, $.10 par value; issued,
       6,425,732 and 6,315,759 shares, respectively, and 5,807,432 and 5,697,459
       shares
       outstanding, respectively                                                             642,573               631,576
    Additional paid-in capital                                                            25,152,010            24,615,866
    Retained earnings                                                                     25,102,628            30,146,599
    Accumulated other comprehensive (loss) income                                            (24,554)               61,107
    Treasury stock - 618,300 shares at cost                                               (2,204,515)           (2,204,515)
                                                                                       -------------         -------------

                                                                                          48,668,142            53,250,633
                                                                                        ------------          ------------

                                                                                        $110,634,881          $136,314,839
                                                                                         ===========           ===========






        The accompanying notes are an integral part of these statements.

</TABLE>


                                      F-4
<PAGE>

<TABLE>
<CAPTION>


                                                Jaco Electronics, Inc. and Subsidiaries

                                                 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                          Year ended June 30,





                                                                          2002               2001                2000
                                                                       -----------        -----------         -------

<S>                                                                   <C>                <C>                 <C>
Net sales                                                             $194,106,208       $350,222,202        $209,325,180

Cost of goods sold                                                     166,132,892        283,382,288         162,443,001
                                                                      ------------        -----------         -----------

       Gross profit                                                     27,973,316         66,839,914          46,882,179

 Selling, general and administrative expenses                           33,562,394         46,098,155          34,522,667
                                                                      ------------       ------------        ------------

       Operating (loss) profit                                          (5,589,078)        20,741,759          12,359,512

Interest expense                                                         2,222,893          4,119,362           1,558,558
                                                                     -------------      -------------       -------------

       (Loss) earnings before income taxes                              (7,811,971)        16,622,397          10,800,954

Income tax (benefit) provision                                          (2,768,000)         6,772,000           4,425,000
                                                                     -------------      -------------       -------------

       NET (LOSS) EARNINGS                                          $   (5,043,971)     $   9,850,397       $   6,375,954
                                                                     =============       ============        ============


Net (loss) earnings per common share:
    Basic                                                                  $(0.88)             $1.74               $1.16
                                                                            =====               ====                ====
    Diluted                                                                $(0.88)             $1.59               $1.11
                                                                            =====               ====                ====


Weighted-average common shares and common equivalent shares outstanding:
      Basic                                                              5,713,365          5,669,560           5,497,866
                                                                         =========          =========           =========
      Diluted                                                            5,713,365          6,178,653           5,766,086
                                                                         =========          =========           =========





The accompanying notes are an integral part of these statements.

</TABLE>


                                      F-5
<PAGE>


<TABLE>
<CAPTION>

                                                Jaco Electronics, Inc. and Subsidiaries

                                                   CONSOLIDATED STATEMENT OF CHANGES
                                                        IN SHAREHOLDERS' EQUITY

                                               Years ended June 30, 2002, 2001 and 2000



                                                                                Additional
                                                       Common stock              paid-in        Retained
                                                 Shares         Amount           capital        earnings
                                                --------       --------      --------------   -------------

<S>             <C>                            <C>             <C>           <C>             <C>
Balance at July 1, 1999                        4,065,721       $406,572      $22,801,295     $13,920,807

Net earnings                                                                                   6,375,954
Unrealized loss on marketable
   securities - net of deferred taxes
Exercise of stock options                        102,482         10,248          860,760
Stock options income tax benefits                                                431,840
Restricted stock plan income tax benefits                                        155,812
Effect of 3-for-2 stock split                  2,084,056        208,406         (208,406)
Deferred compensation expense
                                              -------------- ------------   ---------------- ---------------


Balance at June 30, 2000                       6,252,259        625,226       24,041,301      20,296,761

Net earnings                                                                                   9,850,397
Unrealized loss on marketable
   securities - net of deferred taxes
Exercise of stock options                         63,500          6,350          430,275
Stock options income tax benefits                                                111,890
Restricted stock plan income tax benefits                                         32,400
Payment of fractional shares                                                                        (559)
Deferred compensation expense
                                              -------------- ------------   ---------------- ---------------


Balance at June 30, 2001                       6,315,759        631,576       24,615,866      30,146,599


Net loss                                                                                      (5,043,971)
Unrealized loss on marketable
   securities - net of deferred taxes
Exercise of stock options                        109,973         10,997          480,564
Stock options income tax benefits                                                 55,580
                                              -------------- ------------    -----------     ---------------


Balance at June 30, 2002                       6,425,732       $642,573      $25,152,010     $25,102,628
                                               =========        =======       ==========      ==========





                                                 Accumulated
                                                    other                        Deferred            Total
                                                comprehensive      Treasury       compen-         shareholders'
                                                income (loss)       stock         sation            equity
                                                ---------------- ---------      ---------          ---------
Balance at July 1, 1999                          $213,707          $(2,204,515)    $(270,000)     $34,867,866

Net earnings                                                                                        6,375,954
Unrealized loss on marketable
   securities - net of deferred taxes             (47,038)                                            (47,038)
Exercise of stock options                                                                             871,008
Stock options income tax benefits                                                                     431,840
Restricted stock plan income tax benefits                                                             155,812
Effect of 3-for-2 stock split
Deferred compensation expense                                                        135,000          135,000
                                                 ----------        ---------------  --------     ------------

Balance at June 30, 2000                          166,669           (2,204,515)     (135,000)      42,790,442

Net earnings                                                                                        9,850,397
Unrealized loss on marketable
   securities - net of deferred taxes            (105,562)                                           (105,562)
Exercise of stock options                                                                             436,625
Stock options income tax benefits                                                                     111,890
Restricted stock plan income tax benefits                                                              32,400
Payment of fractional shares                                                                             (559)
Deferred compensation expense                                                        135,000          135,000
                                                 ----------        ---------------  --------     ------------

Balance at June 30, 2001                           61,107           (2,204,515)         -          53,250,633


Net loss                                                                                           (5,043,971)
Unrealized loss on marketable
   securities - net of deferred taxes             (85,661)                                            (85,661)
Exercise of stock options                                                                             491,561
Stock options income tax benefits                                                                      55,580

                                                 ----------     ------------     ----------      -------------
Balance at June 30, 2002                         $(24,554)       $(2,204,515)   $       -         $48,668,142
                                                  ========        ==========     ===========       ==========
The accompanying notes are an integral part of this statement

</TABLE>


                                      F-6
<PAGE>

<TABLE>
<CAPTION>


                                                Jaco Electronics, Inc. and Subsidiaries

                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Year ended June 30,

                                                                          2002                   2001                2000
                                                                       ------------          -----------         --------

Cash flows from operating activities
<S>                                                                 <C>                  <C>                   <C>
   Net (loss) earnings                                              $    (5,043,971)     $     9,850,397       $   6,375,954
   Adjustments to reconcile net (loss) earnings to net cash
     provided by (used in) operating activities
       Depreciation and amortization                                      2,331,684            3,223,205           1,868,420
       Deferred compensation                                                 50,000              185,000             185,000
       Deferred income tax expense (benefit)                                225,402             (803,402)           (996,963)
       Stock options income tax benefits                                     55,580              111,890             431,840
       Restricted stock plan income tax benefits                                                  32,400             155,812
       Gain on sale of equipment                                             (3,100)
       Provision for doubtful accounts                                      418,300            1,397,601             597,694
       Changes in operating assets and liabilities, net of
         effects of acquisitions
           Decrease (increase) in accounts receivable                     8,307,377            2,736,517         (14,659,938)
           Decrease (increase) in inventories                            19,451,304           (8,951,107)        (15,356,153)
           Increase in prepaid expenses and other                          (329,215)              (9,558)            (57,057)
           Increase in prepaid and refundable income taxes               (1,953,730)            (486,325)
           (Decrease) increase in accounts payable                         (217,385)         (14,310,658)         10,630,824
           (Decrease) increase in accrued compensation                   (1,336,687)             143,921           1,299,706
           (Decrease) increase in accrued expenses                          (34,995)            (244,216)            540,639
           (Decrease) increase in income taxes payable                                        (1,575,319)          2,566,174
                                                                   -------------------    --------------        ------------


       Net cash provided by (used in) operating activities               21,920,564           (8,699,654)         (6,418,048)
                                                                      -------------       --------------        ------------

Cash flows from investing activities
   Purchase of marketable securities                                        (14,924)             (56,692)            (73,407)
   Capital expenditures                                                    (205,256)          (1,997,194)           (892,149)
   Proceeds from the sale of equipment                                       61,473                                  128,892
   Business acquisitions, net of cash acquired                                                                   (14,877,230)
   Business acquisitions - deferred payments                               (243,297)          (3,810,000)
   Decrease (increase) in other assets                                        54,451            (327,264)          2,342,542
                                                                   -----------------      --------------        ------------

       Net cash used in investing activities                               (347,553)          (6,191,150)        (13,371,352)
                                                                    ----------------      --------------         -----------

Cash flows from financing activities
   Borrowings from line of credit                                       161,505,349          324,090,871          95,831,956
   Payments of line of credit                                          (182,254,268)        (309,269,516)        (76,391,130)
   Principal payments under equipment financing                            (941,242)            (733,983)           (612,792)
   Payments under term loan                                                (139,487)            (160,714)           (214,286)
   Payment of fractional shares                                                                     (559)
   Proceeds from exercise of stock options                                  491,561              436,625             871,008
                                                                   ----------------      ---------------       -------------

       Net cash (used in) provided by financing activities              (21,338,087)          14,362,724          19,484,756
                                                                     ---------------       -------------         -----------

       NET INCREASE (DECREASE) IN CASH                                      234,924             (528,080)           (304,644)

Cash and cash equivalents at beginning of year                                89,523             617,603             922,247
                                                                   -----------------     ---------------        ------------

Cash and cash equivalents at end of year                           $         324,447    $          89,523      $     617,603
                                                                    ================     ================       ============

Supplemental disclosures of cash flow information:
   Cash paid during the year for:
     Interest                                                      $      2,223,000      $     4,120,000       $   1,559,000
     Income taxes                                                           275,000            9,493,000           2,267,000
Supplemental schedule of non-cash financing and investing activities:
     Deferred acquisition costs                                   $      2,099,563     $        225,000
     Equipment under capital leases and note payable                       396,685            1,535,169        $     126,229



The accompanying notes are an integral part of these statements.
</TABLE>



                                      F-7
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          June 30, 2002, 2001 and 2000



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Jaco  Electronics,  Inc.  and  Subsidiaries  (the  "Company")  is primarily
     engaged  in  the   distribution   of   electronic   components,   including
     semiconductors,  capacitors,  resistors,  electromechanical  devices,  flat
     panel  displays  and  monitors  and power  supplies,  which are used in the
     manufacture and assembly of electronic products.  In addition,  the Company
     provides contract manufacturing services.

     Electronic components  distribution sales include exports made principally
     to customers located in Western Europe,  Canada,  Mexico, and the Far East.
     For the years ended June 30, 2002, 2001 and 2000,  export sales amounted to
     approximately $32,211,000, $52,358,000 and $8,170,000, respectively.

     A summary of the significant accounting policies applied in the preparation
     of the accompanying consolidated financial statements follows:

     1.  Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
         of Jaco Electronics, Inc. and its subsidiaries, all of which are
         wholly-owned. All significant intercompany balances and transactions
         have been eliminated.

     2.  Revenue Recognition

         The  Company  recognizes  revenue as  products  are  shipped and title
         passes to customers.

     3.  Cash and Cash Equivalents

         For purposes of the statements of cash flows, the Company considers
         cash instruments with original maturities of less than three months to
         be cash equivalents.

     4.  Investments in Marketable Securities

          Investments in marketable  securities consist of investments in mutual
          funds.  Such investments  have been classified as  "available-for-sale
          securities" and are reported at fair market value,  which is inclusive
          of an unrealized  loss of $40,924 in 2002,  and an unrealized  gain of
          $95,139  in  2001.  Changes  in the fair  value of  available-for-sale
          securities  are included in  accumulated  other  comprehensive  income
          (loss), net of the related deferred tax effects.







                                      F-8
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     5. Inventories

         Inventories are stated at the lower of cost or estimated market value.
         Cost is  determined  using the  first-in,  first-out  and average cost
         methods.  A provision to reduce  inventories to their estimated market
         value has been provided for.

     6.  Property, Plant and Equipment

         Property, plant and equipment are stated at cost. Depreciation is
         provided for using the straight-line method over the estimated useful
         life of the assets. The Company capitalizes costs incurred for
         internally developed software where economic and technological
         feasibility has been established. These capitalized software costs are
         being amortized on a straight-line basis over the estimated useful life
         of seven years. Significant improvements are capitalized if they extend
         the useful life of the asset. Routine repairs and maintenance are
         expensed when incurred.

     7.  Goodwill And Other Intangible Assets

         Goodwill and other intangible assets represent the excess of the
         aggregate price paid by the Company over the fair market value of the
         tangible assets acquired in business acquisitions accounted for as a
         purchase.

         During the year ended June 30, 2002, the Company adopted the provisions
         of Statement of Financial Accounting Standards ("SFAS") No. 141,
         "Business Combinations," and SFAS No. 142, "Goodwill and Other
         Intangible Assets." The new standards require that all business
         combinations initiated after June 30, 2001 be accounted for under the
         purchase method. In addition, all intangible assets acquired that are
         obtained through contractual or legal right, or are capable of being
         separately sold, transferred, licensed, rented or exchanged shall be
         recognized as an asset apart from goodwill. Goodwill and intangibles
         with indefinite lives will no longer be subject to amortization, but
         will be subject to at least an annual assessment for impairment by
         applying a fair value-based test. Intangible assets with finite lives
         will continue to be amortized over their estimated useful lives. Those
         intangible assets are reviewed for impairment under SFAS No. 121,
         "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
         Assets to be Disposed Of."




                                      F-9
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     8.  Income Taxes

          Deferred income taxes are recognized for temporary differences between
          financial statement and income tax bases of assets and liabilities and
          net  operating  loss  carryforwards  for which  income tax expenses or
          benefits  are  expected to be realized  in future  years.  A valuation
          allowance  had  been   established  to  reduce   deferred  tax  assets
          attributable  to net operating  losses of a subsidiary of the Company.
          During fiscal 2001, the Company utilized a significant  portion of the
          net operating  loss  carryforwards  and thus  eliminated the valuation
          allowance.

     9.  Earnings (Loss) Per Common Share

         Basic earnings per share are determined by dividing the Company's net
         earnings by the weighted average shares outstanding. Diluted earnings
         per share include the dilutive effects of outstanding stock options.

    10.  Financial Instruments and Business Concentrations

         Financial instruments, which potentially subject the Company to
         concentration of credit risk, consist principally of accounts
         receivable. Concentration of credit risk with respect to accounts
         receivable is generally mitigated due to the large number of entities
         comprising the Company's customer base, their dispersion across
         geographic areas and industries, along with the Company's policy of
         maintaining credit insurance. The Company routinely addresses the
         financial strength of its customers and, historically, its accounts
         receivable credit risk exposure is limited.

         Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"),
         "Fair Value of Financial Instruments," requires disclosure of the
         estimated fair value of an entity's financial instrument assets and
         liabilities. The Company's principal financial instrument consists of a
         revolving credit facility,



                                      F-10
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         expiring on March 14, 2004, with two participating  banks. The Company
         believes that the carrying amount of such debt  approximates  the fair
         value  as  the  variable   interest  rate   approximates  the  current
         prevailing interest rate.

         The Company generally purchases products from manufacturers pursuant to
         nonexclusive distributor agreements. During the year ended June 30,
         2002, products purchased from three suppliers accounted for 15%, 12%
         and 9%, respectively, of net sales. As is common in the electronics
         distribution industry, from time to time the Company has experienced
         terminations of relationships with suppliers. There can be no assurance
         that, in the event a supplier cancelled its distributor agreement with
         the Company, the Company will be able to replace the sales with sales
         of other products.

    11.  Use of Estimates

          In  preparing  financial  statements  in  conformity  with  accounting
          principles  generally  accepted  in  the  United  States  of  America,
          management is required to make estimates and  assumptions  that affect
          the  reported  amounts of assets and  liabilities  and  disclosure  of
          contingent  assets  and  liabilities  at the  date  of  the  financial
          statements,  as well as the reported  amounts of revenues and expenses
          during the  reporting  period.  During the fourth  quarter of the year
          ended June 30, 2002, the Company recorded an additional  provision for
          excess and slow moving  inventory of  approximately  $1,100,000  based
          upon  management's  current  estimate of the estimated market value of
          such inventory. Actual results could differ from those estimates.

    12.  Comprehensive Income

         Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
         "Reporting Comprehensive Income," establishes rules for reporting and
         display of comprehensive income and its components in financial
         statements. Comprehensive income consists of net earnings and
         unrealized gains and losses on available-for-sale securities and is
         presented in the consolidated statement of changes in shareholders'
         equity, net of applicable taxes.




                                      F-11
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    13.  Segment Reporting

         Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
         "Disclosures About Segments of an Enterprise and Related Information,"
         requires that the Company disclose certain information about its
         operating segments defined as "components of an enterprise about which
         separate financial information is available that is evaluated regularly
         by the chief operating decision maker in deciding how to allocate
         resources and in assessing performance." Generally, financial
         information is required to be reported on the basis that it is used
         internally for evaluating segment performance and deciding how to
         allocate resources to segments. The Company has two reportable segments
         as defined by the provisions of SFAS No. 131.

    14.  Shipping and Handling Fees

         Shipping and handling fees charged to customers are included in net
         sales. Shipping and handling expenses paid are included as a component
         of cost of good sold.

    15.  Advertising

         Advertising costs are expensed as incurred and totaled $158,791,
         $175,954 and $109,308 for the years ended June 30, 2002, 2001 and 2000,
         respectively.

    16.  Reclassifications

         Certain  reclassifications  have been made to prior  year  amounts  to
         conform to the fiscal 2002 presentation.

    17.  Impact of Recently Issued Accounting Pronouncements

         In August 2001, the Financial Accounting Standards Board ("FASB")
         issued Statement of Financial Accounting Standards No. 144 ("SFAS No.
         144"), "Accounting for the Impairment or Disposal of Long-Lived
         Assets." This statement is effective for fiscal years beginning after
         December 15, 2001 and supersedes SFAS No. 121, "Accounting for the
         Impairment of Long-Lived Assets and for Long-Lived Assets to Be
         Disposed Of," while retaining many of the requirements of such
         statement. Management believes that the adoption of SFAS No. 144 will
         not have a material impact on its results of operations or financial
         position.





                                      F-12
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         In April 2002, the FASB issued Statement of Financial Accounting
         Standards No. 145 ("SFAS No. 145"), "Rescission of SFAS Statements No.
         4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections."
         This statement eliminates the current requirements that gains and
         losses on debt extinguishment must be classified as extraordinary items
         in the income statement. Instead, such gains and losses will be
         classified as extraordinary items only if they are deemed to be unusual
         and infrequent, in accordance with the current GAAP criteria for
         extraordinary classifications. In addition, SFAS No. 145 eliminates an
         inconsistency in lease accounting by requiring that modifications of
         capital leases that result in reclassification as operating leases be
         accounted for consistent with sales-leaseback accounting rules. The
         statement also contains other nonsubstantive corrections to
         authoritative accounting literature. The rescission of SFAS No. 4 is
         effective in fiscal years beginning after May 15, 2002. The amendment
         and technical corrections of SFAS No. 13 are effective for transactions
         occurring after May 15, 2002. All other provisions of SFAS No. 145 are
         effective for financial statements issued on or after May 15, 2002.
         Management believes that the adoption of SFAS No. 145 will not have a
         material impact on its results of operations or financial position.

          In June  2002,  the FASB  issued  Statement  of  Financial  Accounting
          Standards No. 146 ("SFAS No. 146"),  "Accounting for Costs  Associated
          with Exit or Disposal  Activities,"  which  addresses  accounting  for
          restructuring  and similar  costs.  SFAS No. 146  supersedes  previous
          accounting guidance,  principally Emerging Issues Task Force Issue No.
          94-3.  SFAS No. 146 requires that the  liability for costs  associated
          with an exit or disposal  activity be recognized when the liability is
          incurred.  SFAS No. 146 also  establishes  that the  liability  should
          initially be measured and recorded at fair value. Accordingly SFAS No.
          146 may affect the timing of recognizing future restructuring costs as
          well as the amount  recognized.  SFAS no. 146 is effective for exit or
          disposal  activities  that are  initiated  after  December  31,  2002.
          Management  believes that the adoption of SFAS No. 146 will not have a
          material impact on its results of operations or financial position.





                                      F-13
<PAGE>

<TABLE>
<CAPTION>


                                                Jaco Electronics, Inc. and Subsidiaries

                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                     June 30, 2002, 2001 and 2000



NOTE B - INVENTORY

     Inventories consist of the following:

                                                                                                June 30,
                                                                                ---------------------------------------
                                                                                     2002                     2001
                                                                                --------------            -------------

<S>                                                                                <C>                      <C>
      Finished goods and goods held for resale                                     $36,382,922              $52,841,604
      Work-in-process                                                                  502,936                1,401,102
      Raw materials                                                                  5,725,367                7,969,415
                                                                                  ------------              -----------

                                                                                   $42,611,225              $62,212,121
                                                                                    ==========               ==========
</TABLE>

<TABLE>
<CAPTION>

NOTE C - PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of:


                                                                         Useful                      June 30,
                                                                          life         ----------------------------------
                                                                        in years            2002                2001
                                                                        --------        ------------        -------------

<S>                                                                     <C>   <C>       <C>                 <C>
       Land, building and improvements                                  10 to 30        $  1,513,446        $  1,482,419
       Machinery and equipment                                           3 to 7           12,030,190          11,573,339
       Internally developed software costs                                 7               1,977,583           1,952,319
       Transportation equipment                                          3 to 5              126,676             162,707
       Leasehold improvements                                            5 to 10           1,293,424           1,293,424
                                                                                         -----------         -----------

                                                                                          16,941,319          16,464,208

       Less accumulated depreciation and amortization
           (including $1,440,944 in 2002 and $1,378,070 in
           2001 of capitalized lease amortization)                                        10,232,491           8,074,557
                                                                                          ----------         -----------

                                                                                        $  6,708,828        $  8,389,651
                                                                                         ===========         ===========

     Included in machinery and equipment are assets recorded under capitalized
     leases at June 30, 2002 and 2001 for $3,502,364 and $3,967,825,
     respectively. Accumulated amortization of internally developed software
     costs at June 30, 2002 and 2001 aggregated $934,959 and $654,010,
     respectively.


</TABLE>




                                      F-14
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE D - GOODWILL AND OTHER INTANGIBLE ASSETS

     The Company has adopted, as of July 1, 2001, the provisions of SFAS Nos.
     141 and 142. Accordingly, annual and quarterly amortization of goodwill and
     franchise agreements of $1,234,000 and $308,000, respectively, are no
     longer recognized. The Company has performed a transitional fair
     value-based impairment test and has determined that no impairment of
     goodwill or franchise agreements existed as of July 1, 2001.

     The following table presents a reconciliation of net earnings (loss) and
     earnings (loss) per share amounts, as reported in the financial statements,
     to those amounts adjusted for goodwill and intangible asset amortization
     determined in accordance with the provisions of SFAS No. 142.
<TABLE>

                                                                                                June 30,
                                                                           ----------------------------------------------
                                                                              2002               2001               2000
                                                                           -----------        -----------        ---------

<S>                                                                    <C>                <C>                <C>
      Reported net (loss) earnings                                     $(5,043,971)       $   9,850,397      $6,375,954
         Add back: goodwill amortization                                                        980,092         246,332
         Add back: franchise agreement amortization                                              36,667           3,056
                                                                       -----------------  -------------      ------------

      Adjusted net (loss) earnings                                     $(5,043,971)       $10,867,156        $6,625,342
                                                                        ==========         ==========         =========

      Basic (loss) earnings per share
          Reported net (loss) earnings                                 $(0.88)            $1.74              $ 1.16
          Goodwill amortization                                                            0.17                0.05
          Franchise agreement amortization                                                 0.01
                                                                       --------            ----                ----

          Adjusted net (loss) earnings                                 $(0.88)            $1.92               $1.21
                                                                        =====              ====                ====

      Diluted (loss) earnings per share
          Reported net (loss) earnings                                 $(0.88)            $1.59               $1.11
          Goodwill amortization                                                            0.16                0.04
          Franchise agreement amortization                                                 0.01
                                                                       --------            ----               -----

          Adjusted net (loss) earnings                                 $(0.88)            $1.76               $1.15
                                                                        =====              ====                ====

</TABLE>




                                      F-15
<PAGE>

<TABLE>
<CAPTION>


                                                Jaco Electronics, Inc. and Subsidiaries

                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                     June 30, 2002, 2001 and 2000



 NOTE E - INCOME TAXES

     The components of the Company's (benefit) provision for income taxes are as
follows:

                                                                                     June 30,
                                                             -------------------------------------------------------
                                                                 2002                   2001                   2000
                                                             ------------            -----------           ----------

      Federal
<S>                                                           <C>                    <C>                   <C>
         Current                                              $(2,737,000)           $5,853,000            $3,448,000
         Deferred                                                 225,000              (803,000)              (67,000)
                                                              -----------            ----------           -----------

                                                               (2,512,000)            5,050,000             3,381,000

      State                                                      (256,000)            1,722,000             1,044,000
                                                              ------------            ---------             ---------

                                                              $(2,768,000)           $6,772,000            $4,425,000
                                                               ==========             =========             =========


     The Company's effective income tax rate differs from the statutory U.S.
Federal income tax rate as a result of the following:

                                                                                            June 30,
                                                                         --------------------------------------------
                                                                           2002              2001                2000
                                                                         --------         -----------           -----

      Statutory Federal tax rate                                         (34.0)%              34.0%              34.0%
      State income taxes, net of Federal tax benefit                      (3.3)                6.7                5.5
      Sales expense for which no tax benefit arises                        0.8                 1.0                0.9
      Other                                                                1.1                (1.0)               0.6
                                                                       -------               -----              -----

      Effective tax rate                                                 (35.4)%              40.7%              41.0%
                                                                         =====                ====               ====



</TABLE>



                                      F-16
<PAGE>


<TABLE>
<CAPTION>

                                                Jaco Electronics, Inc. and Subsidiaries

                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                     June 30, 2002, 2001 and 2000



 NOTE E - INCOME TAXES (continued)

     Deferred income tax assets and liabilities resulting from differences
     between accounting for financial statement purposes and tax purposes are
     summarized as follows:

                                                                                        2002                   2001
                                                                                     -----------           --------

       Deferred tax assets
<S>                                                                                   <C>                   <C>
            Net operating loss carryforwards                                          $   424,000           $   187,000
            Allowance for bad debts                                                       611,000               619,000
            Inventory valuation                                                         1,554,000             1,820,000
            Deferred compensation                                                         346,000               310,000
            Unrealized loss on marketable securities
                 available for sale                                                        16,000
            Other deferred tax assets                                                     331,000               364,000
                                                                                       ----------            ----------

                                                                                        3,282,000             3,300,000

       Deferred tax liabilities
           Depreciation                                                                  (758,000)             (594,000)
           Unrealized gain on marketable securities
              available for sale                                                                                (34,000)
           Other                                                                          (73,000)              (46,000)
                                                                                      -----------           -----------

       Net deferred tax asset                                                          $2,451,000            $2,626,000
                                                                                        =========             =========

     At June 30, 2002, the Company, through an acquisition, has available a
     Federal net operating loss carryforward of approximately $313,000. Such net
     operating loss is subject to certain limitations and expires in varying
     amounts during the fiscal years 2007 through 2010. In addition, the Company
     has current year net operating losses of approximately $6,600,000 that will
     be carried back for a two-year period for Federal tax refund purposes.
     Since most states do not permit loss carrybacks, the state effect of the
     current year loss is included in the deferred tax asset.


</TABLE>




                                      F-17
<PAGE>

<TABLE>


                                                Jaco Electronics, Inc. and Subsidiaries

                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                     June 30, 2002, 2001 and 2000



NOTE F - (LOSS) EARNINGS PER COMMON SHARE

                                                                  Year ended June 30,
                                  --------------------------------------------------------------------------------------
                                                      2002                                          2001
                                    ----------------------------------------      --------------------------------------
                                       Loss           Shares          Per            Income          Shares         Per
                                      (numer-        (denomi-        share           (numer-        (denomi-       share
                                       ator)          nator)        amount            ator)          nator)       amount
                                    ---------       ---------      -------         ---------       ---------     -------

     Basic (loss) earnings per
     share;
       income available to
<S>                                <C>              <C>             <C>           <C>             <C>              <C>
       common shareholders         $(5,043,971)     5,713,365       $(0.88)       $9,850,397      5,669,560        $1.74

     Effect of dilutive
     securities
       Stock options                                                                                509,093
                                  --------------- --------------                ---------------  ----------


     Diluted (loss) earnings
     per
       share; income available
       to common shareholders
       plus assumed
       conversions                 $(5,043,971)     5,713,365       $(0.88)       $9,850,397      6,178,653        $1.59
                                    ==========      =========                      =========       =========






                                                          2000
                                        ----------------------------------------
                                            Income        Shares         Per
                                            (numer-      (denomi-       share
                                             ator)        nator)       amount
                                          ---------     ---------     -------





 Basic (loss) earnings per
 share;
   income available to

   common shareholders                    $6,375,954      5,497,866       $1.16

 Effect of dilutive
 securities
   Stock options                                             268,220
                                            ------------- ----------


 Diluted (loss) earnings
 per
   share; income available
   to common shareholders
   plus assumed
   conversions                              $6,375,954     5,766,086       $1.11
                                             =========     =========


     Excluded from the calculation of earnings (loss) per share are options to
     purchase 844,548, 90,688 and 45,000 common shares in fiscal 2002, 2001 and
     2000, respectively, as their inclusion would have been antidilutive.


</TABLE>




                                      F-18
<PAGE>


<TABLE>
<CAPTION>


                                                Jaco Electronics, Inc. and Subsidiaries

                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                     June 30, 2002, 2001 and 2000



NOTE G - DEBT AND CAPITALIZED LEASE OBLIGATIONS

     Debt and capitalized lease obligations are as follows:

                                                                                                 June 30,
                                                                                    ---------------------------------
                                                                                        2002                    2001
                                                                                    -------------          -------------

<S>                                                                                   <C>                    <C>
     Term loan and revolving line of credit (a)                                       $33,807,703            $54,556,622
     Other term loan (b)                                                                  185,202                324,689
     Equipment note                                                                                               30,634
     Capitalized lease obligations (c)                                                  1,947,496              2,561,909
                                                                                      -----------            -----------

                                                                                       35,940,401             57,473,854

     Less amounts representing interest on capitalized
         lease obligations                                                                163,216                263,706
                                                                                     ------------           ------------

                                                                                       35,777,185             57,210,148

     Less current maturities                                                              897,419              1,081,905
                                                                                     ------------            -----------

                                                                                      $34,879,766            $56,128,243
                                                                                       ==========             ==========

     (a)   Term Loan and Revolving Line of Credit Facility

     The Company's  agreement with its banks,  as amended,  provides the Company
     with a $45,000,000  revolving line of credit facility.  The credit facility
     is based principally on eligible accounts receivable and inventories of the
     Company as defined  in the  agreement.  The  agreement  was  amended to (i)
     extend the maturity date to March 14, 2004, (ii) reduce the credit facility
     line from $70 million to $45 million,  and (iii) change the requirements of
     certain  financial  covenants.  The interest  rate was based on the average
     30-day LIBOR plus 1% to 2-1/4%  depending on the Company's  performance for
     the  immediately  preceding  four  fiscal  quarters  measured  by a certain
     financial  ratio.  Effective  October 1, 2002, the rate will convert to the
     average 30-day LIBOR plus 2-3/4% and is subject to quarterly decreases,  to
     the  average  30-day  LIBOR  plus  2-1/4%,   based  upon  future  financial
     performance.   Borrowings  under  this  facility  are   collateralized   by
     substantially all of the assets of the Company. In addition,  the agreement
     prohibits the payment of cash  dividends.  The  outstanding  balance on the
     revolving line of credit facility was $33,807,703 at June 30, 2002, with an
     associated interest rate of 4.09%. The agreement also provided a waiver for
     non-compliance of a certain financial covenant.

</TABLE>



                                      F-19
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE G - DEBT AND CAPITALIZED LEASE OBLIGATIONS (continued)

     (b)   Other Term Loan

           The Company has a term loan which requires monthly payments $9,829
           through January 31, 2004. The loan, which bears interest at 1% per
           annum, is collateralized by the related equipment acquired, having a
           carrying value of approximately $261,000 at June 30, 2002 and
           $344,000 at June 30, 2001. The agreement contains, among other
           things, restrictive covenants on one of the Company's subsidiaries,
           which place limitations on significant changes in the business and
           additional indebtedness.

     (c)   Capitalized Lease Obligations

           The Company leases certain equipment under agreements accounted for
           as capital leases. The aggregate obligations for the equipment
           require the Company to make monthly payments through March 2005, with
           implicit interest rates from 7.0% to 8.4%.

     The following is a summary of the aggregate annual maturities of debt and
capitalized lease obligations as of June 30, 2002:

                                                            Capitalized
                                        Debt                  leases
                                        ----                  ------

      Year ending June 30,
           2003                     $     116,628            $   882,558
           2004                        33,876,277                677,768
           2005                                                  387,170
                                      -----------             ----------

                                      $33,992,905             $1,947,496
                                       ==========              =========






                                      F-20
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE H - COMMITMENTS AND CONTINGENCIES

     1.  Leases

         The Company leases certain office and warehouse facilities under
         noncancellable operating leases. The leases also provide for the
         payment of real estate taxes and other operating expenses of the
         buildings. The minimum annual lease payments under such leases are as
         follows:

                          Year ending June 30,
                              2003                           $1,899,386
                              2004                            1,187,459
                              2005                              574,695
                              2006                               86,548
                                                            -----------

                                                             $3,748,088
                                                             ==========

         In addition, the Company leases office and warehouse facilities from a
         partnership owned by two officers and directors of the Company. The
         lease expires in December 2003 and requires minimum annual lease
         payments as follows:

                          Year ending June 30,
                              2003                      $   692,293
                              2004                          354,589
                                                         ----------

                                                         $1,046,882
                                                         ==========

         The Company's rent expense was approximately $602,000 for each of the
         years ended June 30, 2002, 2001 and 2000, respectively, in connection
         with the above lease.

         Rent expense on office and warehouse facilities leases for the years
         ended June 30, 2002, 2001 and 2000 was approximately $2,049,000 ,
         $1,826,000 and $1,235,000, respectively, net of sublease income of
         approximately $115,000 and $127,000, for the years ended June 30, 2001
         and 2000, respectively.







                                      F-21
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE H - COMMITMENTS AND CONTINGENCIES (continued)

     2.  Other Leases

         The Company also leases various office equipment and automobiles under
         noncancellable operating leases expiring through June 2006. The minimum
         rental commitments required under these leases at June 30, 2002 are as
         follows:

                          Year ending June 30,
                              2003                         $214,732
                              2004                           95,450
                              2005                           58,393
                              2006                            2,948
                                                          ---------

                                                           $371,523
                                                           ========

     3.  Employment Agreements

         The Company has entered into employment agreements with three executive
         officers which provide for annual base salaries aggregating $785,000
         through June 30, 2005 and contain provisions for severance payments in
         the event of change of control as defined in the agreements. The
         Company's agreements with its Chairman and Executive Vice President
         provide for cash bonuses equal to 4% and 2%, respectively, of the
         Company's earnings before income taxes for each fiscal year in which
         such earnings are in excess of $1,000,000 or 6% and 3%, respectively,
         of the Company's earnings before income taxes if such earnings are in
         excess of $2,500,000 up to a maximum annual cash bonus of $720,000 and
         $360,000, respectively. In addition, the Company's agreement with its
         Chairman provides for deferred compensation which accrues at a rate of
         $50,000 per year and becomes payable in its entirety no later than
         January 15 of the year next following his cessation of employment for
         any reason.

         Effective July 1, 2001, the Company is obligated to provide health
         insurance to the Chairman, Executive Vice President, and their
         respective spouses commencing upon their termination of employment with
         Jaco and ending on the later to occur of (i) their death or (ii) the
         death of their respective spouses. The Company has adopted Statement of
         Financial Accounting Standards No. 106, "Employer's Accounting for
         Postretirement Benefits Other Than Pension," which requires the Company
         to recognize the cost of providing postretirement benefits over the
         employees' service periods. The recorded liabilities for these
         postretirement benefits, none of which has been funded, amounted to
         $48,900 at June 30, 2002. The weighted-average discount rate used in
         determining the liability was 5.5%, and the annual percentage increase
         in health costs was 7%.





                                      F-22
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE H - COMMITMENTS AND CONTINGENCIES (continued)

         On June 6, 2000, the Company entered into an employment agreement with
         an Executive Vice President which provides for an annual base of
         $300,000 through May 30, 2003. The employment agreement also provides
         for an annual cash bonus equal to 2% of certain gross profit dollars,
         as defined.

     4.  Other Matters

         The Company is a party to legal matters arising in the general conduct
         of business. The ultimate outcome of such matters is not expected to
         have a material adverse effect on the Company's results of operations
         or financial position.


NOTE I - RETIREMENT PLAN

     The Company maintains a 401(k) Plan that is available to all employees, to
     which the Company contributes up to a maximum of 1% of each employee's
     salary. For the years ended June 30, 2002, 2001 and 2000, the Company
     contributed to this plan approximately $144,000, $175,000 and $116,000,
     respectively.






                                      F-23
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE J - SHAREHOLDERS' EQUITY

     On June 26, 2000, the Company announced a 3-for-2 stock split which was in
     the form of a 50% common stock dividend payable on July 24, 2000 to
     shareholders of record on July 10, 2000. All references to the number of
     weighted-average common shares outstanding and earnings per share have been
     restated to reflect the 3-for-2 stock split.

     In December 1992, the Board of Directors approved the adoption of a
     nonqualified stock option plan, known as the "1993 Non-Qualified Stock
     Option Plan," hereinafter referred to as the "1993 Plan." The Board of
     Directors or Plan Committee is responsible for the granting and pricing of
     these options. Such price shall be equal to the fair market value of the
     common stock subject to such option at the time of grant. The options
     expire five years from the date of grant and are exercisable over the
     period stated in each option. In December 1997, the shareholders of the
     Company approved an increase in the amount of shares reserved for the 1993
     plan to 900,000 from 440,000, of which 577,500 are outstanding at June 30,
     2002.

     In October 1993, the Board of Directors approved the adoption of a stock
     option plan for outside directors, known as the "1993 Stock Option Plan for
     Outside Directors," hereinafter referred to as the "Outside Directors
     Plan." Each outside director who was serving as of December 31, 1993 was
     granted a nonqualified stock option to purchase 22,000 shares of the
     Company's common stock at the fair market value on the date of grant. Each
     outside director who was serving on December 31 of each calendar year
     subsequent to 1993 was granted options to purchase 4,399 shares of the
     Company's common stock annually. The Outside Directors Plan expired on
     January 1, 1998, with a total of 8,798 options outstanding at June 30,
     2002. Granted options shall expire upon the earlier of five years after the
     date of grant or one year following the date on which the outside director
     ceases to serve in such capacity.

     In June 1997, the Company appointed an additional outside director to the
     Board of Directors who received 15,000 options to purchase the Company's
     common stock at the fair market value on the date of grant. In September
     1998, two outside directors were each granted 11,250 options to purchase
     the Company's common stock at the fair market value on the date of grant.
     These 37,500 options, of which 22,500 are outstanding at June 30, 2002,
     were not granted pursuant to any of the Company's existing stock option
     plans.




                                      F-24
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE J - SHAREHOLDERS' EQUITY (continued)

     In October 2000, the Board of Directors approved the adoption of the "2000
     Stock Option Plan," hereinafter referred to as the "2000 Plan." The 2000
     Plan provides for the grant of incentive stock options ("ISOs") and
     nonqualified stock options ("NQSOs") to employees, officers, directors,
     consultants and advisers of the Company. The Board of Directors or Plan
     Committee is responsible for the granting and pricing of these options.
     Such price shall be equal to the fair market value of the common stock
     subject to such option at the time of grant. In the case of ISOs granted to
     shareholders owning more than 10% of the Company's voting securities, the
     exercise price shall be no less than 110% of the fair market value of the
     Company's common stock on the date of grant. All options shall expire ten
     years from the date of grant of such option (five years in the case of an
     ISO granted to a 10% shareholder) or on such earlier date as may be
     prescribed by the Committee and set forth in the option agreement, and are
     exercisable over the period stated in each option. The 2000 Plan reserves
     600,000 shares of the Company's common stock, of which 235,750 are
     outstanding at June 30, 2002.

     Outstanding options granted to employees, directors and officers for the
last three fiscal years are summarized as follows:
<TABLE>
<CAPTION>


                                                                           Nonqualified                        Weighted-
                                                                           stock options                       average
                                                                  --------------------------------             exercise
                                                                    Price range             Shares              price
                                                                    -----------             ------              -----

<S>                       <C> <C>                                   <C>     <C>            <C>                   <C>
      Outstanding at June 30, 1999                                  $1.79 - $8.50          727,943               $3.79
                                                                                          --------

      Granted                                                       $2.50 - $13.71         258,000                4.70
      Exercised                                                     $1.79 -  $8.50        (153,723)               5.67
      Expired                                                       $2.50 -  $4.67         (41,800)               3.44
                                                                                         ---------

      Outstanding at June 30, 2000                                  $1.79 - $13.71         790,420                3.74
                                                                                          --------

      Granted                                                       $6.01 - $8.00          238,250                7.91
      Exercised                                                     $2.50 - $8.50          (63,500)               6.88
                                                                                         ---------

      Outstanding at June 30, 2001                                  $1.79 - $13.71         965,170                4.56
                                                                                           -------


      Exercised                                                    $2.50 - $4.67          (109,973)               4.47
      Expired                                                      $8.00 - $13.71          (10,649)               9.05
                                                                                         ---------

      Outstanding at June 30, 2002                                  $1.79 - $13.71         844,548                4.52
                                                                                          ========

      Amounts exercisable at June 30, 2002                          $1.79 - $13.71         844,548                4.52
                                                                                          ========


</TABLE>



                                      F-25
<PAGE>

<TABLE>


                                                Jaco Electronics, Inc. and Subsidiaries

                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                      June 30, 2002, 2001 and 2000



NOTE J - SHAREHOLDERS' EQUITY (continued)

     The following table summarizes information concerning currently outstanding
and exercisable nonqualified stock options:

                                                 Options outstanding                         Options exercisable
                                       --------------------------------------     --------------------------------------
                                                        Weighted-                                 Weighted-
                                                        average        Weighted-                   average     Weighted-
                                                       remaining        average                   remaining     average
                                        Number        contractual      exercise    Number        contractual    exercise
       Range of exercise prices        outstanding    life (months)     price    exercisable   life (months)     price
       ------------------------        -----------  ---------------   ----------  ----------- ---------------  ---------


<S>    <C>     <C>                     <C>                <C>        <C>           <C>              <C>        <C>
       $1.79 - $4.67                   567,548            21         $  2.44       567,548          21         $  2.44

       $6.01 - $8.00                   235,750           101         $  7.91       235,750         101         $  7.91

       $13.71                           41,250            35          $13.71        41,250          35          $13.71

</TABLE>

     The weighted-average option fair value on the grant date was $4.82 and
     $4.97 for options issued during the years ended June 30, 2001 and 2000,
     respectively. There were no options issued during the year ended June 30,
     2002.

     The Company has adopted the disclosure provisions of Statement of Financial
     Accounting Standards No. 123 ("SFAS No. 123"),  "Accounting for Stock-Based
     Compensation";  it applies APB Opinion No. 25, "Accounting for Stock Issued
     to Employees," and related  interpretations in accounting for the 2000 Plan
     and does not  recognize  compensation  expense  for such 2000 Plan.  If the
     Company had elected to recognize  compensation  expense based upon the fair
     value at the grant dates for awards under the 2000 Plan consistent with the
     methodology prescribed by SFAS No. 123, the Company's reported net earnings
     (loss) and earnings  (loss) per share would be reduced  (increased)  to the
     pro forma amounts indicated below for the years ended June 30:
<TABLE>

                                                                          2002                2001                  2000
                                                                      -------------      --------------         --------
      Net (loss) earnings
<S>                                                                    <C>                   <C>                  <C>
          As reported                                                  $(5,043,971)          $9,850,397           $6,375,954
          Pro forma                                                     (5,568,933)           8,732,958            6,098,272
      Net (loss) earnings per common share  - basic
          As reported                                                      $(0.88)               $1.74                $1.16
          Pro forma                                                         (0.97)                1.54                 1.11
      Net (loss) earnings per common share - diluted
          As reported                                                      $(0.88)               $1.59                $1.11
          Pro forma                                                         (0.97)                1.41                 1.06


</TABLE>



                                      F-26
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE J - SHAREHOLDERS' EQUITY (continued)

     These pro forma amounts may not be representative of future disclosures
     because they do not take into account pro forma compensation expense
     related to grants made before fiscal 1996. The fair value of these options
     was estimated at the date of grant using the Black-Scholes option-pricing
     model with the following weighted-average assumptions for the fiscal years
     ended June 30, 2001 and 2000, respectively: expected volatility of 93% and
     109%; risk-free interest rates of 5.33% and 6.25%; and expected term of 3
     years.

     The Black-Scholes option valuation model was developed for use in
     estimating the fair value of traded options which have no vesting
     restrictions and are fully transferable. In addition, option valuation
     models require the use of highly subjective assumptions including the
     expected stock price volatility. Because the Company's employee stock
     options have characteristics significantly different from those of traded
     options, and because changes in the subjective assumptions can materially
     affect the fair value estimate, in management's opinion, the existing
     models do not necessarily provide a reliable single measure of the fair
     value of its employee stock options.

     The Board of Directors of the Company had authorized the purchase of up to
     375,000 shares of its common stock under a stock repurchase program. In
     fiscal 1998, the Board of Directors authorized the repurchase of up to an
     additional 600,000 shares of the Company's common stock. The purchases were
     made by the Company from time to time on the open market at the Company's
     discretion and were dependent on market conditions. The Company had made
     purchases of 618,300 shares of its common stock from July 31, 1996 through
     September 13, 2000 for aggregate consideration of $2,204,515. On September
     14, 2000, the Board of Directors passed a resolution to terminate the stock
     repurchase program.

     On September 18, 2001, the Company announced that its Board of Directors
     authorized the repurchase of up to 250,000 shares of its outstanding common
     stock. Purchases may be made from time to time in market or private
     transactions at prevailing market prices. No purchases were made in fiscal
     2002.

     In June 1997, the Company's Board of Directors approved the adoption of a
     restricted stock plan, which was subsequently ratified by shareholders
     during the Company's December 1997 annual meeting. The plan enables the
     Board of Directors or Plan Committee to have sole discretion and authority
     to determine who may purchase restricted stock, the number of shares, the
     price to be paid and the restrictions placed upon the stock. Pursuant to
     this plan, the Company issued 135,000 shares of common stock to certain
     employees at a purchase price of $.67 per share. Shares purchased are
     subject to a four-year vesting period and the Company recognized $135,000
     of compensation expense during fiscal 2001 and 2000 in connection with this
     plan.




                                      F-27
<PAGE>

<TABLE>


                                                Jaco Electronics, Inc. and Subsidiaries

                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                      June 30, 2002, 2001 and 2000



NOTE K - COMPREHENSIVE INCOME (LOSS)

     Total comprehensive income (loss) and its components for the years ended June 30,
2002, 2001 and 2000 are as follows:

                                                                        2002               2001                2000
                                                                    -------------      -------------      -----------


<S>                                                                   <C>                 <C>               <C>
       Net (loss) earnings                                            $(5,043,971)        $9,850,397        $6,375,954
       Unrealized loss on marketable
           securities                                                    (136,063)          (166,240)          (74,076)
       Deferred tax benefit                                                50,402             60,678            27,038
                                                                      -----------        -----------       -----------

       Comprehensive (loss) income                                    $(5,129,632)        $9,744,835        $6,328,916
                                                                       ==========          =========         =========
</TABLE>

Accumulated other  comprehensive  income (loss) is comprised of unrealized gains
and losses on marketable securities, net of the related tax effect.


NOTE L - ACQUISITIONS

     On June 6, 2000,  the Company  acquired  all of the issued and  outstanding
     shares of common  stock,  no par  value,  of  Interface  Electronics  Corp.
     ("Interface"), a distributor of electronic parts, components and equipment,
     located in  Massachusetts.  The purchase price was  $15,400,000  payable in
     cash at closing,  plus the assumption of certain liabilities and a deferred
     payment of $5,002,860, of which $2,099,563 is outstanding at June 30, 2002.

     The acquisition has been accounted for as a purchase and the operations of
     Interface have been included in the Company's statement of operations since
     the date of acquisition. Included in other assets are the costs of the
     identifiable intangible assets acquired, principally an employment
     agreement which is being amortized on a straight-line basis over five years
     and a franchise agreement which was




                                      F-28
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE L - ACQUISITIONS (continued)

     being amortized on a straight-line basis over fifteen years until the
     Company's adoption of SFAS No. 142. The excess of the purchase price and
     related expenses over the net tangible and identifiable intangible assets
     acquired amounted to approximately $19,703,000 at June 30, 2002 and was
     being amortized on a straight-line basis over twenty years until the
     Company's adoption of SFAS No. 142. A summary of the allocation of the
     assets and liabilities acquired follows:

              Operating assets acquired                         $ 13,157,365
              Employment agreement                                   685,000
              Franchise agreement                                    550,000
                                                                     -------


                                                                  14,392,365


              Liabilities assumed                                (13,464,389)
              Transaction costs                                     (228,241)
                                                                    --------


                                                                 (13,692,630)
                                                                 -----------


              Goodwill                                            19,703,125
                                                                 -----------

              Total purchase price                              $ 20,402,860
                                                                 ===========

     On February 25, 2000, the Company purchased the operating assets of PGI,
     Industries, Inc., ("PGI") an exporter of electronic components, located in
     Ronkonkoma, New York. The purchase price was $1,200,000 paid in cash, plus
     a deferred payment of $100,000, which has been paid. The acquisition has
     been accounted for as a purchase and the operations of PGI have been
     included in the Company's statement of operations since the date of
     acquisition. The excess of the purchase price over the fair value of the
     assets acquired, approximately $310,000 at June 30, 2002, was being
     amortized on a straight-line basis over twenty years until the Company's
     adoption of SFAS No. 142.






                                      F-29
<PAGE>



                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 2002, 2001 and 2000



NOTE M - BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

     The Company has two reportable segments: electronics parts distribution and
     contract manufacturing. The Company's primary business activity is
     conducted with small and medium size manufacturers, located in North
     America, that produce electronic equipment used in a variety of industries.
     Information pertaining to the Company's operations in different geographic
     areas for fiscal years 2002, 2001 and 2000, is not considered material to
     the financial statements.

     The Company's chief operating decision maker utilizes net sales and net
     earnings (loss) information in assessing performance and making overall
     operating decisions and resource allocations. The accounting policies of
     the operating segments are the same as those described in the summary of
     significant accounting policies. The Company accounts for intersegment
     sales as if the sales were to third parties, that is, at current market
     prices. Information about the Company's segments is as follows:

<TABLE>
                                                                                    Year ended June 30,
                                                                   -------------------------------------------------------
                                                                      2002                 2001              2000
                                                                   ---------            ---------         -------
                                                                   ----------------------(in thousands)--------------------

     Net sales from external customers
<S>                                                                 <C>                  <C>                  <C>
         Electronics components distribution                        $175,949             $321,124             $193,111
         Contract manufacturing                                       18,157               29,098               16,214
                                                                   ---------            ---------            ---------

                                                                    $194,106             $350,222             $209,325
                                                                     =======              =======              =======

     Intersegment net sales
         Electronics components distribution                      $      268          $       992          $       324
         Contract manufacturing                                           10
                                                                   ---------           ----------          -----------

                                                                  $      278          $       992          $       324
                                                                   =========           ==========           ==========

     Operating (loss) profit
         Electronics components distribution                       $  (5,380)           $  19,167            $  12,012
         Contract manufacturing                                         (209)               1,575                  348
                                                                   ---------            ---------           ----------

                                                                   $  (5,589)           $  20,742            $  12,360
                                                                    ========             ========             ========

</TABLE>




                                      F-30
<PAGE>

<TABLE>



                                                Jaco Electronics, Inc. and Subsidiaries

                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                      June 30, 2002, 2001 and 2000



NOTE M - BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION (continued)

                                                                                    Year ended June 30,
                                                                   -------------------------------------------------------
                                                                      2002                 2001              2000
                                                                   ---------            ---------          -------
                                                                   ----------------------(in thousands)--------------------


     Interest expense
<S>                                                               <C>                  <C>                  <C>
         Electronics components distribution                      $    1,683           $    3,457           $    1,053
         Contract manufacturing                                          540                  662                  506
                                                                  ----------           ----------           ----------

                                                                  $    2,223           $    4,119           $    1,559
                                                                   =========            =========            =========

     Income tax (benefit) provision
         Electronics components distribution                      $   (2,503)          $    6,400           $    4,489
         Contract manufacturing                                         (265)                 372                  (64)
                                                                  ----------           ----------           ----------

                                                                  $   (2,768)          $    6,772           $    4,425
                                                                   =========            =========            =========


     Identifiable assets
         Electronics components distribution                       $  97,412             $117,069             $115,109
         Contract manufacturing                                       13,223               19,246               10,995
                                                                   ---------             --------             --------

                                                                    $110,635             $136,315             $126,104
                                                                     =======              =======              =======

     Capital expenditures
         Electronics components distribution                     $       174          $     1,238           $      612
         Contract manufacturing                                           31                  759                  280
                                                                  ----------           ----------            ---------

                                                                  $      205           $    1,997           $      892
                                                                   =========            =========            =========

     Depreciation and amortization
         Electronics components distribution                      $    1,439           $    2,297           $    1,209
         Contract manufacturing                                          893                  926                  659
                                                                  ----------           ----------           ----------

                                                                  $    2,332           $    3,223           $    1,868
                                                                   =========            =========            =========

</TABLE>





                                      F-31
<PAGE>


<TABLE>

                                                Jaco Electronics, Inc. and Subsidiaries

                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                                      June 30, 2002, 2001 and 2000



NOTE N - SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

                                                                        Quarter ended
                                                                        -------------
                                          June 30,      March 31,    December 31,    September 30,      June 30,
                                           2002           2002           2001             2001            2001
                                        -----------    -----------    -----------      -----------     -----------

<S>                                     <C>            <C>            <C>              <C>             <C>
     Net sales                          $52,972,961    $49,297,412    $42,405,312      $49,430,523     $72,146,768

     Gross profit                         6,159,286      7,196,967      6,601,562        8,015,501      10,777,533

     Net (loss) earnings                 (1,545,878)      (674,550)    (1,320,995)      (1,502,548)       (437,625)

     Net (loss) earnings per common share
         Basic                               $(0.27)        $(0.12)        $(0.23)          $(0.26)         $(0.08)
         Diluted                              (0.27)         (0.12)         (0.23)           (0.26)          (0.08)






                                                        Quarter ended
                                                        -------------
                                      March 31,      December 31,      September 30,
                                       2001             2000              2000
                                      -----------      -----------       -----------


Net sales                             $83,680,954     $100,235,652       $94,158,828

Gross profit                           15,367,532       20,077,191        20,617,658

Net (loss) earnings                     1,585,493        4,044,662         4,657,867

Net (loss) earnings per common share
    Basic                                   $0.28            $0.72             $0.83
    Diluted                                  0.26             0.65              0.75



</TABLE>


                                      F-32
<PAGE>






                         REPORT OF INDEPENDENT CERTIFIED
                         PUBLIC ACCOUNTANTS ON SCHEDULE




Board of Directors and Shareholders
    Jaco Electronics, Inc.


In connection with our audits of the consolidated financial statements of Jaco
Electronics, Inc. and Subsidiaries for the years ended June 30, 2002 and 2001
referred to in our report dated September 19, 2002, which is included in this
annual report on Form 10-K, we have also audited Schedule II for each of the
three years in the period ended June 30, 2002. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein.





GRANT THORNTON LLP


Melville, New York
September 19, 2002




                                      F-33
<PAGE>

<TABLE>


                                                Jaco Electronics, Inc. and Subsidiaries

                                            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                               Years ended June 30, 2002, 2001 and 2000





              Column A                    Column B                    Column C                  Column D          Column E
              --------                    --------         ----------------------------         --------          --------
                                                                      Additions
                                                           ----------------------------
                                                              (1)                (2)
                                                                            Charged to
                                         Balance at        Charged to          other                              Balance
                                         beginning         costs and        accounts -        Deductions -       at end of
            Description                  of period          expenses         describe           describe           period
            -----------                 -----------        ----------     ------------        -----------        --------

Allowance for doubtful accounts
<S>                 <C> <C>             <C>             <C>                <C>              <C>                 <C>
    Year ended June 30, 2002            $1,695,000      $   418,000        $  79,000 (a)    $   583,000 (b)     $ 1,609,000
                                         =========       ==========         ========         ==========         ==========

    Year ended June 30, 2001            $1,111,000       $1,398,000        $  25,000 (a)    $   839,000 (b)      $1,695,000
                                         =========        =========         ========         ==========           =========

    Year ended June 30, 2000           $   440,000      $   598,000         $178,000 (a)(c) $   105,000 (b)      $1,111,000
                                        ==========       ==========          =======         ==========           =========


Reserve for slow-moving and
   obsolete inventory
    Year ended June 30, 2002            $2,291,000       $2,098,000                          $1,298,000 (d)     $ 3,091,000
                                         =========        =========                           =========         ==========

    Year ended June 30, 2001            $2,406,000      $   865,000                         $   980,000 (d)      $2,291,000
                                         =========       ==========                          ==========           =========

    Year ended June 30, 2000            $1,526,000       $1,266,000                         $   386,000 (d)      $2,406,000
                                         =========        =========                          ==========           =========





(a)  Recoveries of accounts.
(b)  Represents write-offs of uncollectible accounts.
(c)  Includes balance attributable to acquired subsidiary.
(d)  Disposal and sale of slow-moving and obsolete inventory.

</TABLE>


                                      F-34
<PAGE>







                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                       JACO ELECTRONICS, INC.

                                       By:/s/ Joel H Girsky
                                             ----------------------------
                                          Joel H. Girsky, Chairman of the
                                          Board, President and Treasurer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

         Name                  Title                           Date

                       Chairman of the Board,                 September 27, 2002
/s/ Joel H. Girsky     President and Treasurer
   -----------------   (Principal Executive Officer)
    Joel H. Girsky
                       Executive Vice President-              September 27, 2002
/s/ Jeffrey D. Gash    Finance and Secretary
   ---------------     (Prinicpal Financial and
    Jeffrey D. Gash     Accounting Officer)

                       Vice Chairman of the Board             September 27, 2002
/s/ Joseph F. Oliveri  and Executive Vice President
    -----------------
    Joseph F. Oliveri
                       Executive Vice President and           September 27, 2002
/s/ Charles B. Girsky      Director
   ---------------------
    Charles B. Girsky

/s/ Stephen A. Cohen       Director                           September 27, 2002
    -------------------
    Stephen A. Cohen


/s/ Edward M. Frankel      Director                           September 27, 2002
   --------------------
   Edward M. Frankel

/s/ Joseph F. Hickey, Jr.  Director                           September 27, 2002
    --------------------
   Joseph F. Hickey, Jr




<PAGE>



                                  CERTIFICATION





I, Joel H. Girsky, certify that:

1.   I have reviewed this annual report on Form 10-K of Jaco Electronics, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report; and

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report.

Date:  September 27, 2002


                        /s/ Joel H. Girsky
                        ---------------------------------
                        Chairman, President and Treasurer
                        (Principal Executive Officer)



<PAGE>



                                  CERTIFICATION





I, Jeffrey D. Gash, certify that:

1.   I have reviewed this annual report on Form 10-K of Jaco Electronics, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report; and

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report.

Date:  September 27, 2002


                          /s/ Jeffrey D. Gash
                          ----------------------------------------------
                          Executive Vice President, Finance and Secretary
                          (Principal Financial Officer)