FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

                           For the fiscal year ended
                                  June 30, 1999

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

    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: (516) 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 24, 1999
                               was $10,206,301

     Number of shares outstanding of each class of Common Stock, as of September
24, 1999: 3,653,521 shares (excluding 412,200 shares of treasury stock).

                      DOCUMENTS INCORPORATED BY REFERENCE:

   PartIII:  Definitive  Proxy  Statement  to be filed on or before  October 28,
       1999, under Regulation 14A, in connection with the Company's 1999
                        Annual Meeting of Shareholders.







                                       1
<PAGE>










                                     PART I

Item 1.  Business

         Jaco  Electronics,  Inc.,  a New  York  corporation  organized  in 1961
(collectively  with all of its subsidiaries,  unless otherwise noted,  "Jaco" or
the "Company").

General

         Jaco is a  distributor  of  electronic  components  and a  provider  of
contract manufacturing and value-added services throughout the United States and
Canada from two distribution  centers located on the East and West coasts and 14
sales offices  located  throughout  the United States.  The Company  distributes
products  such  as  semiconductors,  capacitors,  resistors,  electro-mechanical
devices, flat panel displays and monitors and power supplies,  which are used in
the manufacture and assembly of electronic products. The Company also provides a
variety  of  value-added   services  including  automated  inventory  management
services,  integrating and assembling  various custom components with flat panel
displays (FPD's) to customer specifications  (box-build),  kitting the component
requirements  of customers,  and  furnishing  contract  manufacturing  services.
Value-added services are intended to attract new customers and increase sales to
existing  customers.  In addition,  these services are designed to respond to an
industry trend of outsourcing, in which purchasing and warehousing functions are
shifted by customers to the most  efficient  provider.  The Company  entered the
contract  manufacturing  business  in March 1994,  when it  acquired  all of the
outstanding  capital  stock of  Nexus  Custom  Electronics,  Inc.  ("Nexus"),  a
Vermont-based   turnkey   contract   manufacturer  of  printed  circuit  boards.
Management believes that by expanding the range of value-added  services it will
enhance its value to customers.





                                       2
<PAGE>




         The  Company's  core  customer  base  consists  primarily  of small and
medium-sized  manufacturers ("OEMs") that produce electronic equipment used in a
wide  variety  of  industries,  including  manufacturers  of  telecommunication,
computer networking,  computer peripheral, medical instrumentation and aerospace
equipment.  In the fiscal  year ended June 30,  1999,  the  Company  distributed
electronic  components  to thousands of  customers,  none of which  individually
represented more than 5% of net sales.

         Jaco is a  service-oriented  company,  built  on  strong  customer  and
supplier  relationships.  The Company's  inventory  management  and  information
systems assist its customers in controlling  materials  costs, in reducing cycle
times and in keeping pace with rapidly occurring technological developments. The
Company  utilizes  a  computerized  inventory  control  system  to assist in the
marketing  of its  products.  During the fiscal year ended June 30,  1999,  Jaco
added several strategic suppliers to its line card, including  Fairchild's power
semiconductor product line that Fairchild acquired from Samsung during the first
half of the fiscal  year ended June 30,  1999,  and  Xecom,  a  manufacturer  of
miniaturized  modems.  The Company's  computer system provides  detailed on-line
information regarding the availability of the Company's entire inventory located
at its stocking  facilities as well as on-line access to the inventories of some
of the Company's major  suppliers.  Through the Company's  integrated  real-time
information system,  customers' orders can readily be tracked through the entire
process of entering the order,  reserving  products to fill the order,  ordering
components from suppliers,  if necessary,  and shipping products to customers on
scheduled  dates.  The Company is thus able to provide  the type of  distributor
service  required by its OEM  customers  that have  adopted  the  "just-in-time"
method of inventory  procurement.  The  "just-in-time"  method is utilized in an
effort to operate  more  efficiently  and  profitably  by  relying on  scheduled
deliveries  of such  components  at the time they are  needed in the  production
process and thereby reducing inventories of components.

         The Company provides additional customer support through  communication
with customers from computer to computer or through  electronic data interchange
("EDI"),   and  through   technically   competent  product  managers  and  Field
Application  Engineers  (FAE's).  Jaco's FAE's located across the United States,
provide  design  support  and  technical  assistance  to Jaco's  customers  with
detailed data solutions employing the latest technologies.  In many cases Jaco's
FAE's are factory-trained.





                                       3
<PAGE>





Industry Overview

         The  electronics  distribution  industry  has  become  an  increasingly
important  sales  channel  for  component  manufacturers.   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  customers  the ability to outsource  their  purchasing  and
warehousing  responsibilities.   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.

Products

         The Company currently  distributes over 60,000 stock items.  Management
believes  that it is necessary  for the Company to carry a wide variety of items
in order to fully  service its  customers  requirements  and, in addition,  many
suppliers require the Company to carry their full product line.





                                       4
<PAGE>




         The components  distributed by the Company are used in the assembly and
manufacture of electronic  equipment such as computers,  data  transmission  and
telecommunications equipment and transportation equipment,  including electronic
signals and aircraft,  and a broad  variety of other  electronic  products.  The
Company's  products fall into two broad  categories:  "passive"  components  and
"active" components.

         Passive components  consist primarily of capacitors,  electromechanical
devices,  and resistors.  Passive products  accounted for approximately 51%, 52%
and 47% of the Company's net  distribution  sales in the fiscal years ended June
30, 1997, June 30, 1998 and June 30, 1999, respectively.

         Active  components  include  semiconductors  and  computer  subsystems.
Semiconductors  consist  of such  items  as  integrated  circuits  and  discrete
components,  transistors,  diodes,  dynamic  RAMs,  static RAMs,  video RAMs and
MOSFETs.  Computer  subsystems  are an integral  part of personal  computers and
computer  workstations and incorporate  such items as disk drives,  tape drives,
flat  panels  and flat  panel  monitors,  touchscreens  and  controllers.  These
products  represented  approximately  49%,  48%  and  53% of the  Company's  net
distribution  sales in the fiscal years ended June 30,  1997,  June 30, 1998 and
June 30, 1999, respectively.

Value-Added Services

         The  Company  provides  a number  of  value-added  services  which  are
intended to attract new  customers,  to maintain and increase  sales to existing
customers  and,  where  feasible,  to generate  additional  revenues and improve
margins from sales of components. Value-added services include:

o                 Automated  Inventory   Management   Services.   Comprehensive,
                  state-of-the-art   solutions  that  effortlessly   manage  the
                  customers inventory  reordering,  stocking and administration.
                  These services reduce  paperwork,  inventory,  cycle time, and
                  the overall cost of doing business.  It is a fully  integrated
                  solution to a customers inventory management.

o                 Kitting. Kitting of customer component product requirements is
                  provided to fill a segment or a complete  order of products to
                  a select  customer base.  Kitting  consists of assembling to a
                  customer's  specifications two or more of the Company's 60,000
                  stock  items  into  pre-packaged  kits  ready  for  use in the
                  customer's assembly line.
o



                                       5
<PAGE>





o                 Contract  Manufacturing.  The Company also  furnishes  turnkey
                  contract  manufacturing  printed  circuit boards  ("PCBs") for
                  OEMs  using  both  conventional  pin-through-hole  and,  on an
                  increasing  basis,  more advanced surface mount  technologies.
                  Contract  manufacturing  operations involve assembling PCBs to
                  customer  specifications  utilizing  components from suppliers
                  with whom the Company has  distribution  agreements  and other
                  suppliers.  As a turnkey  contract  manufacturer  of PCBs, the
                  Company  procures the required raw materials  and  components,
                  manages the  assembly  and test  operations,  and supplies the
                  PCBs in accordance with the customer's  delivery  schedule and
                  quality requirements for the finished product.

o                 Flat Panel Display.  The Company provides turnkey  integration
                  utilizing flat panel displays.  FPDs and other devices such as
                  touchscreen   and  cables   are   integrated   to   customer's
                  specifications providing an assembled product "Box Build".

Sales and Marketing

         Management  believes  the  Company  has  developed  valuable  long-term
customer relationships and an in-depth understanding of its customers' needs and
purchasing  patterns.  Jaco serves a broad range of customers  in the  computer,
computer-related,  telecommunications,  data transmission,  defense,  aerospace,
medical  equipment  and  other  industries.  None  of  the  Company's  customers
individually  represented more than 3%, 4% and 5% respectively,  of net sales in
the  fiscal  years  ended  June  30,  1997,  June 30,  1998  and  June 30,  1999
respectively.

         The  Company's  sales  personnel  are trained to identify the Company's
customers' requirements and to actively market the Company's entire product line
to satisfy  those  needs.  For  example,  the  Company's  sales  staff and field
engineers  regularly  meet with  customers'  engineers  and designers to discuss
prospective  needs and potential  design or procurement  problems and enable the
sales   personnel  to  understand   which  products  will  meet  the  customers'
performance  criteria,  are  cost-effective and target  specifically  identified
problems.





                                       6
<PAGE>




         Sales are made  throughout  the United States and Canada from the sales
departments  maintained at the Company's two distribution  facilities located on
the East and West  Coasts of the United  States in  California  and New York and
from 14  additional  sales offices  located in  California,  Florida,  Maryland,
Massachusetts, Minnesota, North Carolina, Oregon, Texas, Washington, Arizona and
Illinois.  Sales are made  primarily  through  personal  visits by the Company's
employees  and by a staff  of  trained  telephone  sales  personnel  who  answer
inquiries  and receive  and process  orders from  customers.  In  addition,  the
Company  utilizes  the  services  of  independent  sales  representatives  whose
territories  include parts of the United  States,  Canada,  and several  foreign
countries.  These  sales  representatives  operate  under  agreements  which are
terminable   by  either   party  upon  30  days'   notice.   Independent   sales
representatives  are authorized to solicit sales of all of the Company's product
lines and are prohibited from representing competing product lines.

         In the fiscal year ended June 30, 1999, 93% of the Company's sales were
produced by Company sales personnel and 7% by independent sales representatives.
No one sales  representative  produced more than 2% of the Company's  sales. The
Company  believes that the termination of any independent  sales  representative
would not have a material adverse effect upon its business.

Backlog

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

Operations

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





                                       7
<PAGE>




     The Company's central computer system facilitates the control of purchasing
and  inventory,  accounts  payable,  shipping and  receiving,  and invoicing and
collection information of Jaco's distribution  business.  Jaco has completed the
redesign and development of an entirely new Distribution Software System. All of
the dates in this new database are eight (8) characters,  including the century.
The system has been tested and has been in place since  September  1, 1998.  The
system includes financial systems,  Electronic Data Interchange (EDI),  customer
order entry,  purchase order entry to  manufacturers,  warehousing and inventory
control.  Each of the Company's sales  departments and offices is electronically
linked to the Company's central computer systems which provides fully integrated
on-line  real-time  data with respect to the  Company's  inventory  levels.  The
Company's  inventory  management system was developed  internally by Jaco and is
considered proprietary. Inventory turns are tracked by vendor, and the Company's
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.  The Company's  inventory  management
system also uses  bar-code  technology  along with scanning  devices,  which are
supplied by Jaco to certain  customers,  and is networked to the  facilities  of
such customers.  In some cases,  customers use computers that interface directly
with the Company's computers to identify available inventory and rapidly process
orders. This system enables the Company to more effectively manage its inventory
and to respond  more  quickly to customer  requirements  for timely and reliable
delivery of components.  The Company's  inventory turnover was approximately 3.3
times for the fiscal year ended June 30, 1999.

         Approximately 71% of the Company's component  distribution inventory is
maintained at its East Coast distribution center in Hauppauge, New York. Most of
the remaining  inventory is maintained at the Company's  West Coast  facility in
Westlake Village,  California. The Company also monitors supplier stock rotation
programs,  inventory  price  protection,  rejected  material  and other  factors
related to inventory quality and quantity.





                                       8
<PAGE>




         Contract Manufacturing. The Company conducts its contract manufacturing
operations through Nexus at an approximately 32,600 square foot facility located
in Brandon, Vermont. Nexus provides turnkey and consigned contract manufacturing
of PCBs for OEMs.  "Turnkey"  is an  industry  term that  describes  a  contract
manufacturer that buys customer-specified  components from suppliers,  assembles
the  components  onto finished PCBs and performs  post-assembly  testing,  while
"consigned"  refers to a contract  manufacturer  that  provides the assembly and
testing elements only. OEMs then incorporate the PCBs into finished products. In
assembling PCBs, Nexus is capable of employing both pin-through-hole ("PTH") and
surface mount technologies  ("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.  The SMT process
allows for more  miniaturization,  cost savings and shorter  lead paths  between
components  (which results in greater  signal  speed).  In the fiscal year ended
June 30, 1999, the Company invested  approximately $1.2 million primarily in SMT
machinery  and  equipment,  as part of the Company's  ongoing  program to expand
Nexus' operations.

         Nexus  maintains  strict quality  control  procedures for its products,
including use of total quality management ("TQM") systems. Incoming raw material
and components are checked by the Nexus quality  control  personnel.  During the
production stage, quality control personnel check all work in process at several
points in the  production  process.  Finally,  after the assembly  stage,  Nexus
conducts random testing of finished products.

         Nexus' manufacturing  facility has earned ISO 9002 certification by the
Geneva-based  organization  dedicated to the development of worldwide  standards
for quality management  guidelines and quality assurance.  Nexus' receipt of ISO
9002  certification  demonstrates  that  Nexus'  manufacturing  operations  meet
established  world  standards.   Management  believes  sophisticated   customers
increasingly  are requiring their  manufacturers  to be ISO  9002-certified  for
purposes of quality assurance.

     Acquisition  of Q.P.S.  Electronics,  Inc.  On August 2, 1996,  the Company
acquired the operating assets of Q.P.S. Electronics, Inc. ("QPS"), a distributor
of  quality  active  and  passive  electronic  components  based in  Schaumburg,
Illinois. Management believes that the acquisition of QPS has contributed to the
expansion of the Company's national,  dedicated  distribution  network by firmly
establishing the Company's presence in the Midwest marketplace.





                                       9
<PAGE>




         Acquisition  of Corona  Electronics,  Inc.  On January  21,  1997,  the
Company  acquired  all of the  outstanding  shares  of  capital  stock of Corona
Electronics,  Inc. ("Corona"),  an electronics  component distributor located in
Orange County,  California.  Management  believes that the acquisition of Corona
will strengthen the Company's presence in the Southern California marketplace.

Suppliers

         Manufacturers of 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,  the  Company has  non-exclusive  distribution  agreements  with many
manufacturers,  including  California Micro Devices  Corporation,  International
Resistive   Company,   Inc.,   Johanson   Dielectric  Inc.,  Kemet   Electronics
Corporation, Mitel Inc., Rohm Company, Limited, Samsung Semiconductor, Inc., TDK
Corporation of America, Vishay Intertechnology, Inc. and Zetex, Inc. Management
continuously  seeks to identify  potential new  suppliers and obtain  additional
distributorships  for new  lines of  products.  Management  believes  that  such
expansion  and  diversification  will  increase the  Company's  sales and market
share.

         In the fiscal  year  ended  June 30,  1999,  of the  Company's  top ten
suppliers  only Kemet and Samsung  accounted  for more than 10% of net sales and
the remaining eight each accounted for between 8.7% and 1.1% of net sales. As is
common in the electronics  distribution industry,  from time to time the Company
has experienced  terminations of  relationships  with suppliers which may affect
its results of operations in post-termination periods.





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<PAGE>




         The Company generally purchases products from manufacturers pursuant to
non-exclusive distributor agreements.  Selection as an authorized distributor is
a valuable  marketing tool for the Company because  customers  receive  warranty
protection and support from  manufacturers  when they purchase products from the
Company.  As an authorized  distributor,  the Company is able to offer customers
marketing and engineering support from the product manufacturers, which enhances
the Company's ability to attract new customers and close sales.

         Most of the Company's  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 the
distributor  for any  inventory in the  distributor's  possession  for which the
manufacturer  reduces its prices.  Stock rotation privileges typically allow the
Company  to  exchange  inventory  in an  amount  up to  5% of a  prior  period's
purchases.  Upon  termination  of a distributor  agreement,  the right of return
typically requires the manufacturer to repurchase the Company's inventory at the
Company's adjusted purchase price. The Company believes that the above-described
provisions of its distributorship agreements generally have served to reduce the
Company's  exposure to loss from unsold inventory.  As such price protection and
stock rotation  privileges are limited in scope, there can be no assurances that
the Company will not experience  significant losses from unsold inventory in the
future.

Competition

         The electronics distribution industry is highly competitive,  primarily
with respect to price and product  availability.  The Company  believes that the
breadth of customer  base,  services and product  lines,  its level of technical
expertise  and the  quality  of its  services  generally  are also  particularly
important.  The Company competes with large national  distributors such as Arrow
Electronics,   Inc.  and  Avnet,   Inc.,  as  well  as  regional  and  specialty
distributors,  many of whom distribute the same or competitive products. Many of
the  Company's  competitors  have  significantly  greater name  recognition  and
greater financial and other resources than those of the Company.





                                       11
<PAGE>




         The PCB 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, where the finished product often requires a greater
amount of overall labor.

         The Company believes that contract  manufacturers  which are affiliated
or integrated with electronics  distributors  have  competitive  advantages over
comparably-sized,  stand-alone contract  manufacturers.  Distributors can reduce
the  risk of  inventory  obsolescence  through  stock  rotation  privileges  and
inventory price  protection and can also take advantage of material  acquisition
skills, just-in-time delivery expertise and broad supplier relationships.

Employees

         At August 31, 1999, the Company had a total of 393 employees,  of which
114  were  employed  by  Nexus.   Of  total   employees,   10  were  engaged  in
administration,  50 were managerial and supervisory employees, 149 were in sales
and 184 performed  warehouse,  manufacturing  and clerical  functions.  Of these
employees,   Nexus  employed  two  in  administration,   14  in  management  and
supervisory  positions,  one in sales  and 97 in  warehouse,  manufacturing  and
clerical functions. There are no collective bargaining contracts covering any of
the  Company's  employees.  The  Company  believes  its  relationship  with  its
employees is satisfactory.

Item 2.    Properties





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     All of the Company's facilities are leased except for the Brandon,  Vermont
property which is owned by Nexus. Jaco currently leases 16 facilities located in
the States of Arizona, California,  Florida, Illinois, Maryland,  Massachusetts,
Minnesota, New York, North Carolina,  Oregon, Texas and Washington, two of which
are  multipurpose  facilities used  principally as  administrative,  sales,  and
purchasing offices,  as well as warehouses,  and the remainder of which are used
exclusively by Jaco as sales offices.  Jaco's  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   $400  per  month  to
approximately $9,000 per month. Depending on the terms of each particular lease,
in  addition to base rent,  Jaco 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 one year to as long as five
years. All facilities are linked by computer terminals to Jaco's Hauppauge,  New
York  headquarters.  The  following  paragraphs  set forth  certain  information
regarding Jaco's two principal leased facilities:

         (i) Jaco leases from Bemar Realty Company, a partnership  consisting of
Messrs. Joel H. Girsky and Charles B. Girsky,  approximately  72,000 square feet
of office and warehouse space at 145 Oser Avenue, Hauppauge, New York. The lease
provides  for a current  monthly base rent of  approximately  $46,000 net of all
expenses,  including taxes, utilities,  insurance,  maintenance and repairs, and
has a term which expires on December 31, 2003. In Fiscal 1996, Jaco negotiated a
renewal of the lease and the current  rental  rate is similar to that  currently
being charged for comparable properties in the area. Approximately 26,000 square
feet of space is sublet by Jaco to an  unaffiliated  third party. In addition to
its  headquarters,  Jaco  maintains  purchasing  and sales offices and warehouse
facilities at its Hauppauge location.

         (ii) Jaco leases through April 30, 2003,  from an  unaffiliated  party,
approximately  10,000  square  feet of office and  warehouse  space in  Westlake
Village,  California for a base rent of  approximately  $10,550 per month.  Jaco
maintains  both a  purchasing  and  sales  office at this  location,  as well as
warehouse facilities.

         Nexus currently owns and occupies a 32,000 square foot facility located
in Brandon,  Vermont, that is used for manufacturing,  storage and office space.
The  building  was  acquired  by the  Company  on March 11,  1994 as part of the
acquisition of all of the outstanding shares of capital stock of Nexus.

         The Company  believes that its present  facilities  will be adequate to
meet its needs for the foreseeable future.





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Item 3.  Legal Proceedings.

         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.

Item 4.  Submission of Matters To A Vote of Security Holders.

         No response to this Item is required.




                                       14
<PAGE>




                                     PART II

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

         (a) The  Company's  common stock (the "Common  Stock") is traded on The
Nasdaq  National  Market under the symbol "JACO".  The stock prices listed below
represent the high and low closing sale prices of the Common Stock,  as reported
by The Nasdaq National Market,  for each fiscal quarter beginning with the first
fiscal quarter of 1998.

                  Fiscal Year 1998:                                    High            Low
<S>                                             <C> <C>               <C>             <C>
                  First quarter ended September 30, 1997              $8.12           $7.25
                  Second quarter ended December 31, 1997              $7.31           $6.00
                  Third quarter ended March 31, 1998                  $7.50           $6.12
                  Fourth quarter ended June 30, 1998                  $7.00           $5.62
                  Fiscal Year 1999:                                    High            Low
                  First quarter ended September 30, 1998              $6.38           $2.50
                  Second quarter ended December 31, 1998              $6.88           $3.31
                  Third quarter ended March 31, 1999                  $5.09           $2.50
                  Fourth quarter ended June 30, 1999                  $4.31           $2.50
</TABLE>

         (b) As of September  23, 1999 there were  approximately  120 holders of
record of the Company's Common Stock who management  believes held for more than
1,300 beneficial owners.

         (c) The Company has never declared or paid cash dividends on its Common
Stock.  The  Company  intends to retain  its  earnings,  if any,  for use in its
business and to support growth and does not anticipate  paying cash dividends in
the  foreseeable  future.  In addition,  the  agreement  governing the Company's
credit facility (the "Credit  Facility")  contains  provisions that prohibit the
Company from paying cash dividends on its Common Stock.




                                       15
<PAGE>



<TABLE>
<CAPTION>

Item 6.    Selected Consolidated Financial Data.

                                                             Year ended June 30,
                                                 1995             1996             1997             1998             1999
                                               --------         --------         --------         --------          -----
                                                         (in thousands, except per share data)

Statement of operations data
<S>                                            <C>              <C>              <C>              <C>              <C>
   Net sales                                   $138,683         $167,149         $155,098         $153,674         $140,711
   Cost of goods sold                           109,902          133,105          122,993          121,796          113,335
                                                -------          -------          -------        ---------          -------

     Gross profit                                28,781           34,044           32,105           31,878           27,376

   Selling, general and administrative
     expenses                                    23,552           26,247           27,640           28,707           27,642
                                               --------         --------         --------      -----------         --------

     Operating profit (loss)                      5,229            7,797            4,465            3,171             (266)

   Interest expense                               2,010            1,347              971            1,140            1,309
                                              ---------        ---------       ----------     ------------         --------

     Earnings (loss)before income taxes           3,219            6,450            3,494            2,031           (1,575)

   Income tax expense (benefit)                   1,303            2,600            1,415               847            (418)
                                              ---------        ---------        ---------     -------------        ---------

     NET EARNINGS                            $    1,916       $    3,850       $    2,079     $       1,184       $  (1,157)
                                              =========        =========        =========      ============        =========


Earnings per common share*
     Net earnings per common share                 $.78            $1.11             $.53             $.31            $(.31)
                                                    ===             ====              ===              ===              ====

Earnings per common share -
   assuming dilution
         Net earnings per common share             $.78            $1.08             $.53             $.30            $(.31)
                                                    ===             ====              ===              ===            ======

   Weighted average common and
     Common equivalent shares
     Outstanding
       Basic                                  2,440,841        3,479,707        3,899,181        3,836,700        3,698,270
                                              =========        =========        =========        =========        =========

       Diluted                                2,461,091        3,554,018        3,947,687        3,921,518        3,698,270
                                              =========        =========        =========        =========       ==========

Balance sheet data
   Working capital                            $  30,741        $  36,964        $  41,146        $  42,481         $41,998


   Total assets                                  56,323           61,143           69,996           73,419           72,931
   Long-term obligations                         23,666            8,791           15,553           17,037           18,886
   Shareholders' equity                          13,227           34,304           35,892           36,625           34,868

</TABLE>

*  All per share  information  has been  restated  to give effect to a 10% stock
   dividend  paid on March 10,  1995 and a 4-for-3  stock split  distributed  to
   shareholders  of record as of September 22, 1995.  In addition,  all earnings
   per common share amounts for all periods have been restated to conform to the
   SFAS No. 128 computation.





                                       16
<PAGE>




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

     Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:

                  Statements in this filing,  and elsewhere,  which look forward
         in time  involve  risks and  uncertainties  which may effect the actual
         results of operations.  The following important factors,  among others,
         have  affected and, in the future,  could affect the  Company's  actual
         results: dependence on a limited number of suppliers for products which
         generate a significant  portion of the Company's sales, the effect upon
         the  Company  of  increases  in  tariffs  or  duties,  changes in trade
         treaties,  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,  and  general
         economic downturns in the electronics  distribution  industry which may
         have an  adverse  economic  effect  upon  manufacturers,  end-users  of
         electronic components and electronic component distributors.

General

         Jaco is a distributor of electronic components and provider of contract
manufacturing  and value-added  services.  Products  distributed by Jaco include
semiconductors,  capacitors,  resistors,  electromechanical  devices, flat panel
displays and monitors, and power supplies used in the assembly and manufacturing
of electronic equipment.

         The  Company's   customers   are  primarily   small  and  medium  sized
manufacturers.  The  trend  for  these  customers  has  been  to  shift  certain
manufacturing  functions to third parties (outsourcing).  The Company intends to
seek to  capitalize  on this trend toward  outsourcing  by  increasing  sales of
products  enhanced  by  value-added  services.  Value-added  services  currently
provided by Jaco consist of automated  inventory  management  services,  kitting
(e.g.  supplying sets of specified quantities of products to a customer that are
prepackaged for ease of feeding the customer's  production  lines), and contract
manufacturing through Nexus.




                                       17
<PAGE>




         Results of Operations

         The following table sets forth certain items in the Company's statement
of operations as a percentage of net sales for the periods shown:
<TABLE>
<CAPTION>

                                                                        1999      1998      1997
                                                                        ----      ----      ----

<S>                                                                     <C>       <C>      <C>
Net sales                                                               100.0%    100.0%   100.0%
Cost of goods sold                                                       80.5      79.3     79.3
                                                                        -----     -----    -----
Gross profit                                                             19.5      20.7     20.7
Selling, general and administrative expenses                             19.7      18.7     17.8
                                                                        -----     -----    -----
Operating profit (loss)                                                 (0.2)      2.0      2.9
Interest expense                                                         0.9       0.7      0.6
                                                                        -----      -----   -----
Earnings (loss) before income taxes                                     (1.1)      1.3      2.3
Income tax expense (benefit)                                            (0.3)      0.5      1.0
                                                                        -----     -----    -----
NET EARNINGS (LOSS)                                                     (0.8%)     0.8%     1.3%
                                                                        =====     =====    =====
</TABLE>

COMPARISON OF FISCAL YEAR ENDED JUNE 30, 1999  ("FISCAL  1999") WITH FISCAL YEAR
ENDED JUNE 30, 1998 ("FISCAL 1998")


         Net sales for the fiscal year ended June 30, 1999 were $140,711,000,  a
decrease of  $12,963,000,  or 8.4%,  as compared to  $153,674,000  reported  for
Fiscal 1998. The Company's net sales were impacted throughout the fiscal year by
continued  industry  wide  pricing  pressures,  compounded  by weak  demand  for
components  which has  impacted the  electronics  industry for over three years.
Toward the end of Fiscal 1999,  the Company  experienced an increase in activity
in many  product  sectors.  As the new fiscal  year  begins,  demand for product
continues to be strong.  The Company  believes it is positioned well for growth,
having continued expanding its Flat Panel Display Group, strengthening its Field
Application  Engineering  (FAE)  Program,  and by  adding  sales  and  marketing
personnel.





                                       18
<PAGE>




         Gross profit  margins as a percentage of net sales were 19.5% in Fiscal
1999 compared to 20.7% in Fiscal 1998. The decrease was attributable to industry
wide  pressures  and a shift in product  mix  toward a greater  amount of active
components, including flat panel devices, which historically, have a lower gross
profit margin compared to passive components.

         Selling,  General  and  Administrative  expenses  ("SG&A")  were  $27.6
million in Fiscal 1999, a decrease of $1.1 million,  or 3.7%,  compared to $28.7
million in Fiscal 1998. Due to the weakness in the  electronics  industry during
Fiscal  1999,   the  Company  had   implemented   cost   containment   measures.
Additionally, SG&A decreased as a result of the decrease in gross profit dollars
compared  to Fiscal  1998.  Variable  costs  such as  commissions  paid to sales
personnel  decreased.  The  decreases  were  partially  offset  by a bad debt of
approximately  $630,000  during the fourth quarter of fiscal 1999 and additional
staffing  of sales and  marketing  personnel  toward  the end of Fiscal  1999 in
anticipation of an improvement in demand for electronic components.

         Interest  expense  increased  to  approximately  $1.3 million in Fiscal
1999, as compared to $1.1 million in Fiscal 1998. The 14.8% increase in interest
expense was  primarily  attributable  to  increased  net  borrowings  due to the
Company's  purchases  of its common  stock under its stock  repurchase  program,
fixed  asset  additions  primarily  for  contract   manufacturing,   operational
expenditures  made  to  upgrade  the  Company's  core  financial  and  reporting
software, and an increase in borrowing rates.

         Net loss for Fiscal 1999 was $1,157,000,  or $.31 per share diluted, as
compared  to net  earnings  for  Fiscal  1998 of  $1,184,000,  or $.30 per share
diluted.  During  Fiscal  1999,  the  decrease  in net  earnings  was  primarily
attributable  to the decrease in net sales and decrease in gross profit  dollars
attributable  to the  overall  industry  weakness  as it related  to  electronic
components.  The Company is cautiously  optimistic that it is better  positioned
for increased performance during the future period based on the strengthening of
the electronics industry and expenditures made during Fiscal 1999.





                                       19
<PAGE>




COMPARISON  OF FISCAL  YEAR ENDED JUNE 30,  1998 WITH FISCAL YEAR ENDED JUNE 30,
1997 ("FISCAL 1997")

         Net sales for the year ended June 30, 1998 decreased approximately 1.0%
to $153,674,000  as compared to  $155,098,000  reported for the same Fiscal 1997
period.  Fiscal 1998 results reflect the continuing  industry-wide  pressures on
pricing,  compounded  by the softening  demand for  electronic  components.  The
decrease in component  sales through the Company's  distribution  operations was
partially  offset by a $6.4  million,  or 64%,  increase in sales from  contract
manufacturing.  The  Company's  long term plan includes  optimizing  value-added
services, such as Flat Panel Displays and contract manufacturing.

         Gross profit margins,  as a percentage of net sales,  remained constant
at 20.7% in Fiscal 1998,  compared to Fiscal 1997. While unit pricing  continued
to decline  during  Fiscal 1998, as a result of price  protection  and inventory
rotation  extended  to the  Company by its  suppliers,  the  Company was able to
maintain gross profit margins.

         Selling,  General and Administrative (SG&A) expenses were $28.7 million
in Fiscal  1998,  an increase  of $1.1  million,  or 3.9% from $27.6  million in
Fiscal 1997. The Company's addition of sales and sales management personnel, the
expansion of the Field Application  Engineering (FAE) Program,  and the addition
of the Flat  Panel  Display  Group  have  contributed  to the  increase  in SG&A
expenses.  Due to the  continuing  weakness  in the  electronics  industry,  the
Company closely reviewed SG&A and implemented  cost containment  measures in the
fiscal year ended June 30, 1998,  which, it believed,  would not have a negative
impact on sales.





                                       20
<PAGE>




         Interest  expense  increased  to  approximately  $1.1 million in Fiscal
1998, as compared to approximately $1.0 million in Fiscal 1997. The 17% increase
in interest expense was primarily the result of additional  borrowings under the
credit facility for the acquisition of new inventory as further  franchises were
added in Fiscal  1998.  The Company  believed  that the addition of such product
lines  would  have a  favorable  impact  on sales  during  future  periods.  The
Company's acquisition of approximately  $700,000 of new equipment to support the
growth in contract  manufacturing  also  contributed to the increase in interest
expense.

         Net earnings for Fiscal 1998 were $1.2 million,  or approximately  $.30
per share fully diluted,  as compared to $2.1 million, or approximately $.53 per
share fully  diluted for Fiscal 1997.  During  Fiscal 1998,  the decrease in net
earnings was primarily attributable to the increase in SG&A.

Liquidity and Capital Resources

         The  Company's  agreement  with its banks,  as  amended,  provides  the
Company with a $30,000,000 term loan and revolving line of credit facility based
principally on eligible  accounts  receivable and  inventories of the Company as
defined in the agreement which expires  September 13, 2000. The interest rate of
the  credit  facility  is based on the  average  30 day LIBOR  rate plus 3/4% to
1-1/4% depending on the Company's performance for the immediately preceding four
fiscal  quarters  measured  by a certain  financial  ratio,  and may be adjusted
quarterly.  The outstanding balance on the revolving line of credit facility was
$16,963,575  at June 30,  1999.  The term  loan,  with a  remaining  balance  of
$375,000  at June 30,  1999,  requires  monthly  principal  payments of $17,857,
together  with  interest  through  September  13, 2000,  with a final payment of
$107,146  due  on  September  13,  2000.  Borrowings  under  this  facility  are
collateralized by substantially all of the assets of the Company.  The agreement
contains  provisions for maintenance of certain financial  ratios,  all of which
the Company is in compliance with at June 30, 1999, and prohibits the payment of
cash dividends.





                                       21
<PAGE>




         During  Fiscal  1999,  the  Company's  net cash  provided by  operating
activities was approximately  $1.4 million,  as compared to net cash provided by
operating  activities of approximately  $1.6 million for Fiscal 1998, a decrease
of $.2  million.  The  principal  portion  of the cash  flow  resulted  from the
decrease in  inventory.  This was offset by an increase in accounts  receivable.
Net borrowing under the Company's line of credit was approximately $1.5 million.
The  additional  borrowing  is  partially  attributable  to the  purchase of $.8
million of treasury stock along with capital expenditures for equipment required
to support the  contract  manufacturing  business,  and  software  developed  to
operate the Company's distribution business. The Company's cash expenditures may
vary significantly from current levels, based on a number of factors, including,
but not limited to, future acquisitions, if any.

         For Fiscal 1999 and Fiscal 1998,  inventory turnover was 3.3x and 3.5x,
respectively.  The average days outstanding of the Company's accounts receivable
at June 30, 1999 was 59 days, as compared to 52 days at June 30, 1998.

         The Board of Directors of the Company had authorized the purchase of up
to 250,000 shares of its common stock under a stock repurchase  program.  During
Fiscal  1999 the  Board  of  Directors  authorized  the  repurchase  of up to an
additional  400,000  shares of the Company's  common stock.  The purchase may be
made by the  Company  from  time to time on the  open  market  at the  Company's
discretion  and will be dependent on market  conditions.  Through  September 24,
1999, the Company has purchased 412,200 shares of its common stock for aggregate
consideration of $2,204,515 under this program.

         The Company believes that cash flow from operations and funds available
under its credit facility will be sufficient to fund the Company's capital needs
for at least the next twelve months.

Year 2000 Compliance





                                       22
<PAGE>




         The year 2000 ("Y2K") issue is the result of computer  programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems  will be unable to  interpret  dates  beyond the year 1999,  which could
cause a system  failure or other  computer  errors,  leading to  disruptions  in
operations.  In April 1996, the Company developed a three-phase  program for Y2K
information systems compliance. Phase I was to identify those systems with which
the  Company  has  exposure  to Y2K  issues.  Phase II was the  development  and
implementation  of action  plans to be Y2K  compliant in all areas by late 1998.
Phase  III,  to be fully  completed  by mid  1999,  is the final  major  area of
exposure to ensure  compliance.  The Company  has  identified  three major areas
determined  to be critical for  successful  Y2K  compliance:  (1)  financial and
informational system applications,  (2) manufacturing applications and (3) third
party relationships.

         As of September 1, 1998, Jaco completed the redesign and development of
an  entirely  new  distribution  software  system.  All of the dates in this new
database are 8 characters, including the century. The system has been tested and
has been in operation  since  September 1, 1998.  The systems  include  customer
order entry,  purchase order entry to the Company's  manufacturers,  warehousing
and inventory control.

         The financial  systems,  Accounts  Payable and General Ledger have been
Y2K compliant since April 1997. The Accounts  Receivable system is Y2K complaint
as of September 1, 1998.

         Jaco's distribution facilities:  warehouse, shipping and other physical
handling  have  been  tested  and   are  believed  to be Y2K compliant.

         The Company, as it relates to the contract manufacturing  operations in
accordance  with Phase I of the  program,  is in the  process of  conducting  an
internal  review  of all  systems  and  contacting  all  software  suppliers  to
determine  major  areas  of  exposure  to  Y2K  issues.  In  the  financial  and
information  system area a number of  applications  have been  identified as Y2K
compliant due to their recent  implementation.  The contract  manufacturing core
financial  and  reporting  systems are not Y2K compliant but are scheduled to be
complete and fully tested by late 1999. As a contingency plan, these systems can
be performed  manually.  The costs  relating to Y2K  compliance  in the contract
manufacturing area are not expected to be material to the Company.  In the third
party area, the Company has contacted  most of its major  suppliers and vendors.
These parties state that they intend to be Y2K compliant by the year 2000.

         The Company's  management is in the process of developing a "worst-case
scenario" with respect to Y2K  non-compliance  and to develop  contingency plans
designed to minimize the effects of such scenario.  Although management believes
that it is very unlikely that the  worst-case  scenario will occur,  contingency
plans will be  developed  and will  address  both IT (Information Technology)
system and non-IT system (items containing embedded chips, such as elevators
electronic door locks, telephone, etc.)failure.

         In the event of Y2K - related IT system  failure,  the Company would be
unable to ship orders because its power system would not be functioning. In such
event, the Company plans to use its own generators as a back-up power source.

     In terms of non-IT and  third-party  Y2K non  compliance,  the worst - case
scenario for the Company would involve the loss of supply of component  parts or
other materials from one or more of its major suppliers. The Company believes it
has made contingency plans with its vendors to have product available.

     There is still  uncertainty  about the broader scope of the Year 2000 issue
as it may  affect  the  Company  and  third  parties  that are  critical  to our
operations.  For example,  lack of readiness by electrical and water  utilities,
financial  institutions,  governmental  agencies or other  providers  of general
infrastructure  could pose significant  impediments to the Company's  ability to
carry on our normal operations. The Company intends to request assurances of Y2K
readiness from its telephone and utilities  suppliers.  However,  management has
been informed that some suppliers have either  declined to provide the requested
assurances, or have limited the scope of assurances to which they are willing to
permit.  If suppliers of services that are critical to the Company's  operations
were to  experience  business  disruptions  as a  result  of  their  lack of Y2K
readiness  their problems could have a material  adverse affect on the financial
position and results of  operations  of the Company.  The impact of a failure of
readiness by critical  suppliers  cannot be estimated with  confidence,  and the
effectiveness of contingency plans to mitigate the effect of any such failure is
largely  untested.  Management cannot provide an assurance that there will be no
material adverse effects to the financial  condition or results of operations of
the Company as a result of Y2K issues.

         The Company has spent to date approximately $1.8 million to replace the
core financial and reporting software systems for its distribution business. The
Company has utilized outside consultants to undertake a portion of the work.




                                       23
<PAGE>





Inflation

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

Item 7A.  Quantitative and Qualitative Disclosure about Market Risk.

         The Company is exposed to interest rate change market risk with respect
to its credit facility with a financial institution which is priced based on the
average  30 day  LIBOR  rate  plus  3/4% to 1 1/4%  depending  on the  Company's
performance  for the immediately  preceding four fiscal  quarters  measured by a
certain  financial  ratio,  and may be adjusted  quarterly.  At August 31, 1999,
$17,083,821  was  outstanding  under the credit  facility.  Changes in the LIBOR
interest  rate  during the fiscal year ending June 30, 2000 will have a positive
or negative effect on the Company's interest expense. Each 1% fluctuation in the
LIBOR interest rate will increase or decrease  interest  expense for the Company
by approximately $171,000.

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

Item 8.   Financial Statements and Supplementary Data.
         For an index to the financial  statements and  supplementary  data, see
Item 14(a).

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

         No response to this Item is required.





                                       24
<PAGE>




                                    PART III

Item 10.   Directors and Executive Officers of the Company.

         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, 1999.

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, 1999.

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

         Incorporated herein by reference is the information to appear under the
caption  "Principal  Shareholders;  Shares 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,
1999.

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, 1999.




                                       25
<PAGE>




                                     PART IV
<TABLE>
<CAPTION>

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
                                                                                                           Page
<S>      <C>                                                   <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
               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-26

(a)      (2)   Financial Statement Schedule included in Part IV of this Report
               Report of Independent Certified Public Accountants on Schedule II                           F-27
               Schedule II - Valuation and Qualifying Accounts                                             F-28
</TABLE>

Other  schedules are omitted  because of the absence of  conditions  under which
they are required or because the required  information is given in the financial
statements or notes thereto.




                                       26
<PAGE>




Exhibit
   No.

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.

3.1.1         Certificate  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.

10.3          Employment  Agreement  between Joel Girsky and the Company,  dated
              December 29, 1989,  incorporated  by reference to the
              Company's  Annual Report on Form 10-K for the year ended June 30,
              1990 ("the  Company's  1990 10-K"),  Exhibit 10.3 pages
              47-52.

10.4          1980 Stock Incentive  Plan,  incorporated by reference to the
              Company's  Registration  Statement on Form S-1,  Commission
              File No. 2-91547, filed June 9, 1984, Exhibit 10.4, pages 168-172.

10.5          Restated  1981  Incentive  Stock  Option  Plan,   incorporated  by
              reference to the Company's 1987 10-K, Exhibit 10.1.





                                       27
<PAGE>







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.

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.

10.9          Employment  Agreement  between  Joel Girsky and the  Company,
              dated  October 5, 1994,  incorporated  by reference to the
              Company's Annual Report on Form 10-K for the year ended June 30,
              1994, Exhibit 10.9.

10.10         Authorized 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.

10.11         Electronics 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.

10.12         Restricted  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).

10.13         Employment   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

10.14         Employment  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

10.15         Employment  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

21.1          Subsidiaries of the Company.

23.1          Consent of Grant Thornton LLP.





                                       28
<PAGE>




27.           Financial Data Schedule.

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).

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 yea
              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.





                                       29
<PAGE>




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

(b)           Reports  on Form 8-K  filed  during  last  quarter  of the  period
              covered by this Report:

                  None.



                                       30
<PAGE>







                              INDEX TO CONSOLIDATED
                        FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>



                                                                                                                Page




<S>                                                                                                                  <C>
Report of Independent Certified Public Accountants                                                                 F-2

Financial Statements

      Consolidated Balance Sheets                                                                                  F-3

      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-26

      Report of Independent Certified Public Accountants
         on Schedule                                                                                               F-27

      Schedule II - Valuation and Qualifying Accounts                                                              F-28


</TABLE>





                                      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, 1998 and 1999
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,
1999.  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  generally   accepted  auditing
standards.  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, 1998 and 1999, and the consolidated results
of their  operations  and cash  flows for each of the three  years in the period
ended June 30, 1999 in conformity with generally accepted accounting principles.




GRANT THORNTON LLP

Melville, New York
August 20, 1999





                                      F-2
<PAGE>




                                   Jaco Electronics, Inc. and Subsidiaries

                                         CONSOLIDATED BALANCE SHEETS

                                                    June 30,
<TABLE>
<CAPTION>



                                     ASSETS                                                1998                  1999
                                                                                       -------------         -------------

CURRENT ASSETS
<S>                                                                                    <C>               <C>
    Cash                                                                               $     562,556              $922,247

    Marketable securities                                                                    764,810               881,622
    Accounts receivable, less allowance for doubtful
       accounts of $1,268,000 in 1998 and $440,000
       in 1999                                                                            21,887,618            23,408,900
    Inventories                                                                           35,737,288            33,224,719
    Prepaid expenses and other                                                             1,203,198               660,782
    Prepaid and refundable income taxes                                                      610,132               990,855
    Deferred income taxes                                                                    772,500               336,000
                                                                                        ------------         -------------

         Total current assets                                                             61,538,102            60,425,125

PROPERTY, PLANT AND EQUIPMENT - AT COST, NET                                               6,102,445             6,983,761

DEFERRED INCOME TAXES                                                                        333,000               390,000

EXCESS OF COST  OVER NET  ASSETS  ACQUIRED,  less  accumulated  amortization  of
    $719,000 in 1998
    and $895,000 in 1999                                                                   3,776,912             3,588,449

OTHER ASSETS                                                                               1,668,830             1,543,328
                                                                                         -----------          ------------

                                                                                         $73,419,289          $ 72,930,663
                                                                                          ==========           ===========

</TABLE>




        The accompanying notes are an integral part of these statements.




                                      F-3
<PAGE>




                                    Jaco Electronics, Inc. and Subsidiaries

                                    CONSOLIDATED BALANCE SHEETS (continued)

                                                    June 30,

<TABLE>
<CAPTION>


                                 LIABILITIES AND
                              SHAREHOLDERS' EQUITY                                         1998                  1999
                                                                                      --------------         -------------
 CURRENT LIABILITIES
<S>                                                                                      <C>                   <C>
    Accounts payable                                                                     $16,633,389           $15,923,157
    Current maturities of long-term debt and
       capitalized lease obligations                                                         663,198               791,814
    Accrued expenses                                                                       1,760,862             1,712,162
                                                                                         -----------          ------------

         Total current liabilities                                                        19,057,449            18,427,133


 LONG-TERM DEBT AND CAPITALIZED LEASE
    OBLIGATIONS                                                                           17,036,593            18,885,664


 DEFERRED COMPENSATION                                                                       700,000               750,000


 COMMITMENTS AND CONTINGENCIES


 SHAREHOLDERS' EQUITY
    Preferred stock - authorized, 100,000 shares, $10
       par value;  none issued
    Common stock -  authorized,  10,000,000  shares,  $.10 par value;  4,065,721
       shares issued and 3,866,221 and
       3,653,521 shares outstanding, respectively                                            406,572               406,572
    Additional paid-in capital, net                                                       22,396,295            22,531,295
    Retained earnings                                                                      15,077,957            13,920,807
    Accumulated other comprehensive income                                                    164,385               213,707

    Treasury stock - 199,500 and 412,200 shares, respectively,
      at cost                                                                             (1,419,962)           (2,204,515)
                                                                                         -----------           ------------

                                                                                          36,625,247            34,867,866
                                                                                         ------------          -------------

                                                                                         $73,419,289            $72,930,663
                                                                                         ===========             ===========

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




                                      F-4
<PAGE>




                                    Jaco Electronics, Inc. and Subsidiaries

                                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                             Year ended June 30,




<TABLE>
<CAPTION>

                                                                      1997                 1998                  1999
                                                                  -------------        -------------        --------------

<S>                                                                <C>                  <C>                   <C>
Net sales                                                          $155,097,745         $153,674,226          $140,710,825
Cost of goods sold                                                  122,993,172          121,796,083           113,334,627
                                                                    -----------          -----------          ------------

       Gross profit                                                  32,104,573           31,878,143            27,376,198

 Selling, general and administrative expenses                        27,639,567           28,706,520            27,642,724
                                                                   ------------         ------------          ------------

       Operating profit (loss)                                        4,465,006            3,171,623              (266,526)

Interest expense                                                        971,253            1,140,362             1,308,624
                                                                 --------------        -------------         -------------

       Earnings (Loss) before income taxes                            3,493,753            2,031,261            (1,575,150)

Income tax provision (benefit)                                        1,415,000              847,000              (418,000)
                                                                  -------------       --------------       ----------------

       NET EARNINGS (LOSS)                                       $    2,078,753       $    1,184,261        $   (1,157,150)
                                                                  =============        =============         ==============


Net earnings per common share
    Basic                                                                $0.53                $0.31                $(0.31)
                                                                          ====                 ====                  =====
    Diluted                                                              $0.53                $0.30                $(0.31)
                                                                          ====                 ====                 ======


Weighted-average common shares and common
    equivalent shares outstanding
      Basic                                                           3,899,181            3,836,700             3,698,270
                                                                      =========            =========             =========
      Diluted                                                         3,947,687            3,921,518             3,698,270
                                                                      =========            =========            ==========

</TABLE>


        The accompanying notes are an integral part of these statements.




                                      F-5
<PAGE>




                                 Jaco Electronics, Inc. and Subsidiaries

                                     CONSOLIDATED STATEMENT OF CHANGES
                                         IN SHAREHOLDERS' EQUITY

                                   Years ended June 30, 1997, 1998 and 1999
<TABLE>
<CAPTION>

                                                                                                              Accumulated
                                                                               Additional                         other
                                                                                 paid-in       Retained       comprehensive
                                                 Shares         Amount           capital       Earnings          income
                                                --------       --------       ---------------- ---------       ------------

<S>             <C>                            <C>             <C>           <C>               <C>            <C>
Balance at July 1, 1996                        3,955,721       $395,572      $22,024,795       $11,814,943     $  68,245


Net earnings                                                                                     2,078,753
Unrealized gain on marketable
     securities - net                                                                                             51,955

Comprehensive income

Issuance of common stock in connection with
   acquisition                                    20,000          2,000          155,500
Purchase of treasury stock                      ________        _______        _________          ______         ________

Balance at June 30, 1997                       3,975,721        397,572       22,180,295         13,893,696       120,200

Net earnings                                                                                      1,184,261
Unrealized gain on marketable
    securities - net                                                                                               44,185


Comprehensive income

Issuance of restricted  stock                     90,000          9,000          621,000
Deferred compensation expense
Purchase of treasury stock                      ________        _______        _________         _______        _________


Balance at June 30, 1998                       4,065,721        406,572       22,801,295          15,077,957      164,385


Net loss                                                                                          (1,157,150)
Unrealized gain on marketable
    securities - net                                                                                               49,322


Comprehensive loss

Deferred compensation expense
Purchase of treasury stock                     _________        _______        _________         _______        _________


Balance at June 30, 1999                       4,065,721       $406,572      $22,801,295       $13,920,807       $213,707
                                              ===========       ========      ===========       ===========      ===========

</TABLE>




                                      F-6
<PAGE>



                                  Jaco Electronics, Inc. and Subsidiaries

                                  CONSOLIDATED STATEMENT OF CHANGES
                                        IN SHAREHOLDERS' EQUITY

                               Years ended June 30, 1997, 1998 and 1999




<TABLE>
<CAPTION>

                                                              Deferred           Total
                                                Treasury       compen-       shareholders'
                                                 stock         sation           equity
                                                --------       --------       --------------

<S>             <C>                                                              <C>
Balance at July 1, 1996                                                        $ 34,303,555
                                                                               ------------

Net earnings                                                                     2,078,753
Unrealized gain on marketable
     securities - net                                                               51,955
                                                                                ------------

Comprehensive income                                                             2,130,708

Issuance of common stock in connection with
   acquisition                                                                     157,500
Purchase of treasury stock                    $(700,000)                          (700,000)
                                             ------------                      ------------

Balance at June 30, 1997                      (700,000)                         35,891,763
                                                                              ------------

Net earnings                                                                     1,184,261
Unrealized gain on marketable
    securities - net                                                                44,185
                                                                               ------------

Comprehensive income                                                              1,228,446

Issuance of restricted  stock                             $ (540,000)                90,000
Deferred compensation expense                                135,000                135,000
Purchase of treasury stock                   (719,962)                             (719,962)

                                           -----------      ------------          -----------
Balance at June 30, 1998                   (1,419,962)       (405,000)            36,625,247
                                                                                 ------------

Net loss                                                                          (1,157,150)
Unrealized gain on marketable
    securities - net                                                                  49,322
                                                                                 ------------

Comprehensive loss                                                                (1,107,828)

Deferred compensation expense                                 135,000                135,000
Purchase of treasury stock                    (784,553)                             (784,553)
                                             ------------   ------------           -----------

Balance at June 30, 1999                      (2,204,515)    (270,000)            $ 34,867,866
                                             ============    ==========            ===========


</TABLE>

The accompanying notes are an integral part of this statement.




                                      F-7
<PAGE>




                                Jaco Electronics, Inc. and Subsidiaries

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                          Year ended June 30,
<TABLE>
<CAPTION>

                                                                                     1997                 1998               1999
                                                                               -------------         ------------        -----------

Cash flows from operating activities
<S>                                                                               <C>                  <C>                 <C>
   Net earnings (loss)                                                          $   2,078,753      $   1,184,261      $  (1,157,150)
   Adjustments to reconcile net earnings to net cash
     provided by (used in) operating activities
       Depreciation and amortization                                                1,050,666          1,356,457          1,587,766
       Deferred compensation                                                           50,000            185,000            185,000
       Deferred income tax (benefit) expense                                         (119,000)            33,000            351,000
       Loss (gain)on sale of equipment                                                  9,941              2,717               (918)
       Provision for doubtful accounts                                                255,931            475,816            981,622
       Changes in operating assets and liabilities, net of
         effects of acquisitions
           Decrease (increase) in accounts receivable                               1,603,022           (355,660)        (2,502,904)
           (Increase) decrease in inventories                                      (1,767,196)        (2,426,087)         2,512,569
           (Increase) decrease in prepaid expenses and other                         (615,364)           156,419            542,416
           Increase in prepaid and refundable income taxes                           (902,545)           (81,889)          (380,723)
           (Decrease) increase in accounts payable                                   (594,557)           800,191           (710,232)
           Increase (decrease) in accrued expenses                                    235,950            291,933            (48,700)
                                                                                -------------      -------------      -------------

       Net cash provided by operating activities                                    1,285,601          1,622,158          1,359,746
                                                                                -------------      -------------      -------------
Cash flows from investing activities
   Increase in marketable securities                                                  (59,943)           (68,049)           (39,139)
   Capital expenditures                                                              (943,352)        (1,068,775)        (1,603,361)
   Proceeds from the sale of equipment                                                 42,867            120,515              9,689
   Business acquisitions, net of cash acquired                                     (4,742,249)
   Increase in other assets                                                          (176,728)          (258,905)            (7,834)
                                                                                -------------      -------------      -------------
       Net cash used in investing activities                                       (5,879,405)        (1,275,214)        (1,640,645)
                                                                                -------------      -------------      -------------
Cash flows from financing activities
   Borrowings from line of credit                                                 161,931,215        152,258,926         53,507,313
   Borrowings under term loan for equipment                                                                                 575,000
   Payments of line of credit                                                    (155,834,207)      (151,076,073)       (51,851,995)
   Principal payments under equipment financing                                      (289,727)          (586,345)          (590,889)
   Payments under term loan                                                          (214,286)          (214,286)          (214,286)
   Purchase of treasury stock                                                        (700,000)          (719,962)          (784,553)
   Proceeds from issuance of restricted stock                                                             90,000
                                                                                -------------      -------------      -------------
       Net cash provided by (used in)  financing activities                         4,892,995           (247,740)           640,590
                                                                                -------------      -------------      -------------
       NET INCREASE IN CASH                                                           299,191             99,204            359,691
Cash at beginning of year                                                             164,161            463,352            562,556
                                                                                -------------      -------------      -------------
Cash at end of year                                                             $     463,352      $     562,556      $     922,247
                                                                                =============      =============      =============

Supplemental cash flow disclosures:
   Interest paid                                                                $     815,000      $   1,301,000      $   1,310,000
   Income taxes paid                                                                2,502,000            929,000             22,000
Supplemental schedule of noncash financing and investing activities:
     Equipment under capital leases                                             $     531,561      $   1,165,781      $     552,544

</TABLE>

The accompanying notes are an integral part of these statements.




                                      F-8
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          June 30, 1997, 1998 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Jaco  Electronics,  Inc.  and  Subsidiaries  (the  "Company")  is primarily
     engaged  in the  distribution  of  semiconductors,  capacitors,  resistors,
     electromechanical  devices, flat panel displays, power supplies,  computers
     and  computer  subsystems,  produced  by others,  for the  manufacture  and
     assembly of electronic products. In addition, the Company provides contract
     manufacturing services.

     Electronics  parts  distribution  sales include exports made principally to
     customers  located in Western  Europe.  For the years ended June 30,  1997,
     1998  and  1999,   export  sales  amounted  to  approximately   $4,102,000,
     $4,537,000 and $4,810,000, 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.  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
         unrealized   gains  of  $257,782   and   $335,455  in  1998  and  1999,
         respectively.  Changes  in  the  fair  value  of  "available  for  sale
         securities" are included in accumulated other comprehensive income, net
         of the related deferred tax effects.

     4.  Inventories

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
         determined using the first-in, first-out and average cost methods.





                                      F-9
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     5.  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.

     6.  Excess of Cost Over Net Assets Acquired

         The excess of cost over net assets  acquired is amortized  over periods
         of ten to forty  years  using the  straight-line  method.  The  Company
         periodically  reviews and evaluates  whether there has been a permanent
         impairment in the value of its intangibles.  Factors  considered in the
         valuation  include current  operating  results,  trends and anticipated
         undiscounted future cash flows.

     7.  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  has  been   established   to  reduce   deferred  tax  assets
         attributable to a subsidiary of the Company,  as it is more likely than
         not that all, or some portion,  of such deferred tax assets will not be
         realized.  The  effect  on  deferred  taxes of a change in tax rates is
         recognized in income in the period that includes the enactment date.

     8.  Earnings (Loss) Per Common Share

          In fiscal 1998,  the Company  adopted the  provisions  of Statement of
          Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per
          Share."  SFAS No. 128 replaces  the  calculation  of primary and fully
          diluted  earnings per share with basic and diluted earnings per share.
          Unlike primary  earnings per share,  basic earnings per share excludes
          any dilutive effects






                                      F-10
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         of options,  warrants and convertible securities.  Diluted earnings per
         share is very similar to the previously reported fully diluted earnings
         per share.  All  earnings  per share  amounts for all periods have been
         presented, and, where appropriate, restated to conform to the SFAS No.
         128 computation.

     9.  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 has limited its
          accounts receivable credit risk. However, during the fourth quarter of
          fiscal 1999 the Company recorded  approximately $630,000 of additional
          bad debt expense.

         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,  expiring on September 13, 2000,  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,
         1999,  purchases  from three  suppliers  accounted for 19%, 14% 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.





                                      F-11
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    10.  Use of Estimates

         In preparing financial statements in conformity with generally accepted
         accounting  principles,  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.  Actual results could differ from
         those estimates.

11.      Comprehensive Income

         During 1999,  the Company  adopted  Statement  of Financial  Accounting
         Standards No. 130 ("SFAS 130"),  Reporting  Comprehensive  Income. SFAS
         130   establishes   new  rules  for  the   reporting   and  display  of
         comprehensive income and its components;  however, the adoption of SFAS
         130 had no impact on the Company's  earnings or  stockholder's  equity.
         SFAS 130 requires unrealized holding gains or losses on debt and equity
         securities  available  for  sale,  which  prior to  adoption  were only
         reported   separately  in  stockholder's  equity,  to  be  included  in
         comprehensive income and accumulated other comprehensive  income. Prior
         year  financial  statements  have been  reclassified  to conform to the
         requirements of SFAS 130.

12.      Segment Reporting

         The Company  adopted  Statement of Financial  Accounting  Standards No.
         131,   "Disclosures   About  Segments  of  an  Enterprise  and  Related
         Information."  SFAS No. 131 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.

13.      Advertising

         Advertising  costs are  expensed  as  incurred  and  totaled  $177,575,
         $257,281 and $250,198 for the years ended June 30, 1997, 1998 and 1999,
         respectively.




                                      F-12
<PAGE>




                                  Jaco Electronics, Inc. and Subsidiaries

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                       June 30, 1997, 1998 and 1999
<TABLE>
<CAPTION>

NOTE B - INVENTORY

     Inventories consist of the following:
                                                                                                June 30,
                                                                                    1998                     1999

<S>                                                                                <C>                      <C>
      Finished goods and goods held for resale                                     $30,490,288              $29,048,654
      Work-in-process                                                                  555,000                  686,180
      Raw materials                                                                  4,692,000                3,489,885
                                                                                   -----------             ------------

                                                                                   $35,737,288              $33,224,719
                                                                                    ==========               ==========
</TABLE>

<TABLE>
<CAPTION>

NOTE C - PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of:

                                                                         Useful
                                                                          Life                 June 30,
                                                                                        ---------------------
                                                                        in years            1998                1999
                                                                      ----------        ------------        ------------

<S>                                                                     <C>   <C>         <C>                 <C>
       Land, building and improvements                                  10 to 30          $1,468,708          $1,468,708
       Machinery and equipment                                           3 to 7            6,028,756           7,488,477
       Internally developed software costs                                   7             1,123,897           1,769,857
       Transportation equipment                                          3 to 5               32,063              64,109
       Leasehold improvements                                            5 to 10             599,757             601,218
                                                                                          ----------        ------------

                                                                                           9,253,181          11,392,369

       Less accumulated depreciation and amortization
           (including $326,134 in 1998 and $635,195
           in 1999 of capitalized lease amortization)                                      3,150,736           4,408,608
                                                                                           ---------          ----------

                                                                                          $6,102,445          $6,983,761
                                                                                           =========           =========
</TABLE>

     Included in machinery and equipment are assets  recorded under  capitalized
     leases  at  June  30,  1998  and  1999  for  $1,789,913   and   $2,342,457,
     respectively.





                                      F-13
<PAGE>




                                  Jaco Electronics, Inc. and Subsidiaries

                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                      June 30, 1997, 1998 and 1999
<TABLE>
<CAPTION>

 NOTE D - INCOME TAXES

     The components of the Company's provision for income taxes is as follows:

                                                                                     June 30,
                                                                           ---------------------------------
                                                                 1997                   1998                 1999
                                                            -------------            -----------         -------------
      Federal
<S>                                                            <C>                      <C>                  <C>
         Current                                               $1,262,000               $663,000             $(887,000)
         Deferred                                                (119,000)                33,000               351,000
                                                               ----------               --------            ----------

                                                                1,143,000                696,000              (536,000)

      State                                                       272,000                151,000               118,000
                                                               ----------                -------              --------

                                                               $1,415,000               $847,000             $(418,000)
                                                                =========                =======              =========

</TABLE>
<TABLE>
<CAPTION>

     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,
                                                                         --------------------------------------------
                                                                           1997               1998                1999
                                                                         --------           ---------           --------

<S>                                                                       <C>                 <C>               <C>
      Statutory Federal tax rate                                          34.0%               34.0%             (34.0)%
      State income taxes, net of Federal tax benefit                       5.1                 5.0                5.0
      Sales expense for which no tax
         benefit arises                                                    1.8                 2.4                2.4
      Other                                                                (.4)                 .3                 .1
                                                                        ------              ------             ------

      Effective tax rate                                                  40.5%               41.7%             (26.5) %
                                                                          ====                ====             ========


</TABLE>



                                      F-14
<PAGE>




                                   Jaco Electronics, Inc. and Subsidiaries

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                        June 30, 1997, 1998 and 1999
<TABLE>
<CAPTION>

 NOTE D - 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:

                                                                                        1998                   1999
                                                                                    ------------          -------------
       Deferred tax assets
<S>                                                                                   <C>                   <C>
            Net operating loss carryforwards                                          $   260,000           $  389,000
            Allowance for bad debts                                                       463,000              161,000
            Inventory valuation                                                           874,000              869,000
            Deferred compensation                                                         255,000              274,000
            Other deferred tax assets                                                     198,500              243,000
                                                                                       ----------            ---------

                                                                                        2,050,500            1,936,000

       Deferred tax liabilities
           Depreciation                                                                  (458,000)            (683,000)
           Other                                                                          (68,000)             (80,000)
           Unrealized gain on marketable securities
              available for sale                                                          (94,000)            (122,000)
                                                                                      -----------            ----------

                                                                                        1,430,500            1,051,000

       Valuation allowance                                                               (325,000)            (325,000)
                                                                                       ----------           -----------

       Net deferred tax asset                                                          $1,105,500            $ 726,000
                                                                                        =========             ========



</TABLE>




                                      F-15
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE D - INCOME TAXES (continued)

     At June 30, 1999,  the Company,  through an  acquisition,  has  available a
     Federal net operating loss carryforward of approximately $714,000. Such net
     operating  loss is subject to certain  limitations  and  expires in varying
     amounts during the fiscal years 2007 through 2009. Further, the Company has
     established  a valuation  allowance  with  respect to the net  deferred tax
     assets  attributable  to this  acquired  subsidiary.  During  fiscal  1998,
     $169,000 of such net  deferred tax asset was  recognized  as a reduction of
     the excess of cost over net assets  acquired  attributable  to the acquired
     subsidiary.  The  subsequent  realization  of such  deferred tax asset will
     result in the reduction of the excess of cost over net assets acquired.






                                      F-16
<PAGE>




                                    Jaco Electronics, Inc. and Subsidiaries

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                     June 30, 1997, 1998 and 1999


<TABLE>
<CAPTION>

NOTE E - EARNINGS PER COMMON SHARE

                                           For the year ended June 30,                  For the year ended June 30,
                                                      1997                                          1998
                                    ----------------------------------------      ----------------------------------------
                                       Income           Shares          Per         Income          Shares          Per
                                       (Numer-         (Denomi-        Share        (Numer-        (Denomi-        Share
                                        ator)           nator)        Amount         ator)          nator)        Amount
                                     ---------        ---------      -------      ---------       ---------      -------

     Basic earnings per share;
       income available to
<S>                                 <C>               <C>              <C>       <C>              <C>              <C>
       common shareholders          $2,078,753        3,899,181        $0.53     $1,184,261       3,836,700        $0.31


     Effect of dilutive
     securities
       Stock options                                     48,506                                      84,818
                                  ----------------  -----------                 ---------------  ----------


     Diluted earnings per
       share; income available
       to common shareholders
       plus assumed
       conversions                  $2,078,753        3,947,687        $0.53     $1,184,261       3,921,518        $0.30
                                     =========        =========                   =========       =========
</TABLE>
<TABLE>
<CAPTION>

                                       For the year ended June 30,
                                                  1999
                                    ----------------------------------------
                                       Income           Shares          Per
                                       (Numer-         (Denomi-        Share
                                        ator)           nator)        Amount
                                     ---------        ---------      -------

     Basic earnings per share;
       income available to
<S>                                 <C>               <C>              <C>
       common shareholders          $(1,157,150)     3,698,270       $(0.31)


     Effect of dilutive
     securities
       Stock options
                                  ----------------  -----------


     Diluted earnings per
       share; income available
       to common shareholders
       plus assumed
       conversions                  $(1,157,150)     3,698,270      $(0.31)
                                     ===========     =========
</TABLE>

     Options to  purchase  485,296  shares of common  stock at a price  range of
     $2.69 to $12.75 and warrants to purchase  70,000  shares of common stock at
     $22.95 were  outstanding  during fiscal 1999. They were not included in the
     computation  of diluted  earnings per share because the inclusion of common
     stock equivalents would have been anti-dilutive.







                                      F-17
<PAGE>





                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999

<TABLE>
<CAPTION>


NOTE F - DEBT AND CAPITALIZED LEASE OBLIGATIONS

     Debt and capitalized lease obligations are as follows:

                                                                                                   June 30,
                                                                                        ---------------------------------
                                                                                       1998                    1999
                                                                                     ---------               ---------
<S>                                                                                   <C>                     <C>
     Term loan and revolving line of credit (a)                                       $15,897,542             $17,338,575
     Other term loans (b)                                                                 133,863                 621,797
     Equipment note (c)                                                                   115,998                   5,251
     Capitalized lease obligations (d)                                                  1,825,066               1,966,520
                                                                                      -----------             -----------

                                                                                       17,972,469              19,932,143

     Less amounts representing interest on capitalized
         lease obligations                                                                272,678                 254,665
                                                                                     ------------            ------------

                                                                                       17,699,791              19,677,478

     Less current maturities                                                              663,198                 791,814
                                                                                     ------------            ------------


                                                                                      $17,036,593             $18,885,664
                                                                                       ==========              ==========
</TABLE>

     (a)   Term Loan and Revolving Line of Credit Facility

           The  Company's  agreement  with its banks,  as amended,  provides the
           Company with a  $30,000,000  term loan and  revolving  line of credit
           facility  based  principally  on  eligible  accounts  receivable  and
           inventories  of  the  Company  as  defined  in  the  agreements.  The
           agreement  was amended to: (i) extend the maturity  date to September
           13,  2000,  (ii)  change  the  interest  rate to a rate  based on the
           average  30 day  LIBOR  rate plus  3/4% to  1-1/4%  depending  on the
           Company's  performance  for the  immediately  preceding  four  fiscal
           quarters  measured by a certain financial ratio, and (iii) change the
           requirements of certain financial covenants.  The applicable interest
           rate may be adjusted quarterly and borrowings under this facility are
           collateralized by substantially all of the assets of the Company. The
           outstanding  balance on the  revolving  line of credit  facility  was
           $16,963,575  at June 30, 1999,  with an  associated  interest rate of
           6.28%. Pursuant to the same agreement,  at June 30, 1999, a term loan
           with a  remaining  balance of  $375,000  requires  monthly  principal
           payments of $17,857,  together  with interest  through  September 13,
           2000, with a final payment of $107,146 due on September 13, 2000. The
           agreement  contains  provisions for maintenance of certain  financial
           ratios, all of which the Company is in compliance with, and prohibits
           the payment of cash dividends.






                                      F-18
<PAGE>





                                    Jaco Electronics, Inc. and Subsidiaries

                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                         June 30, 1997, 1998 and 1999


<TABLE>

NOTE F - DEBT AND CAPITALIZED LEASE OBLIGATIONS (continued)

     (b)   Other Term Loans

           Other term loans as of June 30, 1999 are as follows:

                                                                                                         Monthly
              Date of loan                                    Balance              Term                  payment

<S>                 <C> <C>                                   <C>                <C>                     <C>
              March 16, 1995                                  $ 10,184           60 months               $ 1,160
              March 16, 1995                                    83,440           84 months                 2,730
              January 14, 1999                                 528,173           60 months                 9,829
                                                               -------

                                                              $621,797
</TABLE>

           The above loans are collateralized by the related equipment acquired,
           having a carrying  value of  approximately  $770,000 at June 30, 1999
           and $331,000 at June 30, 1998.  The agreements  contain,  among other
           things,  restrictive covenants on one of the Company's  subsidiaries,
           which  place   limitations  on:  (i)   consolidations,   mergers  and
           acquisitions,   (ii)  additional   indebtedness,   encumbrances   and
           guarantees, (iii) loans to shareholders,  officers or directors, (iv)
           dividends  and  stock   redemptions,   and  (v)   transactions   with
           affiliates, all as defined in the agreements. The loans bear interest
           payable monthly, at 6%, 5.5% and 1% per annum, respectively.

     (c)   Equipment Note

           The equipment  note is payable  through  September  1999,  bearing an
           implicit interest rate of 9.68%, and is collateralized by the related
           equipment.

     (d)   Capitalized Lease Obligations

           The Company leases certain  equipment under agreements  accounted for
           as  capital  leases.   During  fiscal  1999,  the  Company   acquired
           approximately  $553,000 of  equipment  through a capital  lease.  The
           obligations  for the  equipment  require the Company to make  monthly
           payments  through  September 2003, with implicit  interest rates from
           7.0% to 8.5%.







                                      F-19
<PAGE>




                                Jaco Electronics, Inc. and Subsidiaries

                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                      June 30, 1997, 1998 and 1999


<TABLE>
<CAPTION>

NOTE F - DEBT AND CAPITALIZED LEASE OBLIGATIONS (continued)

     The following is a summary of the aggregate  annual  maturities of debt and
capitalized lease obligations as of June 30, 1999:

                                                                                                          Capitalized
                                                                                       Debt                   leases

      Year ending June 30,
<S>        <C>                                                                       <C>                       <C>
           2000                                                                      $    371,800              $ 532,603
           2001                                                                        17,269,135                541,368
           2002                                                                           139,486                501,006
           2003                                                                           116,628                353,048
           2004                                                                            68,574                 38,495
                                                                                     ------------              ---------

                                                                                     $ 17,965,623             $1,966,520
                                                                                      ============             =========
</TABLE>

<TABLE>
<CAPTION>

NOTE G - 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,
<S>                           <C>                                                     <C>
                              2000                                                    $ 1,128,731
                              2001                                                        990,297
                              2002                                                        947,108
                              2003                                                        897,361
                              2004                                                        354,589
                                                                                       ----------

                                                                                      $ 4,318,086


</TABLE>



                                      F-20
<PAGE>




                                Jaco Electronics, Inc. and Subsidiaries

                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                        June 30, 1997, 1998 and 1999


<TABLE>
<CAPTION>

NOTE G - COMMITMENTS AND CONTINGENCIES (continued)

         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,
<S>                           <C>                                                     <C>
                              2000                                                    $   598,000
                              2001                                                        627,900
                              2002                                                        659,327
                              2003                                                        692,293
                              2004                                                        354,589
                                                                                       ----------


                                                                                       $2,932,109
</TABLE>
         The Company's rent expense was  approximately  $602,000 for each of the
         years ended June 30, 1997, 1998 and 1999,  respectively,  in connection
         with the above lease.

         Rent expense on office and  warehouse  facilities  leases for the years
         ended  June  30,  1997,  1998  and  1999  was  approximately  $962,000,
         $1,033,000  and  $1,131,000,  respectively,  net of sublease  income of
         approximately $115,000, $115,000 and $110,000, respectively.

     2.  Other Leases

         The Company also leases various office equipment and automobiles  under
         noncancellable operating leases expiring through June 2004. The minimum
         rental commitments  required under these leases at June 30, 1999 are as
         follows:
<TABLE>
<CAPTION>

                          Year ending June 30,
<S>                           <C>                                                        <C>
                              2000                                                       $148,419
                              2001                                                         74,596
                              2002                                                         55,791
                              2003                                                         22,075
                              2004                                                         13,416
                                                                                         --------

                                                                                         $314,297

</TABLE>





                                      F-21
<PAGE>





                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE G - COMMITMENTS AND CONTINGENCIES (continued)

     3.  Employment Agreements

         The  Company  has  entered  into  employment  agreements  with  certain
         executive  officers  which  provide for annual base salary  aggregating
         $675,000  through June 30, 2003 and contain  provisions  for  severance
         payments  in  the  event  of a change  of  control as  defined  in  the
         agreements.  The  Company's  agreement  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  a  deferred
         compensation  which  accrues at a rate of $50,000  per year and becomes
         payable in a lump sum at the later of (i) the Chairman's  attainment of
         age 60 (which has occurred), or (ii) his cessation of employment,  with
         or without cause, at any time.

     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 H - 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,  1997,  1998 and 1999,  the  Company
     contributed  to this plan  approximately  $91,000,  $132,000  and  $96,000,
     respectively.


NOTE I - SHAREHOLDERS' EQUITY

     In connection  with the Company's  1995 public  offering,  the Company also
     issued stock warrants, to the representative  underwriters,  to purchase up
     to 70,000  shares of common  stock at an exercise  price per share equal to
     180% of the  $12.75 per share  public  offering  price,  which  expire on
     October 20, 1999.





                                      F-22
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE I - SHAREHOLDERS' EQUITY (continued)

     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 600,000 from 293,333,  of which 433,899 are outstanding at June 30,
     1999.

     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  14,667  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  2,933  shares of the
     Company's  common stock  annually.  The Outside  Directors  Plan expired on
     January  1,  1998,  with a total of  26,397  options  outstanding.  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  10,000  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 7,500 options to purchase the
     Company's common stock at the fair market value on the date of grant. These
     25,000 options were not granted  pursuant to any of the Company's  existing
     stock option plans.






                                      F-23
<PAGE>




                                Jaco Electronics, Inc. and Subsidiaries

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                        June 30, 1997, 1998 and 1999


<TABLE>
<CAPTION>

NOTE I - SHAREHOLDERS' EQUITY (continued)

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

                                                                                 Weighted
                                                    Nonqualified                  average
                                                    stock options                exercise
                                             --------------------------
                                             Price range         Shares            price
                                             -----------         -------        ----------
<S>                       <C>              <C>       <C>        <C>              <C>
      Outstanding at July 1, 1996          $  4.77 - 12.75      200,000          $  7.65

      Granted                              $  7.00 -  8.50      150,265             7.15
      Exercised

      Outstanding at June 30, 1997         $  4.77 - 12.75      350,265             7.44

      Granted                                      $  6.25        8,799             6.25
      Expired                                      $ 12.75       (2,500)           12.75
                                                               ---------

      Outstanding at June 30, 1998         $  4.77 - 12.75      356,564             7.37


      Granted                              $   2.69 -  4.13     265,000             3.34
      Expired                              $   4.77 - 12.75    (136,268)            4.79
                                                               ---------

      Outstanding at June 30, 1999        $  2 .69 -  12.75     485,296             5.68
                                                               =========


      Amounts exercisable at
          June 30, 1999                   $  2 .69 -  12.75     485,296             5.68
                                                               =========

</TABLE>

     The following table summarizes information concerning currently outstanding
and exercisable nonqualified stock options:
<TABLE>
<CAPTION>

                                                                                        Weighted-
                                                                    Number               average               Weighted-
                                                                  outstanding           remaining               average
                                                                      and              contractual             exercise
       Range of exercise prices                                   exercisable         life (months)              price
     ----------------------------                                -------------       --------------           ------------
<S>        <C>     <C>                                              <C>               <C>                     <C>
           $2.69 - $  4.76                                          265,000           54 months               $   3.34

           $4.77 - $  9.00                                          162,430           33 months               $   5.32

           $9.01 - $12.75                                            57,866           17 months                $ 12.62



</TABLE>



                                      F-24
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE I - SHAREHOLDERS' EQUITY (continued)

     The  weighted-average  option fair value on the grant date was $1.82, $1.88
     and $1.38 for options issued during the years ended June 30, 1997, 1998 and
     1999, respectively.

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

                                                                         1997                 1998                 1999
                                                                    ---------------      --------------       ----------------


      Net earnings (loss)
<S>                                                                     <C>                  <C>                 <C>
          As reported                                                   $2,078,753           $1,184,261          $(1,157,150)
          Pro forma                                                      1,805,602            1,167,761           (1,523,550)
      Net earnings (loss) per common share  - basic
          As reported                                                        $.53                 $.31                $(.31)
          Pro forma                                                           .46                  .30                 (.41)
      Net earnings (loss) per common share - diluted
          As reported                                                        $.53                 $.30                $(.31)
          Pro forma                                                           .46                  .30                 (.41)
</TABLE>

     These pro forma  amounts may not be  representative  of future  disclosures
     because they do not take into effect 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, 1997, 1998 and 1999, respectively, expected volatility of 25%, 35%
     and 55%;  risk-free  interest rates of 6.32%,  5.42% and 5.08% and expected
     term of 3 years for all 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.




                                      F-25
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999



NOTE I - SHAREHOLDERS' EQUITY (continued)

     The Board of Directors of the Company has  authorized the purchase of up to
     250,000  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  400,000 shares of the Company's common stock. The purchases may
     be made  by the  Company  from  time to  time  on the  open  market  at the
     Company's  discretion and will be dependent on market conditions.  To date,
     the Company has purchased  412,200 shares of its common stock for aggregate
     consideration of $2,204,515 under this program.

     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 has issued 90,000 shares of common stock to certain
     employees  at a purchase  price of $1.00 per share.  Shares  purchased  are
     subject to a four-year vesting period and the Company  recognized  $135,000
     of compensation expense during fiscal 1999 and 1998 in connection with this
     plan.


NOTE J - ACQUISITIONS

     During August 1996 and January 1997, the Company purchased QPS Electronics,
     Inc.  and  Corona  Electronics,  Inc.,  respectively,  both  of  which  are
     electronic  component  distributors.  Aggregate  consideration paid for the
     acquisitions  approximated  $4,700,000,  of which $157,500 was paid through
     the  issuance  of  20,000  shares  of the  Company's  common  stock.  These
     acquisitions  have been accounted for by the purchase  method and, as such,
     the fair value of the assets and liabilities acquired have been recorded on
     the date of the respective  acquisitions.  The respective  results of their
     operations  are  included  with  those  of the  Company  from  the  date of
     acquisition.  The excess of the  purchase  price over the fair value of the
     assets  acquired,  approximately  $3,053,000,  is being amortized using the
     straight-line method over a period of twenty years.






                                      F-26
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999

NOTE K - BUSINESS SEGMENT 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 1997,
1998 and 1999, 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. Information about the Company's segments is as follows:
<TABLE>
<CAPTION>



                                                                                            Year ended June 30,
                                                                                     ------------------------------------
                                                                                 1997                 1998              1999
                                                                                ---------            ---------         -------
                                                                                               (in thousands)

     Net sales from external customers
<S>                                                                              <C>                  <C>               <C>
    Electronics components distribution                                        $ 145,091            $ 137,297             $ 127,401
    Contract manufacturing                                                        10,007               16,377                13,310
                                                                               ---------            ---------             ---------

                                                                               $ 155,098            $ 153,674             $ 140,711
                                                                               =========            =========             =========

Intersegment net sales
    Electronics components distribution                                        $     242            $     593             $     336
    Contract manufacturing                                                                                382                   111
                                                                                                    ---------             ---------
                                                                               $     242            $     975             $     447
                                                                               =========            =========             =========


Operating profit (loss)
    Electronics components distribution                                        $   3,994            $   2,251             $    (868)
    Contract manufacturing                                                           471                  921                   602
                                                                               ---------            ---------             ---------

                                                                               $   4,465            $   3,172             $    (266)
                                                                               =========            =========             =========

Interest expense
    Electronics components distribution                                        $     532            $     662             $     768
    Contract manufacturing                                                           439                  478                   541
                                                                               ---------            ---------             ---------
                                                                               $     971            $   1,140             $   1,309
                                                                               =========            =========             =========


Income tax expense (benefit)
    Electronics components distribution                                        $   1,402            $     662             $    (374)
    Contract manufacturing                                                            13                  185                   (44)
                                                                               ---------            ---------             ---------
                                                                               $   1,415            $     847             $    (418)
                                                                               =========            =========             =========


</TABLE>



                                      F-27
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                          June 30, 1997, 1998 and 1999
<TABLE>
<CAPTION>

NOTE K - BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION (continued)

                                                                                              Year ended June 30,
                                                                                     ------------------------------------
                                                                                 1997                 1998              1999
                                                                                ---------            ---------         -------
                                                                                               (in thousands)

     Identifiable assets
<S>                                                                                  <C>                <C>                  <C>
    Electronics components distribution                                            $61,515              $60,929              $62,259
    Contract manufacturing                                                           8,481               12,490               10,672
                                                                                   -------              -------              -------

                                                                                   $69,996              $73,419              $72,931
                                                                                   =======              =======              =======

Capital expenditures
    Electronics components distribution                                            $   810              $ 1,002              $   396
    Contract manufacturing                                                             133                   67                1,207
                                                                                   -------              -------              -------

                                                                                   $   943              $ 1,069              $ 1,603
                                                                                   =======              =======              =======

Depreciation and amortization
    Electronics components distribution                                            $   742              $   913              $ 1,049
    Contract manufacturing                                                             309                  443                  539
                                                                                   -------              -------              -------

                                                                                   $ 1,051              $ 1,356              $ 1,588
                                                                                   =======              =======              =======


</TABLE>





                                      F-28
<PAGE>






                         REPORT OF INDEPENDENT CERTIFIED
                         PUBLIC ACCOUNTANTS ON SCHEDULE




Board of Directors and Shareholders
    Jaco Electronics, Inc.


In connection with our audit of the  consolidated  financial  statements of Jaco
Electronics,  Inc. and  Subsidiaries  referred to in our report dated August 20,
1999, 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,  1999.  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
August 20, 1999






                                      F-29
<PAGE>




                     Jaco Electronics, Inc. and Subsidiaries

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                    Years ended June 30, 1997, 1998 and 1999


<TABLE>
<CAPTION>



              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, 1997              $758,000          $256,000       $  95,000 (a)(c)    $263,000 (b)     $   846,000
                                           =======           =======        ========            =======          ==========

    Year ended June 30, 1998              $846,000          $476,000        $226,000 (a)       $280,000 (b)      $1,268,000
                                           =======           =======         =======            ========          =========

    Year ended June 30, 1999            $1,268,000          $982,000       $  12,000 (a)     $1,822,000 (b)      $  440,000
                                         ==========          ========         =======         ==========          =========


</TABLE>


(a)  Recoveries of accounts.
(b)  Represents  write-offs  of  uncollectible  accounts.  (c) Includes  balance
attributable to acquired subsidiary.



                                      F-30
<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.


Date: September 27, 1999       By: Joel H. Girsky
                              ------------------------------
                              Joel H. Girsky, Chairman of the
                              Board, President and Treasurer
                              (Principal Executive Officer)

         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.


Date: September 27, 1999     /s/ Joel H. Girsky
                              -------------------------------
                              Joel H. Girsky, Chairman of the
                              Board, President and Treasurer
                              (Principal Executive Officer)


Date:September 27, 1999       /s/ Jeffrey D. Gash
                              -------------------------------
                              Jeffrey D. Gash, Vice President-Finance
                              and Secretary
                              (Principal Financial and Accounting Officer)


Date:September 27, 1999       /s/ Stephen A. Cohen
                              --------------------------------
                              Stephen A. Cohen, Director


Date:September 27, 1999       /s/ Edward M. Frankel
                              ---------------------------------
                              Edward M. Frankel, Director


Date:September 27, 1999       /s/ Charles B. Girsky
                              ----------------------------------
                              Charles B. Girsky, Executive
                              Vice President and Director


Date:September 27, 1999       /s/ Joseph F. Hickey, Jr.
                              ----------------------------------
                              Joseph F. Hickey, Jr., Director