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



                                    FORM 10-Q

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



For the quarterly period ended:       December  31, 1999

                                       OR



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



For the transition period from _______ to ________



                       Commission file number          1-13550



                             HAUPPAUGE DIGITAL, INC.
             (Exact Name of registrant as specified in its charter)

          Delaware                                       11-3227864
( State or other jurisdiction of                       (I.R.S. Employer
 Incorporation or organization)                       Identification No.)

                    91 Cabot Court, Hauppauge, New York 11788
                    (Address of principal executive offices)



                                 (516) 434-1600
                           (Issuer's telephone number)



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

                                Yes X         No


As of February 9, 2000,  4,352,002  shares of .01 par value  Common Stock of the
registrant were Outstanding, not  including  treasury  shares



<PAGE>


                    HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES


                                      INDEX


PART I. FINANCIAL INFORMATION


Item 1.Financial Statements                                             Page No.

Condensed Consolidated Balance Sheets-
   December 31, 1999 and September 30, 1999                                 3

Condensed Consolidated Statements of Income-
  Three Months ended December 31, 1999 and 1998                             4

Condensed Consolidated Statements of Cash Flows-
  Three Months ended December 31, 1999 and 1998                             5

Notes to Condensed Consolidated Financial Statements                      6-8

Item 2. Management's Discussion and Analysis of  Financial Condition     8-13
           and Results of Operations


PART II. OTHER INFORMATION

Item 1.  Legal proceedings                                                 14

Item 6.  Exhibits and Reports on form 8-K                                  14


SIGNATURES                                                                 15


<PAGE>

        PART I. FINANCIAL INFORMATION

                Item 1. Financial Statements

                      HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
                        CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

ASSETS
                                                                                        December 31,
                                                                                            1999             September 30,
                                                                                        (Unaudited)               1999
                                                                                     ------------------    ------------------
<S>                                                                                            <C>            <C>
 CURRENT ASSETS:
     Cash and cash  equivalents                                                             $5,224,771            $6,122,922
     Accounts receivable, net of allowance for doubtful accounts                             9,856,826             6,973,452
     Inventories                                                                            12,777,810            12,957,439
     Prepaid expenses and other current assets                                                 561,681               407,916
     Deferred tax assets                                                                       457,753               477,074
                                                                                     ------------------     -----------------
                Total current assets                                                        28,878,841            26,938,803

     Property, plant and equipment-at cost                                                     834,610               718,562
     Security deposits and other non-current assets                                             85,009                70,219
                                                                                     ------------------    ------------------
                                                                                           $29,798,460           $27,727,584
                                                                                     ==================    ==================



 LIABILITIES AND SHAREHOLDERS' EQUITY :

 CURRENT LIABILITIES:
    Accounts payable                                                                       $12,521,753           11,208,777
    Accrued expenses                                                                         1,951,903            2,698,161
    Income taxes payable                                                                       494,557              498,555
                                                                                     ------------------    ------------------
              Total current liabilities                                                     14,968,213           14,405,493
                                                                                     ------------------    ------------------


 SHAREHOLDERS' EQUITY
    Common stock $.01 par value; 10,000,000 shares authorized, 4,563,302 and
        4,560,302  issued as of December 31 , 1999  and September 30, 1999                     45,633               45,603
    Additional paid-in capital                                                             10,728,179           10,696,208
    Retained earnings                                                                       5,323,564            3,847,409
    Treasury Stock, at cost, 214,300 shares                                                (1,267,129)          (1,267,129)
                                                                                     ------------------    ------------------
              Total stockholders' equity                                                   14,830,247           13,322,091
                                                                                     ------------------    ------------------
                                                                                          $29,798,460          $27,727,584
                                                                                     ==================    ==================

</TABLE>


 See accompanying notes to consolidated financial statements

<PAGE>




                    HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>

                                                                                      Three Months Ended December 31,
                                                                                        1999               1998
                                                                                     (Unaudited)       (Unaudited)
                                                                                ---------------------------------------
<S>                                                                                       <C>              <C>

NET SALES                                                                           $22,043,649        $15,056,999

COST OF SALES                                                                        16,735,724         11,048,110
                                                                                ---------------------------------------
    Gross Profit                                                                      5,307,925          4,008,889

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                          3,083,202          2,309,314
RESEARCH & DEVELOPMENT EXPENSES                                                         402,970            241,092
                                                                                ---------------------------------------
    Income from operations                                                            1,821,753          1,458,483

OTHER INCOME :
  Interest income                                                                        46,500             49,405
  Other, net                                                                             37,902             41,763
                                                                                ---------------------------------------
      Income before taxes on income                                                   1,906,155          1,549,651


TAXES ON  INCOME                                                                        430,000            597,000

                                                                                ---------------------------------------
      Net income                                                                     $1,476,155           $952,651
                                                                                ===================    ================
Net income per share-basic                                                                $0.34              $0.22

Net income per share-diluted                                                              $0.30              $0.21
                                                                                ===================    ================
</TABLE>


   See accompanying notes to consolidated financial statements


 <PAGE>


                    HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                                       Three Months Ended  December 31,
                                                                                           1999               1998
                                                                                      (Unaudited)         (Unaudited)
                                                                                  -------------------   ------------------
<S>                                                                                       <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                          $1,476,155             $952,651
                                                                                  -------------------   ------------------
   Adjustments to reconcile net income to net cash  provided by
    (used in) operating activities:
     Depreciation and amortization                                                       58,676                36,072
     Provision for uncollectible accounts receivable                                     15,000                10,000
     Compensation paid in stock                                                           9,504                 2,400
      Deferred income taxes                                                              19,321               (58,388)
         Changes in current assets and liabilities:
      Accounts receivable                                                            (2,898,387)            1,547,764
      Inventories                                                                       179,629              (364,023)
      Prepaid expenses and other current assets                                        (153,765)               53,566
      Accounts payable                                                                1,312,976            (1,918,443)
      Accrued expenses                                                                 (750,256)              183,791
                                                                                  -------------------   ------------------
                                                                                     (2,207,302)             (507,261)
                                                                                  -------------------   ------------------
        Net cash (used in) provided by  operating activities                           (731,147)              445,390
                                                                                  -------------------   ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property, plant and equipment                                       (174,724)             (95,725)
      Security deposits and other                                                       (14,780)                 -
                                                                                  -------------------   ------------------
               Net cash used in investing activities                                   (189,504)             (95,725)
                                                                                  -------------------   ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options                                              22,500               26,900
                                                                                  -------------------   ------------------
        Net cash provided by  financing activities                                       22,500               26,900
                                                                                  -------------------   ------------------
        Net  (decrease) increase in cash and cash equivalents                          (898,151)             376,565
Cash and Cash Equivalents, beginning of period                                        6,122,922            6,281,852
                                                                                  -------------------   ------------------
Cash and Cash Equivalents, end of period                                             $5,224,771           $6,658,417
                                                                                  ===================   ==================
SUPPLEMENTAL DISCLOSURES:

   Income taxes paid                                                                   $414,677             $829,992
                                                                                  ===================   ==================

</TABLE>

           See accompanying notes to consolidated financial statements


<PAGE>

                    HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1.  BASIS OF PRESENTATION

     The accompanying  unaudited  condensed  consolidated  financial  statements
included  herein  have been  prepared  in  accordance  with  generally  accepted
accounting  principles  for interim  period  reporting in  conjunction  with the
instructions to Form 10-Q.  Accordingly,  these statements do not include all of
the information required by generally accepted accounting  principles for annual
financial statements, and are subject to year-end adjustments. In the opinion of
management,  all known adjustments  (consisting of normal recurring accruals and
reserves)  necessary  to  present  fairly  the  financial  position,  results of
operations and cash flows for the three months ended December 31, 1999 have been
included.  It is suggested that these interim  statements be read in conjunction
with the  financial  statements  and related  notes  included  in the  Company's
September 30, 1999 Form 10-K.

     The operating  results for the three months ended December 31, 1999 are not
necessarily  indicative of the results to be expected for the September 30, 2000
year end.

NOTE 2.  INVENTORIES

     Inventories  have been valued at the lower of average  cost or market.  The
components of inventory at December 31, 1999 and September 30, 1999 consist of:

                                         December  31,        September 30,
                                             1999                1999

     Component Parts                   $   4,238,325          $  4,875,940
     Work in Progress                        416,759               494,285
     Finished Goods                        8,122,726             7,587,214
                                           ---------             ---------
                                       $  12,777,810          $ 12,957,439
                                       =============          ============

NOTE 3.  NET INCOME PER SHARE

Basic  earnings  per share  includes no dilution and is computed by dividing net
income by the  weighted  average  number of common  shares  outstanding  for the
period.  Diluted earnings per share reflect, in the periods in which they have a
diluted  effect,  the  dilution  which  would  occur upon the  exercise of stock
options.  A reconciliation  of the shares used in calculating  basic and diluted
earnings per share follows:

<PAGE>


                    HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Net income per share - continued

                                                         Three Months Ended
                                                            December 31,
                                                     1999                1998
                                                     ----                ----

Weighted average shares outstanding-basic          4,346,589           4,297,640
Number of shares issued on the assumed
    Exercise of stock options                        545,331             301,857
                                                     -------             -------
Weighted average shares outstanding-diluted        4,891,920           4,599,497
                                                   ---------           ---------

The Company has repurchased 214,300 shares over the prior three fiscal years for
treasury purposes. These shares, on a weighted average basis, have been excluded
in calculating weighted average shares outstanding.

NOTE 4.  INCOME TAXES

     Income taxes through fiscal 1999 were based on annualized  statutory  rates
for federal and state income taxes.  The provision for income taxes  reflects an
annualized effective tax rate after deductions for the utilization of restricted
net operating loss carry  forwards,  adjustments  for items  deductible for book
purposes but not  currently  deductible  for tax purposes and the benefit  which
results from the utilization of a foreign sales corporation.

     Effective October 1, 1999, the Company restructured its foreign operations.
The result of the  restructuring  eliminated the foreign sales  corporation  and
established  a new  Luxembourg  corporation,  which will  function as the entity
which services the Company's European customers.

     The company's  tax  provision  for the quarter ended  December 31, 1999 was
based on this new structure.

NOTE 5.  STOCK REPURCHASE PROGRAM

     On November 8, 1996, the Company approved a stock repurchase  program.  The
Company has  repurchased  214,300 shares for  $1,267,129 at an average  purchase
price of approximately $5.91 per share.

<PAGE>

                    HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 6 .  PROSPECTIVE ACCOUNTING CHANGES

Investment Derivatives and Hedging Activities  Income

     In June 1998, the Financial  Accounting Standards Board issued SFAS No. 133
("SFAS 133"),  Accounting  for  Derivative  Investments  and Hedging  Activities
Income. SFAS 133 is effective for transactions entered into after June 15, 2000.
SFAS 133 requires  that all  derivative  instruments  be recorded on the balance
sheet at fair value.  Changes in the fair value of the  derivatives are recorded
each period in current  earnings or other  comprehensive  income,  depending  on
whether a derivative is designed as part of the hedge  transaction  and the type
of hedge transaction.  The ineffective  portion of all hedges will be recognized
in earnings.  The Company is in the process of  determining  the impact that the
adoption  of SFAS 133 will  have on its  results  of  operations  and  financial
position.

 ITEM 2.       Management's Discussion and Analysis of
            Financial Condition and Results of Operations

Results of Operations

Three Month Period ended December 31, 1999 versus December  31, 1998

     Sales  for the three  months  ended  December  31,  1999  were  $22,043,649
compared to $15,056,999 for the prior year's first fiscal quarter,  resulting in
an increase of $6,986,650 or approximately  46%,  comprised of a 74% increase in
domestic sales and a 33% increase in international sales. The forces driving the
sales growth were:

- The strength of new products rolled out during the latter part of fiscal 1999.
- The opening of new geographic markets.
- Sales contribution from the company's Singapore office, which was opened
  during the fourth quarter of fiscal 1999.

     Unit sales for the three months ended December 31, 1999 increased about 82%
to  approximately  303,000 as  compared to  approximately  166,000 for the prior
year.  Sales to domestic  customers for the first fiscal quarter were 31% of net
sales for this year's  first  fiscal  quarter and 26% for the prior year's first
fiscal quarter. Sales to international  customers were 69% of net sales compared
to 74% of net sales for the three months ended December 31, 1998.

     Gross  profit  increased  to  $5,307,925  from  $4,008,889,  an increase of
$1,299,036 or 32% over the comparable quarterly period of the prior fiscal year.
The gross profit percentage was 24% for the three months ended December 31, 1999
compared to 27% for the prior  year's first  fiscal  quarter.  The change in the
margins can be attributed to:

<PAGE>

Item 2.  Management's Discussion and Analysis -Continued

- Start up costs attributed to the introduction of several new products.
- Decrease in sales of higher margin professional WinTV products due to Year
  2000 "lockdowns".
- Fluctuations in the  Euro exchange rate.

     The  chart  below  illustrates  the  components  of  selling,  general  and
administrative expenses:
<TABLE>
<CAPTION>

                                Three months ended December 31,
                                -------------------------------
                         Dollar Costs                Percentage of Sales
                         ------------                -------------------
                                                                                   Increase/
                            1999         1998      Increase      1999    1998      (Decrease)
<S>                          <C>          <C>        <C>          <C>     <C>          <C>

Sales & Promotional     $2,031,614   $1,460,838  $   570,776     9.2%     9.7%      ( .5%)
Customer Support           126,533       96,762       29,771      .6%      .6%        -
Product Handling           212,684      126,229       86,455     1.0%      .8%        .2%
General & Admin            712,371      625,485       86,886     3.2%     4.2%      (1.0%)
                           -------      -------       ------     ---      ---       ------
    Total               $3,083,202   $2,309,314  $   773,888    14.0%    15.3%      (1.3%)
</TABLE>

As a percentage of sales, Selling,  General and Administrative expenses declined
by 1.3% when compared to the first fiscal quarter of 1999. Declines in Sales and
Promotional expenses and General and Administrative expenses of 1.5% were offset
by a 0.2% increase in product handling.  Represented in dollars, Selling General
and Administrative  expenses increased $773,888 over the comparable prior year's
fiscal first quarter.

The increase in Sales and Promotional expenses of  $570,776 was mainly due to:

-  Higher commission attributable to the sales increase of  46%.
-  Increased sales staff.
-  Sales and marketing  programs for the Asian market.
-  Increased European marketing activities.

     Customer  Support  and  Product  Handling  expenses  increased  $29,771 and
$86,455  respectively.  Customer Support costs increased due to additional staff
required  to  maintain  a high  level of  customer  service  in  support  of the
Company's  expanding  worldwide customer base.  Increased Product handling costs
was a function of greater shipment volume to customers.

The increase in General and  Administrative  expenses of $ 86,886 was  primarily
due to :

-  Contractual wage increases for senior executives.
-  Higher professional fees for investment, tax and litigation advice.
-  General and administrative expenses of the company's Singapore office.

     Research and development  expenses increased $161,878 or approximately 67%.
The increase  was due to  engineering  and  development  costs of our  Singapore
office, increased personnel and increased material for digital prototypes.

<PAGE>

Item 2.  Management's Discussion and Analysis -Continued

     The Company had net other  income of $84,402  compared to net other  income
for the prior year's first fiscal quarter of $91,168.  The decrease in net other
income was primarily due to slightly lower returns on monies invested.

     Provision  for income taxes was  $430,000,  or an effective tax rate of 23%
for the three  months  ended  December  31,  1999  compared  to  $597,000  or an
effective tax rate of 38% for the three months ended December 31, 1998.

     Effective October 1, 1999, the Company restructured its foreign operations.
The result of the  restructuring  eliminated the foreign sales  corporation  and
established  a new  Luxembourg  corporation,  which will  function as the entity
which services the Company's European customers.

     The company's  tax  provision  for the quarter ended  December 31, 1999 was
based on this new structure.

     As a result of the above,  the Company  recorded net income after taxes for
the quarter ended December 31, 1999 of  $1,476,155,  which resulted in basic and
diluted earnings per share of $0.34 and $0.30, respectively, on weighted average
basic and diluted shares  outstanding of 4,346,589 and 4,891,920,  respectively,
compared  to net income  after  taxes of  $952,651  for the three  months  ended
December 31,  1998,  which  resulted in basic and diluted  earnings per share of
$0.22 and $0.21,  respectively,  on weighted average basic and diluted shares of
4,297,640 and 4,599,497, respectively.

     Since the company sells primarily to the consumer  market,  the Company has
experienced  certain  revenue  trends.  The  Company has  historically  recorded
stronger  sales results during the Company's  first fiscal  quarter  (October to
December),  which due to the holiday  season,  is a strong  quarter for computer
equipment sales. The Company  experienced this trend in each of the fiscal years
ended  September 30, 1999 and  September  30, 1998.  In addition,  the Company's
international  sales,  mostly in the European  market,  were 73%, 72% and 66% of
sales for the years ended 1999,  1998 and 1997,  respectively.  Due to this, the
Company's  sales  for its  fourth  fiscal  quarter  (July to  September)  can be
potentially impacted by the reduction of activity experienced with Europe during
the July and August summer holiday period.

     To offset the above cycles,  the Company continues to target a wide a range
of customer types in order to moderate the seasonality of retail sales.

<PAGE>

Liquidity and Capital Resources

     The Company's cash,  working capital and  stockholders'  equity position is
disclosed  below:

                          December 31, 1999             September 30, 1999
                          -----------------             -----------------

Cash                        $  5,224,771                  $  6,122,922
Working capital               13,910,628                    12,533,310
Stockholder's equity          14,803,247                    13,322,091

The  significant  items of cash  provided by and cash  (consumed ) are  detailed
below:

<TABLE>
<CAPTION>

<S>                                                                               <C>
Net income (adjusted for non cash items), excluding deferred tax benefits     $ 1,559,335
Changes to deferred tax assets                                                     19,321
Increase  in investment for current assets                                     (2,872,523)
Operations funded by current  liabilities-net                                     562,720
Purchase of  Property, Plant & Equipment                                         (174,724)
Other                                                                               7,720

</TABLE>


     Net cash of $ 731,147 consumed by operating activities was primarily due to
cash generated  from the Company's net income,  (adjusted for non cash items) of
$1,559,335,  deferred tax asset utilization of $ 19,321 and cash provided by the
increase  in current  liabilities  of  $562,720,  offset by an  increase in cash
invested in current assets, mainly receivables, of $2,872,523.

     Cash of $ 174,724  was used to  purchase  fixed  assets.  The  exercise  of
employee options  provided an additional $ 22,500 offset by other  disbursements
of $14,780.

     The Company's asset based credit facility expired on February 28, 1998. The
company has chosen not to renew the loan facility.  The Company feels it is in a
position to obtain new  financing at more  competitive  rates,  and is currently
negotiating with new institutions to replace the expired loan facility.

     On November 8, 1996, the Company approved a stock repurchase  program.  The
Company has  repurchased  214,300 shares for  $1,267,129 at an average  purchase
price of approximately $5.91 per share.

     The Company  believes  that its current cash  position  and its  internally
generated  cash flow will be  sufficient  to satisfy the  Company's  anticipated
operating needs for a least the ensuing twelve months.

Inflation

     While inflation has not had a material  effect on the Company's  operations
in the past, there can be no assurance that the Company will be able to continue
to offset the  effects of

<PAGE>

inflation on the costs of its products or services  through  price  increases to
its customers  without  experiencing a reduction in the demand for its products;
or that  inflation  will not have an overall  effect on the  computer  equipment
market that would have a material affect on the Company.

Effect of New Accounting Pronouncements

 Investment Derivatives and Hedging Activities  Income

     In June 1998, the Financial  Accounting Standards Board issued SFAS No. 133
("SFAS 133"),  Accounting  for  Derivative  Investments  and Hedging  Activities
Income. SFAS 133 is effective for transactions entered into after June 15, 2000.
SFAS 133 requires  that all  derivative  instruments  be recorded on the balance
sheet at fair value.  Changes in the fair value of the  derivatives are recorded
each period in current  earnings or other  comprehensive  income,  depending  on
whether a derivative is designed as part of the hedge  transaction  and the type
of hedge transaction.  The ineffective  portion of all hedges will be recognized
in earnings.  The Company is in the process of  determining  the impact that the
adoption  of SFAS 133 will  have on its  results  of  operations  and  financial
position.

Year 2000

Many  computer  systems  were not designed to handle dates beyond the year 1999.
The Company  evaluated  the effect of Year 2000 issues  relating to its internal
computer  systems and has concluded that its system was not Year 2000 compliant.
In  recognition  of this,  the Company  purchased and installed new software and
upgraded its computer  hardware  during  fiscal 1999.  Testing was  performed in
house by Company  personnel,  with  assistance from an outside  consultant.  The
hardware upgrades and the  implementation of new software began in January 1999.
The new system was fully operational on October 1, 1999. The cost to the Company
to become  Year 2000  compliant  was  approximately  $150,000,  which was funded
through internally generated cash flow,  capitalized to fixed assets and will be
amortized  over  a  period  as  prescribed  by  generally  accepted   accounting
principles.

     The Company has been advised by its vendor that the Company's phone system,
installed  during fiscal 1998, is Year 2000  compliant.  The Company's  facility
security system was upgraded during fiscal 1999 and the Company has been advised
by its vendor that such system is Year 2000 compliant.

     During  fiscal  1999,  the Company sent Year 2000  questionnaires  to third
parties the Company does  business with in order to identify,  if possible,  the
status of the third  parties'  Year  2000  readiness.  The  Company  received  a
majority of responses  back by the close of the 1999 fiscal  year.  Although the
responses  showed that these third  parties  were either Year 2000  compliant or
working to resolve their Year 2000 compliance issues, the Company has limited or
no control over the actions taken by these third parties. Accordingly, there can
be no assurance  that all the third  parties the Company does business with will
successfully  resolve all of their Year 2000 issues.  The failure of these third
parties  to resolve  their Year 2000  issues  could have a  potentially  adverse
affect on the Company.  The Company  continues to monitor the readiness of third
parties it currently  does  business  with and look to procure new third parties
who are year 2000 compliant in an effort minimize the risk to the Company.

     The Company has a contingency  plan to respond to the possible  effects the
Year 2000  problem has on third  parties  that are  important  to the  Company's
operations. The Company has

<PAGE>

Year 2000-continued

communicated  with  its  critical  suppliers,  vendors,  customers,   utilities,
financial  institutions  and  telecommunication  providers  with  whom  it  does
significant business to identify any Year 2000 issues. The Company will continue
to communicate with and review the progress of these third party  enterprises in
resolving their Year 2000 issues. The ability to accurately assess the Company's
third  parties'  readiness is dependent in large part upon the  reliability  and
completeness of their representations.

To date, the Company  has not experienced any Year 2000 issues.

Market Risks

     Since the Company has extensive sales to European customers, the Company is
exposed to market risks resulting from the  fluctuations in the foreign currency
exchange  rates to the  dollar.  The Company  attempts to reduce  these risks by
utilizing foreign exchange hedging contracts.

     The value of the Euro and British  Pound  against the dollar can affect the
Company's  financial  results.  Changes  in  exchange  rates may  positively  or
negatively affect the Company's revenues (as expressed in U.S.  dollars),  gross
margins,  operating income and retained  earnings.  Where it deems prudent,  the
Company  engages in hedging  programs aimed at limiting,  in part, the impact of
currency  fluctuations.  Primarily  selling  foreign  currencies  through window
contracts,  the Company  attempts to hedge its foreign  sales  against  currency
fluctuations.

     These hedging  activities  provide only limited protection against currency
exchange  risks.  Factors that could impact the  effectiveness  of the Company's
programs include  volatility of the currency markets and availability of hedging
instruments. The contracts the Company procures are specifically entered into as
a hedge against  existing or  anticipated  exposure.  The Company does not enter
into contracts for speculative  purposes.  Although the Company  maintains these
programs to reduce the impact of changes in currency  exchange  rates,  when the
U.S. dollar sustains a  strengthening  position  against the currencies in which
the Company sells it products, the Company's revenues can be adversely affected.

Special Note Regarding Forward Looking Statements

     Certain statements in this Report constitute  "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking  statements.  Such  factors  include,  among other  things,  the
following:  the Company's  ability to manage growth;  the risks  associated with
successfully   integrating  acquired  businesses;   the  risks  associated  with
dependence  on  resellers,   contract   manufacturers   and  other   third-party
relationships;  the uncertainty of continued market acceptance of PC-based video
products;  the Company's  highly  competitive  industry and rapid  technological
change within the Company's industry; the risks associated with development and

<PAGE>

Special Note Regarding Forward Looking Statements-continued

introduction of new products; the need to manage product transitions;  the risks
associated with product defects and reliability  problems;  the risks associated
with  single  source  suppliers;  the  uncertainty  of  patent  and  proprietary
technology  protection  and reliance on technology  licensed from third parties;
the risks of third party claims of  infringement;  the  Company's  dependence on
retention and  attraction of key  employees;  the risks  associated  with future
acquisitions;  the risks associated with international licensing and operations;
general economic and business  conditions;  and other factors referenced in this
Report.

PART II. OTHER INFORMATION

Item 1  Legal Proceedings

     There are no new events to report  subsequent to the disclosures  contained
in the Company's September 30, 1999 Form 10K.


Item 6  Exhibits and Reports on Form 8-K

(a) Exhibits

        27. Financial Data Schedule

(b) Reports on form 8-K
           None


<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  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.


                             HAUPPAUGE DIGITAL, INC.
                             -----------------------
                                   Registrant




Date: February 11, 2000                 By /s/ Kenneth Plotkin
                                           ------------------------
                                           KENNETH  PLOTKIN
                                           Vice President and
                                           Chief Executive Officer




Date: February 11, 2000                 By /s/ Gerald Tucciarone
                                           ------------------------
                                           GERALD TUCCIARONE
                                           Treasurer and Chief
                                           Financial Officer





<PAGE>