<PAGE>

                       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 January 31, 1999

                                       or

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

            For the transition period from __________ to ____________

                         COMMISSION FILE NUMBER 0-21695

                         Manchester Equipment Co., Inc.
             (Exact name of registrant as specified in its charter)

         New York                                    11-2312854
(State or other jurisdiction of                   (I.R.S. Employer
Incorporation or organization)                    Identification Number)

                                 160 Oser Avenue
                            Hauppauge, New York 11788
              (Address of registrant's principal executive offices)

                                 (516) 435-1199
              (Registrant's telephone number, including area code)


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.

                                 [X] Yes [ ] No

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

         There were  8,096,600  outstanding  shares of COMMON STOCK at March 12,
1999.






<PAGE>



                 MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES

                                Table of Contents

PART I.            FINANCIAL INFORMATION                                   Page

Item 1.            Condensed Consolidated Balance Sheets
                          January 31, 1999  (unaudited) and July 31, 1998     3

                   Condensed Consolidated Statements of Income
                          Three months and six months  ended
                           January 31, 1999 and 1998 (unaudited)              4

                   Condensed Consolidated Statements of Cash Flows
                          Six months ended January 31, 1999
                          and 1998 (unaudited)                                5

                   Notes to Condensed Consolidated Financial Statements       6

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


PART II.           OTHER INFORMATION

Item 5.            Other information                                         15

Item 6.            Exhibits and Reports                                      15




















<PAGE>

Part I - FINANCIAL INFORMATION

ITEM 1.            Financial Statements

                 Manchester Equipment Co., Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
                       (in thousands except share amounts)
<TABLE>
<CAPTION>

                                                              January 31, 1999          July 31, 1998
                                                                (Unaudited)               
                                                                -----------              -----------
<S>                                                              <C>                  <C>     

Assets:
  Cash and cash equivalents                                        $  7,431              $  7,816
  Investments                                                             -                 1,501
  Accounts receivable, net                                           26,388                26,296
  Inventory                                                           8,907                 9,167
  Deferred income taxes                                                 482                   482
  Prepaid income taxes                                                  245                     -
  Prepaid expenses and other current assets                             283                   290
                                                                        ---                   ---
         Total current assets                                        43,736                45,552

  Property and equipment, net                                         6,071                 5,975
  Goodwill, net                                                       5,065                 4,325
  Deferred income taxes                                                 475                   475
  Other assets                                                          541                   567
                                                                        ---                   ---

                                                                    $55,888               $56,894
                                                                    =======               =======

Liabilities:
  Current maturities under capital lease obligation              $       26               $    82
  Accounts payable and accrued expenses                              17,119                18,358
  Deferred service revenue                                              599                   775
  Income taxes payable                                                    -                   225
                                                                         --                   ---
         Total current liabilities                                   17,744                19,440

    Deferred compensation payable                                       109                   109
                                                                        ---                   ---

         Total liabilities                                           17,853                19,549
                                                                     ------                ------

Shareholders' equity:
  Preferred stock, $.01 par value; 5,000,000
     shares authorized, none issued                                       -                     -
  Common stock, $.01 par value; 25,000,000
     shares authorized, 8,096,600 issued and outstanding                 81                    81
  Additional paid-in capital                                         18,803                18,767
  Deferred compensation                                                 (51)                  (64)
  Retained earnings                                                  19,202                18,561
                                                                     ------                ------

         Total shareholders' equity                                  38,035                37,345
                                                                     ------                ------

                                                                    $55,888               $56,894
                                                                    =======               =======
</TABLE>

See notes to condensed consolidated financial statements.
                                       3
<PAGE>
                 Manchester Equipment Co., Inc. and Subsidiaries
                   Condensed Consolidated Statements of Income
               (in thousands, except share and per share amounts)
                                    Unaudited
<TABLE>
<CAPTION>

                                      Three months ended January 31,  Six months ended January 31,
                                           1999            1998         1999             1998
                                           ----            ----         ----            -----
<S>                                      <C>             <C>          <C>              <C>    
Revenue
       Products                           $51,778        $48,308      $107,453         $94,416 
       Services                             1,611          1,064        3,435            2,012
                                            -----          -----        -----            -----
                               
                                           53,389         49,372       110,888          96,428   
                                           ------         ------       -------          ------   
Cost of revenue
       Products                            45,066         41,665        93,448          81,266
       Services                             1,061            803         2,165           1,466
                                            -----            ---         -----           -----
                                           46,127         42,468        95,613          82,732
                                           ------         ------        ------          ------

       Gross profit                         7,262          6,904        15,275          13,696

Selling, general and
    administrative expenses                 7,224          6,705        14,409          12,404
                                            -----          -----        ------          ------

       Income  from operations                 38            199           866           1,292

Interest expense                               (3)           (23)           (5)            (33)
Interest income                               105            203           220             404
                                             ----           ----          ----             ---

       Income before income taxes             140            379         1,081           1,663

Provision for income taxes                     67            148           440             670
                                               --           ----           ---             ---

       Net income                             $73         $  231          $641           $ 993
                                              ===         ======          ====           =====

Net Income per share
   Basic                                    $0.01          $0.03        $0.08            $0.12
                                            =====          =====        =====            =====
   Diluted                                  $0.01          $0.03        $0.08            $0.12
                                            =====          =====        =====            =====

Weighted average
  shares outstanding
     Basic                              8,096,600      8,531,304     8,096,600       8,528,152
                                        =========      =========     =========       =========
      Diluted                           8,096,600      8,531,304     8,096,600       8,528,152
                                        =========      =========     =========       =========

</TABLE>

See notes to condensed consolidated financial statements.
                                       4

<PAGE>



                 Manchester Equipment Co., Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                 For the six months ended January 31,
                                                                         1999          1998
                                                                             (Unaudited) 
                                                                    ---------------------------
<S>                                                                   <C>           <C>    
Cash flows from operating activities:
         Net income                                                    $  641          $993

  Adjustments to reconcile net income to net cash from
    operating activities:
              Depreciation and amortization                               877           550
              Allowance for doubtful accounts                              74           192
              Non cash compensation and commission expense                 49            27
  Change in  assets  and  liabilities  net of the  effects 
   of the  purchase of Coastal:
         Increase in accounts receivable                                 (166)       (4,522)
         Decrease in inventory                                            260         3,500
         Increase in prepaid income taxes                                (245)            -
         (Increase) decrease in prepaid expenses and
             other current assets                                           7          (715)
         (Increase) decrease in other assets                               26           (90)
         Decrease in accounts payable and
             accrued expenses                                          (2,110)       (2,647)
         Decrease in deferred service contract revenue                   (176)          (22)
         Decrease  in income taxes  payable                              (225)            -
         Sale of investments                                            1,501         4,408
                                                                        -----         -----

         Net cash provided by operating activities                        513         1,674
                                                                          ---         -----

Cash flows from investing activities:
         Capital expenditures                                            (842)       (1,648)
         Payment for the purchase of Coastal, net of cash acquired          -        (2,921)
                                                                          ---         -----

              Net cash used in investing activities                      (842)       (4,569)
                                                                          ---         -----

Cash flows from financing activities:
         Net repayments of borrowings                                       -        (1,274)
         Payments on capital lease obligation                             (56)          (53)
         Payments on notes payable - other                                  -          (415)
                                                                          ---          ----
              Net cash used in financing activities                       (56)       (1,742)
                                                                           ---        ------
Net decrease in cash and cash equivalents                                (385)       (4,637)
         Cash and cash equivalents at beginning of period               7,816        15,049
                                                                        -----        ------
Cash and cash equivalents at end of period                             $7,431       $10,412
                                                                       ======       =======
</TABLE>

     See notes to condensed consolidated financial statements.
                                       5

<PAGE>



                 Manchester Equipment Co., Inc. and Subsidiaries
              Notes to Condensed Consolidated Financial Statements

   1.    Organization and Basis of Presentation

         Manchester  Equipment Co., Inc. (the "Company") is a network integrator
      and  reseller of computer  hardware,  software  and  networking  products,
      primarily  for  commercial  customers.  The Company  offers its  customers
      single-source  solutions  customized to their information systems needs by
      combining  value-added  services  with  hardware,   software,   networking
      products and peripherals from leading vendors.

         Sales of  hardware,  software  and  networking  products  comprise  the
      majority of the Company's revenue. The Company has entered into agreements
      with  certain  suppliers  and  manufacturers  which  provide  the  Company
      favorable pricing and price protection in the event the vendor reduces its
      prices.

         In the opinion of the Company,  the  accompanying  unaudited  Condensed
      Consolidated  Financial Statements contain all adjustments  (consisting of
      only  normal and  recurring  accruals)  necessary  to  present  fairly the
      financial  position  of the Company as of January 31, 1999 and the results
      of operations for the three and six months ended January 31, 1999 and 1998
      and cash  flows  for the six  months  ended  January  31,  1999 and  1998.
      Although the Company believes that the disclosures  herein are adequate to
      make the information not misleading,  these financial statements should be
      read in conjunction  with the audited  financial  statements and the notes
      thereto for the year ended July 31, 1998, included in the Company's Annual
      Report on Form 10-K as filed with the Securities and Exchange Commission.

   2.    Net Income Per Share

         Basic net income per share has been  computed by dividing net income by
      the weighted  average  number of common  shares  outstanding.  Diluted net
      income per share has been  computed by dividing net income by the weighted
      average number of common shares outstanding,  plus the assumed exercise of
      dilutive  stock options and warrants,  less the number of treasury  shares
      assumed to be  purchased  from the  proceeds of such  exercises  using the
      average market price of the Company's  common stock during each respective
      period.  Stock options and warrants are excluded from the  calculation  of
      diluted net income per share when the result would be antidilutive.

    3.    Acquisition of Coastal Office Products, Inc.

         On January 2, 1998, the Company acquired all of the outstanding  shares
      of Coastal Office Products,  Inc. ("Coastal"),  a reseller and provider of
      microcomputer  services  and  peripherals  to  companies  in  the  greater
      Baltimore, Maryland area. The acquisition, which has been accounted for as
      a purchase,  consisted of a cash  payment of $3.1  million plus  potential
      future contingent  payments.  Contingent payments of up to $1,050 for each
      of calendar 1998 and 1999 will be determined based upon Coastal  achieving
      certain  agreed upon  increases in revenue and pretax  income for calendar
      1998 and 1999 over calendar  1997 amounts.  The cash payment was made from
      the Company's cash balances. Contingent payments, if any, would be paid in
      cash (or, under certain conditions,  in Company common stock) on March 15,
      1999 and March 15, 2000. As of January 31, 1999,  the Company has recorded
      additional  purchase  price of $871,000,  of which  $800,000  represents a
      contingent  payment  due on  March  15,  1999.  The  selling  shareholders
      received  employment  agreements  that also  provided  for the issuance of
      20,000  shares  of  common  stock.  The fair  value of the  common  stock,
      amounting  to $80,000 was recorded as deferred  compensation  and is being
      expensed over the three-year vesting period.


         Operating results of Coastal are included in the Condensed Consolidated
      Statements  of  Income  from  the  date of  acquisition.  The  acquisition
      resulted  in  goodwill  of  $3,836,000  which  is being  amortized  on the
      straight-line basis over 20 years.
                                       6
<PAGE>
         The following  unaudited pro forma  consolidated  results of operations
      for the six  months  ended  January  31,  1998  assume  that  the  Coastal
      acquisition  occurred  on  August  1,  1997  and  reflect  the  historical
      operations  of the  purchased  business  adjusted  for lower  interest  on
      invested funds,  contractually  revised officer  compensation and rent and
      increased amortization, net of applicable income taxes, resulting from the
      acquisition:

                                                          Six months ended
                                                          January 31, 1998
                                                          ----------------
                                                         (in thousands,
                                                    except per share amounts)
                  Revenue                                    $100,003
                                                              =======
                  Net income                                   $1,019
                                                               ======
                  Net income per share                          $0.12
                                                                 ====

                  The pro  forma  results  of  operations  are  not  necessarily
      indicative  of the  actual  results  that  would  have  occurred  had  the
      acquisition been made at the beginning of the period,  or of results which
      may occur in the future.

                                       7

<PAGE>



     ITEM 2 - MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
     RESULTS OF OPERATIONS

           The  following  discussion  and analysis of financial  condition  and
      results of operations of the Company  should be read in  conjunction  with
      the condensed consolidated financial statements and notes thereto included
      elsewhere  in this  Quarterly  Report on Form 10-Q and with the  Company's
      Annual Report on Form 10-K. This discussion and analysis  contains certain
      forward-looking  statements  within the meaning of the  Securities  Act of
      1933, as amended,  and Section 21E of the Securities Exchange Act of 1934,
      as  amended,  which  are not  historical  facts,  and  involve  risks  and
      uncertainties  that could cause actual results to differ  materially  from
      the results anticipated in those forward-looking  statements.  These risks
      and uncertainties  include, but are not limited to, those set forth below,
      those set forth in the  Company's  Annual Report on Form 10-K for the year
      ended July 31, 1998,  and those set forth in the  Company's  other filings
      from time to time with the Securities and Exchange Commission.

      General

           The  Company  is  a  network  integrator  and  reseller  of  computer
      hardware,  software and  networking  products,  primarily  for  commercial
      customers.  The  Company  offers  its  customers  single-source  solutions
      customized to their  information  systems  needs by combining  value-added
      services with hardware, software, networking products and peripherals from
      leading vendors.  To date, most of the Company's  revenue has been derived
      from  product  sales.  The  Company  generally  does not  develop  or sell
      software products. However, certain computer hardware products sold by the
      Company are loaded with pre-packaged software products.

           As a result of intense price competition within the computer industry
      as  well  as  other  industry  conditions,  the  Company  has  experienced
      increasing  pressure on per unit prices as well as on its gross profit and
      operating  margins  with respect to the sale of  products.  The  Company's
      strategy  includes  increasing its focus on providing value added services
      with operating margins that are higher than those obtained with respect to
      the sale of products.  The Company has experienced a significant  increase
      in selling, general and administrative expenses,  primarily in the form of
      increased  personnel costs, in connection with the  implementation of this
      strategy.  The  Company's  future  performance  will depend in part on its
      ability to manage  successfully  a continuing  shift in its  operations to
      value-added services.

           The Company  directly  competes  with local,  regional  and  national
      systems  integrators,  value-added  resellers ("VARs") and distributors as
      well as with certain  computer  manufacturers  that market  through direct
      sales  forces  and/or the  Internet.  In the future,  the Company may face
      further  competition  from new  market  entrants  and  possible  alliances
      between  existing   competitors.   In  addition,   certain  suppliers  and
      manufacturers  may choose to market products directly to end users through
      a direct  sales force  and/or the  Internet  rather than or in addition to
      channel distribution. Some of the Company's competitors have, or may have,
      greater financial,  marketing and other resources, and may offer a broader
      range of products and services, than the Company. As a result, they may be
      able to respond more quickly to new or emerging technologies or changes in
      customer  requirements,  benefit from greater purchasing economies,  offer
      more aggressive  hardware and service pricing or devote greater  resources
      to the promotion of their products and services. There can be no assurance
      that the Company will be able to compete  successfully  in the future with
      these or other current or potential future competitors.

           The Company's business is dependent upon its relationships with major
      manufacturers in the computer industry. There can be no assurance that the
      pricing  and  related  terms  offered  by  major  manufacturers  will  not
      adversely  change in the future.  The failure to obtain an adequate supply
      of products,  the loss of a major  manufacturer,  the deterioration of the
      Company's   relationship  with  a  major  manufacturer  or  the  Company's
      inability  in  the  future  to  develop  new   relationships   with  other
      manufacturers  could  have a  material  adverse  effect  on the  Company's
      business, results of operations and financial condition.
                                       8
 <PAGE>
          The Company's largest customer  accounted for approximately 8% and 8%
      (or $8,376,000 and $7,698,000,  respectively) of the Company's revenue for
      the  six  months   ended   January  31,   1999  and  1998,   respectively,
      substantially  all of which  revenue was derived from the sale of hardware
      products.  This  customer  accounted for 7% of revenue for the fiscal year
      ended July 31,  1998.  There can be no  assurance  that the  Company  will
      continue to derive substantial revenue from this customer.

           The  Company's  profitability  has been  enhanced  by its  ability to
      obtain  volume  discounts  from  certain  manufacturers,  which  has  been
      dependent, in part, upon the Company's ability to sell large quantities of
      products to computer resellers,  including VARs. There can be no assurance
      that the Company  will be able to continue to sell  products to  resellers
      and thereby obtain the desired  discounts from the  manufacturers  or that
      the Company will be able to increase sales to end-users to offset the need
      to rely upon sales to resellers.

           The markets for the Company's products and services are characterized
      by rapidly changing technology and frequent  introductions of new hardware
      and software  products and services,  which render many existing  products
      noncompetitive, less profitable or obsolete. The Company believes that its
      inventory controls have contributed to its ability to respond  effectively
      to these technological  changes. As of January 31, 1999 and July 31, 1998,
      inventories  represented  16% of total  assets.  For the six months  ended
      January 31, 1999 and 1998,  annualized  inventory  turnover  was 21 and 15
      times,  respectively.  Inventory  turned 17 times in the fiscal year ended
      July 31, 1998. The failure of the Company to anticipate  technology trends
      or to continue to effectively  manage its inventory  could have a material
      adverse  effect on the  Company's  business,  results  of  operations  and
      financial condition.

           The  Company  believes  its  controls  on  accounts  receivable  have
      contributed  to  its   profitability.   The  Company's  bad  debt  expense
      represented  less  than  0.2% of total  revenues  in each of the six month
      periods  ended  January 31, 1999 and 1998.  For the fiscal year ended July
      31, 1998, bad debt expense represented 0.2% of total revenues.

           The Company's  quarterly  revenue and  operating  results have varied
      significantly  in the past and are  expected  to  continue to do so in the
      future.  Quarterly revenue and operating results generally  fluctuate as a
      result  of the  demand  for  the  Company's  products  and  services,  the
      introduction  of new  hardware  and software  technologies  with  improved
      features,  the  introduction  of new  services  by  the  Company  and  its
      competitors, changes in the level of the Company's operating expenses, the
      timely availability of product supply, competitive conditions and economic
      conditions. In particular,  the Company currently is increasing certain of
      its  fixed  operating  expenses,   including  a  significant  increase  in
      personnel,  as part of its  strategy  to increase  its focus on  providing
      higher margin,  value-added  services.  Accordingly,  the Company believes
      that  period-to-period  comparisons of its operating results should not be
      relied upon as an  indication  of future  performance.  In  addition,  the
      results  of any  quarterly  period  are not  indicative  of  results to be
      expected for a full fiscal year.

           As a result of rapid  changes  which are taking place in computer and
      networking technologies,  product life cycles are short. Accordingly,  the
      Company's product offerings change  constantly.  Prices of products change
      with  generally  higher  prices early in the life cycle of the product and
      lower  prices  near the end of the  product's  life  cycle.  Recently  the
      computer industry has experienced rapid declines in average selling prices
      of personal  computers.  In some  instances,  the Company has been able to
      offset these price declines with increases in units shipped.  There can be
      no assurance  that average  selling prices will not continue to decline or
      that the Company will be able to offset declines in average selling prices
      with increases in units shipped.

           Most  of  the  personal  computers  shipped  by the  Company  utilize
      operating  systems developed by Microsoft  Corporation.  The United States
      Department of Justice has brought an antitrust  action against  Microsoft,
      which could delay the introduction and distribution of Microsoft products.
      The potential  unavailability of Microsoft  products could have a material
      adverse  effect on the  Company's  business,  results  of  operations  and
      financial condition.
                                       9
<PAGE>
      Year 2000 Issue

           Many existing  computer  systems,  including certain of the Company's
      internal systems as well as those that the Company sells to customers, use
      only the last two digits to identify years in the date field. As a result,
      those  systems may not  accurately  distinguish  years in the 21st century
      from years in the 20th  century,  or may not function  properly when faced
      with years later than 1999.  This problem is generally  referred to as the
      "Year 2000 Issue."  Computer  systems that are able to deal correctly with
      dates after 1999 are referred to as "Year-2000-Compliant."


      Year 2000 Readiness Disclosure

           The Company has  undertaken a complete and thorough  review of all of
      its  operations to determine  those aspects which involve or are dependent
      upon a computer  application.  The Company is  reviewing  the software and
      operating  systems  for  each  such  application  to  determine  if  it is
      Year-2000-Compliant.   Any  such  system  or  application   which  is  not
      Year-2000-Compliant  is being modified or upgraded to assure the Company's
      continued ability to operate without  interruption.  This process has been
      underway  since  before  January 1, 1998 and is  currently on schedule for
      completion  by March 31, 1999.  The Company is in the process of obtaining
      assurances  regarding Year 2000 compliance from other companies upon which
      it may rely for products or services.

           The  Company  expects  to  implement  successfully  the  systems  and
      programming  changes necessary to address the Year 2000 Issue. The Company
      expects to implement  these changes using primarily  internal  information
      technology and other personnel.  Moreover, the Company does not expect the
      costs associated with that  implementation to be material to the Company's
      financial position or results of operations.

           With  respect to products  sold to  customers,  the Company  does not
      warrant any products  sold as  Year-2000-Compliant.  Instead,  the Company
      refers   customers   to  any   warrantees   provided   by  the   product's
      manufacturers.

          The Company  believes the most reasonably  likely worst case Year 2000
     scenario would include a combination of some or all of the following:

     o    Internal information technology modules or systems may fail to operate
          or may give  erroneous  information.  Such  failure  could  result  in
          shipping  delays,  inability  to generate or delays in  generation  of
          financial  reports  and  statements,   inability  of  the  Company  to
          communicate  among its various offices,  and computer network downtime
          resulting in inefficiencies and higher payroll expenses.

     o    Components in HVAC, lighting,  telephone, security and similar systems
          might fail, causing such systems to fail.

     o    Communications  with  customers  and vendors that the Company  depends
          upon may fail or give erroneous  information.  These types of problems
          could  result in such  difficulties  as the  inability  to  receive or
          process  customer  orders,  shipping  delays,  or sale of  products at
          erroneous  prices.  Furthermore,  customers  may be unable  to, or may
          suffer delays, in remitting payments to the Company on a timely basis.

     o    The  unavailability  of  products  as a result of Year  2000  problems
          experienced by one or more key vendors of the Company,  or as a result
          of  changes  in  inventory  levels at  aggregators,  VARs and  similar
          providers in response to an  anticipated  Year 2000 problem and/or the
          inability of the Company to develop  alternative  sources for products
          may  result in the  inability  of the  Company  to obtain an  adequate
          supply of products.

     o    Products sold to some of the Company's customers could fail to perform
          some or all of their  intended  functions.  In such a  situation,  the
          Company's  maximum  obligation  would  be to  repair  or  replace  the
          defective  products  to the extent the  Company is  required  to do so
          under manufacturer warranty.
                                       10
  <PAGE>
          The Company  believes its plans for addressing the Year 2000 Issue as
      outlined  above are  adequate to handle the most  reasonably  likely worst
      case  scenario.  The  Company  does not  believe  it will incur a material
      financial  impact for the risk of  failure,  or from the costs  associated
      with  assessing  the risks of failure,  arising  from the Year 2000 Issue.
      Consequently,  the Company  does not intend to create a  contingency  plan
      other than as set forth above. In addition, if the Company's assessment of
      its vendors,  when completed,  indicate that certain product shortages can
      be anticipated, the Company may adjust its plans accordingly, although the
      Company  does  believe  that it has the  capacity to maintain  significant
      levels of inventory.

           The statements  above  describing the Company's  plans and objectives
      for handling the Year 2000 Issue and the expected  impact of the Year 2000
      Issue on the  Company are  forward-looking  statements.  Those  statements
      involve risks and uncertainties  that could cause actual results to differ
      materially from the results discussed above. Factors that might cause such
      a difference include, but are not limited to, delays in executing the plan
      outlined  above and  increased or  unforeseen  costs  associated  with the
      implementation  of the plan and any  necessary  changes  to the  Company's
      systems.  Any inability on the part of the Company to implement  necessary
      changes in a timely fashion could have an adverse effect on future results
      of operations.  Moreover,  even if the Company successfully implements the
      changes  necessary  to  address  the  Year  2000  Issue,  there  can be no
      assurance  that the Company will not be adversely  affected by the failure
      of others to become Year-2000-Compliant.

      Recent Acquisition

           On January 2,  1998,  the  Company  acquired  all of the  outstanding
      shares  of  Coastal  Office  Products,   Inc.   ("Coastal"),   a  Maryland
      corporation  and a reseller  and  provider of  microcomputer  services and
      peripherals  to companies in the greater  Baltimore,  Maryland  area.  The
      acquisition,  which has been  accounted for as a purchase,  consisted of a
      cash  payment  of   approximately   $3.1  million  plus  potential  future
      contingent  payments.  The cash payment was made from the  Company's  cash
      balances. Contingent payments of up to $1,050,000 in each of calendar 1998
      and 1999 will be determined  based upon Coastal  achieving  certain agreed
      upon  increases in revenues and pretax  income for calendar  1998 and 1999
      over calendar 1997 amounts.  Contingent payments, if any, would be paid in
      cash (or, under certain conditions,  in Company common stock) on March 15,
      1999 and March 15, 2000.  Operating results of Coastal are included in the
      Consolidated  Statements  of  Income  from  the date of  acquisition.  The
      acquisition  resulted in goodwill of $3,836,000,  which is being amortized
      on the straight-line basis over 20 years.

      E-Commerce

         On January 18, 1999 the Company officially launched its new website and
      electronic     commerce    system.    The    new    site,    located    at
      www.manchesterequipment.com  allows  both  existing  customers,  corporate
      shoppers  and others to find  product  specifications,  compare  products,
      check price and availability and place and track orders quickly and easily
      24 hours a day seven days a week.  The  Company  has made,  and expects to
      continue  to  make,  significant   investments  and  improvements  in  its
      e-commerce  capabilities.  There can be no assurance that the Company will
      be  successful  in  enhancing  and  increasing  its  business  through its
      expanded Internet presence.


                                       11
<PAGE>



           Results of Operations

           The  following   table  sets  forth,   for  the  periods   indicated,
      information derived from the Company's Condensed  Consolidated  Statements
      of Income expressed as a percentage of related revenue or total revenue.
<TABLE>
<CAPTION>

                                                             Percentage of Revenue
                                               Three Months Ended    Six Months Ended
                                                     January 31,         January 31,     
                                                     -----------         -----------     
                                                 1999      1998        1999       1998
                                                 ----      ----        ----       ----
           <S>                                 <C>       <C>         <C>        <C>  
           Product Sales                         97.0%     97.8%       96.9%      97.9%
           Services                               3.0       2.2         3.1        2.1
                                                  ---       ---         ---        ---
                Total revenue                   100.0     100.0       100.0      100.0
                                                -----     -----       -----      -----

           Cost of Product Sales                 87.0      86.2        87.0       86.1
            Cost of Services                     65.9      75.5        63.0       72.9
                                                 ----      ----        ----       ----
                Cost of revenue                  86.4      86.0        86.2       85.8
                                                -----     -----        ----       ----

           Product Gross Profit                  13.0      13.8        13.0       13.9
           Services Gross Profit                 34.1      24.5        37.1       27.1
                                                 ----      ----        ----       ----
                Gross Profit                     13.6      14.0        13.8       14.2
                                                 ----      ----        ----       ----

           Selling, general and
              administrative expenses            13.5      13.6        13.0       12.9
                                                -----      ----        ----       ----
           Income from operations                 0.1       0.4         0.8        1.3
           Interest and other income, net         0.2       0.4         0.2        0.4
                                                 ----       ---         ---       ----
           Income before income taxes             0.3       0.8         1.0        1.7
           Provision for income taxes             0.1       0.3         0.4        0.7
                                               ------      ----         ---        ---
           Net income                             0.2%      0.5%        0.6%       1.0%
                                               ======     =====         ===        ===
</TABLE>


     Three Months Ended  January 31, 1999 Compared to Three Months Ended January
     31, 1998

           Revenue.  The Company's  revenue  increased $4.0 million or 8.1% from
      $49.4 million for the three months ended January 31, 1998 to $53.4 million
      for the three months ended January 31, 1999.  Product revenue increased by
      $3.5  million  (7.2%) due  primarily to increases in shipments of personal
      computers and displays, as well as revenue generated by Coastal, partially
      offset by lower per unit prices for personal  computers.  Service  revenue
      increased $547,000 (51.4%) as a result of the Company's continued emphasis
      on providing value-added services.

           Gross Profit.  Cost of revenue  includes the direct costs of products
      sold, freight and the personnel costs associated with providing  technical
      services,  offset in part by certain market  development funds provided by
      manufacturers.  All other operating costs are included in selling, general
      and administrative  expenses. Gross profit increased $358,000 or 5.2% from
      $6.7 million for the second quarter of fiscal 1998 to $7.2 million for the
      most  recent  fiscal  quarter.  Gross  profit  from the  sale of  products
      increased  by  $69,000  while  gross  profit  from  the  sale of  services
      increased by $289,000.  The changes in gross profit  primarily result from
      the changes in revenue discussed above. As a percentage of revenue,  gross
      profit decreased to 13.6% in the second quarter of fiscal 1999 as compared
      to  14.0% in  fiscal  1998.  Competitive  pressures,  changes  in types of
      products or services sold and product  availability result in fluctuations
      in gross profit.

              Selling, General and Administrative Expenses. Selling, general and
      administrative  expenses  increased  $519,000 or 7.7% from $6.7 million in
      the second quarter of fiscal 1998 to $7.2 million in the second quarter of
      fiscal 1999.  This increase is principally a result of higher salaries and
                                       12
<PAGE>     
     personnel costs as well as higher  depreciation and amortization  costs. In
     addition,  the Company  incurred higher operating costs associated with the
     Company's new subsidiary, Coastal.

          Interest Income. Interest income decreased from $203,000 in the second
     quarter of 1998 to $105,000 in the second quarter of 1999 due to lower cash
     balances available for investment.

              Provision  for  Income  Taxes.   The  effective  income  tax  rate
      increased to 48% in the current  period  compared to 39% of pre-tax income
      in the prior year period principally as a result of certain non deductible
      expenses.

     Six Months Ended  January 31, 1999 Compared to Six Months Ended January 31,
     ---------------------------------------------------------------------------
     1998
     ----

              Revenue. The Company's revenue increased by $14.5 million or 15.0%
      from $96.4  million  for the six months  ended  January 31, 1998 to $110.9
      million for the six months ended  January 31, 1999.  Revenue from the sale
      of products  increased by $13.0 million (13.8%) while revenue from service
      offerings increased by $1.4 million (70.7%). The increases in revenue were
      largely  attributable to growth at the Company's  Electrograph and Coastal
      subsidiaries.  Coastal  was  acquired  on  January 2,  1998.  The  Company
      continued  to  experience   lower  average  selling  prices  for  personal
      computers offset partially by increases in units shipped.

              Gross  Profit.Gross  profit  increased by $1.6 million  (11.5%) to
      $15.3  million for the first six months of fiscal 1999 from $13.7  million
      in the  comparable  period a year ago.  Gross  profit from  product  sales
      increased by 6.5% ($855,000) from $13.1 million in the first six months of
      fiscal 1998 to $14.0 million in the most recent six month period.  Service
      offerings  generated  $1.3 million of gross profit in the first six months
      of fiscal 1999 versus $546,000 in gross profit generated in the comparable
      period a year ago. The growth in gross profit dollars is  principally  due
      to the  increase in revenue  discussed  above.  Gross  margin  percentages
      declined in the recent  period due to generally  lower  vendor  incentives
      including  market  development   funds,  co-op  advertising,   and  rebate
      programs.

              Selling, General and Administrative Expenses.  Selling general and
      administrative  expenses  increased  by $2.0  million  or 16.2% from $12.4
      million for the first six months of fiscal  1998 to $14.4  million for the
      first six months of fiscal 1999. The increase is principally due to higher
      salaries and personnel costs, higher advertising costs associated with the
      Company's strategy of focusing on providing value added services and costs
      associated   with   enhancing  the  Company's   e-commerce   capabilities.
      Additionally,  the Company  incurred higher  depreciation and amortization
      costs  and  other  operating  costs  associated  with  the  Company's  new
      subsidiary, Coastal.

          Interest Income.  Interest income decreased due to lower cash balances
     available for investment.

              Provision  for  Income  Taxes.   The  effective  income  tax  rate
      increased  slightly  from 40.3% for the first six months of fiscal 1998 to
      40.7% in the most recent fiscal period.

      Liquidity and Capital Resources
      -------------------------------

           The  Company's  primary  sources of  financing  have been  internally
      generated  working  capital  from  operations  and a line of  credit  from
      financial institutions.

           For the six months ended January 31, 1999, cash provided by operating
      activities was $513,000 consisting  primarily of net income,  depreciation
      and  amortization  and the  sale of  investments,  partially  offset  by a
      decrease in accounts payable and accrued expenses.  The Company's accounts
      receivable and accounts payable and accrued  expenses  balances as well as
      its investment in inventory can fluctuate significantly from one period to
      the next due to the  receipt  of large  customer  orders  or  payments  or
      variations in product  availability  and vendor  shipping  patterns at any
      particular date. Generally,  the Company's experience is that increases in
                                       13
<PAGE>      
      accounts receivable, inventory and accounts payable and accrued expenses
      will coincide with growth in revenue and increased  operating  levels.  In
      addition,  during the six months  ended  January 31, 1999 the Company used
      approximately $842,000 for capital expenditures.

           The   Company  has   available  a  line  of  credit  with   financial
      institutions  in the aggregate  amount of $15.0  million.  No amounts were
      outstanding under this line as of January 31, 1999.

           The  Company  believes  that its  current  balances  in cash and cash
      equivalents  and  investments,  expected  cash flows from  operations  and
      available  borrowings under the line of credit will be adequate to support
      current operating levels for the foreseeable future,  specifically through
      at least the end of fiscal  1999.  The Company  currently  has no material
      commitments for capital  expenditures.  Future capital requirements of the
      Company  include  those for the  growth of working  capital  items such as
      accounts  receivable  and  inventory  and the  purchase of  equipment  and
      expansion of facilities,  the possible  opening of new offices,  potential
      acquisitions, and expansion of the Company's e-commerce capabilities.

      New Accounting Standards
      ------------------------

           The  Financial   Accounting   Standards  Board  issued  Statement  of
      Financial  Accounting  Standards No. 131, "Disclosure About Segments of an
      Enterprise  and  Related  Information,"  which  the  Company  has  adopted
      effective  August  1,  1998.  This  statement  establishes  standards  for
      reporting  information about operating  segments,  and related disclosures
      about  product and services,  geographic  areas and major  customers.  The
      adoption  of this  statement  did  not  have an  impact  on the  Company's
      financial statements.

           The Company will  implement the  provisions of Statement of Financial
      Accounting Standards No. 133,  "Accounting for Derivative  Instruments and
      Hedging  Activities,"  in  fiscal  2000.  The  Company  believes  that the
      implementation  of this  new  pronouncement  will  have no  impact  on the
      financial position and results of operations of the Company.

                                       14

<PAGE>




      PART II - OTHER INFORMATION

      Item 5.     Other Information

              As  permitted  by a  recent  amendment  to the New  York  Business
      Corporation  Law, on March 12, 1999,  the Board of  Directors  amended the
      By-Laws to permit notices of meetings of shareholders to be given not less
      than ten nor more than sixty days  before the  meeting,  and to permit the
      Board to set a record date for meetings of  shareholders  that is not more
      than  sixty nor less than ten days prior to the date of such  meeting.  In
      each case, the prior outside date had been fifty days.

      Item 6.     Exhibits and Reports

      (a)     Exhibits
      ---     --------

       Exhibit No.           Description
       -----------           -----------

          3(ii)              Amended and Restated By-Laws
         27                  Financial Data Schedule


      (b)     Reports on Form 8-K

      None


                                       15


<PAGE>




                         MANCHESTER EQUIPMENT CO., INC.

                                   Signatures

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                       MANCHESTER EQUIPMENT CO., INC.
                                       (Registrant)



DATE:   March 12, 1999                  s/s Barry Steinberg 
                                        ------------------- 
                                       Barry Steinberg
                                       President and Chief Executive Officer



DATE:   March 12, 1999                 s/s/ Joseph Looney   
                                       ------------------------------
                                       Joseph Looney
                                       Chief Financial Officer

                                       16
<PAGE>