FORM 10-Q
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


{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 0-5896

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


            NEW YORK                                   11-1978958
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


                145 OSER AVENUE, HAUPPAUGE, NEW YORK    11788
              (Address of principal executive office) (Zip Code)



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

Indicated  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 report),  and (2) has been subject to such
filing requirements for the past 90 days.



                        YES  X                      NO __



Number of Shares of Registrant's Common Stock Outstanding as of February 7, 2000
- 3,653,521 (Excluding 412,200 Shares of Treasury Stock).


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FORM 10-Q                                                                       December 31, 1999
Page  2


PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS


                                         JACO ELECTRONICS, INC. AND SUBSIDIARIES
                                          CONDENSED CONSOLIDATED BALANCE SHEETS
                                                       (UNAUDITED)


                                                              December 31,              June 30,
                                                                  1999                    1999
                                                             --------------           ------------
ASSETS

Current Assets

<S>                                                           <C>                       <C>
         Cash                                                 $   479,127               $   922,247
         Marketable securities                                    896,729                   881,622
         Accounts receivable - net                             29,239,832                23,408,900
         Inventories                                           35,179,108                33,224,719
         Prepaid expenses and other                               692,200                   660,782
         Prepaid and refundable income taxes                                                990,855
         Deferred income taxes                                    738,000                   336,000
                                                              -----------               -----------

                  Total current assets                         67,224,996                60,425,125


Property, plant and equipment - net                             6,559,097                 6,983,761

Deferred income taxes                                             397,000                   390,000

Excess of cost over net assets acquired - net                   3,494,217                 3,588,449

Other assets                                                    1,456,542                 1,543,328
                                                              -----------               -----------


                                                              $79,131,852               $72,930,663
                                                              ===========               ===========




                     See accompanying notes to condensed consolidated financial statements.

</TABLE>




                                       2
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FORM 10-Q                                                                            December 31, 1999
Page 3



                                        JACO ELECTRONICS, INC. AND SUBSIDIARIES
                                          CONDENSED CONSOLIDATED BALANCE SHEETS
                                                       (UNAUDITED)


                                                                      December 31,           June 30,
                                                                         1999                  1999
                                                                    ---------------        -------------

LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities

<S>                                                                 <C>                 <C>
         Accounts payable and accrued expenses                      $ 20,803,690        $ 17,635,319
         Current maturities of long term debt and
           capitalized lease obligations                                 843,936             791,814
         Income taxes payable                                            183,758
                                                                   -------------        ------------

         Total current liabilities                                    21,831,384          18,427,133

Long term debt and capitalized lease obligations                      20,526,364          18,885,664

Deferred compensation                                                    775,000             750,000


SHAREHOLDERS' EQUITY


         Preferred stock - authorized, 100,000 shares,
           $10 par value; none issued
         Common stock - authorized 10,000,000 shares,
           $.10 par value; issued 4,065,721 shares
            and 3,653,521 shares outstanding                             406,572             406,572
         Additional paid-in capital - net                             22,598,795          22,531,295
         Retained earnings                                            15,018,356          13,920,807
         Accumulated other comprehensive income                          179,896             213,707
         Treasury stock                                               (2,204,515)         (2,204,515)
                                                                     ------------        ------------

         Total shareholders' equity                                   35,999,104          34,867,866
                                                                      ----------          ----------


                                                                     $79,131,852         $72,930,663
                                                                      ==========          ==========

                       See accompanying notes to condensed consolidated financial statements.

</TABLE>




                                       3
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FORM 10-Q                                                                       December 31, 1999
Page 4



                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     FOR THE THREE MONTHS ENDED DECEMBER 31,
                                   (UNAUDITED)



                                                                   1999                 1998
                                                               --------------       -------------


<S>                                                               <C>                 <C>
NET SALES                                                         $45,100,259         $34,966,098


COST AND EXPENSES

Cost of goods sold                                                 35,232,148          28,271,002
                                                                   ----------          ----------

         Gross profit                                               9,868,111           6,695,096

Selling, general and administrative expenses                        7,978,814           6,467,866
                                                                 ------------        ------------

         Operating profit                                           1,889,297             227,230

Interest expense                                                      345,823             341,022
                                                                 ------------        ------------

         Earnings (Loss) before income taxes                        1,543,474           (113,792)

Income tax provision (benefit)                                        660,000            (46,000)
                                                                 ------------        ------------


         NET EARNINGS (LOSS)                                     $    883,474        $   (67,792)
                                                                 ============        ============

Net earnings (loss) per common share

Basic and diluted                                                $       0.24        $     (0.02)
                                                                 ============        ============

Weighted average common shares outstanding

         Basic                                                      3,653,521           3,654,182
         Diluted                                                    3,705,505           3,654,182
                                                                 ============        ============




                      See accompanying notes to condensed consolidated financial statements.

</TABLE>



                                       4
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FORM 10-Q                                                                       December 31, 1999
Page 5



                                         JACO ELECTRONICS, INC. AND SUBSIDIARIES
                                     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                           FOR THE SIX MONTHS ENDED DECEMBER 31,
                                                        (UNAUDITED)



                                                                   1999                 1998
                                                               --------------       -------------


<S>                                                               <C>                 <C>
NET SALES                                                         $87,117,622         $68,222,554

COST AND EXPENSES

Cost of goods sold                                                 69,313,906          54,825,070
                                                                   ----------          ----------
         Gross profit                                              17,803,716          13,397,484

Selling, general and administrative expenses                       15,227,411          13,262,918
                                                                 ------------        ------------
         Operating profit                                           2,576,305             134,566

Interest expense                                                      668,756             654,464
                                                                 ------------        ------------
         Earnings (Loss) before income taxes                        1,907,549           (519,898)

Income tax provision (benefit)                                        810,000           (210,000)
                                                                 ------------        ------------

         NET EARNINGS (LOSS)                                     $  1,097,549        $  (309,898)
                                                                 ============        ============

Net earnings (loss) per common share

Basic and diluted                                                $       0.30        $     (0.08)
                                                                 ============        ============

Weighted average common shares outstanding

         Basic                                                      3,653,521           3,725,441
         Diluted                                                    3,707,424           3,725,441
                                                                 ============        ============




                   See accompanying notes to condensed consolidated financial statements.

</TABLE>



                                       5
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FORM 10-Q                                                                                        December 31, 1999
Page 6



                                                          JACO ELECTRONICS, INC. AND SUBSIDIARIES
                                                              CONSOLIDATED STATEMENT OF CHANGES
                                                                  IN SHAREHOLDERS' EQUITY
                                                         FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
                                                                           (UNAUDITED)




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



<S>             <C>                     <C>             <C>          <C>               <C>                 <C>
Balance at July 1, 1999                 4,065,721       $406,572     $ 22,801,295      $ 13,920,807        $ 213,707

Net earnings                                                                              1,097,549

Unrealized loss on marketable
  securities - net                                                                                           (33,811)

Comprehensive income

Deferred compensation
                                   --------------- -------------- ----------------  ---------------- ----------------

Balance at December 31, 1999            4,065,721       $406,572     $ 22,801,295      $ 15,018,356        $ 179,896
                                   =============== ============== ================  ================ ================





                                                                          Total
                                       Treasury         Deferred      shareholders'
                                         stock       compensation        equity
                                   --------------- -------------- ----------------



<S>                                  <C>               <C>             <C>
Balance at July 1, 1999              $ (2,204,515)     $ (270,000)     $34,867,866
                                                                        ----------
Net earnings                                                             1,097,549

Unrealized loss on marketable
  securities - net                                                         (33,811)
                                                                         ----------
Comprehensive income                                                     1,063,738
                                                                         ----------
Deferred compensation                                     67,500            67,500
                                   --------------- -------------- ----------------

Balance at December 31, 1999        $ (2,204,515)     $ (202,500)      $35,999,104
                                   =============== ============== ================



                              See accompanying notes to condensed consolidated financial statements.

</TABLE>



                                       6
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<CAPTION>

FORM 10-Q                                                                              December 31, 1999
Page 7


                                         JACO ELECTRONICS, INC. AND SUBSIDIARIES
                                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           FOR THE SIX MONTHS ENDED DECEMBER 31,
                                                        (UNAUDITED)

                                                                                   1999                 1998
                                                                             ------------------   -----------------

Cash flows from operating activities
<S>                                                                                <C>                  <C>
      Net earnings (loss)                                                          $ 1,097,549          $ (309,898)

Adjustments to reconcile net earnings (loss) to net
     cash provided by (used in) operating activities
          Depreciation  and amortization                                               877,159             781,948
          Deferred compensation                                                         92,500              92,500
          Deferred income tax benefit                                                 (389,000)            (70,000)
          Provision for doubtful accounts                                              259,075             253,687
          Gain on sale of equipment                                                                         (1,655)
          Changes in operating assets and liabilities,
          (Increase) decrease in operating assets - net                             (7,084,959)            575,494
          Increase (decrease) in operating liabilities - net                         3,352,129          (2,618,043)
                                                                             ------------------   -----------------

          Net cash used in operating activities                                     (1,795,547)         (1,295,967)
                                                                             ------------------   -----------------

Cash flows from investing activities
          Capital expenditures                                                        (220,923)         (1,200,316)
          Increase in marketable securities                                            (68,918)            (35,298)
          Proceeds from sale of equipment                                                                    9,689
          Decrease (increase) in other assets                                           75,675             (84,507)
                                                                             ------------------   -----------------

         Net cash used in investing activities                                        (214,166)         (1,310,432)
                                                                             ------------------   -----------------

Cash flows from financing activities
       Borrowings under line of credit                                              29,094,235          28,698,555
       Payments under line of credit                                               (27,119,478)        (25,089,672)
       Principal payments under equipment financing
       and term loans                                                                 (408,164)           (390,463)
       Purchase of treasury stock                                                                         (784,553)
                                                                             ------------------   -----------------

Net cash provided by financing activities                                            1,566,593           2,433,867
                                                                             ------------------   -----------------

NET DECREASE IN CASH                                                                  (443,120)           (172,532)
                                                                             ------------------   -----------------

Cash at beginning of period                                                            922,247             562,556
                                                                             ------------------   -----------------

Cash at end of period                                                                $ 479,127           $ 390,024
                                                                             ==================   =================

Supplemental schedule of non-cash financing and
    investing activities
Equipment under capital leases                                                       $ 126,229           $ 552,544


                    See accompanying notes to condensed  consolidated  financial statements.
</TABLE>



                                       7
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FORM 10-Q                                                      December 31, 1999
Page 8


                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE A - BASIS OF PRESENTATION

1) The accompanying  condensed  consolidated  financial  statements  reflect all
adjustments,  consisting only of normal recurring accrual adjustments, which are
in  the  opinion  of  management,  necessary  for a  fair  presentation  of  the
consolidated  financial  position and the results of  operations  at and for the
periods presented.  Such financial statements do not include all the information
or footnotes necessary for a complete  presentation.  Therefore,  they should be
read in conjunction with the Company's audited  consolidated  statements for the
year ended June 30, 1999 and the notes thereto  included in the Company's annual
report on Form 10-K. The results of operations  for the interim  periods are not
necessarily indicative of the results for the entire year.

2) The Company has a $30,000,000 term loan and revolving line of credit facility
with its banks, which are based principally on eligible accounts receivables and
inventories as defined in the agreement.  The agreement was amended twice during
the first six months of fiscal 2000.  Effective September 1, 1999, the agreement
was amended to extend the  maturity  date to  September  13, 2001 and  effective
December 31, 1999, the requirements of certain financial covenants were amended.
The interest rate 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. The applicable interest rate may
be adjusted  quarterly and borrowings under this facility are  collateralized by
substantially all of the assets of the Company.

3) The Board of  Directors of the Company has  authorized  the purchase of up to
650,000 shares of its outstanding common stock under a stock repurchase program.
The  purchases  may be made by the Company from time to time on the open market.
The Company has made  purchases of 412,200  shares of its common stock from July
31, 1996 through  October 16, 1998 for aggregate  consideration  of  $2,204,515.
Since October 17, 1998 the Company has made no additional  purchases of treasury
stock.

4) For interim financial reporting  purposes,  the Company uses the gross profit
method for computing inventories, which consists of goods held for resale.




                                       8
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FORM 10-Q                                                                       December 31, 1999
Page 9

5)       The number of shares used in the Company's basic and diluted earnings per share computations are as follows:


                                                       Three Months Ended                     Six Months Ended
                                                          December 31,                           December 31,
                                                  ---------------------------------  --------------------------------

                                                    1999               1998                1999               1998
                                                --------------     --------------      -------------      -------------

Weighted average common shares
  outstanding net of treasury shares,
<S>                                                 <C>                <C>                <C>                <C>
  for basic earnings per share                      3,653,521          3,654,182          3,653,521          3,725,441

Common stock equivalents for
  stock options                                        51,984                                53,903
                                                --------------     --------------      -------------      -------------

Weighted average common shares
  outstanding for diluted earnings per share        3,705,505          3,654,182          3,707,424          3,725,441
                                                ==============     ==============      =============      =============

</TABLE>


         For the three  and six  months  ended  December  31,  1999  options  to
purchase 614,796 shares of common stock at a price range of $2.69 to $12.75 were
outstanding  during the period.  The stock options with exercise  prices greater
than the average quoted market prices,  have been excluded from the  computation
of diluted earnings per share as there affect is anti-dillutive.

6) 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 the three months and
six months ended  December 31, 1999 and 1998 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  included in the Company's  annual report to  shareholders.
Information about the Company's segments is as follows:





                                       9
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FORM 10-Q                                                                       December 31, 1999
Page 10

                                                        Three Months Ended                   Six Months Ended
                                                            December 31,                        December 31,
                                                            ------------                        ------------
                                                       1999             1998                1999              1998
                                                    ---------        ---------           ---------         -------
                                                           (in thousands)                      (in thousands)

Net sales from external customers
<S>                                                   <C>              <C>                 <C>               <C>
    Electronics components distribution               $42,215          $31,315             $81,439           $61,358
    Contract manufacturing                              2,885            3,651               5,679             6,865
                                                      -------          -------             -------           -------

                                                      $45,100          $34,966             $87,118           $68,223
                                                       ======           ======              ======            ======

Intersegment net sales
    Electronics components distribution             $      63        $      91           $     131          $    162
    Contract manufacturing                              _____               51               _____               111
                                                                       -------                               -------

                                                    $      63         $    142            $    131          $    273
                                                     ========          =======             =======           =======

Operating profit (loss)
    Electronics components distribution               $ 1,704         $    110             $ 2,286          $   (116)
    Contract manufacturing                                185              117                 290               251
                                                      -------          -------             -------           -------

                                                      $ 1,889         $    227             $ 2,576          $    135
                                                        =====          =======              ======           =======

Interest expense
    Electronics components distribution              $    220         $    205            $    412          $    390
    Contract manufacturing                                126              136                 257               264
                                                     --------         --------             -------           -------

                                                     $    346         $    341            $    669           $   654
                                                      =======          =======             =======            ======
Income tax provision (benefit)

    Electronics components distribution             $     635        $     (39)             $    796         $    (205)
    Contract manufacturing                                 25               (7)                   14                (5)
                                                     --------         ---------             --------         ----------

                                                     $    660        $     (46)             $    810         $    (210)
                                                      =======         =========              =======          =========

Identifiable assets
    Electronics components distribution               $69,329          $61,530               $69,329           $61,530
    Contract manufacturing                              9,803           12,048                 9,803            12,048
                                                      -------          -------               -------           -------

                                                      $79,132          $73,578               $79,132           $73,578
                                                       ======           ======                ======            ======

Capital expenditures
    Electronics components distribution             $      63         $    404              $    129          $    624
    Contract manufacturing                                 46               53                    92               576
                                                      -------          -------               -------           -------

                                                     $    109         $    457              $    221           $ 1,200
                                                      =======          =======               =======            ======

Depreciation and amortization
    Electronics components distribution              $    283         $    274              $    571          $    521
    Contract manufacturing                                155              133                   306               261
                                                     --------         --------               -------           -------

                                                     $    438         $    407              $    877           $   782
                                                      =======          =======               =======            ======



</TABLE>




                                       10
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FORM 10-Q                                                      December 31, 1999
Page 11


                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
                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 Custom Electronics,  Inc., a wholly owned subsidiary
of the  Company.  The  Company  is also  expanding  in the  flat  panel  display
value-added  market  which  includes  full system  integration,  kitting and the
implementation of touch technologies.




                                       11
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FORM 10-Q                                                                       December 31, 1999
Page 12


Results of Operations

The following  table sets forth  certain  items in the  Company's  statements of
operations as a percentage of net sales for the periods shown:



                                                 Three Months Ended                     Six Months Ended
                                                    December 31,                          December 31,
                                           ------------------------------         ---------------------------

                                               1999               1998                1999             1998
                                            ----------         ----------          ----------       ----------

<S>                                                <C>             <C>                 <C>               <C>
Net Sales                                        100.0%             100.0%              100.0%           100.0%
Cost of goods sold                                78.1               80.9                79.6             80.4
                                             ----------         ----------          ----------       ----------

Gross Profit                                      21.9               19.1                20.4             19.6
Selling, general and
  administrative expenses                         17.7               18.5                17.4             19.4
                                             ----------         ----------          ----------       ----------

Operating  profit                                  4.2                0.6                 3.0              0.2
Interest expense                                   0.8                0.9                 0.8              1.0
                                             ----------         ----------          ----------       ----------

Earnings (Loss) before income taxes                3.4              (0.3)                 2.2            (0.8)
Income tax provision (benefit)                     1.4              (0.1)                 0.9            (0.3)
                                              ----------         ----------          ----------       ----------
NET EARNINGS (LOSS)                                2.0%             (0.2)%                1.3%           (0.5)%
                                              =========           =========          ==========       ==========

</TABLE>

COMPARIS0N  OF THE THREE AND SIX MONTHS  ENDED  DECEMBER  31,1999  AND  DECEMBER
31,1998

         Net sales for the three and six  months  ended  December  31,1999  were
$45.1  million and $87.1  million,  respectively, compared to $35.0  million and
$68.2 million for the three and six months ended December 31,1998,  respectively
representing  increases  in net  sales of 29.0%  and  27.7%,  respectively.  The
Company's  net sales were  impacted by strong demand for both active and passive
components including record quarterly sales of flat panel displays and monitors.
The Company has continued to invest in increasing the number of sales, marketing
and engineering  personnel,  which in conjunction with, the electronic automated
inventory  management  systems,  provides  a  value-added  service to enable the
Company to increase net sales, in addition,  there has been increases  resulting
from the strong demand for product.
         Gross profit  margins as a percentage of net sales were 21.9% and 20.4%
for the three and six months ended December 31,1999,  respectively,  compared to
19.1%  and  19.6%  for  the  three  and  six  months  ended  December   31,1998,
respectively. The increases are attributable to the strong demand for components
that currently  exist  throughout the  electronics  industry.  During the second
quarter,   there  has  been  a  world-wide  shortage  in  capacitors  which  has
historically represented a significant portion of the Company's sales.




                                       12
<PAGE>




FORM 10-Q                                                      December 31, 1999
Page 13

         Selling,  general and  administrative  expenses ("S,G&A") for the three
and six months  ended  December  31, 1999 were $8.0  million  and $15.2 million,
respectively,  increases of $1.5  million and $2.0 million when  compared to the
three and six months ended December 31, 1998,  respectively.  As a percentage of
net sales, S,G&A for the three and six months ended December 31, 1999 were 17.7%
and  17.4%,  respectively,  compared  to 18.5%  and  19.4% for the three and six
months ended December 31, 1998,  respectively.  These trends  reflect  operating
efficiencies achieved with higher revenue levels.
         Interest  expense for the three and six months ended  December 31, 1999
were $346,000 and $669,000,  respectively, compared to $341,000 and $654,000 for
the three and six months ended December 31, 1998, respectively.  The Company has
been able to maintain its  borrowings  at  comparable  levels to the prior year.
Additionally, the rates have remained relatively constant.
         The net earnings for the three and six months  ended  December 31, 1999
were $883,000 and $1,098,000 or $.24 and $.30 per share  diluted,  respectively,
compared  to net  losses  of  $68,000  and  $310,000  or $.02 and $.08 per share
diluted,  respectively,  during the same  periods in the last fiscal  year.  The
increase in earnings was attributable to the increase in net sales, the increase
in gross profit margins and the operating  efficiencies  achieved in S,G&A.  The
Company  continues to be  cautiously  optimistic  that it is  positioned  to see
increased  performance  based on the strong  demand for  electronic  components,
continuing  growth in the  Company's  flat  panel  division,  and the  automated
inventory management programs.

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  expiring  September 13, 2001. 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 $18,938,332
at December 31,  1999.  The term loan,  with a remaining  balance of $267,857 at
December 31, 1999, requires monthly principal payments of $17,857, together with
interest   through   March  1,  2001.   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 December  31,  1999,  and  prohibits  the
payment of cash dividends.
         For the six months ended December 31, 1999, the Company's net cash used
in operating  activities was approximately $1.8 million, as compared to net cash
used in operating  activities of $1.3 million for the six months ended  December
31, 1998. The increase is primarily attributable to an increase in inventory and
accounts  receivable  which was  partially  offset by an  increase  in  accounts
payable and accrued  expenses and net earnings for the six months ended December
31, 1999.  Net cash used in investing  activities  decreased to $0.2 million for
the six months ended  December 31, 1999, as compared to $1.3 million for the six
months  ended  December 31, 1998.  The decrease is primarily  attributable  to a
reduction in capital  expenditures.  Net borrowings  under the Company's line of
credit was  approximately  $2.0  million for the six months  ended  December 31,
1999,  as compared to net  borrowings  of $3.6  million for the six months ended
December 31, 1998.  The change of $1.6  million is primarily  attributable  to a
reduction in capital  expenditures and no additional purchases of treasury stock
during the six months ended December 31, 1999.  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 the first six  months of Fiscal  2000 and  Fiscal  1999,  inventory
turnover was 4.1x and 3.2x,  respectively.  The average days  outstanding of the
Company's  accounts  receivable at December 31, 1999 was 55 days, as compared to
58 days at December 31, 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 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. Through October 16, 1998,
the Company has purchased 412,200 shares




                                       13
<PAGE>




FORM 10-Q                                                      December 31, 1999
Page 14

of its  common  stock for  aggregate  consideration  of  $2,204,515  under  this
program. Since October 17, 1998, the Company has made no additional purchases of
treasury stock.

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

         The year 2000 ("Y2K") issue was the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems  would have been unable to interpret  dates beyond the year 1999,  which
would 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  had  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,  which was fully  completed by late 1999, was the final major area of
exposure to ensure  compliance.  The Company  had  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 production  as of 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 compliant
as of September 1, 1998.

     Jaco's  distribution  facilities:  warehouse,  shipping and other  physical
handling have been tested and are Y2K  compliant.  At this time, the Company has
tested  substantially all of its programs and has experienced no system problems
as it relates to Y2K issues. There were only minor corrections that needed to be
made to certain  non-essential  applications.  In  general,  the Y2K  compliance
efforts  continue  to be  part of the  Company's  ongoing  software  development
process.
         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.

Inflation

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

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 January 31, 2000,
$15,701,266  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 $157,000.





                                       14
<PAGE>





FORM 10-Q                                                      December 31, 1999
Page 15


PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

                           Nothing to Report

Item 2.           Changes in Securities and Use of Proceeds

                           Nothing to Report

Item 3.           Defaults Upon Senior Securities

                           Nothing to Report

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

                           Nothing to Report

Item 5.          Other Information

                            Nothing to Report

Item 6.          Exhibits and Reports on Form 8-K

a)       Exhibits

                             27.1       Financial Data Schedule

                             99.8.6   Amendment to Second Restated
                                      and Amended Loan and Security Agreement
                                      dated December 31, 1999


b)       Reports on Form 8-K  None







                                       15
<PAGE>







                                S I G N A T U R E




         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.


                             JACO ELECTRONICS, INC.
                                  (Registrant)



                             BY: /s/ Jeffrey D. Gash
                                     Jeffrey D. Gash, Vice President/Finance
                                     (Principal Financial Officer)









DATED:  February 11, 2000