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:       March 31, 2000

                                       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 May 7,  2000  8,866,100  shares  of .01  par  value  Common  Stock  of the
registrant were outstanding, not  including  treasury  shares

                                       1
<PAGE>

                HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES

                                      INDEX

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements                                           Page No.

Condensed Consolidated Balance Sheets-
   March 31, 2000 and September 30, 1999                                    3

Condensed Consolidated Statements of Income-
  Six Months ended March 31, 2000 and 1999                                  4

Condensed Consolidated Statements of Income-
  Three Months ended March  31, 2000 and 1999                               5

Condensed Consolidated Statements of Cash Flows-
  Six Months ended March  31, 2000 and 1999                                 6

Notes to Condensed Consolidated Financial Statements                      7-9

Item 2. Management's Discussion and Analysis of  Financial Condition     9-18
        and Results of Operations


PART II. OTHER INFORMATION

Item 1.  Legal proceedings                                                 18

Item 6.  Exhibits and Reports on form 8-K                                  18


SIGNATURES                                                                 19
----------

                                       2

<PAGE>
PART I.  FINANCIAL INFORMATION

        Item 1.  Financial Statements

                    HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          March 31,

                                          ASSETS                                            2000            September 30,
                                                                                         (Unaudited)             1999
<S>                                          <C>                                                <C>             <C>
                                                                                        ------------        -------------
 CURRENT ASSETS:

     Cash and cash  equivalents                                                          $ 3,543,620          $6,122,922
     Accounts receivable, net of allowance for doubtful accounts
         of  $165,000  and $135,000, respectively                                          9,316,657           6,973,452
     Inventories                                                                          13,588,630          12,957,439
     Prepaid expenses and other current assets                                               695,326             407,916
     Deferred tax assets                                                                     465,879             477,074
                                                                                             -------             -------
                Total current assets                                                      27,610,112          26,938,803

     Property, plant and equipment-net                                                       892,453             718,562
     Security deposits and other non-current assets                                          484,570              70,219
                                                                                             -------              ------

                                                                                         $28,987,135        $ 27,727,584
                                                                                         ===========        ============

 LIABILITIES AND STOCKHOLDERS' EQUITY:

 CURRENT LIABILITIES:

    Accounts payable                                                                  $   11,541,955         $11,208,777
    Accrued expenses                                                                       1,373,031           2,698,161
    Income taxes payable                                                                     591,439             498,555
                                                                                             -------             -------
              Total current liabilities                                                   13,506,425          14,405,493
                                                                                          ==========          ==========

 STOCKHOLDERS' EQUITY:

    Common stock $.01 par value; 10,000,000 shares authorized,  9,290,900
       and 9,120,604  issued as of  March 31 , 2000  and September 30, 1999                   92,909              91,206
    Additional paid-in capital                                                            11,073,902          10,650,605
    Retained earnings                                                                      5,581,028           3,847,409
    Treasury Stock, at cost, 428,600 shares                                               (1,267,129)         (1,267,129)
                                                                                          ----------          ----------
              Total stockholders' equity                                                  15,480,710          13,322,091
                                                                                          ----------          ----------
                                                                                         $28,987,135        $ 27,727,584
                                                                                         ===========        ============

</TABLE>

      See accompanying notes to condensed consolidated financial statements

                                       3

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

<TABLE>
<CAPTION>

                                                            Six Months Ended March 31,

                                                            2000              1999
                                                         (Unaudited)       (Unaudited)

                                                      ----------------------------------

<S>                                                      <C>                  <C>
Net Sales                                               $41,568,846        $29,569,767
Cost  of  Sales                                          32,262,974         21,525,525
                                                          ----------        ----------
    Gross Profit                                          9,305,872          8,044,242

Selling, General and  Administrative Expenses             6,270,859          4,597,699
Research  and  Development Expenses                         762,825            526,256
                                                            -------            -------
    Income from operations                                2,272,188          2,920,287

Other Income:

  Interest income                                            72,703             94,147
  Other, net                                                (96,272)          ( 74,231)
                                                            -------           - ------
    Income before taxes on income                         2,248,619          2,940,203

Taxes on income                                             515,000          1,122,000
                                                            -------          ---------
    Net income                                           $1,733,619         $1,818,203
                                                         ==========         ==========
Net income per share-basic                                    $0.20              $0.21

Net income per share-diluted                                  $0.18              $0.20
                                                              =====              =====

</TABLE>



      See accompanying notes to condensed consolidated financial statements

                                       4

<PAGE>

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


<TABLE>
<CAPTION>

                                                       Three Months Ended March 31,

                                                         2000                1999
                                                     (Unaudited)         (Unaudited)
                                                     --------------------------------
<S>                                                  <C>                      <C>
Net Sales                                            $19,525,197          $14,512,768
Cost of  Sales                                        15,527,250           10,477,415
                                                      ----------           ----------
    Gross Profit                                       3,997,947            4,035,353

Selling, General and Administrative Expenses           3,187,657            2,288,385
Research and  Development  Expenses                      359,855              285,164
                                                         -------              -------
    Income from operations                               450,435            1,461,804

Other Income:

  Interest income                                         26,203               44,742
  Other, net                                            (134,174)            (115,994)
                                                        --------             --------
    Income before taxes on  income                       342,464            1,390,552

Taxes on income                                           85,000              525,000
                                                          ------              -------
    Net income                                          $257,464             $865,552
                                                        ========             ========
Net income per share-basic                                 $0.03                $0.10

Net income per share-diluted                               $0.03                $0.09
                                                           =====                =====


</TABLE>

      See accompanying notes to condensed consolidated financial statements

                                       5

<PAGE>

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

<TABLE>
<CAPTION>

                                                                        Six Months Ended March 31,

                                                                          2000                 1999
                                                                       (Unaudited)         (Unaudited)
                                                                     ----------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                       <C>                     <C>
  Net income                                                           $1,733,619          $1,818,203
                                                                       ----------          ----------
   Adjustments to reconcile net income to net cash
    used in operating activities:
     Depreciation and amortization                                        115,459              75,369
     Provision for uncollectible accounts receivable                       30,000              20,000
     Deferred tax benefits                                                 11,195            (122,900)
     Other non cash items                                                  41,008               2,400
         Changes in current assets and liabilities:
      Accounts receivable                                              (2,373,205)         (1,133,618)
      Inventories                                                        (631,191)           (850,089)
      Prepaid expenses and other  assets                                 (287,410)             26,469
      Other assets                                                       (414,358)               -
      Accounts payable and other current liabilities                     (899,068)            (95,721)
                                                                         --------             -------
                                                                       (4,407,570)         (2,078,090)
                                                                       ----------         - ---------
        Net cash used in operating activities                          (2,673,951)           (259,887)
                                                                       ----------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Purchases of property, plant and equipment                          (289,350)           (283,259)
                                                                         --------            --------
               Net cash used in investing activities                     (289,350)           (283,259)
                                                                         --------            --------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Purchase of treasury stock                                               -               (63,525)
     Proceeds from the exercise of stock options                          383,999              60,884
                                                                          -------              ------
        Net cash  provided by (used in) financing activities              383,999              (2,641)
                                                                          -------              ------
        Net  decrease in cash and cash equivalents                     (2,579,302)           (545,787)
     Cash and Cash Equivalents, beginning of period                     6,122,922           6,281,852
                                                                        ---------           ---------
     Cash and Cash Equivalents, end of period                         $ 3,543,620          $5,736,065
                                                                      ===========          ==========
SUPPLEMENTAL DISCLOSURES:

     Income taxes paid                                                   $414,677          $1,313,615
                                                                         ========          ==========

</TABLE>

     See accompanying notes to condensed consolidated financial statements

                                       6

<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.  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 and six  month  period  ended  March 31,  2000 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 and six month  period ended March 31,
2000 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 consist of:

                                          March 31,           September 30,
                                            2000                   1999
                                            -----                  ----

     Component Parts                 $   3,979,487           $  4,875,940
     Work in Progress                      485,296                494,285
     Finished Goods                      9,123,847              7,587,214
                                         ---------              ---------
                                      $ 13,588,630            $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
dilutive  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:

                                       7

<PAGE>

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

Net income per share - continued

                                                      Three Months Ended
                                                           March 31,
                                                     2000                 1999
                                                     ----                 ----


Weighted average shares outstanding-basic          8,819,900           8,618,402
Number of shares issued on the assumed
    Exercise of stock options                      1,112,433             651,970
                                                   ---------             -------
Weighted average shares outstanding-diluted        9,932,333           9,270,372
                                                   ---------           ---------

                                                        Six Months Ended
                                                            March 31,
                                                     2000                  1999
                                                     ----                  ----

Weighted average shares outstanding-basic          8,796,541           8,606,714
Number of shares issued on the assumed
    Exercise of stock options                      1,067,585             623,508
                                                   ---------             -------
Weighted average shares outstanding-diluted        9,864,126           9,230,222
                                                   ---------           ---------

On February 10, 2000 the Company's  Board of Directors  authorized a two for one
stock split effected as a 100% common stock  dividend.  The stock split has been
reflected retroactively for all issued common stock.

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  reflects,  for the three and six months ended
March 31, 2000, this new structure.

                                       8

<PAGE>

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


NOTE 5.  STOCK REPURCHASE PROGRAM

     On  November  8, 1996,  the Company  approved a stock  repurchase  program,
extended by a resolution of the Board of Directors.  The Company has repurchased
on a basis  adjusted for the stock split,  428,600  shares for  $1,267,129 at an
average purchase price of approximately $2.955 per share.

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

Six Month Period ended March  31, 2000 versus March  31, 1999

     Sales for the six months ended March 31, 2000 were $41,568,846  compared to
$29,569,767  for six months ended March 31, 1999, an increase of  $11,999,079 or
41%,  comprised  of a 76%  increase  in  domestic  sales and a 26%  increase  in
international sales. The forces driving the sales growth were:

-       Sales of new products introduced 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.

                                       9

<PAGE>

Item 2.  Management's Discussion and Analysis -Continued

     Unit  sales of  digital  video and  conferencing  boards for the six months
ended  March 31,  2000  increased  80% to  approximately  587,000 as compared to
approximately  327,000 for the prior year.  Sales to domestic  customers for the
six month  period were 28% of net sales for the  current  period and 23% for the
prior comparable period. Sales to international  customers were 72% of net sales
for the current period compared to 77% for the comparable prior period.

     Gross  profit  increased  to  $9,305,872  from  $8,044,242,  an increase of
$1,261,630 or 16% over the prior period. The gross profit percentage was 22% for
the  current  period  compared  to 27%  for the  prior  comparable  period.  The
fluctuation in margins can be attributed to:

-       Slow takeoff of the digital TV market
-       Larger sales mix of lower margin  product
-       Decline in the Euro exchange rate.

     The  chart  below  illustrates  the  components  of  selling,  general  and
administrative expenses:

<TABLE>
<CAPTION>

                                                          Six months ended March  31,
                                           Dollar Costs                           Percentage of Sales
                                                                                                   Increase/
                             2000              1999          Increase          2000       1999     (Decrease)
                             ----              ----         -----------        ----       ----     ----------
<S>                          <C>                <C>            <C>              <C>       <C>         <C>

Sales & Promotional      $4,119,276        $2,848,261       $1,271,015         9.9%       9.6%         .3%
Customer Support            252,564           213,449           39,115          .6%        .7%        (.1%)
Product Handling            404,723           280,904          123,819         1.0%       1.0%          -
General & Admin           1,494,296         1,255,085          239,211         3.6%       4.3%        (.7%)
                          ---------         ---------          -------         ---        ---         ----
    Total                $6,270,859        $4,597,699       $1,673,160        15.1%      15.6%        (.5%)

</TABLE>

As a percentage of sales, Selling,  General and Administrative  expenses for the
six months  ended  March 31,  2000  declined  by .5% when  compared to the prior
comparable  period.  Declines in Customer Support and General and Administrative
expenses of .8% were offset by an increase in Sales and Promotional  expenses of
 .3%.  Represented  in  dollars,  Selling  General  and  Administrative  expenses
increased $1,673,160 over the comparable prior year's six month period.

The increase in sales and promotional expense of $1,271,015 was mainly due to:

-       Higher commission attributable to increased sales.
-       Employment of additional sales  and marketing personnel.
-       Sales and marketing  expenses of  the Company's Singapore office.
-       Increased European marketing activities.
-       Increased Latin America marketing activities.

                                       10

<PAGE>

Item 2.  Management's Discussion and Analysis -Continued

     Customer  Support  and  Product  Handling  expenses  increased  $39,115 and
$123,819 respectively.  Customer Support costs increased due to additional staff
required to maintain a high level of customer  service in light 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 $239,211 was primarily
due to:

-       Contractual salary 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 $236,569 or approximately 45%.
The increase  was due to  engineering  and  development  costs of our  Singapore
office, increased personnel and increased material for new product prototypes.

     The Company had net other  expenses for the six months ended March 31, 2000
of $23,569  compared  to net other  income for the prior  year of  $19,917.  The
decrease  in net other  income  was  primarily  due to lower  returns  on monies
invested and foreign currency losses due to the decline of the Euro.

     Provision  for income taxes was  $515,000,  or an effective tax rate of 23%
for the six months ended March 31, 2000  compared to  $1,122,000 or an effective
tax rate of 38% for the six months  ended March 31, 1999.  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
March 31, 2000 was based on this new structure.

On February 10, 2000 the Company's  Board of Directors  authorized a two for one
stock split effected as a 100% common stock  dividend.  The stock split has been
reflected retroactively for all issued common stock.

                                       11

<PAGE>

Item 2.  Management's Discussion and Analysis -Continued

     As a result of the above,  the Company's net income after taxes for the six
months ended March 31, 2000 was $1,733,619,  which resulted in basic and diluted
earnings per share of $0.20 and $0.18, respectively, on weighted average shares,
adjusted for the stock split, of 8,796,541 and 9,864,126, respectively, compared
to net income after taxes of $1,818,203 for the six months ended March 31, 1999,
which  resulted  in basic and diluted  earnings  per share of $0.21 and $0.20 on
weighted  average  shares,  adjusted  for the  stock  split,  of  8,606,714  and
9,230,222, respectively.

Three Month Period ended March  31, 2000 versus March  31, 1999

     Sales for the three months ended March 31, 2000 were  $19,525,197  compared
to  $14,512,768  for the prior  years  second  fiscal  quarter,  an  increase of
$5,012,429  or 35%,  comprised  of an 80%  increase in domestic  sales and a 20%
increase in international sales.

The primary forces driving the sales growth was an increase in the

-       Sales of  new products introduced 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 of digital  video and  conferencing  boards for the three months
ended March 31, 2000 increased about 76% to approximately 284,000 as compared to
approximately  161,000 for the prior year. Sales to domestic  customers for this
year's second fiscal quarter were 25% of net sales compared to 20% for the prior
year's second fiscal quarter.  Sales to international  customers were 75% of net
sales for the second fiscal quarter  compared to 80% for the  comparable  second
quarter of the prior fiscal year.

     Gross profit for the quarter was  $3,997,947 as compared to $4,035,353  for
the prior fiscal year's second quarter.  The gross profit percentage was 20% for
the three months ended March 31, 2000 compared to 28% for the three months ended
March 31, 1999. The fluctuation in margins can be attributed to:

-       Slow take off of the digital TV market
-       Larger sales mix of lower margin  product
-       Decline in the Euro exchange rate.

                                       12

<PAGE>

Item 2.  Management's Discussion and Analysis -Continued

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

                                                          Three months ended March  31,
                                          Dollar Costs                                   Percentage of Sales

                                                                                                            Increase/
                                     2000             1999          Increase          1999        1998     (Decrease)
                                     ----             ----         -----------        ----        ----     ---------
<S>                              <C>               <C>             <C>                <C>         <C>        <C>
Sales & Promotional              $2,087,662        1,387,423       $700,239           10.7%       9.6%       1.1%
Customer Support                    126,031          116,687          9,344             .6%        .8%       (.2%)
Product Handling                    192,039          154,675         37,364            1.0%       1.0%        -
General & Admin                     781,925          629,600        152,325            4.0%       4.4%       (.4%)
                                    -------          -------        -------            ---        ---        ---
    Total                        $3,187,657       $2,288,385       $899,272           16.3%      15.8%        .5%
</TABLE>

As a percentage of sales, Selling,  General and Administrative  expenses for the
three months ended March 31, 2000  increased by .5% when  compared to the second
quarter of the prior fiscal year. Declines in Customer Support,  and General and
Administrative  expenses  of .6% were  offset  by a 1.1%  increase  in Sales and
Promotional expense.  Represented in dollars, Selling General and Administrative
expenses increased $899,272 over the comparable period of the last fiscal year.

The increase in sales and promotional expense of $700,239 was mainly due to:

-       Higher commission attributable to increased  sales.
-       Increased sales  and marketing personnel.
-       Sales and marketing  expenses of  the Company's Singapore office.
-       Increased European marketing activities.
-       Increased Latin America marketing activities.

     Customer  Support  and  Product  Handling   increased  $9,344  and  $37,364
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 $ 152,325 was primarily
due to:

-       Contractual salary 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 $74,691 or approximately 26%.
The increase  was due to  engineering  and  development  costs of our  Singapore
office, increased personnel and increased material for new product prototypes.

                                       13

<PAGE>

Item 2.  Management's Discussion and Analysis -Continued

     The Company had net other  expenses  for the three  months  ended March 31,
2000 of $107,971  compared to net other expenses for the prior comparable period
of $71,252. The increase in net other expense was primarily due to lower returns
on monies invested and foreign currency losses due to the decline of the Euro.

     Provision for income taxes was $85,000, or an effective tax rate of 22% for
the three months ended March 31, 2000  compared to $525,000 or an effective  tax
rate of 38% for the three  months  ended March 31,  1999.  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 three months
ended March 31, 2000 was based on this new structure

On February 10, 2000 the Company's  Board of Directors  authorized a two for one
stock split effected as a 100% common stock  dividend.  The stock split has been
reflected retroactively for all outstanding common stock.

     As a result of the above,  the  Company's  net income  after  taxes for the
three  months  ended March 31, 2000 was  $257,464,  which  resulted in basic and
diluted  earnings per share of $0.03, on weighted  average shares,  adjusted for
the stock  split,  of 8,819,900  and  9,932,333,  respectively,  compared to net
income after taxes of $865,552 for the three months ended March 31, 1999,  which
resulted in basic and diluted earnings per share of $0.10 and $0.09, on weighted
average  shares,  adjusted for the stock  split,  of  8,618,402  and  9,270,372,
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.

                                       14

<PAGE>

Liquidity and Capital Resources

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

                                  March 31, 2000           September 30, 1999
                                  --------------           ------------------

Cash                           $     3,543,620             $  6,122,922
Working capital                     14,103,687               12,533,310
Stockholders' equity                15,480,710               13,322,091

The significant items of cash provided by and cash (consumed) for the six month
period ended March 31, 2000 are detailed below:
<TABLE>
<CAPTION>

<S>                                                                                                <C>
Net income (adjusted for non cash items), excluding deferred tax benefits       $   1,920,086
Change in deferred tax assets                                                          11,195
Increase in investment for current assets                                          (3,291,806)
Increase in other assets                                                             (414,358)
Cash expended for reduction in current  liabilities-net                              (899,068)
Purchase of Property, Plant & Equipment                                              (289,350)
Proceeds from the exercise of options                                                 383,999

</TABLE>

     Net cash of $2,673,951 consumed by operating  activities was primarily due
to cash invested in current  assets of  $3,291,806,  primarily  receivables  and
inventory,  cash  invested in other  assets of  $414,358,  and cash used for the
reduction of current  liabilities of $899,068 offset  partially by the Company's
net income,  adjusted for non cash items, of $1,920,086 and a change in deferred
tax assets of $11,195.

     Cash of $289,350 was used to purchase fixed assets.  The exercise of stock
options provided a cash source of $383,999.

     The Company's credit facility expired on February 28, 1998. The Company has
chosen not to renew the loan facility. The Company has reached an agreement with
Chase Manhattan Bank for a new $6,500,000  credit facility.  The facility allows
the  Company,  at its  option,  to borrow at the prime  rate or 1.25%  above the
London Interbank Offered Rate "LIBOR".  The facility is secured by the assets of
the Company, and expires on March 31, 2001.

     On November 8, 1996, the Company approved a stock repurchase  program.  The
Company has repurchased on a basis adjusted for the stock split,  428,600 shares
for $1,267,129 at an average purchase price of approximately $2.955 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  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

                                       15

<PAGE>

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 we currently due 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

                                       16

<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 experiences 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 to
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

                                       17

<PAGE>

technological  change within the Company's  industry;  the risks associated with
development  and  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



                                       18

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and 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: May  15, 2000                        By /s/ Kenneth Plotkin
      -------------                           -------------------------
                                              KENNETH PLOTKIN
                                              Vice President and
                                              Chief Executive Officer

Date: May 15, 2000                         By /s/ Gerald Tucciarone
      ------------                            -------------------------
                                              GERALD TUCCIARONE
                                              Treasurer and Chief
                                              Financial Officer








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