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


{X}      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2006

                                       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 offices)          (Zip Code)


Registrant's telephone number, including area code:   (631) 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 reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X                    No __
   -----

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and larger accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer |_|  Accelerated filer |_|  Non-accelerated filer |X|

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes __            No   X
                    --------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

  Class                         Shares Outstanding at February 14, 2006
  -----                         ---------------------------------------
Common Stock,$0.10        6,294,332 (excluding 659,900 shares held as treasury
Par Value                                       stock)



<PAGE>



FORM 10-Q                                                     December 31, 2006
Page 2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

<TABLE>

                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS



                                                               December 31,                      June 30,
                                                                   2006                            2006
                                                           ---------------------           ---------------------
                                                               (Unaudited)
ASSETS

Current assets

<S>                                                         <C>                                      <C>
            Cash                                            $            9,922                       $   29,211
            Accounts receivable - net                               38,405,261                       36,498,390
            Inventories - net                                       31,890,952                       33,271,437
            Prepaid expenses and other
                                                                     3,999,351                        1,027,763
                                                           ---------------------           ---------------------

                        Total current assets                        74,305,486                       70,826,801



Property, plant and equipment - net                                  1,604,341                        1,766,467

Goodwill                                                            25,416,087                       25,416,087


Note receivable                                                      2,750,000                        2,750,000


Other assets                                                         2,274,639                        2,320,296
                                                           ---------------------           ---------------------

Total assets                                                $     106,350,553              $         103,079,651
                                                           =====================           =====================




                      See accompanying notes to condensed consolidated financial statements.

</TABLE>


<PAGE>


FORM 10-Q                                                      December 31, 2006
Page 3


<TABLE>

                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS



                                                                  December 31,                  June 30,
                                                                      2006                        2006
                                                              ----------------------       --------------------
                                                                   (Unaudited)
LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities

<S>                                                           <C>                             <C>
        Accounts payable and accrued expenses                 $        33,765,198             $    31,539,051
        Current maturities of long-term debt and
             capitalized lease obligations                             35,773,939                  35,141,702
        Income taxes payable                                               43,293                      39,812
                                                               ----------------------       --------------------

                                                                       69,582,430                  66,720,565
        Total current liabilities


Long-term debt and capitalized lease obligations                           62,553                      88,111

Deferred compensation                                                   1,125,000                   1,100,000

Commitments and Contingencies

SHAREHOLDERS' EQUITY


        Preferred stock - authorized, 100,000 shares,

          $10 par value; none issued                                    -                            -
        Common stock - authorized, 20,000,000 shares,
          $.10 par value; 6,954,232 shares issued
        and 6,294,332 shares outstanding                                  695,423                     695,423
        Additional paid-in capital                                     27,058,455                  27,049,999
        Retained earnings                                              10,141,258                   9,740,119
        Treasury stock                                                 (2,314,566)                 (2,314,566)
                                                              ----------------------       --------------------

        Total shareholders' equity                                     35,580,570                  35,170,975
                                                              ----------------------       --------------------


         Total liabilities and shareholders' equity            $      106,350,553             $   103,079,651
                                                              =====================       ====================



                  See accompanying notes to condensed consolidated financial statements.

</TABLE>

<PAGE>



FORM 10-Q                                                      December 31, 2006
Page 4
<TABLE>

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

                                                                     2006                         2005
                                                            -----------------------       ----------------------
<S>                                                          <C>                                    <C>
Net sales                                                    $          65,989,745                  $ 48,107,541


Cost of goods sold                                                      57,473,663                   41,442,881
                                                            -----------------------       ----------------------

             Gross profit                                                8,516,082                    6,664,660

Selling, general and administrative expenses                             7,667,119                    6,845,195
                                                            -----------------------       ----------------------

             Operating profit (loss)                                       848,963                    (180,535)

Interest expense                                                           693,900                      552,875
                                                            -----------------------       ----------------------

        Earnings (loss) before income taxes                                155,063                    (733,410)

Income tax provision                                                        15,000                    6,629,199
                                                            -----------------------       ----------------------

                                                             $             140,063                 $ (7,362,609)
             Net earnings (loss)
                                                            =======================       ======================


PER SHARE INFORMATION


Basic earnings (loss) per common share:                      $                 .02                     $  (1.17)
                                                            =======================       ======================


Diluted earnings (loss) per common share:                    $                 .02                     $  (1.17)
                                                            =======================       ======================

Weighted average common shares and
common equivalent shares outstanding:


                    Basic                                                6,294,332                     6,275,480
                                                            =======================       ======================


                    Diluted                                              6,369,866                     6,275,480
                                                            =======================       ======================

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


<PAGE>


FORM 10-Q                                                     December 31, 2006
Page 5

<TABLE>


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

                                                            2006                            2005
                                                    ----------------------         -----------------------
<S>                                                         <C>                      <C>
 Net sales                                                  $  135,607,324           $        100,568,573


Cost of goods sold                                            118,434,129                      86,786,495
                                                    ----------------------         -----------------------

             Gross profit                                      17,173,195                      13,782,078

Selling, general and administrative expenses                   15,202,111                      13,687,539
                                                    ----------------------         -----------------------

             Operating profit                                   1,971,084                          94,539

Interest expense                                                1,539,945                       1,118,488
                                                    ----------------------         -----------------------

        Earnings (loss) before income taxes                       431,139                      (1,023,949)

Income tax provision                                               30,000                       6,438,133
                                                    ----------------------         -----------------------


             Net earnings (Loss)                    $              401,139            $        (7,462,082)
                                                    ======================         =======================

PER SHARE INFORMATION


Basic earnings (loss) per common share:              $                .06             $             (1.19)

                                                    ======================         =======================


Diluted earnings (loss) per common share:            $               .06            $               (1.19)

                                                    ======================         =======================

Weighted average common shares and
common equivalent shares outstanding:


            Basic                                               6,294,332                        6,271,656
                                                    ======================         =======================

            Diluted                                             6,371,799                        6,271,656
                                                    ======================         =======================


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


<PAGE>


<TABLE>
FORM 10-Q                                                                                                December 31, 2006
Page 6




                                             JACO ELECTRONICS, INC. AND SUBSIDIARIES
                                          CONDENSED CONSOLIDATED STATEMENT OF CHANGES
                                                  IN SHAREHOLDERS' EQUITY
                                         FOR THE SIX MONTHS ENDED DECEMBER 31, 2006
                                                             (UNAUDITED)





                                                             Additional                                                 Total
                                      Common stock            paid-in             Retained           Treasury       shareholders'
                                 Shares       Amount           capital            earnings              stock           equity
                              ------------ -------------- ----------------  -------------------  ---------------- -----------------


<S>             <C>             <C>            <C>           <C>                   <C>              <C>               <C>
Balance at July 1, 2006         6,954,232      $ 695,423     $ 27,049,999          $ 9,740,119      $ (2,314,566)     $ 35,170,975

Net earnings                                                                           401,139                             401,139

Stock-based compensation                                            8,456                                                    8,456

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

Balance at December 31, 2006    6,954,232      $ 695,423     $ 27,058,455         $ 10,141,258      $ (2,314,566)     $ 35,580,570
                              ============ ============== ================  ===================  ================ =================

</TABLE>



     See accompanying notes to condensed consolidated financial statements.









<PAGE>

FORM 10-Q                                                      December 31, 2006
Page 7
<TABLE>

                     JACO ELECTRONICS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      FOR THE SIX MONTHS ENDED DECEMBER 31,
                                   (UNAUDITED)
                                                                                2006                    2005
                                                                       --------------------    -----------------
Cash flows from operating activities

<S>                                                                                   <C>        <C>
      Net earnings (loss)                                                             401,139    $  (7,462,082)

Adjustments to reconcile net earnings (loss) to net
     cash (used in) provided by operating activities

          Depreciation  and amortization                                              373,004          543,636
          Deferred compensation                                                        25,000           25,000
          Stock-based compensation                                                      8,456             --
          Deferred income tax expense                                                    --          6,394,000
          Provision for (recovery of) doubtful accounts                              (124,707)          48,200
          Changes in operating assets and liabilities
          (Increase) decrease in operating assets - net                            (3,413,127)      14,106,038
          Increase (decrease) in operating liabilities - net
                                                                                    2,229,631       (8,805,216)
                                                                                -------------    -------------
          Net cash (used in) provided by operating activities
                                                                                     (500,604)       4,849,576
                                                                                -------------    -------------
Cash flows from investing activities

          Capital expenditures                                                       (125,364)         (93,583)
                                                                                -------------    -------------

          Net cash used in investing activities                                      (125,364)         (93,583)
                                                                                -------------    -------------
Cash flows from financing activities

          Borrowings under line of credit                                         135,213,166       98,196,822
          Repayments under line of credit                                        (134,584,551)    (103,288,360)
          Principal payments under equipment financing                                (21,936)         (29,526)
          Proceeds from exercise of stock options                                        --             58,750
                                                                                -------------    -------------


          Net cash provided by (used in) financing activities                         606,679       (5,062,314)
                                                                                -------------    -------------


          Net decrease in cash                                                        (19,289)        (306,321)


          Cash at beginning of period                                                  29,211          321,423
                                                                                -------------    -------------

Cash at end of period                                                                   9,922           15,102
                                                                                =============    =============


          Supplemental disclosures of cash flow information:
             Cash paid during the year for:

             Interest                                                               1,540,000        1,145,000
             Income taxes                                                              27,000          110,000


     See accompanying notes to condensed consolidated financial statements.

</TABLE>


<PAGE>



FORM 10-Q                                                      December 31, 2006
Page 8

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


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 of Jaco
Electronics, Inc. and its subsidiaries ("Jaco" or the "Company") at the end of
and for all 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
financial statements for the fiscal year ended June 30, 2006 and the notes
thereto included in the Company's Annual Report on Form 10-K, as amended, for
the fiscal year ended June 30, 2006. The results of operations for the interim
periods are not necessarily indicative of the results for the entire year or any
other interim period therein. The balance sheet at June 30, 2006 has been
derived form the audited Financial Statements at that date. There have been no
changes to the Company's significant accounting policies subsequent to June 30,
2006.

2) Although the Company recorded net earnings of approximately $401,000 during
the six months ended December 30, 2006, the Company incurred a net loss of
approximately $6,962,000 during the fiscal year ended June 30, 2006. The Company
also utilized approximately $501,000 and $2,036,000 of cash in operations during
the six months ended December 31, 2006 and the fiscal year ended June 30, 2006,
respectively. At December 31, 2006, the Company had cash of approximately
$10,000 and working capital of approximately $4,723,000, as compared to cash of
approximately $29,000 and working capital of approximately $4,106,000 at June
30, 2006.

         As discussed further in Note 4, on December 22, 2006 the Company
entered into a new $55 million secured revolving line of credit, which provides
the Company with bank financing based upon eligible accounts receivable and
inventory, as defined therein. The new credit facility has a maturity date of
December 22, 2009 and replaces the Company's $40 million credit facility, which
has been terminated. At times during the fiscal year ended June 30, 2006, the
Company was in violation of certain financial covenants contained in its
previous credit agreement and, as a result, was required to secure waivers from
its previous lenders and make related amendments to that credit agreement. As of
December 31, 2006, the Company was in compliance with all of the covenants
contained in its new credit agreement.

         Management continues to believe that its ongoing plan for cost
containment, improved operating controls, paring back of unprofitable product
lines, and a focused sales and marketing effort should continue to improve
results from operations and cash flows in the near term. Continued achievement
of this plan, however, will be dependent upon the Company's ability to generate
sufficient revenues, decrease operating costs and improve trade support levels
consistent with this plan, and remain in compliance with its bank covenants. The
Company's future operating performance will be subject to financial, economic
and other factors beyond its control, and there can be no assurance that the
Company will be able to achieve these goals. The Company's failure to achieve
these goals or remain in compliance with the covenants contained in its new
credit agreement would have a material adverse effect upon its business,
financial condition and results of operations.

3) On September 20, 2004, the Company completed the sale of substantially all of
the assets of its contract manufacturing subsidiary, Nexus Custom Electronics,
Inc. ("Nexus"), to Sagamore Holdings, Inc. for consideration of up to
$13,000,000, subject to closing adjustments, and the assumption of certain
liabilities. The Company received $9,250,000 of the purchase consideration in
cash on the closing date. The balance of the purchase consideration was
satisfied through the delivery of a $2,750,000 subordinated note




<PAGE>




FORM 10-Q                                                      December 31, 2006
Page 9

issued by the purchaser. This note has a maturity date of September 1, 2009 and
bears interest at the lower of the prime rate or 7%. The note is payable by the
purchaser in quarterly cash installments ranging from $156,250 to $500,000
commencing September 2006 and continuing for each quarter thereafter until
maturity. No payments have been received as of February 12, 2007. Prepayment of
the principal of and accrued interest on the note is permitted. In accordance
with the purchase agreement, the Company determined that it was owed an
additional $500,000 pursuant to a working capital adjustment provided for in the
agreement, which has been recorded in the Company's financial statements. The
Purchaser has disputed the Company's claim to the working capital adjustment and
has informed the Company that it believes that the Company owes a $500,000
working capital adjustment to the purchaser. Since this dispute remains
unresolved, there has to date been no purchase price adjustment between the
Company and Sagamore. Additionally, the Company is entitled to receive
additional consideration in the form of a six-year earn-out based on 5% of the
annual net sales of Nexus after the closing date, up to $1,000,000 in the
aggregate. As of December 31, 2006, the Company had not earned any of the
additional consideration.

         On September 19, 2006, Nexus Nano Electronics, Inc. ("NNE"), as
successor to Sagamore, and its subsidiary filed suit against the Company in the
U.S. District Court for the Southern District of New York alleging fraud and
misrepresentations by the Company in connection with the sale of Nexus and
seeking an unspecified amount of damages. The Company believes that the
plaintiffs' claims are without merit and intends to contest them vigorously as
well as assert counterclaims for amounts owed to it in connection with such
sale, if this matter is not settled. Subsequent to the filing of this suit, the
parties entered into settlement discussions and have reached an agreement in
principle to settle this matter for, among other things, a mutual release of all
disputed claims relating to this transaction and the cancellation of the
purchaser's $2,750,000 subordinated note held by the Company in consideration
for NNE's issuance to the Company of shares of its preferred stock of an
equivalent value. The documentation relating to this proposed settlement has not
yet been finalized or approved by the parties' respective boards of directors
and, therefore, the Company cannot assure you that this settlement will be
completed upon the terms described above or at all.

4) To provide  liquidity in funding its operations,  the Company borrows amounts
under credit facilities and other external sources of financing. On December 22,
2006,  the Company  entered  into a new  three-year  Credit  Agreement  with CIT
Group/Business  Credit, Inc. which provides for a $55,000,000  revolving secured
line of credit.  On  January  23,  2007 the CIT  Group/Business,  Inc.  assigned
$25,000,000 of its interest in the credit facility to Bank of America, N.A. This
credit facility has a maturity date of December 22, 2009.  Borrowings  under the
new credit facility are based  principally on eligible  accounts  receivable and
inventories  of the  Company,  as  defined  in the  credit  agreement,  and  are
collateralized  by substantially  all of the assets of the Company.  At December
31, 2006, the outstanding  balance on this revolving line of credit facility was
$35,700,000 with an additional $7,400,000 available. The Company has outstanding
$2,700,000  of stand-by  letters of credit on behalf of certain  vendors and was
required  to  advance  such  amount to its  previous  lender  until the stand by
letters of credit  expire on February 28,  2007.  The advance by the Company has
been recorded as a component of prepaid expenses and other current assets in the
accompanying  condensed  consolidated  balance  sheet.  The interest rate on the
outstanding borrowings at December 31, 2006 was approximately 7.74%.

     Under the credit  agreement,  the  Company is  required  to comply with one
financial  covenant which stipulates in the event that the Company's  additional
borrowing  availability under the revolving line of credit facility for any five
consecutive days is less than $5,000,000,  the Company is required to maintain a
Fixed Charge Coverage Ratio (as defined  therein) of 1.1 to 1.0 as of the end of
the immediately preceding fiscal quarter.



<PAGE>



FORM 10-Q                                                      December 31, 2006
Page 10

         The credit agreement also provides for a limitation on capital
expenditures of $700,000 for the Company's 2007 fiscal year and $500,000 for
each remaining fiscal year in which the credit agreement is in effect. The
credit agreement also contains other covenants and restrictions, including
limitations on: the Company's incurrence of additional indebtedness unrelated to
the credit facility; its incurrence of liens; mergers, consolidations and sales
of assets by the Company; investments, loans and acquisitions by the Company;
and the Company's ability to pay cash dividends. In addition, the credit
agreement, as was the case with the Company's prior credit agreement, includes a
subjective acceleration clause and requires the deposit of customer receipts to
be directed to a blocked account and applied directly to the repayment of
indebtedness outstanding under the credit facility. Accordingly, outstanding
borrowings under the credit agreement are classified as a current liability.

         As of December 31, 2006, the Company was in compliance with all of its
bank covenants.

         At times during the fiscal year ended June 30, 2006, the Company was in
violation of certain financial covenants contained in its previous credit
agreement and, as a result, was required to secure waivers from its prior
lenders and make related amendments to that credit agreement. In the event that
in the future the Company were to fail to remain in compliance with the
covenants contained in its new credit agreement and was not able to obtain an
amendment or waiver with respect to such noncompliance, the lenders under the
credit facility could declare the Company to be in default under the facility,
requiring all amounts outstanding under the facility to be immediately due and
payable and/or limit the Company's ability to borrow additional amounts under
the facility. If the Company did not have sufficient available cash to pay all
such amounts that become due and payable, we would have to seek additional debt
or equity financing through other external sources, which may not be available
on acceptable terms, or at all. Failure to maintain financing arrangements on
acceptable terms would have a material adverse effect on the Company's business,
results of operations and financial condition.

5) On September 18, 2001, the Company's Board of Directors authorized the
repurchase of up to 250,000 shares of its outstanding common stock. Purchases
may be made from time to time in market or private transactions at prevailing
market prices. The Company made purchases of 41,600 shares of its common stock
from November 5, 2002 through February 21, 2003 for aggregate consideration of
$110,051. No repurchases of common stock were made during the six months ended
December 31, 2006 or 2005.

6) In December 1992, the Board of Directors approved the adoption of a
nonqualified stock option plan, known as the "1993 Non-Qualified Stock Option
Plan," hereinafter referred to as the "1993 Plan." The Board of Directors or the
Compensation Committee of the Board is responsible for the granting and pricing
of options under the 1993 Plan. Such price shall be equal to the fair market
value of the common stock subject to such option at the time of grant. The
options expire five years from the date of grant and are exercisable over the
period stated in each option. In December 1997, the shareholders of the Company
approved an increase in the amount of shares reserved for issuance under the
1993 plan to 900,000 from 440,000, of which there were no outstanding options at
December 31, 2006.
         In October 2000, the Board of Directors approved the adoption of the
"2000 Stock Option Plan," hereinafter referred to as the "2000 Plan." The 2000
Plan originally provided for the grant of up to 600,000 incentive stock options
("ISOs") and nonqualified stock options ("NQSOs") to employees, officers,
directors, consultants and advisers of the Company. In December 2004, the
shareholders of the Company approved an increase in the amount of shares
reserved for issuance under the 2000 plan to 1,200,000. The Board of Directors
or the Compensation Committee of the Board is responsible for the granting and
pricing of these options. Such price shall be equal to the fair market value of
the common stock subject to such option at the time of grant. In the case of
ISOs granted to shareholders owning more than 10% of the Company's voting
securities, the exercise price shall be no less than 110% of the fair market
value of the Company's common stock on the date of grant. All options shall
expire ten years from the date of grant of such option (five years in the case
of an ISO granted to a 10% shareholder) or on such earlier date as may be
prescribed by the Committee and set forth in the option agreement, and are
exercisable over the period stated in each option. Under the 2000 Plan,
1,200,000 shares of the Company's common stock are reserved, of which 647,250
were outstanding at December 31, 2006.


<PAGE>


FORM 10-Q                                                      December 31, 2006
Page 11

         During the six months ended December 30, 2006, 180,000 stock options
were granted to certain employees and directors of the Company. These stock
options had exercise prices ranging from $3.10 to $3.49, vest in 25% increments
over four years and expire ten years from the date of grant. The
weighted-average fair value of these options of $2.43, which was estimated at
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: expected volatility of 71%; risk-free
interest rate of 4.59%; expected term of 7 years and expected dividend yield of
0%.
         There were no stock options or other share-based awards granted during
the six months ended December 31, 2005.
         The Company measures the cost of employee services received in exchange
for an award of equity instruments based on the fair-value of the award, as
determined using the Black-Scholes Option pricing method, and recognizes such
cost over the requisite service period, which is generally the vesting period.
Compensation expense recognized in the accompanying condensed consolidated
statement of operations was $8,456 for the six months ended December 31, 2006.
No compensation expense with regard to stock options or other share-based awards
has been recognized in the accompanying condensed consolidated statement of
operations for the six months ended December 31, 2005. At December 31, 2006,
there was an aggregate of $429,694 of unamortized compensation expense related
to stock options which will be recognized as an expense over a
remaining period of approximately four years which represents the remaining
requisite service period for such awards.

Summary of Stock Option Activity

The Company issues new shares of common stock upon exercise of stock options.
The following is a summary of option activity for our stock option plans:
<TABLE>


                                                                                       Weighted-
                                                                     Weighted-          Average
                                                                      Average          Remaining
                                                       Options        Exercise        Contractual
                                                     Outstanding       Price          Term(months)

                                                  --------------------------------  --------------
Employee Stock Option Plans:
<S>                        <C> <C>                     <C>              <C>
Shares outstanding at June 30, 2006                    499,750          $5.07
Granted                                                180,000           3.46
Terminated                                             32,500            3.55
                                                  --------------------------------  -----------------

Shares outstanding at December 31, 2006                647,250          $4.70              79
                                                  --------------------------------  -----------------
Shares exercisable at December 31, 2006                467,250          $5.18              63

The aggregate intrinsic value of outstanding and exercisable options at December
31, 2006 was $212,950 and $209,950, respectively.


</TABLE>




<PAGE>




FORM 10-Q                                                      December 31, 2006
Page 12

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

<TABLE>


                                                   Six Months Ended                Three Months Ended
                                                      December 31,                    December 31,
                                                 2006            2005            2006            2005
                                                 ----            ----            ----            ----


Weighted average common shares
outstanding net of treasury shares, for
<S>                                             <C>             <C>             <C>             <C>
basic earnings per share                        6,294,332       6,271,656       6,294,332       6,275,420

Effect of dilutive securities                      77,467           --             75,534           --
                                                   ------          ------          ------         ------

Weighted average common shares
outstanding for diluted earnings per share      6,371,799       6,271,656        6,369,866       6,275,420
                                                =========       =========        =========       =========



</TABLE>






         Excluded from the calculation of earnings per share for the three and
six months ended December 31, 2006 were outstanding options to purchase 411,250
and 331,250 shares of the Company's common stock as the exercise price of such
options equaled or exceeded the average market price during the period. Excluded
from the calculation of loss per share for the three and six months ended
December 31, 2005 are outstanding options to purchase 502,000 shares of the
Company's common stock, representing all outstanding options for the three and
six months ended December 2005, as their inclusion would have been antidilutive.
Common stock equivalents for stock options are calculated using the treasury
stock method.

8) The Company is a party to various legal matters arising in the general
conduct of business. The ultimate outcome of such matters is not expected to
have a material adverse effect on the Company's business, results of operations
or financial position.

9) During the three and six months ended December 31 2006, the Company recorded
sales of $75,040 and $92,592, respectively, compared to $50,877 and $56,914 for
the three and six months ended December 31, 2005, respectively, from a customer,
Frequency Electronics, Inc. ("Frequency"). The Company's Chairman of the Board
of Directors and President serves on the Board of Directors of Frequency. Such
sales transactions with Frequency are in the normal course of business. Amounts
included in accounts receivable from Frequency at December 31, 2006 and June 30,
2006 aggregate $1,924 and $17,068, respectively.
         A law firm of which one of our former directors is a partner provides
legal services on behalf of the Company. The director chose not to run for
re-election for our Board of Directors. His term expired December 12, 2006. Fees
paid to such firm during the period in which the partner served as director
amounted to $9,864 for the three and six months ended December 31, 2006,
compared to $24,117 and $84,091 for the three and six months ended December 31,
2005.
         The son-in-law of the Company's Chairman and President was a partner of
a law firm which provides legal services on behalf of the Company. Fees paid to
such firm during the period he was a partner amounted to $31,745 for the three
and six months ended September 30, 2006 and December 31, 2006.
             The Company leases office and warehouse facilities from a
partnership owned by two officers and directors of the Company. As of June 30,
2005, the partnership had advanced the Company $125,000 to fund the construction
of a new Flat Panel Display Integration Center, $75,000 of which the Company
repaid in September 2006 and accrued the remaining $50,000 as a liability in the
accompanying balance sheet. The Company subsequently repaid such remaining
amount on January 8, 2007.

10) In the prior year, the Company had recorded deferred tax assets of
$6,610,500 related to the anticipated recovery of tax loss carry forwards.
Management, on a quarterly basis, evaluates the weight of available evidence
whether it is more likely than not that the amount of future tax benefit would
not be


<PAGE>



FORM 10-Q                                                     December 31, 2006
Page 13

realized. While the Company still believed that it was positioned for long-term
growth, the volatility in its industry and markets has made it increasingly
difficult to predict sales and operating results on a short-term basis, and when
coupled with the cumulative losses reported over the previous four fiscal years
and the first two quarters of its fiscal year ended June 30, 2006, the Company
could no longer conclude that, based upon the weight of available evidence, it
was "more likely than not" that the deferred tax asset of $6,610,500 will be
realized, and added $6,610,500 to the income tax provision to bring the carrying
value of the deferred tax asset to zero.

11) In June 2000, the Financial Accounting Standards Board ("FASB") issued FIN
No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109." This interpretation clarifies the accounting for uncertainty
in income taxes recognized in an entity's financial statements in accordance
with SFAS No. 109 "Accounting for Income Taxes." It prescribes a recognition and
threshold measurement attribute for financial statement disclosure of tax
positions taken or expected to be taken on a tax return. The Company will be
required to adopt FIN No. 48 in the first quarter of fiscal 2008. Management is
currently evaluating the requirements of FIN No. 48 and has not yet determined
the impact it will have on the Company's consolidated financial statements.

     In  September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standards  No. 157 ("SFAS  157"),  Fair Value  Measurements.  SFAS 157  provides
guidance for  measuring  the fair value of assets and  liabilities.  It requires
additional  disclosures  related to the extent to which companies measure assets
andliabilities  at fair value,  the information  used to measure fair value, and
the effect of fair value  measurements  on earnings.  SFAS 157 is effective  for
fiscal years beginning after November 15, 2007. The Company is in the process of
determining  what  effect,  if any,  the  adoption  of SFAS 157 will have on our
financial position, results of operations, or cash flows.

        In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB No. 108"). SAB No. 108 provides guidance on how prior year
misstatements should be taken into consideration when quantifying misstatements
in current year financial statements for purposes of determining whether the
current year's financial statements are materially misstated. SAB No. 108
requires registrants to apply the new guidance for the first time that it
identifies material errors in existence at the beginning of the first fiscal
year ending after November 15, 2006 by correcting those errors through a
one-time cumulative effect adjustment to beginning-of-year retained earnings.

        We will initially apply SAB 108 using the cumulative effect transition
method in connection with the preparation of our annual financial statements for
the year ending June 30, 2007 and are currently evaluating the impact the
adoption of SAB 108 will have on our consolidated financial statements.

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

      The following discussion contains various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, or
the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, which represent our management's beliefs and
assumptions concerning future events. When used in this report and in other
written or oral statements made by us from time to time, forward-looking
statements include, without limitation, statements regarding our financial
forecasts or projections, our expectations, beliefs, intentions or future
strategies that are signified by the words "expects", "anticipates",
"estimates", "intends", "plans" or similar language. Although we believe that
the expectations in these forward-looking statements are reasonable, we cannot
assure you that such expectations will prove to be correct. These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties, which are subject to change and/or beyond our control, that could
cause our actual results and the timing of certain events to differ materially
from those expressed in the forward-looking statements. Consequently, the
inclusion of the forward-looking statements should not be regarded as a
representation by us of results that actually will be achieved. For a discussion
of important
<PAGE>





FORM 10-Q                                                      December 31, 2006
Page 14


factors that could cause our actual results to differ materially from those
contemplated by the forward-looking statements, see Item 1A. Risk Factors in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2006, as amended,
and our other reports and documents filed with the Securities and Exchange
Commission.

GENERAL

         Jaco is a leading distributor of active and passive electronic
components to industrial Original Equipment Manufacturers ("OEMs") that are used
in the manufacture and assembly of electronic products in such industries as
telecommunications, medical devices, computers and office equipment,
military/aerospace, and automotive and consumer electronics. Products
distributed by the Company include semiconductors, flat panel displays,
capacitors, resistors, electromechanical devices and power supplies. Due to the
ongoing shift of manufacturing to the Far East, the Company modified its
business model during the fiscal year ended June 30, 2006 to pursue the business
available in the United States, increase its support of global contract
manufacturers that require its value-added services and logistics programs, and
aggressively promote its flat panel display, (FPD), product offerings, which
have experienced significant growth in recent quarters and which the Company
believes have potential for growth in the future, through its FPD in-house
integration center that opened in February 2005. This in-house integration
center allows us to provide optimized and efficient design solutions, optical
enhancements and touchscreen integrations, as well as to manufacture FPD
subassemblies and complete displays for commercial, industrial and military
applications.

Critical Accounting Policies and Estimates

         We have disclosed in Note A to our consolidated financial statements
and in Management's Discussion and Analysis of Financial Condition and Results
of Operations included in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2006, as amended, those accounting policies that we consider to
be significant in determining our results of operations and financial position.
There have been no material changes to the critical accounting policies
previously identified and described in our 2006 Form 10-K. The accounting
principles we have utilized in preparing our consolidated financial statements
conform in all material respects to generally accepted accounting principles in
the United States of America.

         The preparation of these consolidated financial statements requires our
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, as well as the disclosure of
contingent assets and liabilities at the date of our financial statements. We
base our estimates on historical experience, actuarial valuations and various
other factors that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Some of
those judgments can be subjective and complex and, consequently, actual results
may differ from these estimates under different assumptions or conditions. While
for any given estimate or assumption made by our management there may be other
estimates or assumptions that are reasonable, we believe that, given the current
facts and circumstances, it is unlikely that applying any such other reasonable
estimate or assumption would materially impact the financial statements.

New Accounting Standards

     In June 2000, the Financial  Accounting Standards Board ("FASB") issued FIN
No. 48,  "Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109." This interpretation clarifies the accounting for uncertainty
in income taxes  recognized  in an entity's  financial  statements in accordance
with SFAS No. 109 "Accounting for Income Taxes." It prescribes a recognition and
threshold  measurement  attribute  for  financial  statement  disclosure  of tax
positions  taken or expected to be taken on a tax  return.  The Company  will be
required to adopt FIN No. 48 in the first quarter of fiscal 2008.


<PAGE>




FORM 10-Q                                                      December 31, 2006
Page 15

Management is currently evaluating the requirements of FIN No. 48 and has not
yet determined the impact it will have on the Company's consolidated financial
statements.

        In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157 ("SFAS 157") Fair Value Measurements. SFAS 157 provides
guidance for measuring the fair value of assets and liabilities. It requires
additional disclosures related to the extent to which companies measure assets
and liabilities at fair value, the information used to measure fair value, and
the effect of fair value measurements on earnings. SFAS 157 is effective for
fiscal years beginning after November 15, 2007. The Company is in the process of
determining what effect, if any, the adoption of SFAS 157 will have on our
financial position, results of operations, or cash flows.

        In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB No. 108"). SAB No. 108 provides guidance on how prior year
misstatements should be taken into consideration when quantifying misstatements
in current year financial statements for purposes of determining whether the
current year's financial statements are materially misstated. SAB No. 108
requires registrants to apply the new guidance for the first time that it
identifies material errors in existence at the beginning of the first fiscal
year ending after November 15, 2006 by correcting those errors through a
one-time cumulative effect adjustment to beginning-of-year retained earnings.

        We will initially apply SAB 108 using the cumulative effect transition
method in connection with the preparation of our annual financial statements for
the year ending June 30, 2007 and are currently evaluating the impact the
adoption of SAB 108 will have on our consolidated financial statements.

Results of Operations
<TABLE>

The following table sets forth certain items in our statements of operations as
a percentage of net sales for the periods shown:
                                                 Three Months Ended                       Six Months Ended
                                                    December 31,                            December 31,
                                                    ------------                            -----------

                                              2006               2005                 2006         2005
                                              ----               ----                 ----         ----
<S>                                              <C>                 <C>                 <C>           <C>
Net sales                                        100.0%              100.0%              100.0%        100.0%
Cost of goods sold                                87.1               86.1                  87.3         86.3
                                                  ----               ----                  ----         ----
Gross profit                                      12.9               13.8                  12.6         13.7
Selling, general and
 administrative expenses                          11.6               14.2                  11.2         13.6
                                                  ----               ----                  ----         ----
Operating profit (loss)                            1.3              (.04)                   1.4          0.1
Interest expense                                   1.1                1.1                   1.1          1.1
                                                   ---                ---                   ---          ---
Earnings (loss) before income taxes                0.2              (1.5)                   0.3        (1.0)
Income tax provision                               0.0               13.8                   0.0          6.4
                                                   ---               ----                   ---          ---
Net earnings (loss)                               0.2%              (15.3) %                0.3%        (7.4)%
                                                  ====              ========               ====        =======

</TABLE>


<PAGE>


FORM 10-Q                                                      December 31, 2006
Page 16

Comparison of the three and six months ended December 31, 2006 and
December 31, 2005

         Net sales for the three and six months ended December 31,2006 were
$66.0 million and $135.6 million, respectively, compared to $48.1 million and
$100.6 million for the three and six months ended December 31, 2005,
representing increases of 37.2% and 34.8%, respectively. During the quarter, we
continued to see strong demand from global contract manufacturers, primarily in
the Far East, which we support with our logistics programs consisting of
inventory management services and warehousing capabilities. Sales to these
customers, which are comprised almost entirely of semiconductors, increased to
$28.8 million and $61.5 million for the three and six months ended December 31,
2006, respectively, from $12.7 million and $29.2 million for the three and six
months ended December 31, 2005, representing increases of 129.2% and 110.6%,
respectively. As a result of the increase in sales to these customers during the
quarter, semiconductors represented 59.8% and 59.4% of our net sales for the
three and six months ended December 31, 2006, respectively, compared to 45.8%
and 49.1% of net sales for the same periods of last fiscal year, respectively.
Our global customers support the needs of major equipment manufacturers. As a
result, our logistics programs are partially dependent on the ability of these
manufacturers, the end-users of our products, to forecast their future
requirements. Due to the highly cyclical nature of the semiconductor industry,
we have historically been subject to fluctuations in this portions of our
business.

         We sell FPDs as a component sale through our standard distribution
channel and we sell FPD products as a value-added offering through our in-house
integration center. We provide design capabilities and a "full solution"
capability enabling us to offer our customers an expanded range of services to
integrate FPDs into their applications. We market our FPD capabilities to a
broad range of business segments, such as electronic kiosk, the fast food
industry, signage, financial institutions, electronic voting equipment, medical
and military applications. For the three and six months ended December 31, 2006,
FPD sales increased 2.1% and 16.9% to $14.5 million and $31.1 million,
respectively, from $14.2 million and $26.6 million for the three and six months
ended December 31, 2005, respectively.

         Passive components, which are primarily commodity product such as
capacitors and resistors, and electromechanical components, which are primarily
relays, printerheads and power supplies, accounted for approximately $12.1
million and $24.0 million for the three and six months ended December 31, 2006,
respectively, compared to $11.9 million and $24.6 million for the three and six
months ended December 31, 2005. Based on current demand for these components we
do not expect any material increases in our passive components sales for the
foreseeable future.

         We continue to aggressively market our FPD product, while looking to
focus on our other products that we believe to be competitive in the United
States. Our growth through our logistics programs is partially attributable to
an increase in the number of vendors we support. We intend to continue to
aggressively market these programs to this customer base. In addition we
continue to seek to identify potential strategic alliances to expand our
presence in the Far East in response to the significant growth in manufacturing
in the region that has occurred in recent years

         Gross profit was $8.5 million, or 12.9% of net sales and $17.2 million,
or 12.6% of net sales for the three and six months ended December 31, 2006,
respectively, as compared to $6.7 million, or 13.8% of net sales and $13.8
million, or 13.7% of net sales for the three and six months ended December 31,
2005, respectively. Management considers gross profit to be a key performance
indicator in managing our business. Gross profit margins are usually a factor of
product mix and demand. As discussed above, there has been strong demand for
product sold through our logistics programs in the Far East. These logistics
programs historically operate at lower margins than product sold through our
regular distribution channels. However, the strong increase in our overall sales
more than offset the decrease in gross profit margin, resulting in an increase
in gross profit dollars for the three and six months ended December 31, 2006 of
27.8% and 24.6%, respectively, compared to the same periods of last fiscal year.
Unless there is a material change in net sales generated through our logistics
programs, we do not anticipate any material change in our gross profit margins
for the foreseeable future. In addition, demand and pricing for our products
have been, and in the future may continue to be, adversely affected by
industry-wide trends and events beyond our control.


<PAGE>




FORM 10-Q                                                     December 31, 2006
Page 17

         Selling, general and administrative ("SG&A") expenses were $7.7
million, or 11.6% of net sales and $15.2 million, or 11.2% of net sales,
respectively, for the three and six months ended December 31, 2006 compared to
$6.8 million, or 14.2% of net sales, and $ 13.7 million, or 13.6% of net sales,
respectively, for the three and six months ended December 31, 2005. SG&A
increased $0.8 million, or 11.9% and $1.5 million, or 11.0%, respectively, for
the three and six months ended December 31, 2006 compared to the same periods of
last fiscal year. Management considers SG&A as a percentage of net sales to be a
key performance indicator in managing our business. We continue to focus our
spending on core business areas while carefully monitoring spending in
non-strategic areas. The majority of the increase in SG&A during the three and
six months ended December 31, 2006 related to variable costs such as commissions
and bonuses, that are directly associated with the increase in our net sales.
Although we continue to monitor all spending, we have been increasing staffing
to support our FPD sales and our FPD value-add capabilities, which we believe
has contributed to our net sales growth.

         Interest expense was $ 694,000 and $1,540,000 for the three and six
months ended December 31, 2006 respectively, compared to $ 553,000 and
$1,118,000 for the comparable periods of last fiscal year. This increase has
resulted from of higher borrowing rates primarily due to continuing increases in
federal lending rates and higher bank borrowings to support the increase in
accounts receivable and inventory.

         Net earnings for the three and six months ended December 31, 2006 were
$0.2 million, or $0.02 per diluted share, and $0.4 million and $0.6 per diluted
share, respectively, compared to a net loss of $ 7.4 million, or $1.17 per
diluted share or $ 7.5 million, or $1.19 per diluted share, respectively, for
the three and six months ended December 31,2005. The losses during fiscal 2006
were significantly impacted by the result of a write-off of $6.6 million during
the quarter ending December 31, 2005 for the reason described in Note 10 of the
Notes to Condensed Consolidated Financial Statements. The increase in earnings
before income taxes is the result of an increase in net sales and gross profit
dollars.

LIQUIDITY AND CAPITAL RESOURCES

         To provide liquidity in funding its operations, the Company borrows
amounts under credit facilities and other external sources of financing. On
December 22, 2006, the Company entered into a new three-year Credit Agreement
with CIT Group/Business Credit, Inc., which provides for a $55,000,000 revolving
secured line of credit. On January 23, 2007 the CIT Group/Business, Inc.
assigned $25,000,000 of its interest in the credit facility to Bank of America,
N.A. This credit facility has a maturity date of December 22, 2009. Borrowings
under the credit facility are based principally on eligible accounts receivable
and inventories of the Company, as defined in the credit agreement, and are
collateralized by substantially all of the assets of the Company. At December
31, 2006, the outstanding balance on this revolving line of credit facility was
$35.7 million, with an additional $7.4 million available. The Company has
outstanding $2.7 million of stand-by letters of credit on behalf of certain
vendors. The interest rate on the outstanding borrowings at December 31, 2006
was approximately 7.74%.

         Under the credit agreement, as amended, the Company is required to
comply with one financial covenant which stipulates that in the event that the
Company's additional borrowing availability under the revolving line of credit
facility for any five consecutive days is less than $5,000,000, the Company is
required to retroactively maintain a Fixed Charge Coverage Ratio (as defined
therein) of 1.1 to 1.0 as of the end of the immediately preceding fiscal
quarter. The credit agreement also provides for a limit on capital expenditures
of $700,000 for the Company's 2007 fiscal year and $500,000 for remaining fiscal
years in which the credit agreement is in effect. The credit agreement also
contains other covenants and restrictions, including limitations on: the
Company's incurrence of additional indebtedness unrelated to the credit
facility; its incurrence of liens; mergers, consolidations and sales of assets
by the Company; investments, loans and acquisitions by the Company; and the
Company's ability to pay cash dividends. In addition, the credit agreement
includes a subjective acceleration clause and requires the deposit of customer
receipts to be directed to a blocked account and applied directly to the
repayment of indebtedness outstanding under the credit facility. Accordingly,
outstanding borrowings under the credit agreement are classified as a current
liability.




<PAGE>


FORM 10-Q                                                     December 31, 2006
Page 18

         As of December 31, 2006, the Company was in compliance with all of its
covenant contained in the credit agreement.

               At December 31, 2006, the Company had cash of approximately
$10,000 and working capital of approximately $4,723,000, as compared to cash of
approximately $29,000 and working capital of approximately $4,106,000 at June
30, 2006. As described above, our credit agreement requires our cash generated
from operations to be applied directly to the prepayment of indebtedness under
our credit facility.

              For the six months ended December 31, 2006, our net cash used in
operating activities was approximately $0.5 million as compared to net cash
provided by operating activities of $4.8 million for the six months ended
December 31, 2005. The decrease in net cash provided by operating activities is
primarily attributable to an increase in our accounts receivable and prepaid
expenses partially offset by a decrease in inventory and an increase in accounts
payable and accrued expenses for the six months ended December 31, 2006, as
compared to a substantial decrease in our accounts receivable and inventory,
partially offset by a decrease in current liabilities for the six months ended
December 31, 2005. Net cash used in investing activities was approximately
$125,000 for the six months ended December 31, 2006 as compared to net cash used
in investing activities of $94,000 for the six months ended December 31, 2005.
Net cash provided by financing activities was approximately $0.6 million for the
six months ended December 31, 2006 as compared to $5.1 million used in financing
activities for the six months ended December 31, 2005. The increase in net cash
provided is primarily attributable to the increase in net borrowings under our
credit facility of approximately $0.6 million in the six months ended December
31, 2006 as compared to a decrease in net borrowings of $5.1 million in the six
months ended December 31, 2005.

         For the six months ended December 31, 2006 and 2005, our inventory
turnover was 7.4 times and 5.0 times, respectively. The average days outstanding
of our accounts receivable at December 31, 2006 were 51 days, as compared to 57
days at December 31, 2005. Inventory turnover and average days outstanding are
key ratios that management relies on to monitor our business.

           Based upon our present plans, including no anticipated material
capital expenditures, we believe that cash flow that we expect to generate from
operations and funds available under our credit facility will be sufficient to
fund our capital needs for the next twelve months. However, our ability to
maintain sufficient liquidity depends partially on our ability to achieve
anticipated levels of revenue, while continuing to control costs, and remaining
in compliance with our bank covenants. Historically, including on several
occasions during the fiscal year ended June 30, 2006, we have, when necessary,
been able to obtain amendments to our credit facilities or waivers from our
lenders to satisfy instances of our non-compliance with financial covenants.
While we cannot assure that any such future amendments or waivers, if needed,
will be available, management believes we will be able to continue to obtain
financing on acceptable terms under our existing credit facility or through
other external sources. In the event that in the future we are unable to obtain
such an amendment or waiver of our non-compliance with our financial covenants,
the lenders under our credit facility could declare us to be in default under
the facility, requiring all amounts outstanding under the facility to be
immediately due and payable and/or limit the Company's ability to borrow
additional amounts under the facility. If we did not have sufficient available
cash to pay all such amounts that become due and payable, we would have to seek
additional debt or equity financing through other external sources, which may
not be available on acceptable terms, or at all. Failure to maintain financing
arrangements on acceptable terms would have a material adverse effect on our
business, results of operations and financial condition.




<PAGE>





FORM 10-Q                                                     December 31, 2006
Page 19

Contractual Obligations

         This table summarizes our known contractual obligations and commercial
commitments at December 31, 2006.
<TABLE>

                                 Total          < 1 Year      1 to 3 Years    3 to 5 Years     > 5 Years
                             --------------- --------------- --------------- ---------------- --------------

<S>                             <C>             <C>
         Bank Debt              $35,724,703     $35,724,703
         Capital lease              131,361          63,053          $68,308
         Operating leases         6,764,459       1,326,503        1,968,468      $1,652,218     $1,817,270
                             --------------- --------------- --------------- ---------------- --------------

         Total                  $42,620,523     $37,114,259       $2,036,776      $1,652,218     $1,817,270
                             =============== =============== =============== ================ ==============
</TABLE>


Inflation and Seasonality

         Inflation and seasonality have not had a significant impact on our
operations during the last three fiscal years.


Item 3. Quantitative and Qualitative Disclosures About Market Risk.

         We are exposed to interest rate changes with respect to borrowings
under our credit facility, which bears interest at a variable rate dependent
upon either the prime rate, federal funds rate or the LIBOR rate ("rates"). At
January 31, 2007, $32.5 million was outstanding under the credit facility.
Changes in any of the rates during the current fiscal year will have a positive
or negative effect on our interest expense. Each 1.0% fluctuation in the rate
will increase or decrease our interest expense under the credit facility by
approximately $0.3 million based on the amount of outstanding borrowings at
January 31, 2007. The impact of interest rate fluctuations on our other floating
rate debt is not material.

Item 4. Controls and Procedures.

         An evaluation was performed, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934) as of December 31, 2006. Based upon that evaluation, the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
has concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed in the reports
that the Company files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, and is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure. There have been no changes in the Company's internal
control over financial reporting or in other factors identified in connection
with this evaluation that occurred during the three months ended December 31,
2006 that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.


<PAGE>


FORM 10-Q                                                      December 31, 2006
Page 20


PART II - OTHER INFORMATION


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

       Our Annual Meeting of Shareholders was held on December 22, 2006. At the
Annual Meeting our shareholders approved the following matter:

(i)             The election of each of the nominees to the Board of Directors
                of the Company to hold office until the Company's next annual
                meeting of shareholders or until their successors are duly
                elected and qualified:
       Edward M. Frankel      For:     5,736,822     Withheld:        172,723
       Charles B. Girsky      For:     5,850,318     Withheld:         59,227
       Joel H. Girsky         For:     5,848,498     Withheld:         61,047
       Marvin Meirs           For:     5,770,130     Withheld:        139,415
       Joseph F. Oliveri      For:     5,833,647     Withheld:         75,898
       Neil Rappaport         For:     5,860,226     Withheld:         49,319
       Robert J. Waldman      For:     5,837,626     Withheld:         71,919


Item 6.  Exhibits.

          Exhibit  10.1 - Credit  Agreement  dated as of December 22, 2006 among
          Jaco Electronics,  Inc. and Interface Electronics Corp., as Borrowers,
          and The CIT Group/Business  Credit,  Inc., as Agent,  Swingline Lender
          and  Issuing  Bank  ("CIT"),  and  CIT  Capital  Securities,  LLC,  as
          Syndication Agent, Sole Bookrunner and Sole Load Arranger (the "Credit
          Agreement").

          Exhibit 10.2 - Amendment No. 1 to Credit Agreement dated as of January
          23,  2007 among CIT,  as Agent  under the Credit  Agreement,  and Jaco
          Electronics,  Inc. and Interface Electronics Corp., as Borrowers under
          the Credit Agreement.

          Exhibit 10.3 - Assignment and Assumption Agreement dated as of
          January 23, 2007 between CIT and Bank of America, N.A.,
          consented to by Jaco Electronics, Inc.

          Exhibit 31.1 - Rule 13a-14 (a) / 15d-14 (a) Certification of
          Principal Executive Officer.

          Exhibit 31.2 - Rule 13a-14 (a) / 15d-14 (a) Certification of
          Principal Financial Officer.

          Exhibit  32.1 - Section  1350  Certification  of  Principal  Executive
          Officer.

          Exhibit  32.2 - Section  1350  Certification  of  Principal  Financial
          Officer.






<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.

February 14, 2007
                           JACO ELECTRONICS, INC.
                                      (Registrant)


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