<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 October 31, 1997

                                       or

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

            For the transition period from __________ to ____________

                         COMMISSION FILE NUMBER 0-21695

                         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 8,525,000  outstanding shares of COMMON STOCK at December 8,
1997.






<PAGE>



                 MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES

                                      Index

PART I.            FINANCIAL INFORMATION                                   Page

Item 1.   Condensed Consolidated Balance Sheets
           October 31, 1997 (unaudited) and July 31, 1997                     3

          Condensed Consolidated Statements of Income
           Three months ended
           October 31, 1997 and 1996 (unaudited)                              4

          Condensed Consolidated  Statements of Cash Flows Three
           months ended October 31, 1997 and 1996 (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 2.            Changes in Securities and Use of Proceeds                 13

Item 6.            Exhibits and Reports                                      13


                                       2

<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>

                                               October 31, 1997   July 31, 1997
                                                  (Unaudited)           
                                               ----------------   -------------
<S>                                                  <C>             <C>
Assets:
  Cash and cash equivalents                          $ 14,702        $ 15,049
  Investments                                           2,505           4,408
  Accounts receivable, net                             22,554          21,473
  Inventory                                             8,785          10,127
  Deferred income taxes                                   440             440
  Prepaid expenses and other current assets               110             248
                                                          ---             ---
         Total current assets                          49,096          51,745

  Property and equipment, net                           4,266           4,073
  Goodwill, net                                         1,504           1,524
  Deferred income taxes                                   379             379
  Other assets                                            603             487
                                                          ---             ---

                                                      $55,848         $58,208
                                                      =======         =======

Liabilities:
  Current maturities under capital lease obligation   $    99         $    99
  Notes payable - bank                                      -           1,274
  Notes payable - other                                   165             264
  Accounts payable and accrued expenses                17,193          19,283
  Deferred service revenue                                221             247
  Income taxes payable                                    377               -
                                                         ----            ----    
                                                                                   
         Total current liabilities                     18,055          21,167
                                                      
  Capital lease obligation, less current maturities        52              77
  Deferred compensation payable                            87              87
                                                           --              --

         Total liabilities                             18,194          21,331
                                                       ------          ------
                                                               
Shareholders' equity:
  Preferred stock, $.01 par value; 5,000,000 
   shares authorized, none issued                           -               -
  Common stock, $.01 par value; 25,000,000
   authorized, 8,525,000 issued and outstanding            85              85
  Additional paid-in capital                           20,418          20,403
  Retained earnings                                    17,151          16,389
                                                       ------          ------
                                                      
         Total shareholders' equity                    37,654          36,877
                                                       ------          ------
                                                     
                                                      $55,848         $58,208
                                                      =======         =======
</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)
<TABLE>
<CAPTION>

                                               Three months ended October 31,
                                                    1997                1996
                                                         (Unaudited)
                                                -----------------------------
<S>                                               <C>                <C>

Revenue
       Products                                    $46,108           $50,590
       Services                                        948               397
                                                    ------            ------
                                                    47,056            50,987
                                                    ------            ------
Cost of revenue
       Products                                     39,601            43,537
       Services                                        663               271
                                                       ---               ---
                                                    40,264            43,808
                                                    ------            ------

       Gross profit                                  6,792             7,179

Selling, general and
    administrative expenses                          5,699             5,188
                                                     -----             -----

       Income from operations                        1,093             1,991

Interest expense                                       (10)             (120)
Interest income                                        201                 5
                                                      ----             -----

       Income before income taxes                    1,284             1,876

Provision for income taxes                             522               775
                                                       ---               ---

       Net income                                   $  762            $1,101
                                                    ======            ======

Net Income per share                                $0.09             $ 0.18
                                                    =====             ======
Weighted average
  shares outstanding                             8,525,000         6,200,000
                                                 =========         =========
                                                                              
</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 three months
                                                            ended October 31,
                                                            1997          1996
                                                                (Unaudited)
                                                          ---------------------
<S>                                                         <C>         <C>
Cash flows from operating activities:
         Net income                                          $  762      $1,101

  Adjustments to reconcile net income
   to net cash from operating activities:
              Depreciation and amortization                     266         150
              Allowance for doubtful accounts                    96         126
              Stock options commission expense                   15           -
  Change in assets and liabilities:
         Increase in accounts receivable                     (1,177)     (2,893)
         Decrease (increase) in inventory                     1,342      (2,294)
         Decrease  (increase) in prepaid expenses and
             other current assets                               138        (202)
         (Increase) decrease in other assets                   (116)         24
         Decrease in accounts payable and
             accrued expenses                                (2,090)       (499)
         Decrease in deferred service contract revenue          (26)          -
         Increase  in income taxes  payable                     377         539
         Increase in deferred compensation payable                -          85
                                                               ----       -----

         Net cash used in operating activities                 (413)     (3,863)
                                                                ---       ------

Cash flows from investing activities:
         Capital expenditures                                  (439)        (45)
         Proceeds from sale of assets                             -          54
         Proceeds from sale of investments                    1,903           -
                                                              -----          --

              Net cash provided by investing activities       1,464           9
                                                              -----          --

Cash flows from financing activities:
         Net repayments of borrowings                        (1,274)          -
         Payments on notes payable-shareholder                    -        (118)
         Payments on capital lease obligation                   (25)        (16)
         Payments on notes payable - other                    (  99)          -
                                                                 --          --

              Net cash used in financing activities          (1,398)       (134)
                                                              -----        ----
Net decrease in cash and cash equivalents                      (347)     (3,988)
         Cash and cash equivalents at beginning of period    15,049       5,774
                                                             ------       -----
Cash and cash equivalents at end of period                  $14,702      $1,786
                                                            =======      ======
</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 systems 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 most of
      the  Company's  revenues.  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 October 31, 1997 and the results
      of  operations  for the three months  ended  October 31, 1997 and 1996 and
      cash flows for the three months ended October 31, 1997 and 1996.  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, 1997,  included in the Company's Annual Report
      on Form 10-K as filed with the Securities and Exchange Commission.

   2. Net Income Per Share
      --------------------

         Net income per share is based on the weighted  average number of common
      shares and common share equivalents outstanding during each period. Common
      share  equivalents  include  dilutive stock options and warrants,  if any,
      using the treasury stock method.

         Statement of Financial  Accounting  Standards  No. 128,  "Earnings  Per
      Share," is required to be adopted  for interim and annual  periods  ending
      after  December  15, 1997.  At that time,  the Company will be required to
      change the method currently used to compute earnings per share and restate
      all prior  periods.  Basic and  diluted  earnings  per share will  replace
      primary and fully diluted earnings per share. The dilutive effect of stock
      options and other  common  stock  equivalents  will be  excluded  from the
      calculation of basic earnings per share,  but will be reflected in diluted
      earnings per share. The  implementation of SFAS No. 128 would not have had
      an impact on net income per share for the three  months ended  October 31,
      1997 and 1996.

   3. Initial Public Offering
      -----------------------

         On December 2, 1996, the Company  completed an initial public  offering
      (the  "Offering")  of  2,325,000  shares of its common stock at an initial
      public  offering price of $10 per share.  Net proceeds to the Company were
      approximately  $20.4 million,  after deducting the underwriting  discounts
      and commissions and other costs associated with the Offering.
                                       6
<PAGE>
   4.  Acquisition of Electrograph Systems, Inc.
       ----------------------------------------

          On April 25, 1997,  the Company,  through a newly formed  wholly-owned
     subsidiary,  acquired  substantially  all of the assets and assumed certain
     liabilities of  Electrograph  Systems,  Inc., a wholly owned  subsidiary of
     Bitwise  Designs,  Inc.  Electrograph  is  a  specialized   distributor  of
     microcomputer  peripherals,  primarily in the eastern  United  States.  The
     purchase price and transaction costs aggregated approximately $2.6 million.

         The  acquisition has been accounted for as a purchase and the operating
      results  of  Electrograph  are  included  in  the  Condensed  Consolidated
      Statements  of  Income  from  the  date of  acquisition.  The  acquisition
      resulted  in  goodwill  of  $1,543,000  which  is being  amortized  on the
      straight-line basis over 20 years.

         The following  unaudited pro forma  consolidated  results of operations
      for the three months ended  October 31, 1996 assume that the  Electrograph
      acquisition  occurred  on  August  1,  1996  and  reflect  the  historical
      operations  of the  purchased  business  adjusted  for lower  interest  on
      invested funds and increased amortization,  net of applicable income taxes
      resulting from the acquisition:

                                                                   1996
                                                               (in thousands)
                                                               --------------
                  Revenues                                      $55,534
                  Net income                                        827
                  Net income per share                            $0.19

         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, 1997,  and those set forth in the  Company's  other filings
      from time to time with the Securities and Exchange Commission.

      General

           Manchester is a systems 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 revenues have 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'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. 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 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.
                                       8
<PAGE>
          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.

           The Company's  largest customer  accounted for  approximately 10% and
      14%  (or  $4,502,000,  and  $7,303,000,  respectively)  of  the  Company's
      revenues  for  the  three   months  ended   October  31,  1997  and  1996,
      respectively,  substantially  all of which  revenues were derived from the
      sale of hardware products. This customer accounted for 15% of revenues for
      the fiscal year ended July 31, 1997.  There can be no  assurance  that the
      Company will continue to derive substantial revenues 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 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  October  31,  1997  and  1996,
      inventories  represented 16% and 29%,  respectively,  of total assets. For
      the three months  ended  October 31, 1997 and 1996,  annualized  inventory
      turnover was 18 and 16 times,  respectively.  Inventory turned 17 times in
      the fiscal  year  ended  July 31,  1997.  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  0.2% of total  revenues  in each of the three  month  periods
      ended October 31, 1997 and 1996.  For the fiscal year ended July 31, 1997,
      bad debt expense represented 0.2% of total revenues.

           The Company's  quarterly  revenues and operating  results have varied
      significantly  in the past and are  expected  to  continue to do so in the
      future.  Quarterly revenues 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
                                       9
<PAGE>
      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.  The  Company
      believes  that the  impact of price or volume  changes  of any  particular
      product  or  products  is  not  material  to  the  Company's  Consolidated
      Financial Statements.

           The Company's Chief Executive  Officer has entered into an employment
      agreement with the Company under which he receives annual  compensation of
      $550,000, exclusive of fringe benefits, through the end of fiscal 1998. In
      addition,  the Company's  Executive  Vice  President has agreed to receive
      annual  base  compensation,  exclusive  of fringe  benefits,  of  $450,000
      through the end of fiscal 1998.  These officers agreed and did not receive
      any bonuses for fiscal 1997 and further  agreed that any bonus  payable to
      either of these  officers  in fiscal 1998 will  require the  approval of a
      majority of the independent  directors of the Company.  The Company leases
      certain  warehouse  and offices from entities that are owned or controlled
      by the  Company's  majority  shareholder.  Each of the leases with related
      parties was amended  effective  with the closing of the Company's  Initial
      Public  Offering  to reduce  the rent  payable  under  that  lease to then
      current market rates.

                                       10
<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 Revenues
                                                  Three Months Ended
                                                      October 31,
                                                  1997             1996
                                                  ----             ----
           <S>                                   <C>              <C>  
           Product Sales                          98.0%            99.2%
           Services                                2.0               .8
                                                   ---               --
                Total revenue                    100.0            100.0
                                                 -----            -----

           Cost of Product Sales                  85.9             86.1
           Cost of Services                       69.9             68.3
                                                  ----             ----
                Cost of revenue                   85.6             85.9
                                                  ----             ----

           Product Gross Profit                   14.1             13.9
           Services Gross Profits                 30.1             31.7
                                                  ----             ----
                Gross Profit                      14.4             14.1
                                                  ----             ----

           Selling, general and
              administrative expenses             12.1             10.2
                                                  ----             ----
           Income from operations                  2.3              3.9
           Interest and other income, net           .4            (  .2)
                                                   ---             ----
           Income before income taxes              2.7              3.7
           Provision for income taxes              1.1              1.5
                                                   ---              ---
           Net income                              1.6%             2.2%
                                                   ====             ====
</TABLE>

     THREE MONTHS ENDED  OCTOBER 31, 1997  COMPARED TO THREE MONTHS ENDED 
     OCTOBER 31, 1996
    
          REVENUE.  The Company's  revenue  decreased  $3.9 million or 7.7% from
     $51.0  million for the three months ended October 31, 1996 to $47.1 million
     for the three months ended October 31, 1997.  Product  revenue  declined by
     $4.5 million (8.9%) due primarily to lower shipments to the Company's major
     customer as well as lower per unit prices for personal computers  partially
     offset   by   revenues   generated   from   Electrograph    Systems,   Inc.
     ("Electrograph") a wholly-owned subsidiary of the Company that was acquired
     on April 25, 1997. Service revenue increased $551,000 (139%) as a result of
     the Company's continued emphasis on providing value-added services.

           GROSS PROFIT.  Cost of revenues 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 decreased $387,000 or 5.4% from
      $7.2 million for the first  quarter of fiscal 1996 to $6.8 million for the
                                       11
<PAGE>
     recent fiscal quarter.  Gross profits from the sale of products declined by
     $546,000  while  gross  profit  from  the  sale of  services  increased  by
     $159,000.  The changes in gross profits  primarily results from the changes
     in revenue  discussed  above.  As a  percentage  of revenue,  gross  profit
     increased  to 14.4% in fiscal  1997 as  compared  to 14.1% in fiscal  1996.
     Competitive  pressures,  changes in types of products or services  sold and
     product availability result in fluctuation in gross profit.

          SELLING,  GENERAL AND ADMINISTRATIVE  EXPENSES.  Selling,  general and
     administrative expenses increased $511,000 or 9.8% from $5.2 million in the
     first quarter of fiscal 1996 to $5.7 million in the first quarter of fiscal
     1997. This increase is principally a result of overhead associated with the
     Company's  new  subsidiary,  Electrograph,  which was acquired on April 25,
     1997 as well as higher salaries and depreciation  costs partially offset by
     lower advertising and commissions.

          INTEREST INCOME.  Interest income increased from $5,000 in fiscal 1996
     to $201,000 in fiscal 1997 due to earnings on short term  investments  made
     with certain of the proceeds from the Company's initial public offering.

          PROVISION  FOR INCOME TAXES.  The  effective  income tax rate remained
     constant at 41% of pre-tax income.

      LIQUIDITY AND CAPITAL RESOURCES

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

          For the three  months ended  October 31, 1997,  cash used in operating
     activities  was  $413,000  consisting  primarily of an increase in accounts
     receivable  and  a  decrease  in  accounts  payable  and  accrued  expenses
     partially  offset by net income and a decrease in inventory.  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
     accounts  receivable,  inventory and accounts  payable and accrued expenses
     will  coincide with growth in revenue and increased  operating  levels.  In
     addition,  during the three months ended  October 31, 1997 the Company used
     approximately  $439,000  for capital  expenditures,  $1.4  million to repay
     indebtedness and generated $1.9 million from the sale of investments.

          The Company and a  subsidiary  have  available  lines of credit with a
     financial  institution in the aggregate amount of $10.0 million. No amounts
     are currently outstanding under these lines.

          On December 2, 1996, the Company  completed an initial public offering
     (the  "Offering") of 2,325,000  shares of its common stock resulting in net
     proceeds  to  the  Company,   after  deducting  underwriting  discount  and
     expenses, of approximately $20.4 million.  Remaining net proceeds have been
     invested in short-term, interest bearing, investment grade securities.

          The  Company  believes  that  its  current  balances  in cash and cash
     equivalents  and  investments,  expected  cash  flows from  operations  and
     available  borrowings under the lines of credit will be adequate to support
     current operating levels for the foreseeable future,  specifically  through
     at least the end of fiscal 1998.  The Company has entered into  commitments
     for the  renovation  and  expansion  of  certain  of its sales and  service
     facilities.  The  aggregate  remaining  commitment  for these  projects  is
     approximately  $1.0  million  which  will  be  paid  out of  the  Company's
     available  cash  balances.  The  Company  currently  has no other  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 as well as the possible  opening of new offices and
     potential acquisitions.
                                       12

<PAGE>
      PART II - OTHER INFORMATION

      Item 2.      Changes In Securities and Use of Proceeds

      Report on Sale of Securities and Uses of Proceeds Therefrom

           Subsequent  to  the  Company's  initial  public  offering,  effective
      November  25,  1996  (Registration  No.  333-13345),  and  pursuant to the
      requirements of the Securities Act of 1933, as amended and then in effect,
      the Company  filed an initial  report on Form SR with the  Securities  and
      Exchange Commission on March 6, 1997.

           The  following  table  sets  forth the  amount of direct or  indirect
      payments to others from such effective date through October 31, 1997 which
      have changed from those amounts set forth in the Company's Annual Report 
      on Form 10-K for the year ended July 31, 1997.

      USE OF PROCEEDS                    DIRECT OR INDIRECT  PAYMENTS  TO OTHERS
      Construction  of plant,
       buildings and facilities                    $ 250,000
      Purchase and  installation  of
        machinery  and  equipment                  $ 900,000 
      Acquisition  of other  business(es)         $2,600,000
      Working capital                             $8,961,493

                                     
      Item 6.     Exhibits and Reports

      (a)     Exhibits

       Exhibit No.           Description

         27                  Financial Data Schedule


      (b)     Reports on Form 8-K

      None

                                       13





<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:  December 10, 1997               /s/ Barry Steinberg
                                       -------------------
                                       Barry Steinberg
                                       President and Chief Executive Officer



DATE:  December 10, 1997               /s/ Joseph Looney                       
                                       ------------------    
                                       Joseph Looney
                                       Chief Financial Officer







                                       14