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, 1997

                                       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 of 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: (516) 273-5500

Indicate by check mark whether the Registrant (1) has filed all reports required
   to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
 during the preceding 12 months (or for such shorter  period that the Registrant
   was required to file such 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 3, 1998
  - 3,778,221 (Excluding 197,500 Shares of Treasury Stock and 90,000 Shares of
                               Restricted Stock).


<PAGE>
<TABLE>
<CAPTION>
FORM 10-Q                                                                        December 31, 1997
Page  2





PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS


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



                                                                 December 31,              June 30,
                                                                     1997                    1997
                                                               ------------------      -----------------

ASSETS

Current Assets

<S>                                                                    <C>                    <C>
         Cash                                                          $ 476,724              $ 463,352
         Marketable securities                                           690,723                627,179
         Accounts receivable - net                                    23,202,003             22,008,210
         Inventories                                                  32,280,464             33,311,201
         Prepaid expenses and other                                    1,177,631              1,359,617
         Prepaid income taxes                                            110,264                528,243
         Deferred income taxes                                           818,000                750,000
                                                               ------------------      -----------------

            Total current assets                                      58,755,809             59,047,802


Property, plant and equipment - net                                    5,543,853              5,009,045


Deferred income taxes                                                    261,000                244,000

Excess of cost over net assets acquired                                4,055,937              4,151,574

Other assets                                                           1,635,601              1,543,257
                                                               ------------------      -----------------

                                                                    $ 70,252,200            $69,995,678
                                                               ==================      =================





     See accompanying notes to condensed consolidated financial statements.


</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM 10-Q                                                                                  December  31, 1997
Page 3




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


                                                                                December 31,         June 30,
                                                                                    1997               1997
                                                                              -----------------  ------------------

LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities

<S>                                                                               <C>                 <C>
         Accounts payable and accrued expenses                                    $ 17,351,691        $ 17,302,127
         Current maturities of long term debt and
            capitalized lease obligations                                              585,756             599,239
                                                                              -----------------  ------------------


         Total current liabilities                                                  17,937,447          17,901,366

Long term debt and capitalized lease obligations                                    14,950,045          15,552,549

Deferred compensation                                                                  675,000             650,000


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 and
            3,975,721 shares respectively, and 3,954,221 and 3,888,221
            shares outstanding, respectively                                           406,572             397,572
         Additional paid-in capital, net of deferred compensation                   22,272,545          22,180,295
         Unrealized gain on marketable securities                                      120,697             120,200
         Retained earnings                                                          14,754,909          13,893,696
         Treasury stock                                                               (865,015)           (700,000)
                                                                              -----------------  ------------------

         Total shareholders' equity                                                 36,689,708           35,891,763
                                                                              -----------------  ------------------

                                                                               $    70,252,200         $ 69,995,678
                                                                              =================  ==================


   See accompanying notes to condensed consolidated financial statements.

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
FORM 10-Q                                                                                  December 31, 1997
Page 4




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



                                                                         1997               1996
                                                                    ----------------   ----------------


<S>                                                                     <C>                <C>
NET SALES                                                               $39,787,894        $38,194,939


COST AND EXPENSES

Cost of goods sold                                                       31,589,263         30,183,146
                                                                    ----------------   ----------------

          Gross profit                                                    8,198,631          8,011,793

Selling, general and administrative expenses                              7,149,105          6,761,206
                                                                    ----------------   ----------------

          Operating profit                                                1,049,526          1,250,587

Interest expense                                                            270,343            206,306
                                                                    ----------------   ----------------

          Earnings before income taxes                                      779,183          1,044,281

Income tax provision                                                        316,000            423,000
                                                                    ----------------   ----------------

          NET EARNINGS                                              $      463,183     $       621,281
                                                                    ================   ================

Net earnings per common share

Basic and diluted                                                   $            .12   $            .16
                                                                    ================   ================

Weighted average common shares outstanding

Basic                                                                     3,882,851          3,888,221
Diluted                                                                   3,938,860          3,940,394
                                                                    ================   ================

   See accompanying notes to condensed consolidated financial statements.


</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FORM 10-Q                                                                      December 31, 1997
Page 5



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



                                                                1997                 1996
                                                          -----------------    ------------------

<S>                                                       <C>                  <C>
NET SALES                                                 $    76,666,428       $    76,516,729


COST AND EXPENSES

Cost of goods sold                                              60,650,643            60,389,434
                                                          -----------------    ------------------

          Gross profit                                          16,015,785            16,127,295

Selling, general and administrative expenses                    14,026,220            13,353,450
                                                          -----------------    ------------------

          Operating profit                                       1,989,565             2,773,845

Interest expense                                                   542,352               405,923
                                                          -----------------    ------------------

          Earnings before income taxes                           1,447,213             2,367,922

Income tax provision                                               586,000               959,000
                                                          -----------------    ------------------


          NET EARNINGS                                    $        861,213      $      1,408,922
                                                          =================    ==================

Net earnings per common share

Basic and diluted                                         $            .22      $            .36
                                                          =================    ==================

Weighted average common shares outstanding

Basic                                                            3,885,537             3,909,906
Diluted                                                          3,939,345             3,961,315
                                                          =================    ==================


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

<TABLE>
<CAPTION>
FORM 10-Q                                                                            December 31,1997
Page 6




                                         JACO ELECTRONICS, INC. AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENT OF CHANGES
                                                  IN SHAREHOLDERS' EQUITY
                                      FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
                                                      (UNAUDITED)




                                                                                     Unrealized
                                                                    Additional        Gain on
                                           Common Stock              Paid-In         Marketable        Retained         Treasury
                                        Shares       Amount          Capital         Securities        Earnings           Stock
                                   --------------- ------------- ----------------- --------------- ----------------- --------------

<S>             <C>                     <C>           <C>            <C>                <C>            <C>               <C>
Balance at July 1, 1997                 3,975,721     $ 397,572      $ 22,180,295       $ 120,200      $ 13,893,696      $(700,000)

Issuance of restricted stock               90,000         9,000           621,000

Deferred compensation expense

Purchase of treasury stock                                                                                                (165,015)

Unrealized gain on marketable
  securities - net                                                                            497

Net earnings                                                                                                861,213
                                   --------------- ------------- ----------------- --------------- ----------------- --------------
Balance at December 31, 1997            4,065,721     $ 406,572      $ 22,801,295       $ 120,697      $ 14,754,909      $(865,015)
                                   =============== ============= ================= =============== ================= ==============

                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF CHANGES
                             IN SHAREHOLDERS' EQUITY
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
                                   (UNAUDITED)

                                       Deferred      Shareholders'
                                     Compensation        Equity
                                   --------------- -----------------

Balance at July 1, 1997                                $ 35,891,763

Issuance of restricted stock           $ (540,000)           90,000

Deferred compensation expense              11,250            11,250

Purchase of treasury stock                                 (165,015)

Unrealized gain on marketable
  securities - net                                              497

Net earnings                                                 861,213
                                   --------------- -----------------

Balance at December 31, 1997            $ (528,750)     $ 36,689,708
                                   =============== =================


      See accompanying notes to condensed consolidated financial statements


</TABLE>
<PAGE>

<TABLE>
<CAPTION>
FORM 10-Q                                                                                  December 31, 1997
Page 7



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


                                                                                  1997                1996
                                                                             ----------------    ----------------
Cash flows from operating activities

<S>                                                                           <C>                 <C>
      Net earnings                                                            $      861,213     $    1,408,922

Adjustments to reconcile net earnings to net
     cash provided by operating activities
          Depreciation  and amortization                                             650,795             463,786
          Deferred compensation                                                       36,250              25,000
          Deferred income tax benefit                                                (85,000)            (15,000)
          Gain on sale of equipment                                                                      (11,094)
          Provision for doubtful accounts                                            235,575             162,450
          Changes in operating assets and liabilities, net
             of effect of acquisitions
          Decrease in operating assets - net                                         291,333           2,785,845
          Increase (decrease) in operating liabilities - net                          49,564          (2,760,155)
                                                                             ----------------    ----------------
          Net cash provided by operating activities                                2,039,730           2,059,754
                                                                             ----------------    ----------------

Cash flows from investing activities
         Capital expenditures                                                     (1,023,300)           (782,641)
         Proceeds from sale of equipment                                                                  34,000
         Acquisition of operating assets - net                                                        (1,257,369)
         Increase in marketable securities - net                                     (63,046)
         Increase in other assets                                                   (159,010)           (128,989)
                                                                             ----------------    ----------------

         Net cash used in investing activities                                    (1,245,356)         (2,134,999)
                                                                             ----------------    ----------------
Cash flows from financing activities
       Borrowings under line of credit                                            73,312,120          81,253,959
       Payments under line of credit                                             (73,455,110)        (80,002,019)
       Principal payments under equipment financing
          and term loans                                                            (472,997)           (240,359)
       Purchase of treasury stock                                                   (165,015)           (700,000)
                                                                             ----------------    ----------------

       Net cash (used in) provided by financing activities                          (781,002)            311,581
                                                                             ----------------    ----------------

       NET INCREASE IN CASH                                                           13,372             236,336
                                                                             ----------------    ----------------

Cash at beginning of period                                                          463,352             164,161
                                                                             ----------------    ----------------

Cash at end of period                                                         $      476,724      $      400,497
                                                                             ================    ================


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

FORM 10-Q                                                      December 31, 1997
 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, 1997 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 to (i) extend the maturity date to September 13, 2000,  (ii) change
     the interest rate to a rate based on the average 30 day LIBOR rate plus 3/4
     % to 1 1/4% depending on the Company's  performance measured by a financial
     ratio  effective  January 1, 1998 and (iii)  changed  the  requirements  of
     certain financial  covenants.  The applicable interest rate may be adjusted
     quarterly  and  borrowings  under  this  facility  are   collateralized  by
     substantially all of the assets of the Company.

3)   The Board of Directors of the Company has  authorized the purchase of up to
     250,000  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 at the Company's discretion.  The Company has resumed purchases
     of its common  stock under this  program and as of February 3, 1998 a total
     of 197,500  shares have been  repurchased  for aggregate  consideration  of
     $1,406,270.

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

5)   In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial  Accounting  Standards No. 128, "Earnings Per Share," which is
     effective  for  financial  statements  for both interim and annual  periods
     ending after  December 15, 1997.  The new standard  eliminates  primary and
     fully  diluted  earnings per share and requires  presentation  of basic and
     diluted  earnings per share  together with  disclosure of how the per share
     amounts  were  computed.  The  Company has adopted  this  standard  and has
     restated its earnings per share for prior periods presented.


<PAGE>

FORM 10-Q                                                      December 31, 1997
Page 9

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

<TABLE>
<CAPTION>

                                                         Three Months Ended             Six Months Ended
                                                            December 31,                  December 31.
                                                      -------------------------      ------------------------
                                                         1997          1996             1997        1996
                                                      -----------   -----------      ----------- ------------

Weighted average common shares
  outstanding net of treasury shares,
<S>                                                    <C>           <C>              <C>          <C>
  for basic earnings per share                         3,882,851     3,888,221        3,885,537    3,909,906

Common stock equivalents for
  stock options and restricted stock                      56,009        52,173           53,808       51,409
                                                      -----------   -----------      -----------  -----------

Weighted average common shares
  outstanding for diluted earnings per share           3,938,860     3,940,394        3,939,345    3,961,315
                                                       =========     =========        =========    =========

</TABLE>



6)   During  August  1996,   and  January  1997,   the  Company   purchased  QPS
     Electronics, Inc. and Corona Electronics, Inc., respectively, both of which
     are electronic component distributors. Aggregate consideration paid for the
     acquisitions approximated $4,700,000 of which $157,500 was paid through the
     issuance of 20,000 shares of the Company's common stock. These acquisitions
     have been accounted for by the purchase method and, as such, the fair value
     of the assets and  liabilities  acquired  have been recorded on the date of
     the respective acquisitions. The respective results of their operations are
     included with those of the Company from the date of acquisition. The excess
     of the  purchase  price,  over  the  fair  value  of the  assets  acquired,
     approximately $3,053,000, is being amortized using the straight-line method
     over a period of twenty years. Pro forma  historical  results of operations
     are not presented,  as such results would not be materially  different from
     the historical results of the Company.

7)   In December 1997, the  shareholders' of the Company approved an amendmentto
     the  Company's  1993  Non-Qualified  Stock  Option  Plan,  (the  "Plan") to
     increase the aggregate number of shares of common stock which may be issued
     upon exercise of all options  granted under the Plan from 293,333 shares to
     600,000 shares.  Additionally,  the shareholders'  approved the adoption of
     the Jaco  Electronics,  Inc.  Restricted Stock Plan (the "Restricted  Stock
     Plan").  The Restricted Stock Plan,  enables the Board of Directors or Plan
     Committee  to have sole  discretion  and  authority  to  determine  who may
     purchase  restricted stock, the number of shares,  the price to be paid and
     the  restrictions  placed upon the stock.  Pursuant to the Restricted Stock
     Plan,  the Board of Directors has  authorized the purchase of 90,000 shares
     of the Company's  common stock by certain  employees at a purchase price of
     $1.00 per  share.  Shares  purchased  are  subject to a  four-year  vesting
     period.

<PAGE>


FORM 10-Q                                                      December 31, 1997
Page 10




                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


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  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  (FPD's) 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 configuring
complete computer systems to customer  specifications  both in tower and desktop
configurations, 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),  automated  inventory  management  services and  contract  manufacturing
services   through  the   Company's   wholly-owned   subsidiary,   Nexus  Custom
Electronics, Inc.


<PAGE>


FORM 10-Q                                                      December 31, 1997
Page 11


Results of Operations

The  following  table sets forth  certain  items in the  Company's  statement of
earnings as a percentage of net sales for the periods shown;

<TABLE>
<CAPTION>


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

                                             1997             1996                    1997             1996
                                        ------------    --------------           --------------    -------------

<S>                                          <C>             <C>                      <C>               <C>
Net Sales                                    100.0%          100.0%                   100.0%            100.0%

Cost of goods sold                            79.4             79.0                     79.1             78.9
                                         ------------    --------------           --------------    -------------

Gross profit                                  20.6             21.0                     20.9             21.1

Selling, general and
  administrative expenses                     18.0             17.7                     18.3             17.5
                                         ------------    --------------           --------------    -------------

Operating profit                               2.6              3.3                      2.6              3.6

Interest expense                               0.6              0.6                      0.7              0.5
                                         ------------    --------------           --------------    -------------

Earnings before income taxes                   2.0              2.7                      1.9              3.1

Income tax provisions                          0.8              1.1                      0.8              1.3
                                        ------------    --------------           --------------    -------------

NET EARNINGS                                   1.2%             1.6%                     1.1%             1.8%
                                        ============    ==============           ==============    =============

</TABLE>

COMPARISON OF THE THREE AND SIX MONTHS ENDED  DECEMBER 31, 1997 AND DECEMBER 31,
1996
--------------------------------------------------------------------------------

Net sales for the second  quarter and six months  ended  December  31, 1997 were
$39.8  million and $76.7  million as compared to $38.2 million and $76.5 million
for the three months and six months ended December 31, 1996. This  represented a
4.2 % and .2%  increase in net sales,  respectively.  The  increase in net sales
during the current quarter was partially attributable to the sales of flat panel
displays and an increase in revenue from the wholly owned subsidiary  (Nexus), a
contract  manufacturer.  The Company  believes that its flat panel division will
generate sales growth in future periods.  Additionally,  during the quarter, the
Company  increased its sales in contract  manufacturing  through  growth in both
existing and new customers.

<PAGE>

FORM 10-Q                                                      December 31, 1997
Page 12


Gross profit  margins for the three and six months ended  December 31, 1997 were
20.6% and 20.9% as compared to 21.0% and 21.1% for the comparable periods of the
prior fiscal year. The Company was able to slightly  increase  profit margins on
it's  component  sales.  However,  the slight  overall  decrease in gross profit
margins during the three and six months ended December 31, 1997 was attributable
to the lower profit margins  generated by contracting  manufacturing,  which was
the result of increased revenue from larger contracts with lower margins.

Selling,  general and administrative (SG&A) expenses were $7.1 million and $14.0
million for the three and six months ended  December 31, 1997,  compared to $6.8
million and $13.4  million  last year.  The  increase  was  attributable  to the
acquisition  of Corona  Electronics,  Inc.  during  January 1997,  the hiring of
additional   sales  personnel  for  the  flat  panel  group,   additional  field
application   engineers   (FAE's)  and   additional   management   to  focus  on
semiconductor  growth.  These increases were partially offset during the current
quarter  and six months by a  reduction  in certain  administrative  costs and a
reduction in non-core personnel.

Interest expense increased to $270,000 and $542,000 for the three and six months
ended  December 31, 1997  compared to $206,000 and $406,000 for the same periods
last year. The increase was primarily  attributable to the increased  borrowings
resulting from the acquisition of Corona  Electronics, Inc. (see note A-6 of the
notes to condensed consolidated financial statements) during fiscal 1997.

Net earnings for the three months ended December 31, 1997 was $463,000,  or $.12
per share  diluted,  as compared to $621,000,  or $.16 per share diluted for the
three  months ended  December  31,  1996.  Net earnings for the six months ended
December  31,  1997 was  $861,000,  or $.22 per share  diluted,  as  compared to
$1,409,000,  or $.36 per share diluted as compared to the comparable period last
year.  The  decrease in net earnings  was  attributable  to the increase in SG&A
expenses  incurred in expanding the  semiconductor  management group, flat panel
display  division,  field  application  engineer  program and the acquisition of
Corona Electronics, Inc.



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 receivables and  inventories of the Company as defined in the
agreements expiring September 13, 2000. Effective June 1, 1997, borrowings under
the credit  facility bear interest at the average  30-day LIBOR rate plus 1%. As
of January 1, 1998,  interest is based on the average  daily  30-day  LIBOR rate
plus 3/4% to 1 1/4% depending on a financial ratio. The applicable interest rate
may be adjusted  quarterly.  The  outstanding  balance on the revolving  line of
credit  facility was  $13,880,202  at December 31, 1997.  The term loan,  with a
remaining  balance of $696,428 at December 31, 1997,  requires monthly principal
payments of $17,857,  together with interest through  September 13, 2000, with a
final payment of $107,147 on September 13, 2000.  Borrowings under this facility
are  collateralized  by  substantially  all of the  assets of the  Company.  The
agreement  contains  provisions for maintenance of certain financial ratios, all
of which

<PAGE>

FORM 10-Q                                                      December 31, 1997
Page 13


the Company believes it is in compliance with at December 31, 1997, and
prohibits the payment of cash  dividends.  The  agreement  also provides for the
issuance of letters of credit by the banks on the Company's  behalf. At December
31, 1997, $500,000 of such letters of credit were outstanding.

For the six months ended  December 31, 1997,  the Company's net cash provided by
operating  activities  was  $2,040,000  as  compared  to net  cash  provided  by
operating  activities of $2,060,000  for the six months ended December 31, 1996.
Net cash used in investing  activities decreased to $1,245,000 for the first six
months of fiscal  1998,  as compared to  $2,135,000  for the first six months of
fiscal 1997. The acquisition of the operating  assets of QPS  Electronics,  Inc.
during fiscal 1997 required $1,257,000, which was financed substantially through
additional  borrowings from the Company's  line of credit.  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.

On April 15, 1996, the Company's  Board of Directors  authorized the purchase of
up to  250,000  shares of its  common  stock or  approximately  6.3% of the then
outstanding shares,  under a stock repurchase program.  During the quarter,  the
Company repurchased 24,000 shares at an average market price of $6.88 per share.
As of February 3, 1998, in the aggregate,  the Company has  repurchased  197,500
shares at an average market price of $7.12 per share.

The year 2000 data management  issue,  which has received wide spread publicity,
is not expected to have a material impact on the Company.

The first six months of fiscal  1998 and 1997  inventory  turnover  was 3.7x and
4.1x,  respectively.  The average days  outstanding  of the  Company's  accounts
receivable  at December 31, 1997 was 54 days, as compared to 52 days at December
31,  1996.  The Company did not  experience  any  significant  trade  collection
difficulties during the first six months of fiscal 1998.

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.

INFLATION

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

<PAGE>

FORM 10-Q                                                      December 31, 1997
Page 14


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

                  Jaco's Annual Meeting of Shareholders  was held on December 9,
                  1997. The Shareholders approved the following:

               (i)  The  election  of  each  of the  nominees  to the  Board  of
                    Directors:


                    Stephen A. Cohen     For: 3,381,990 Withheld: 220,582

                    Edward M. Frankel    For: 3,382,164 Withheld: 220,408

                    Charles B. Girsky    For: 3,382,164 Withheld: 220,408

                    Joel H. Girsky       For: 3,381,899 Withheld: 220,673

                    Joseph F.Hickey,Jr.  For: 3,382,164 Withheld: 220,408


               (ii) An  amendment  to the  Company's  1993  Non-Qualified  Stock
                    Option Plan (the "1993  Non-Qualified  Plan") as amended, to
                    increase  the  aggregate  number of shares of common  stock,
                    $0.10 par value per share (the "Common Stock"), which may be
                    issued upon the  exercise of the options  granted  under the
                    1993  Non-Qualified Plan from 293,333 shares of Common Stock
                    to 600,000 shares of Common Stock

                    For: 1,599,185   Against: 1,283,012   Abstention: 105,467


<PAGE>



FORM 10-Q                                                      December 31, 1997
Page 15



               (iii)An amendment to the  Company's  1993  Non-Qualified  Plan to
                    incorporate  certain  provisions  of  Section  162(m) of the
                    Internal Revenue Code.

                    For:  2,478,299  Against: 835,956   Abstention:  105,011



               (iv) The Company's Restricted Stock Plan.

                    For: 2,096,725 Against: 686,749    Abstention:    105,941



Item 5.          Other Information

                            Nothing to Report

Item 6.          Exhibits and Reports on Form 8-K

                           a)          Exhibits:

                                      27. Financial Data Schedule

                            b)        Reports on Form 8-K: None


<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 13, 1998