<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                 ANNUAL REPORT
                                  ON FORM 10K

      Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
For the fiscal year ended                                Commission file number
   February 28, 1997                                            1-8798
--------------------------------                      --------------------------
 
                         Nu Horizons Electronics Corp.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)
 
     Delaware                                                   11-2621097
-------------------------------------                   ----------------------
  (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                         Identification No.)
 
   70 Maxess Road, Melville, New York                                  11747
--------------------------------------------------------------------------------
 (Address of principal executive offices)                     (Zip Code)


                                (516) 396-5000
--------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:

                                     None
----------------------------------------------------------------------------
                               (Title of class)

          
          Securities registered pursuant to Section 12(g) of the Act:

                                                   Name of each exchange on
        Title of each class                             which registered

    Common Stock Par Value $.0066 Per Share      NASDAQ National Market System
--------------------------------------------- ----------------------------------

--------------------------------------------------------------------------------
                               (Title of class)

        Indicate by check mark whether the registrant (1) has filed all reports
    required to be filed by Section 13 or 15(d) of the Securities Exchange Act
    of 1934 during the preceding 12 months (or for such shorter period that the
    registrant was required to file such reports), and (2) has been subject to
    such filing requirements for the past 90 days.  YES  X     NO ___
                                                        ---          

        Indicate by check mark if disclosure of delinquent filers pursuant to
    Item 405 of Regulation S-K is not contained herein, and will not be
    contained, to the best of Registrant's knowledge, in definitive proxy or
    information statements incorporated by reference in Part III of this Form
    10-K or any amendment to this Form 10-K [X]

        Indicate the number of shares outstanding of each of the issuer's
    classes of common stock, as of May 19, 1997.

    Common Stock - Par Value $.0066                   8,732,299
    -------------------------------              ------------------
            Class                              Outstanding Shares

        Aggregate Market Value of Non-Affiliate Stock at May 19, 1997 -
        ---------------------------------------------------------------
         approximately $60,602,155
         -------------------------
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES


                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
 
PART I:
<S>            <C>                                                          <C>       
 
   Item 1.     Business                                                     Pages  3 -  7
 
   Item 2.     Properties                                                   Pages  7 -  8
 
   Item 3.     Legal Proceedings                                            Page        8
 
   Item 4.     Submission of Matters to a Vote of Security Holders          Page        8
 
PART II:
 
   Item 5.     Market for the Registrant's Common Equity and Related  Page              8
               Stockholder Matters
 
   Item 6.     Selected Financial Data                                      Page        9
 
   Item 7.     Management's Discussion and Analysis of Financial            Pages 10 - 13
               Condition and Results of Operations
 
   Item 8.     Financial Statements and Supplementary Data                  Pages F1 - F19
 
   Item 9.     Changes in and Disagreements with Accountants on             Page       14
               Accounting and Financial Disclosures
 
PART III:
 
   Item 10.    Directors and Executive Officers of the Company              Pages 14 - 15
 
   Item 11.    Executive Compensation                                       Pages 16 - 25
 
   Item 12.    Security Ownership of Certain Beneficial Owners and          Page       26
               Management
 
   Item 13.    Certain Relationships and Related Transactions               Page       26
 
PART IV:
 
   Item 14.    Exhibits, Financial Statement Schedules, and Reports         Pages 27 - 34
               on Form 8-K

Signatures                                                                   Page      35

Exhibit Index
</TABLE> 

                                                                          Page 2
<PAGE>
 
PART I.

ITEM 1.  BUSINESS:

        GENERAL:

         Nu Horizons Electronics Corp. (the "Company") and its wholly-owned
       subsidiaries, NIC Components Corp. ("NIC") and Nu Horizons/Merit
       Electronics Corp. ("NUM"), are engaged in the distribution of high
       technology active and passive electronic components.  Nu Horizons
       International Corp. ("International"), another wholly-owned subsidiary,
       is an export distributor of electronic components.  Nu Visions
       Manufacturing, Inc. ("NUV" or "Nu Visions") located in Springfield,
       Massachusetts, another wholly-owned subsidiary of the Company, is a
       contract assembler of circuit boards, harnesses and related
       electromechanical devices for various OEM's.  All references herein to
       the Company shall, unless the context otherwise requires, be deemed to
       refer to the Company and its subsidiaries.

         Active components distributed by the Company, principally to original
       equipment manufacturers (OEM's) in the United States, include mainly
       commercial semiconductor products such as memory chips, microprocessors,
       digital and linear circuits, microwave, RF and fiberoptic components,
       transistors and diodes.  Passive components distributed by NIC,
       principally to OEM's and other distributors nationally, consist of a high
       technology line of chip and leaded components including capacitors,
       resistors and related networks.

         The active and passive components distributed by the Company are
       utilized by the electronics industry and other industries in the
       manufacture of sophisticated electronic products including:  industrial
       instrumentation, computers and peripheral equipment, consumer
       electronics, telephone and telecommunications equipment, satellite
       communications equipment, cellular communications equipment, medical
       equipment, automotive electronics, and audio and video electronic
       equipment.

         Manufacturers of electronic components augment their marketing programs
       through the use of independent distributors and contract assemblers such
       as the Company, upon which the Company believes they rely to a
       considerable extent to market their products.  Distributors and
       assemblers, such as the Company, offer their customers the convenience of
       diverse inventories and rapid delivery, design and technical assistance,
       and the availability of product in smaller quantities than generally
       available from manufacturers.  Generally, companies engaged in the
       distribution of active and passive electronic components, such as the
       Company, are required to maintain a relatively significant investment in
       inventories and accounts receivable.  To meet these requirements, the
       Company, and other companies in the industry, typically depend on
       internally generated funds as well as external borrowings.

         Management's policy is to manage, maintain and control all inventories
       from its principal headquarters and stocking facilities on Long Island,
       New York and stocking facilities in San Jose, California.  As additional
       franchise line opportunities become available to the Company, the need
       for branch level inventories may be necessary and desirable in order to
       better serve the specific needs of local markets.

                                                                          Page 3
<PAGE>
 
ITEM 1.  BUSINESS (Continued):

        Semiconductor Products (Active Components):

         The Company is a distributor of a broad range of semiconductor products
       to commercial and military OEM's principally in the United States.  The
       Company is a franchised distributor of active components for
       approximately forty product lines, the most significant of which are SGS-
       Thomson Microelectronics and Toshiba.  Other significant franchised
       product lines include Allegro, Cirrus Logic, Crystal, Elantec, Exar,
       Exel, Microelectronics, Integrated Circuit Systems, International
       Rectifier,  Maxim Integrated Products, NEC, Silicon Systems, Standard
       Microsystems Corporation, Supertex, Inc., Watkins Johnson, and Xilinx.

         The Company's franchise agreements authorize it to sell all or part of
       the product line of a manufacturer on a non-exclusive basis.  Under these
       agreements, each manufacturer will grant credits for any subsequent price
       reduction by such manufacturer and inventory return privileges whereby
       the Company can return to each such manufacturer for credit or exchange a
       percentage ranging from 5% to 20% of the inventory purchased from said
       manufacturer during a semi-annual period.  The franchise agreements
       generally may be cancelled by either party upon written notice.  The
       Company anticipates, in the future, entering into additional franchise
       agreements and increasing its inventory levels in accordance with
       business demands.

        Passive Components and Relationship with Nippon:

         NIC has been the exclusive outlet in North America for Nippon
       Industries Co. Ltd.'s (Japan) brand of passive components and does not
       anticipate any change in this relationship.  While the Company does not
       have a written agreement with Nippon in this regard, it believes that a
       formal written agreement is not material to its ongoing business
       relationship with Nippon.

         Due to certain market situations, NIC, with Nippon's assent, has also
   established several manufacturing associations with U.S. and Taiwan based
   companies.  NIC intends to continue to give Nippon priority however, in
   acquiring its products whenever the technology and pricing are commensurate
   with the North American market's requirements.

       Contract Assembly:

         As discussed above, the Company's core business is the distribution of
       active components to OEM's and passive components to OEM's and
       distributors nationally in the United States.

         Those components are then placed on printed circuit boards by the OEM's
       themselves or are contracted for placement to outside contract assembly
       companies (domestically or offshore).  The Company believes that the
       latter outside contract assembly is becoming more prevalent nationally,
       especially among small to midsize OEM's

         With a view towards maximizing the Company's current customer base as
       well as offering new customers additional services, the Company decided
       that contract circuit board assembly was a natural extension to its
       business, since 80% of the components found on most printed circuit
       boards can be provided through the Company's active and NIC's passive
       products.

                                                                          Page 4
<PAGE>
 
ITEM 1.  BUSINESS (Continued):

       Contract Assembly (continued):

         In August 1991, the Company formed a new subsidiary, Nu Visions
       Manufacturing, Inc. (NUV or Nu Visions), a Massachusetts corporation, for
       the purpose of providing contract through hole and surface mount circuit
       board assembly services.  NUV began doing business in  September 1991 and
       was moved to a new facility in mid-February 1992.  In order to expand and
       enhance this part of the business, the Company has acquired approximately
       $2,000,000 of automated circuit board assembly equipment.

        Sales and Marketing:

         Management's strategy for long-term success has been to focus the
       Company's sales and marketing efforts towards the following industry
       segments:   industrial, telecom/datacom, medical instrumentation,
       microwave and RF, fiberoptic, consumer electronics, security and
       protection devices, office equipment, computers and computer peripherals,
       factory automation and robotics both domestically and abroad.  In order
       to help achieve these goals, the Company may enter into new franchise
       agreements for a broad base of commodity semiconductor products including
       those used in the key niche industries referred to above.

         As of February 28, 1997 the Company had approximately 13,000 customers.
       All sales are made through customers' purchase orders.  Semiconductors
       are sold primarily via telephone by the Company's in-house staff of
       approximately 90 salespersons, and by a field sales force of
       approximately 110 salespersons.  The Company maintains branch sales
       facilities located as follows:

        EAST COAST
        ----------

        Massachusetts - Boston
        New York - Amityville (Long Island) and Rochester
        New Jersey - Mt. Laurel (Philadelphia) and Pine Brook
        Ohio - Cleveland
        Maryland - Columbia
        North Carolina - Raleigh
        Georgia - Atlanta
        Alabama - Huntsville
        Florida - Ft. Lauderdale and Orlando

        MIDWEST
        -------

        Minnesota - Minneapolis
        Texas - Austin and Dallas

        WEST COAST
        ----------

        California - Irvine, Los Angeles, San Diego and San Jose

         NIC's passive components are marketed through the services of a
       national network of approximately 20 independent sales representative
       organizations, employing over 200 salespersons, as well as through NIC's
       in-house sales and engineering personnel.  The independent representative
       organizations do not represent competing product lines but sell other
       related products.  Commissions to such organizations are generally
       equivalent to 5% of all sales in a representative's exclusive territory.

                                                                          Page 5
<PAGE>
 
ITEM 1.  BUSINESS (Continued):

        Sales and Marketing (Continued):

         NIC has developed a national network of approximately 75 regional
       distributor locations which market passive components on a non-exclusive
       basis.  Approximately 35 of the regional distributors have entered into
       agreements with NIC whereby they are required to purchase from NIC a
       prescribed initial inventory.  These distributors are protected by NIC
       against price reductions and are granted certain inventory return and
       other privileges.  Due to the efforts of NIC and its distributors, NIC's
       passive components have been tested and "designed in" as a prime source
       of qualified product by over 7,000 OEM's in the United States.

         Nu Visions' contract manufacturing facilities are marketed through the
       services of several East Coast independent sales representatives as well
       as the Company's field sales force.

         No single customer accounted for more than 2% of the Company's
       consolidated sales for the year ended February 28, 1997.  The Company's
       sales practice is to require payment within thirty days of delivery.

        Source of Supply:

         The Company inventories an extensive stock of active and passive
       components; however, if the Company's customers order products for which
       the Company does not maintain inventory, the Company's marketing strategy
       is to obtain such products from its franchise manufacturers, or, if a
       product is unobtainable, to identify and recommend satisfactory
       interchangeable alternative components.  For this purpose, the Company
       devotes considerable efforts to familiarizing itself with component
       product movement throughout the industry, as well as to constant
       monitoring of its own inventories.

         As of February 28, 1997, there was one manufacturer that represented
       more than 10% of the Company's inventory, on a consolidated basis.  That
       supplier, SGS-Thomson, accounted for 14% of total inventory.  Electronic
       components distributed by the Company generally are presently readily
       available; however, from time to time the electronics industry has
       experienced shortages or surplus of certain electronic products.

         For the year ended February 28, 1997, the Company purchased inventory
       from one supplier, Xilinx, that was in excess of 10% of the Company's
       total purchases.  Purchases from this supplier aggregated approximately
       $21,385,000 for the fiscal year.

        Competition and Regulation:

         The Company competes with many companies that distribute semiconductor
       and passive electronic components and to a lesser extent companies which
       manufacture such products and sell them directly to OEM's and other
       distributors.  Many of these companies have substantially greater assets
       and possess greater financial and personnel resources than those of the
       Company.  In addition, certain of these companies possess independent
       franchise agreements to carry semiconductor product lines which the
       Company does not carry, but which it may desire to have.  Competition is
       based primarily upon inventory availability, quality of service,
       knowledge of product and price.  The Company believes that it derives an
       advantage in the distribution of passive electronic components from the
       distribution of those components under its own label.

                                                                          Page 6
<PAGE>
 
ITEM 1.  BUSINESS (Continued):

        Competition and Regulation (Continued):

         The Company's competitive ability to price its imported active and
       passive components could be adversely affected by increases in tariffs,
       duties, changes in the United States' trade treaties with Japan, Taiwan
       or other foreign countries, transportation strikes and the adoption of
       Federal laws containing import restrictions.  In addition, the cost of
       the Company's imports could be subject to governmental controls and
       international currency fluctuations.  Because imports are paid for with
       U.S. dollars, the decline in value of United States currency as against
       foreign currencies would cause increases in the dollar prices of the
       Company's imports from Japan and other foreign countries.  Although the
       Company has not experienced any material adverse effect to date in its
       ability to compete or maintain its profit margins as a result of any of
       the foregoing factors, no assurance can be given that such factors will
       not have a material adverse effect in the future.

        Backlog:

         The Company defines backlog as orders, believed to be firm, received
       from customers and scheduled for shipment no later than 60 days for
       active components and no later than 90 days for passive components from
       the date of the order.  As of May 1, 1997, the Company's backlog was
       approximately     $24,000,000 as compared to a backlog of approximately
       $30,000,000 at May 1, 1996.

        Employees:

         As of February 28, 1997, the Company employed approximately 412
       persons: 10 in management, 243 in sales and sales support, 17 in product
       and purchasing, 14 in accounting and finance, 31 in operations, 67 in
       manufacturing, and 30 in shipping, receiving and warehousing.  The
       Company believes that its employee relations are satisfactory.

ITEM 2. PROPERTIES

         In December 1996, the Company leased an approximately 80,000 square
   foot facility in Melville, Long Island, New York to serve as its executive
   offices and main distribution center.  In April 1997, the Company moved its
   executive offices to this facility and is in the process of moving its
   distribution operation with a completion date of June 1997.  The lease term
   is from December 17, 1996 to December 16, 2008 at an annual base rental of
   $601,290 and provision for a 4% annual escalation in each of the last ten
   years of the term.

         The Amityville facility, which served as corporate headquarters until
   April 1997, was placed for sale.  A contract for sale was entered into in
   March 1997 and closing on the property is expected on or about July 15, 1997.
   The Company satisfied the mortgage indebtedness on the Amityville property in
   February 1997.  While there can be no assurances that a closing will take
   place, the Company currently knows of no impediments to a satisfactory
   conclusion of the sale.

         In October 1991, the Company leased approximately 10,400 square feet of
       manufacturing and office space in Springfield, Massachusetts for its Nu
       Visions subsidiary which was subsequently increased to 14,400 square feet
       in 1996.  The lease term is from February 17, 1992 to February 16, 2002
       at an annual base rental of $100,850 subject to annual consumer price
       index increases not to exceed 2% annually.  The lease includes buy out
       provisions at the end of the fifth and sixth years.

                                                                          Page 7
<PAGE>
 
ITEM 2. PROPERTIES (Continued):

         On May 1, 1996, the Company leased approximately 25,000 square feet of
       warehouse and office space in San Jose, California for its Nu
       Horizons/Merit subsidiary.  This facility will serve as the Company's
       West Coast regional sales and distribution headquarters.  The lease term
       is from May 1, 1996 to April 30, 2001 at an annual base rental of
       $225,000.

         The Company also leases space for seventeen (17) branch sales offices
       which range in size from 1,000 square feet to 5,000 square feet, with
       lease terms that expire between September 1996 and January 2002.  Annual
       rentals range from $9,300 to $48,000 with aggregate rentals approximating
       $362,000.

ITEM 3. LEGAL PROCEEDINGS:

         No material legal proceeding is pending to which the Company is a party
       or to which any of its property is or may be subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

         No matters were submitted during the fourth quarter of the fiscal year
       ended February 28, 1997 to a vote of security holders through the
       solicitation of proxies or otherwise.

PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:

       (a)  The Company's common stock is traded on the NASDAQ National Market
            System under the symbol "NUHC".  The following table sets forth, for
            the periods indicated, the high and low closing prices for the
            Company's common stock, as reported by the NASDAQ National Market
            System.
<TABLE>
<CAPTION>
 
                                                         HIGH    LOW
                                                        ------  ------
<S>                                                     <C>     <C>
              FISCAL YEAR 1996:
 
                First Quarter                           $ 9.38  $ 6.50
                Second Quarter                           11.50    7.13
                Third Quarter                            17.25   10.50
                Fourth Quarter                           18.88   13.00
 
              FISCAL YEAR 1997:
 
                First Quarter                            17.25   12.63
                Second Quarter                           14.75    7.25
                Third Quarter                            11.13    7.88
                Fourth Quarter                           10.00    7.88
 
              FISCAL YEAR 1998:
 
                First Quarter (Through May 19, 1997)      9.25    6.75
</TABLE>

       (b)  As of May 19, 1997, the Company's common stock was owned by
            approximately 4,500 holders of record.

       (c)  The Company has never paid a cash dividend on its common stock.  In
            addition, the Company's prior revolving credit line agreement
            prohibited, without the bank's consent, the payment of cash
            dividends.  The Company's existing revolving credit line agreement
            only permits dividends of up to 25% of the Company's consolidated
            net income.

                                                                          Page 8
<PAGE>
 
ITEM 6. SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
 
 
                                     FOR THE       FOR THE       FOR THE       FOR THE       FOR THE
                                   YEAR ENDED      YEAR ENDED    YEAR ENDED    YEAR ENDED    YEAR ENDED
                                    FEBRUARY       FEBRUARY      FEBRUARY      FEBRUARY      FEBRUARY
                                    28, 1997       29, 1996      28, 1995      28, 1994      28, 1993
                                   ---------     -----------   -----------   -----------   ------------
INCOME STATEMENT
 DATA:
<S>                            <C>              <C>             <C>           <C>           <C> 
  Net sales                       $216,612,707    $202,803,184   $130,251,554   $92,418,038   $60,507,620
  Gross profit
   on sales                         48,488,124      48,201,148     30,913,305    24,950,478    15,390,022
  Gross profit
   percentage                             22.4%           23.8%          23.7%         27.0%         25.4%
  Income before
   provision for
   income taxes                     11,921,256       15,799,592     7,444,147     8,549,534     2,564,335
  Net income                         7,073,560        9,396,301     4,421,823     5,044,225     1,489,658
  Earnings per
   common share:
 
    Primary                               $.78            $1.14          $.56          $.65          $.20
 
    Fully diluted                         $.69             $.97          $.52          $.65          $.19
</TABLE> 
 
<TABLE> 
<CAPTION> 

                                      FEBRUARY          FEBRUARY      FEBRUARY      FEBRUARY      FEBRUARY
                                      28, 1997          29, 1996      28, 1995      28, 1994      28, 1993
                                   ------------      ------------  ------------   ------------  ------------
BALANCE SHEET
 DATA:
<S>                               <C>                <C>           <C>           <C>           <C> 
  Working capital                  51,941,472        $57,954,434   $36,328,941   $23,792,512   $17,523,791
  Total assets                     74,783,314         75,459,586    51,972,606    37,448,040    26,083,687
  Long-term debt                   15,523,483         27,094,030    20,580,613     9,339,195     8,079,590
  Shareholders'
   equity                          46,950,735         37,617,703    22,541,916    18,051,985    12,679,681
 
</TABLE>

                                                                          Page 9
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
   OF OPERATIONS:

   Introduction:

     Nu Horizons Electronics Corp. (the "Company") and its wholly-owned
     subsidiaries, Nu Horizons/Merit Electronics Corp. ("Merit"), NIC Components
     Corp. ("NIC") and Nu Horizons International Corp. ("International"), are
     engaged in the distribution of high technology active and passive
     electronic components to a wide variety of original equipment manufacturers
     ("OEM's") of electronic products.  Active components distributed by the
     Company include semiconductor products such as memory chips,
     microprocessors, digital and linear circuits, microwave/RF and fiberoptic
     components, transistors and diodes.  Passive components distributed by NIC,
     principally to OEM's and other distributors nationally, consist of a high
     technology line of chip and leaded components including capacitors,
     resistors and related networks.

     Nu Visions Manufacturing, Inc. ("NUV" or "Nu Visions") located in
     Springfield, Massachusetts, another subsidiary of the Company, is a
     contract assembler of circuit boards, harnesses and related
     electromechanical devices for various OEM's.

     The financial information presented herein includes:  (i) Balance sheets as
     of February 28, 1997 and February 29, 1996; (ii) Statements of income for
     the twelve month periods ended February 28, 1997, February 29, 1996 and
     February 28, 1995  (iii) Statements of cash flows for the twelve month
     periods ended February 28, 1997, February 29, 1996 and February 28, 1995;
     (iv) Consolidated changes in shareholders' equity for the twelve month
     periods ended February 28, 1997, February 29, 1996 and February 28, 1995.

   Fiscal Year 1997 versus 1996

   Results of Operations:

     Net sales for the year ended February 28, 1997 aggregated $216,612,707 as
     compared to $202,803,184 for the year ended February 29, 1996, an increase
     of 6.8%.  Management attributes this moderate increase in sales for the
     period entirely to the core semiconductor distribution business which
     experienced excess inventory levels at the semiconductor manufacturing
     (supplier) level which resulted in reduced unit pricing and lower overall
     sales volume.  Management believes that this situation is temporary and is
     now in the process of correction; however, no assurance can be given in
     this regard.

     Gross profit margin as a percentage of net sales was approximately 22.4%
     for the year ended February 28, 1997 as compared to 23.8% for the year
     ended February 29, 1996.  Management attributes this lower profit margin
     primarily to a general downward correction of selling prices in the
     marketplace, for both semiconductors and passive components, during the
     period and a greater volume of larger orders at lower gross profit margins.
     Although the Company expects that these conditions will not continue, as
     long as current market trends prevail, no assurances can be given in this
     regard.

                                                                         Page 10
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (Continued):

        Fiscal Year 1997 versus 1996 (Continued)
        Results of Operations (continued):

       Operating expenses increased by $4,496,530 to $34,873,910 for the year
       ended February 28, 1997 from $30,377,380 for the year ended February 29,
       1996, an increase of approximately 14.8%.  The dollar increase in
       operating expenses was due to increases in the following expense
       categories:  Approximately $3,740,000 or approximately 83% of the
       increases were for personnel related costs - commissions, salaries,
       travel and fringe benefits.  The remaining increase of approximately
       $756,000 or approximately 17% of the total increment is a result of
       increases in various other operating expenses.  Toward the latter part of
       fiscal 1996 and early in fiscal 1997, the Company decided to pursue a
       policy of upgrading and enlarging its sales and sales support staff to
       support anticipated future growth in the near as well as more distant
       future.  increased sales levels in the second, third and fourth quarters
       of fiscal 1997 did not meet expectations.  The Company continues to
       believe in this strategy for long term growth and expects market
       conditions to undergo a correction in the near future although no
       assurances can be given in this regard.

        Interest expense decreased by $325,625 from $2,026,717 for the year
   ended February 29, 1996 to $1,701,092 for the year ended February 28, 1997.
   This decrease was primarily due to the interest on higher average levels of
   bank debt being more than offset by the lower amount of outstanding
   subordinated convertible debt (see Note 7 of the Consolidated Financial
   Statements).

 
                                       INTEREST COSTS
                                       FOR THE FISCAL
                                        YEARS ENDED
                                   ----------------------
                                    February    February
                                     28, 1997    29, 1996
                                   ----------  ----------
         Revolving Bank Credit     $1,116,340  $  916,226
         Sub. Convert. Notes          584,752   1,110,491
                                   ----------  ----------
         Total Interest Expense    $1,701,092  $2,026,717
                                   ==========  ==========


       Net income for the year ended February 28, 1997 was $7,073,560 or $.69
       per share, fully diluted, as compared to $9,396,301 or $.97 per share
       fully diluted, for the year ended February 29, 1996.  The decrease in
       earnings is primarily due to increased operating expenses and the lack of
       commensurate increased sales volume.

        Results of Operations:
        Fiscal Year 1996 versus 1995

       Net sales for the year ended February 29, 1996 aggregated $202,803,184 as
       compared to $130,251,554 for the year ended February 28, 1995, an
       increase of 56%.  Management attributes the increase in sales for the
       period to the following reasons:  Approximately $3,303,000 or 4.6% of the
       overall increase resulted from incremental sales at the Nu Visions
       subsidiary.  Approximately $12,807,000 or 17.6% of the overall increase
       resulted from incremental sales relative to the new California segment of
       the distribution business which the Company owned for ten months during
       fiscal 1995.  The balance of the overall increase, approximately
       $56,441,000 or 77.8%, resulted from incremental sales generated by the
       East Coast core distribution business and NIC passive component business
       as a whole, through greater market penetration and continued economic
       strength in the electronic component industry.

                                                                         Page 11
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (Continued):

        Fiscal Year 1996 versus 1995 (Continued)

        Results of Operations (continued):

       Gross profit margin as a percentage of net sales was 23.8% for the year
       ended February 29, 1996 as compared to 23.7% for the year ended February
       28, 1995.  Management attributes the relative stabilization of profit
       margins during these periods primarily to a settling effect in the
       marketplace subsequent to the downward adjustment in calendar 1994.
       Although the Company expects that these conditions will continue, as long
       as current market trends prevail, no assurances can be given in this
       regard.

       Operating expenses increased by $8,283,222 to $30,377,380 for the year
       ended February 29, 1996 from $22,094,158 for the year ended February 28,
       1995, an increase of approximately 37%.  As a percentage of net sales,
       operating expenses declined from 17% in fiscal 1995 to 15% in fiscal
       1996, as sales grew more rapidly than operating expenses.  The dollar
       increase in operating expenses was due to increases in the following
       expense categories:  Approximately $7,319,000 or approximately 88% of the
       increases were for personnel related costs - commissions, salaries,
       travel and fringe benefits.  These increases were required to produce the
       increased sales which were achieved during the past fiscal year.  The
       remaining increase of approximately $964,000 or approximately 12% of the
       total increment is a result of increases in various other operating costs
       to support the increase in net sales for the period.

        Interest expense increased by $639,698 from $1,387,019 for the year
   ended February 28, 1995 to $2,026,717 for the year ended February 29, 1996.
   This increase was primarily due to higher average borrowings resulting from
   an increase in the Company's inventory and accounts receivable required to
   support the 56% increase in sales volume mentioned above.  See the liquidity
   and capital resources discussion below.
 
                                       INTEREST COSTS
                                       FOR THE FISCAL
                                        YEARS ENDED
                                   ----------------------
                                    February    February
                                     29, 1996    28, 1995
                                   ----------  ----------
         Revolving Bank Credit     $  916,226  $  716,707
         Sub. Convert. Notes        1,110,491     670,312
                                   ----------  ----------
         Total Interest Expense    $2,026,717  $1,387,019
                                   ==========  ==========


       Net income for the year ended February 29, 1996 was $9,396,301 or $.97
       per share, fully diluted, as compared to $4,421,823 or $.52 per share
       fully diluted, for the year ended February 28, 1995.  The increase in
       earnings is primarily due to increased sales volume net of higher
       operating expenses.

        Liquidity and Capital Resources:

        Fiscal Year 1997 versus 1996

       The Company ended its 1997 fiscal year with working capital and cash
       aggregating approximately $51,941,000 and $946,000, respectively at
       February 28, 1997 as compared to approximately $57,954,000 and $874,000
       respectively, at February 29, 1996.  The Company's current ratio at
       February 28, 1997 was 5.2:1.  The Company believes that its financial
       position at February 28, 1997 will enable it to take advantage of any new
       opportunities that may arise.

                                                                         Page 12
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (Continued):

        Fiscal Year 1997 versus 1996 (Continued)

        Liquidity and Capital Resources (continued):

       On April 8, 1996, the Company entered into an amended and restated
       unsecured revolving line of credit, which currently provides for maximum
       borrowings of $25,000,000 through April 8, 2000.  At February 28, 1997,
       $8,000,000 was outstanding under this line of credit as compared to
       $17,300,000 at February 29, 1996.  On May 23, 1997, subsequent to the
       balance sheet date, the Company entered into a new unsecured revolving
       line of credit with new banks, which currently provides for maximum
       borrowings of $35,000,000 through May 23, 2001.

       In a private placement completed on August 31, 1994, the Company issued
       $15 million principal amount of Subordinated Convertible Notes, which are
       due in $5,000,000 increments on August 31, 2000, 2001 and 2002.  The
       notes are subordinate in right of payment to all existing and future
       senior indebtedness of the Company.  The notes bear interest at 8.25%,
       payable quarterly on November 15, February 15, May 15 and August 15.  The
       notes are convertible into shares of common stock at a conversion price
       of $9.00 per share.  The cost of issuing these notes was $521,565 and is
       being amortized over the life of the notes.  The Company has registered,
       under the Securities Act of 1933, for the resale by the holders thereof,
       117,666 shares of common stock, representing the number of shares of
       common stock obtainable by such holders upon conversion of $1,059,000 of
       the outstanding principal amount of such notes.  As of February 28, 1997,
       $7,941,000 of the notes have been converted into 882,333 shares of common
       stock and $7,059,000 principal amount of subordinated convertible notes
       remained outstanding and are due in increments of $2,353,000 on August
       31, 2000, 2001 and 2002.  No assurance can be given that the notes will
       be converted or that the shares of common stock underlying the notes will
       be sold by the holders thereof.

       The Company anticipates that its resources provided by its cash flow from
       operations and its bank line of credit will be sufficient to meet its
       financing requirements for at least the next twelve month period.

       Inflationary Impact:

       Since the inception of operations, inflation has not significantly
       affected the operating results of the Company.  However, inflation and
       changing interest rates have had a significant effect on the economy in
       general and therefore could affect the operating results of the Company
       in the future.

       Other:

       Except for historical information contained herein, the matters set forth
       above are forward-looking statements that involve certain risks and
       uncertainties that could cause actual results to differ from those in the
       forward-looking statements.  Potential risks and uncertainties include
       such factors as the level of business and consumer spending for
       electronic products, the amount of sales of the Company's products, the
       competitive environment within the electronics industry, the ability of
       the Company to continue to expand its operations, the level of costs
       incurred in connection with the Company's expansion efforts, economic
       conditions in the semiconductor industry and the financial strength of
       the Company's customers and suppliers.  Investors are also directed to
       consider other risks and uncertainties discussed in documents filed by
       the Company with the Securities and Exchange Commission.

                                                                         Page 13
<PAGE>
 
              ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                          Independent Auditors' Report



To The Board of Directors
Nu Horizons Electronics Corp.
Amityville, New York

   We have audited the accompanying consolidated financial statements of Nu
Horizons Electronics Corp. and subsidiaries.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nu Horizons
Electronics Corp. and subsidiaries at February 28, 1997 and February 29, 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended February 28, 1997 in conformity with generally
accepted accounting principles.



                         /s/ LAZAR, LEVINE, & COMPANY LLP
                        ----------------------------------
                          LAZAR, LEVINE & COMPANY LLP



New York, New York
May 23, 1997

                                                                        Page F-1
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                          CONSOLIDATED BALANCE SHEETS
                          ---------------------------
 
-ASSETS-                                             FEBRUARY     FEBRUARY
                                                     28, 1997      29, 1996

CURRENT ASSETS:
 Cash (including time deposits)                     $   946,084  $   874,267
 Accounts receivable-net of allowance for
  doubtful accounts of $2,192,079 and $1,509,802
  for 1997 and 1996, respectively                    30,636,645   30,005,182
 Inventories                                         29,764,570   36,808,915
 Prepaid expenses and other current assets            2,903,269    1,013,923
                                                    -----------  -----------
TOTAL CURRENT ASSETS                                 64,250,568   68,702,287
 
PROPERTY, PLANT AND EQUIPMENT - NET
(Notes 3 and 6)                                       7,550,356    3,439,804
 
OTHER ASSETS
 Costs in excess of net assets acquired-net           1,909,256    2,066,180
 Other assets (Note 4)                                1,073,134    1,251,315
                                                    -----------  -----------

                                                    $74,783,314  $75,459,586
                                                    ===========  ===========

                    -LIABILITIES AND SHAREHOLDERS' EQUITY-
                     --------------------------------------
 
CURRENT LIABILITIES:
   Accounts payable                              $ 7,931,500  $ 7,898,757
   Accrued expenses                                4,186,802    2,254,878
   Current portion of long-term debt (Note 6)        190,794      373,930
   Income taxes (Note 9)                                   -      220,288
                                                 -----------  -----------
 TOTAL CURRENT LIABILITIES                        12,309,096   10,747,853
                                                 -----------  -----------
 
LONG TERM LIABILITIES:
   Deferred income taxes (Note 9)                    222,148      115,577
   Revolving credit line (Notes 5 and 15)          8,000,000   17,300,000
   Long-term debt (Note 6)                           242,335      678,453
   Subordinated convertible notes (Note 7)         7,059,000    9,000,000
                                                 -----------  -----------
TOTAL LONG-TERM LIABILITIES                       15,523,483   27,094,030
                                                 -----------  -----------
 
COMMITMENTS AND CONTINGENCIES
  (Notes 5, 10, 11 and 12)
 
SHAREHOLDERS' EQUITY (Note 8):
   Preferred stock, $1 par value, 1,000,000
    shares authorized; none issued or
    outstanding                                            -            -
   Common stock, $.0066 par value, 20,000,000
    shares authorized; 8,732,299 and
    8,423,137 shares issued and outstanding
    for 1997 and 1996, respectively                   57,633       55,593
   Additional paid-in capital                     18,938,984   16,821,502
   Retained earnings                              28,234,018   21,160,458
                                                 -----------  -----------
                                                  47,230,635   38,037,553
   Less:  loan to ESOP (Notes 6 and 10)              279,900      419,850
                                                 -----------  -----------
                                                  46,950,735   37,617,703
                                                 -----------  -----------

                                                 $74,783,314  $75,459,586
                                                 ===========  ===========

                See notes to consolidated financial statements.

                                                                        Page F-2
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                       CONSOLIDATED STATEMENTS OF INCOME
                       ---------------------------------


                                       FOR THE YEAR ENDED
                           -----------------------------------------
                              FEBRUARY       FEBRUARY       FEBRUARY
                              28, 1997       29, 1996       28, 1995
                           -------------   ------------  ----------- 

NET SALES                   $216,612,707   $202,803,184  $130,251,554
                            ------------   ------------  ------------
 
 
COSTS AND EXPENSES:
 
 Cost of sales (Note 12)     168,124,583    154,602,036    99,338,249
 Operating expenses           34,873,910     30,377,380    22,094,158
 Interest expense              1,701,092      2,026,717     1,387,019
 Interest income                  (8,134)        (2,541)      (12,019)
                            ------------   ------------   -----------
                             204,691,451    187,003,592   122,807,407

 
INCOME BEFORE PROVISION
FOR INCOME TAXES              11,921,256     15,799,592     7,444,147
 
 Provision for income
 taxes (Note 9 )               4,847,696      6,403,291     3,022,324
                            ------------   ------------   -----------
 
NET INCOME                  $  7,073,560   $  9,396,301   $ 4,421,823
                            ============   ============   ===========
 
EARNINGS PER SHARE
(Note 2i):
 
 Primary                    $        .78   $       1.14   $       .56
                            ============   ============   ===========
 
 Fully diluted              $        .69   $        .97   $       .52
                            ============   ============   ===========
 

                See notes to consolidated financial statements.

                                                                        Page F-3
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
           ----------------------------------------------------------
<TABLE>
<CAPTION>
 
 
                                       ADDITIONAL          TOTAL
                        COMMON          PAID-IN          RETAINED     LOAN TO    SHAREHOLDERS'
                        SHARES     STOCK     CAPITAL     EARNINGS       ESOP         EQUITY
                       ---------  -------  -----------  -----------  ----------  --------------
<S>                    <C>        <C>      <C>          <C>          <C>         <C>
February 28, 1994      7,713,634  $50,910  $10,699,407  $ 7,342,334  $ (40,666)    $18,051,985
 
Exercise of stock
  options                 18,417      122       27,320            -          -          27,442
Repayment from ESOP            -        -            -            -     40,666          40,666
Net income                     -        -            -    4,421,823          -       4,421,823
                       ---------  -------  -----------  -----------  ---------     -----------
Balance at
  February 28, 1995    7,732,051   51,032   10,726,727   11,764,157          -      22,541,916
 
Exercise of stock
  options                 24,420      161       99,175            -          -          99,336
Conversion of
 subordinated
 convertible notes       666,666    4,400    5,995,600            -          -       6,000,000
Loan to ESOP                   -        -            -            -   (559,800)       (559,800)
Repayment from ESOP            -        -            -            -    139,950         139,950
Net income                     -        -            -    9,396,301          -       9,396,301
                       ---------  -------  -----------  -----------  ---------     -----------
Balance at
  February 29, 1996    8,423,137   55,593   16,821,502   21,160,458   (419,850)     37,617,703
 
Exercise of stock
  options                 93,495      617      177,905            -          -         178,522
Conversion of
 subordinated
 convertible notes       215,667    1,423    1,939,577            -          -       1,941,000
Repayment from ESOP            -        -            -            -    139,950         139,950
Net income                     -        -            -    7,073,560          -       7,073,560
                       ---------  -------  -----------  -----------  ---------     -----------
Balance at
  February 28, 1997    8,732,299  $57,633  $18,938,984  $28,234,018  $(279,900)    $46,950,735
                       =========  =======  ===========  ===========  =========     ===========
 
</TABLE>



                See notes to consolidated financial statements

                                                                        Page F-4
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     -------------------------------------
<TABLE>
<CAPTION>
 
 
                                                          FOR THE YEAR ENDED
                                          -----------------------------------------
                                            FEBRUARY         FEBRUARY     FEBRUARY
                                             28, 1997        29, 1996     28, 1995
                                          ------------      ----------   ---------- 
INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS:
<S>                                       <C>            <C>            <C>  
Cash flows from operating activities:
  Cash received from customers            $215,279,744   $192,949,945   $125,991,043
    Cash paid to suppliers and employees  (197,159,875)  (196,045,525) (124,980,742)
    Interest received                            8,134          2,541         18,991
    Interest paid                           (1,701,092)   (2,026,717)    (1,387,019)
    Income taxes paid                       (1,677,850)   (6,034,790)    (5,770,418)
                                           ------------  ------------   ------------  
      Net cash provided (used) by
       operating activities                 14,749,061   (11,154,546)    (6,128,145)
                                           ------------  ------------   ------------   
Cash flows from investing activities:
    Capital expenditures                    (4,936,512)   (1,055,558)      (602,746)
  Purchase of stock for ESOP                         -      (559,800)             -
    Purchase of Merit Electronics -
   net of cash acquired                              -             -      (5,753,022)
                                           ------------  ------------   ------------  
    Net cash (used) by investing
     activities                             (4,936,512)   (1,615,358)     (6,355,768)
                                           ------------  ------------   ------------  
 
Cash flows from financing activities:
    Borrowings under revolving
      credit line                           21,150,000    65,000,000      66,090,000
    Repayments under revolving
     credit line                           (30,450,000)  (52,100,000)    (69,790,000)
    Principal payments of long-term
      debt                                    (619,254)     (413,884)       (468,917)
    Proceeds from exercise of employee
      stock options                            178,522        99,336          27,442
    Proceeds from long-term debt                     -       559,800               -
    Proceeds from subordinated debt                  -             -      15,000,000
                                           ------------  ------------   ------------  
     Net cash (used in) provided by
       financing activities                 (9,740,732)   13,145,252      10,858,525
                                           ------------  ------------   ------------   
Net increase (decrease) in cash and
    cash equivalents                            71,817       375,348      (1,625,388)
 
Cash and cash equivalents, beginning
    of year                                    874,267       498,919       2,124,307
                                           ------------  ------------   ------------   
Cash and cash equivalents, end of year    $    946,084   $   874,267    $    498,919
                                           ============  ============   ============   
</TABLE>
                See notes to consolidated financial statements.

                                                                        Page F-5
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
               -------------------------------------------------

<TABLE> 
<CAPTION> 


                                                              FOR THE YEAR ENDED
                                                  -----------------------------------------
                                                    FEBRUARY      FEBRUARY       FEBRUARY
                                                    28, 1997      29, 1996       28, 1995 
                                                  -----------    ----------     -----------

RECONCILIATION OF NET INCOME TO NET
   CASH FROM BY OPERATING ACTIVITIES:
 
<S>                                                <C>           <C>            <C>
Net income                                         $ 7,073,560   $  9,396,301   $  4,421,823
                                                   -----------   ------------   ------------
 
Adjustments to reconcile net income to
     net cash provided (used) by
     operating activities:
 
     Depreciation and amortization                   1,238,967      1,169,816        886,235
    Bad debts                                          701,500        635,000        442,500
     Contribution to ESOP (compensation)               139,950        139,950         40,666
Changes in assets and liabilities:
        (Increase) in accounts receivable           (1,332,963)    (9,853,239)    (4,260,511)
       Decrease (increase) in inventories            7,044,345    (14,553,370)    (3,566,701)
        (Increase) decrease in prepaid
              expenses and other current assets     (1,889,346)       623,688     (1,183,805)
        (Increase) in other assets                     (77,902)       (77,969)    (1,277,857)
        Increase (decrease) in accounts
         payable and accrued expenses                1,964,667      1,666,050       (354,525)
        (Decrease) increase in income taxes           (220,288)       212,545     (1,625,045)
        Increase (decrease) in other
          current liabilities                                -        (43,686)        34,361
        (Decrease) increase in deferred
          taxes                                        106,571       (469,632)       314,714
                                                   -----------   ------------   ------------
              Total adjustments                      7,675,501    (20,550,847)   (10,549,968)
                                                   -----------   ------------   ------------
Net cash provided (used) by operating
   activities                                     $ 14,749,061   $(11,154,546)   $(6,128,145)
                                                  ============   =============   =========== 
</TABLE> 

NON-CASH FINANCING ACTIVITIES:

    During the year ended February 29, 1996 the subordinated debt-holder (see
    Note 7) converted $6,000,000 of debt into 666,666 shares of the Company's
    common stock.

    During the year ended February 28, 1997, the subordinated debt-holder (see
    Note 7) converted $1,941,000 of debt into 215,667 shares of the Company's
    common stock.



                See notes to consolidated financial statements.

                                                                        Page F-6
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------

1.  ORGANIZATION:

    Nu Horizons Electronics Corp. and its subsidiaries, NIC Components Corp.,
    and Nu Horizons International Corp., were incorporated in the State of New
    York on October 22, 1982, November 8, 1982, and December 8, 1986,
    respectively.  Nu Visions Manufacturing, Inc. was incorporated in the State
    of Massachusetts on August 9, 1991.  On April 15, 1987, Nu Horizons
    Electronics Corp. was reincorporated in the State of Delaware.  On April 18,
    1994, Nu Horizons/Merit Electronics Corp. was incorporated in the State of
    Delaware, for the express purpose of acquiring the business of Merit
    Electronics, Inc.  All companies are wholesale distributors throughout the
    United States or export distributors of electronic components, except for Nu
    Visions Manufacturing, which is a contract assembler of circuit boards and
    various electromechanical devices.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

    a. Principles of Consolidation:

      The consolidated financial statements include the accounts of Nu Horizons
      Electronics Corp., (the "Company") and its wholly-owned subsidiaries, NIC
      Components Corp. ("NIC"), Nu Horizons/Merit Electronics Corp. ("NUM"), Nu
      Visions Manufacturing, Inc. ("NUV") and Nu Horizons International Corp.
      ("International").  All material intercompany balances and transactions
      have been eliminated.

    b.  Use of Estimates:

      In preparing financial statements in accordance with generally accepted
      accounting principles, management makes certain estimates and assumptions,
      where applicable, that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the
      date of the financial statements, as well as reported amounts of revenues
      and expenses during the reporting period.  While actual results could
      differ from those estimates, management does not expect such variances, if
      any, to have a material effect on the financial statements.

    c.  Concentration of Credit Risk/Fair Value:

      Financial instruments that potentially subject the Company to
      concentrations of credit risk consist principally of cash and accounts
      receivable.

      The Company maintains, at times, deposits in federally insured financial
      institutions in excess of federally insured limits.  Management attempts
      to monitor the soundness of the financial institution and believes the
      Company's risk is negligible.

      Concentrations with regard to accounts receivable are limited due to the
      Company's large customer base.

      The carrying amount of cash, accounts receivable, accounts payable and
      accrued expenses approximate fair value due to the short-term nature of
      these items.  The carrying amount of long-term debt also approximates fair
      value since the interest rates on these instruments approximate market
      interest rates.

  d.  Inventories:

      Inventories, which consist primarily of goods held for resale, are stated
      at the lower of cost (first-in, first-out method) or market.

                                                                        Page F-7
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

  e.  Depreciation:

      Depreciation is provided using the straight-line method as follows:

        Building and improvements       25 years
        Office equipment                5 years
        Furniture and fixtures          5 years
        Computer equipment              5 years

      Leasehold improvements are amortized over the term of the lease.
      Maintenance and repairs are charged to operations and major improvements
      are capitalized.  Upon retirement, sale or other disposition, the
      associated cost and accumulated depreciation are eliminated from the
      accounts and any resulting gain or loss is included in operations.

  f.  Income Taxes:

      The Company has elected to file a consolidated federal income tax return
      with its subsidiaries.  The Company utilizes Financial Accounting
      Standards Board Statement No. 109 (SFAS 109) "Accounting for Income
      Taxes".  SFAS 109 requires use of the asset and liability approach of
      providing for income taxes.  Deferred income taxes are provided for on the
      timing differences for certain items which are treated differently for tax
      and financial reporting purposes.  These items include depreciation of
      fixed assets, inventory capitalization valuations and the recognition of
      bad debt expense.

      International has elected under Section 995 of the Internal Revenue Code
      to be taxed as an "Interest Charge Disc".  Based upon these rules, income
      taxes are paid when International distributes its income to the parent
      company.  Until distributions are made, the parent company pays interest
      only on the deferred tax liabilities.  International's untaxed income at
      February 28, 1997 approximates $2,400,000.

    g.  Goodwill:

      Costs in excess of net assets acquired are being amortized on a straight-
      line basis over fifteen years.  As of February 28, 1997, accumulated
      amortization of goodwill aggregated $444,618.

      The Company periodically reviews the valuation and amortization of
      goodwill to determine possible impairment by comparing the carrying value
      to the undiscounted future cash flows of the related assets, in accordance
      with Statement of Financial Accounting Standards (SFAS) No. 121,
      Accounting for the Impairment of Long-lived Assets and for Long-lived
      Assets to be Disposed of.

  h.  Cash and Cash Equivalents:

      For purposes of the statements of cash flows, the Company considers all
      highly liquid investments with an original maturity of three months or
      less to be cash equivalents.

                                                                        Page F-8
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

  i.  Earnings Per Common Share:

      Primary earnings per share has been computed on the basis of the weighted
      average number of common shares and common equivalent shares outstanding
      during each period presented.  All shares held by the Employee Stock
      Ownership Plan (see Note 10) are included in outstanding shares.  Fully
      diluted earnings per common share has been computed assuming conversion of
      all dilutive stock options and convertible debt.

      The following average shares were used for the computation of primary and
      fully diluted earnings per share:
 
                            1997        1996       1995
                         ----------  ----------  ---------
 
        Primary           9,089,772   8,236,249  7,847,677
        Fully diluted    10,818,859  10,410,699  9,279,297

  j. Reclassifications:

      Certain prior year information has been reclassified to conform to the
      current year's reporting presentation.

  k. Stock-Based Compensation:

      SFAS No. 123 "Accounting for Stock Based Compensation", effective January
      1, 1996, requires the Company to either record compensation expense or to
      provide additional disclosures with respect to stock awards and stock
      option grants made after December 31, 1994.  The accompanying Notes to
      Consolidated Financial Statements include the disclosures required by SFAS
      No. 123.  No compensation expense is recognized pursuant to the Company's
      stock option plans under SFAS No. 123 which is consistent with prior
      treatment under APB No. 25.

                                                                        Page F-9
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------

3.  PROPERTY, PLANT AND EQUIPMENT:

    Property, plant and equipment, which is reflected at cost, consists of the
    following:
 
                                       1997        1996
                                    ----------  ----------
 
  Land                              $  266,301  $  266,301
  Building and improvements          1,747,930   1,747,930
  Furniture, fixtures and office
   equipment                         5,791,946   2,037,183
  Computer equipment                 2,476,185   2,278,582
  Assets held under capitalized
    leases                             919,834     919,834
  Leasehold improvements               984,146           -
                                    ----------  ----------
                                    12,186,342   7,249,830
                                    ==========  ==========
 

   Less:  accumulated depreciation
            and amortization         4,635,986   3,810,026
                                    ----------   ---------
                                    $7,550,356  $3,439,804
                                    ==========  ==========


    Depreciation expense including depreciation of capitalized leases for the
    years ended February 28, 1997, February 29, 1996 and February 28, 1995
    aggregated     $825,960, $756,808 and $615,356, respectively.

    The Company has entered into a contract to sell the land and building which
    served as its corporate headquarters.  The sales price aggregates
    approximately $1,175,000 and the Company expects to close the transaction in
    July 1997.

 4.    OTHER ASSETS:

    Other assets as of February 28, 1997 and February 29, 1996 consists of the
    following:
 
                                                       1997         1996
                                                   ------------  ----------
 
    Net cash surrender value - life insurance        $  869,473  $  793,537
    Debt issue costs - net (Note 7)                     151,359     407,443
    Other                                                52,302      50,335
                                                     ----------  ----------
                                                     $1,073,134  $1,251,315
                                                     ==========  ==========

                                                                       Page F-10
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------

5.  REVOLVING CREDIT LINE:

    In February, 1988 the Company entered into an agreement with its bank, which
    as amended, provided for a $25,000,000 unsecured revolving line of credit at
    the bank's prime rate (8.25 % at February 28, 1997) with payments of
    interest only through April 8, 2000.  Direct borrowings under lines of
    credit were $8,000,000 and $17,300,000 at February 28, 1997 and February 29,
    1996, respectively.  The credit agreement contained various covenants
    including a restriction on the payment of cash dividends without the bank's
    consent.  As of the end of the fiscal year, the Company met all of the
    required covenants.

6.  LONG-TERM DEBT:

    Long-term debt consists of the following:
                                                            1997          1996
                                                            ----          ----

  Mortgage payable to bank, due in quarterly
  installments of $26,552 plus interest at
  88% of the bank's prime rate (8.25% at
  February 28, 1997)                                      $    -       $398,276
 
Term loan payable to bank, due in monthly
 installments of $9,321 plus interest at
 the bank's prime rate to March 31, 2000                     354,182    447,388
 
Various capitalized equipment leases,
interest rates ranging from 6.78% to 8.38%,
maturing in 1997 and 1998.  Gross lease
obligations aggregate $85,134 and $34,748,
for each of the next two fiscal years,
with interest thereon aggregating $40,935                     78,947    206,719
                                                          ----------   --------
                                                             433,129  1,052,383
Less:  current portion                                       190,794    373,930
                                                          ----------   --------
 
                                                          $  242,335   $678,453
                                                          ==========   ========

    The mortgage payable was collateralized by land, building, and substantially
    all furniture and fixtures.  The term loan payable is secured by a pledge of
    the shares of the common stock of the Company purchased with the proceeds of
    the loans (See Note 10).  Other equipment loans are secured by the specific
    equipment acquired.

  Long-term debt of the Company matures as follows:
 
        1998    $190,794
        1999     111,852
        2000     111,852
        2001      18,631
                --------
                $433,129
                ========

                                                                       Page F-11
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------



7.  SUBORDINATED CONVERTIBLE NOTES:

    In a private placement completed on August 31, 1994, the Company issued $15
    million principal amount of Subordinated Convertible Notes, which are due in
    $5,000,000 increments on August 31, 2000, 2001 and 2002.  The notes are
    subordinate in right of payment to all existing and future senior
    indebtedness of the Company.  The notes bear interest at 8.25%, payable
    quarterly on November 15, February 15, May 15 and August 15.  The notes are
    convertible into shares of common stock at a conversion price of $9.00 per
    share.  The cost of issuing these notes was $521,565 and is being amortized
    over the life of the notes.

    As of February 28, 1997, $7,941,000 of the notes have been converted into
    882,333 shares of common stock and $7,059,000 principal amount of
    subordinated convertible notes remained outstanding which are due in
    increments of $2,353,000 on August 31, 2000, 2001 and 2002.

8.  STOCK OPTIONS:

    Stock options granted to date under the Company's Key Employees Stock
    Incentive Plan and the 1994 Stock Option Plan generally expire five years
    after date of grant and become exercisable in four equal annual installments
    commencing one year from date of grant.  Stock options granted under the
    Company's Outside Director Stock Option Plan expire ten years after the date
    of grant and become exercisable in three equal annual installments on the
    date of grant and the succeeding two anniversaries thereof.

    A summary of options granted and related information for the two years ended
    February 28, 1997 is as follows:
 
                                                  Weighted Average
                                               Options    Exercise Price
                                             -----------  --------------
 
   Outstanding, February 28, 1995               717,415           $ 6.46
     Granted                                    323,000             9.33
     Exercised                                  (24,420)            4.07
     Canceled                                   (23,023)            2.86
                                             ----------
   Outstanding, February 29, 1996               992,972             7.54
 
   Weighted average fair value of options
     granted during the year                                       $4.50
                                                                ========
     Granted                                    471,500             8.56
     Exercised                                  (93,495)            1.91
     Canceled                                   (68,750)           10.36
                                             ----------
   Outstanding, February 28, 1997             1,302,227             8.16
                                             ==========          
   Weighted average fair value of options
     granted during the year                                       $4.39
                                                                ========
     Options exercisable:
     February 28, 1995                           13,305           $ 5.96
     February 29, 1996                          159,945             7.35
     February 28, 1997                          381,377             7.86
 

                                                                       Page F-12
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------


8.  STOCK OPTIONS (continued):

    Exercise prices for options outstanding as of February 28, 1997 ranged from
    $2.11 to $14.83.  The weighted-average remaining contractual life of these
    options is approximately 5 years.  Outstanding options at February 28, 1997
    are held by 44 individuals.

    The Company applies APB 25 and related Interpretations in accounting for the
    Option Plan.  Accordingly, no compensation cost has been recognized for the
    Option Plan.  Had compensation cost for the Option Plan been determined
    using the fair value based method, as defined in SFAS 123, the Company's net
    earnings and earnings per share would have been adjusted to the pro forma
    amounts indicated below:
 
                                           1997        1996
                                        ----------  ----------
 
   Net earnings:
     As reported                        $7,073,560  $9,396,301
     Pro forma                           7,051,451   7,996,865
   Primary earnings per share:
      As reported                       $      .78  $     1.14
      Pro forma                                .78         .97
   Fully diluted earnings per share:
     As reported                        $      .69  $      .97
     Pro forma                                 .68         .83

    The fair value of each option grant was estimated on the date of the grant
    using the Black-Scholes option-pricing model with the following weighted
    average assumptions for 1997 and 1996, respectively:  expected volatility of
    48.3% and 39.8%, respectively; risk free interest rate of 6.5%; and expected
    lives of 3 to 5 years.

    The effects of applying SFAS 123 in the above pro forma disclosures are not
    indicative of future amounts as they do not include the effects of awards
    granted prior to 1995.  Additionally, future amounts are likely to be
    affected by the number of grants awarded since additional awards are
    generally expected to be made at varying amounts.
 
 9.    INCOME TAXES:

  The provision for income taxes is comprised of the following:
 
                     FEBRUARY     FEBRUARY    FEBRUARY
                      28, 1997     29, 1996    28, 1995
                    ----------   ----------  ----------
Current:
 Federal            $4,213,767   $5,082,876  $2,436,377
 State and local       900,193    1,107,016     461,816
Deferred:
 Federal              (221,867)     178,923     120,704
  State                (44,397)      34,476       3,427
                    ----------   ----------  ----------
 
                    $4,847,696   $6,403,291  $3,022,324
                    ==========   ==========  ==========
 

                                                                       Page F-13
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------


9.  INCOME TAXES (continued):

    The components of the net deferred income tax liability, pursuant to SFAS
    109, as of February 28, 1997 and February 29, 1996 are as follows:
 
                                                     1997          1996
                                                     ----          ----
 
 Deferred Tax Assets:
  Accounts Receivable                            $   679,600     $ 614,188
  Inventory                                          162,400       146,448
                                                 -----------     ---------
  Total Deferred Tax Assets                          842,000       760,636
                                                 -----------     ---------
 
 Deferred Tax Liabilities:
  Fixed Assets                                      (112,148)       (8,136)
  Income of Interest Charge DISC                    (952,000)     (868,077)
                                                 -----------     ---------
  Total Deferred Tax Liabilities                  (1,064,148)     (876,213)
                                                 -----------     ---------
 
 Net Deferred Tax Liabilities                    $  (222,148)    $(115,577)
                                                 ===========     =========
 
The following is a reconciliation of the maximum statutory federal tax rate to
the Company's effective tax rate:
 
                                                   1997     1996   1995
                                                   ----     ----   ----

Statutory rate                                    35.0%    35.0%  34.0%
State and local taxes                              7.0      6.5    6.4
Other                                             (1.3)    (1.0)    .2
                                                   ----    -----   ----
 
Effective tax rate                                40.7%    40.5%  40.6%
                                                  =====    =====  =====

10.   EMPLOYEE BENEFIT PLANS:

    On January 13, 1987, the Company's Board of Directors approved the
    termination of the Company's pension plan and approved the adoption of an
    employee stock ownership plan (ESOP) to replace the terminated pension plan.
    The ESOP covers all eligible employees and contributions are determined by
    the Board of Directors.  Contributions are in the form of cash which is
    utilized to acquire the Company's common stock for the benefit of
    participating employees.  Contributions to the Plan for the years ended
    February 28, 1997, February 29, 1996 and February 28, 1995 aggregated
    $139,950,  $139,950 and $40,666, respectively.

    In May 1988, the Company, on behalf of the ESOP, entered into an additional
    credit agreement with a bank which provides for a $2,000,000 revolving line
    of credit at the bank's prime rate until April 8, 2000.  Direct borrowings
    under this line of credit are payable in forty-eight equal monthly
    installments commencing with the fiscal period subsequent to such
    borrowings. At February 28, 1997, the ESOP owned 360,810 shares at an
    average price of approximately $2.52 per share.  At February 28, 1997,
    direct borrowings outstanding under the ESOP line of credit were $354,182.

    In January 1991, the Company also established a 401-K profit sharing plan to
    cover all eligible employees.  The Company's contributions to the plan are
    discretionary, but may not exceed 1% of compensation.  Contributions to the
    plan for the three years ended February 28, 1997 were $111,585, $90,243 and
    $61,519, respectively.

                                                                       Page F-14
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------


11. COMMITMENTS:

    (a) The Company signed employment contracts (the "Contracts"), as amended,
        with three of its senior executives for a six year period expiring
        February 28, 2001.  The Contracts specify a base salary of $200,000 for
        each officer, which shall be increased each year by the change in the
        consumer price index, and also entitles each of the officers to an
        annual bonus equal to 3.33% (10% in the aggregate) of the Company's
        consolidated earnings before income taxes.  Benefits are also payable
        upon the occurrence of either a change in control of the Company, as
        defined, or the termination of the officer's employment, as defined.
        The contracts also provide for certain payments of the executive's
        salaries, performance bonuses and other benefits in the event of death
        or disability of the officer for the balance of the period covered by
        the agreement.

    (b) In December 1996, the Company leased an approximately 80,000 square foot
        facility in Melville, Long Island, New York to serve as its executive
        offices and main distribution center.  In April 1997, subsequent to the
        balance sheet date, the Company moved its executive offices to the
        facility and is in the process of moving its distribution operation with
        a completion date of June 1997.  The lease term is from December 17,
        1996 to December 16, 2008 at an annual base rental of $601,290 and
        provision for a 4% annual escalation in each of the last ten years of
        the term.  The Company also leases certain other office, warehouse and
        other properties which leases include various escalation clauses,
        renewal options, etc.  Aggregate minimum rental commitments under
        noncancellable operating leases are as follows:

               Fiscal 1998         $1,354,547
               Fiscal 1999          1,315,188
               Fiscal 2000          1,262,713
               Fiscal 2001          1,171,665
               Fiscal 2002            878,190
               Thereafter           5,691,328

      Rent expense was $712,548, $587,079 and $450,201 for each of the three
      years in the period ending February 28, 1997.

  (c) The Company has signed a four year consulting agreement with the former
  owner of Merit Electronics which commenced on April 29, 1994.  The agreement
  provides for the consultant to perform advisory services to Nu Horizons/Merit
  and to receive consulting fees of approximately $665,000 per annum.

12.   MAJOR SUPPLIERS:

    For the year ended February 28, 1997 the Company purchased inventory from
    one supplier that was in excess of 10% of the Company's total purchases.
    Purchases from this supplier aggregated approximately $21,385,000.

    For the year ended February 29, 1996 the Company purchased inventory from
    two suppliers that were each in excess of 10% of the Company's total
    purchases.  Purchases from these suppliers aggregated approximately
    $33,505,000.

    For the year ended February 28, 1995, the Company purchased inventory from
    one supplier that was in excess of 10% of the Company's total purchases.
    Purchases from this supplier aggregated approximately $12,400,000.

                                                                       Page F-15
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------


13. BUSINESS SEGMENT INFORMATION:

    The Company's operations have been classified into two business segments:
    Electronic component distribution and industrial contract manufacturing.
    The component distribution segment includes the resale of active and passive
    components to various original equipment manufacturers and distributors.
    The industrial contract manufacturing segment consists of a subsidiary which
    provides electronic circuit board and harness assembly services to original
    equipment manufacturers.  This segment began operations in September 1991.

    Summarized financial information by business segment for fiscal 1997 and
    1996 is as follows:

                                                        1997          1996
-------------------------------------------------------------------------------
Net sales:
 
  Electronic Component Distribution                 $206,417,667  $195,929,559
  Industrial Contract Manufacturing                   10,195,040     6,873,625
-------------------------------------------------------------------------------
                                                    $216,612,707  $202,803,184
-------------------------------------------------------------------------------
Operating income (loss):
 
  Electronic Component Distribution                 $ 13,019,791  $ 18,038,688
  Industrial Contract Manufacturing                      594,423      (214,920)
-------------------------------------------------------------------------------
                                                    $ 13,614,214  $ 17,823,768
-------------------------------------------------------------------------------
Total assets:
 
  Electronic Component Distribution                 $ 70,577,102  $ 71,653,755
  Industrial Contract Manufacturing                    4,206,212     3,805,831
-------------------------------------------------------------------------------
                                                    $ 74,783,314  $ 75,459,586
-------------------------------------------------------------------------------
Depreciation and amortization:
 
  Electronic Component Distribution                 $    978,684  $    920,827
  Industrial Contract Manufacturing                      260,283       248,989
-------------------------------------------------------------------------------
                                                    $  1,238,967  $  1,169,816
-------------------------------------------------------------------------------
Capital expenditures (including capital leases):
 
  Electronic Component Distribution                 $  4,566,196  $    659,163
  Industrial Contract Manufacturing                      370,316       396,395
-------------------------------------------------------------------------------
                                                    $  4,936,512  $  1,055,558
-------------------------------------------------------------------------------

                                                                       Page F-16
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------

14.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
 

<TABLE> 
<CAPTION> 
                                           THREE MONTH PERIOD ENDED
                                -----------------------------------------------
 
                                     FEBRUARY    NOVEMBER     AUGUST      MAY
                                     28, 1997    30, 1996     31, 1996  31, 1996
                                     --------    --------     --------  --------
<S>                            <C>             <C>          <C>          <C>  
NET SALES                         $54,198,484  $53,958,639  $50,783,044  $57,672,540
                                  -----------  -----------  -----------  -----------
 
COST OF SALES                      42,071,313   41,894,971   39,411,875   44,746,424
                                  -----------  -----------  -----------  -----------
 
OTHER OPERATING
EXPENSES                            9,517,539    9,138,969    9,103,283    8,807,077
                                  -----------  -----------  -----------  -----------
 
PROVISION FOR
INCOME TAXES                        1,084,131    1,182,805      916,658    1,664,102
                                  -----------  -----------  -----------  -----------
 
NET INCOME                        $ 1,525,501  $ 1,741,894  $ 1,351,228  $ 2,454,937
                                  ===========  ===========  ===========  ===========
 
PRIMARY EARNINGS                         $.17         $.20         $.15         $.27
 PER SHARE                               ====         ====         ====         ====
 
WEIGHTED AVERAGE
NUMBER OF COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING                  8,896,514    8,887,610    8,974,574    9,130,000
                                  ===========    =========    =========    =========
<CAPTION> 
 
                                               THREE MONTH PERIOD ENDED
                                -----------------------------------------------
 
                                    FEBRUARY    NOVEMBER     AUGUST        MAY
                                    29, 1996    30, 1995    31, 1995     31, 1995
<S>                              <C>           <C>          <C>          <C>  
NET SALES                         $52,928,682  $55,066,644  $50,091,805  $44,716,053
                                  -----------  -----------  -----------  -----------
 
COST OF SALES                      40,017,844   41,983,941   38,192,979   34,407,272
                                  -----------  -----------  -----------  -----------
 
OTHER OPERATING
EXPENSES                            8,737,554    8,244,334    7,841,646    7,578,022
                                  -----------  -----------  -----------  -----------
 
PROVISION FOR
INCOME TAXES                        1,648,131    2,004,226    1,651,272    1,099,662
                                  -----------  -----------  -----------  -----------
 
NET INCOME                        $ 2,525,153  $ 2,834,143  $ 2,405,908  $ 1,631,097
                                  ===========  ===========  ===========  ===========
 
PRIMARY EARNINGS                         $.29         $.34         $.30         $.21
PER SHARE                                ====         ====         ====         ====
 
WEIGHTED AVERAGE
NUMBER OF COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING                  8,874,371    8,310,144    8,009,707    7,852,309
                                  ===========  ===========  ===========  ===========
 
</TABLE>

                                                                       Page F-17
<PAGE>
 
                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      THREE YEARS ENDED FEBRUARY 28, 1997
                      -----------------------------------


15.   SUBSEQUENT EVENTS:

    On May 23, 1997, subsequent to the balance sheet date, the Company entered
    into a new unsecured revolving line of credit with two banks, which
    currently provides for maximum borrowings of $35,000,000 at either (i) the
    lead bank's prime rate or (ii) LIBOR plus 57.5 to 112.5 basis points
    depending on the ratio of the Company's debt to its earnings before
    interest, taxes, depreciation and amortization, at the option of the
    Company, through May 23, 2001.

                                                                       Page F-18
<PAGE>
 
  REPORT OF MANAGEMENT

    The management of Nu Horizons Electronics Corp. is responsible for the
    preparation of the consolidated financial statements in accordance with
    generally accepted accounting principles and for the integrity and
    objectivity of all the financial data included in this annual report.  In
    preparing the financial  statements, management makes informed judgements
    and estimates as to the expected effects of events and transactions
    currently being reported.

    To meet this responsibility, the Company maintains a system of internal
    accounting controls to provide reasonable assurance that assets are
    safeguarded, and that transactions are properly executed and recorded.  The
    system includes policies and procedures, and reviews by officers of the
    Company.

    The Board of Directors, through its Audit Committee, is responsible for
    determining that management fulfills its responsibility with respect to the
    Company's financial statements and the system of internal accounting
    controls.

    The Audit Committee is composed solely of outside directors.  The Committee
    meets periodically and, when appropriate, separately with representatives of
    the independent accountants and officers of the Company to monitor the
    activities of each.

    Lazar, Levine & Company LLP, the independent accountants, have been selected
    by the Board of Directors to examine the Company's financial statements.
    Their report appears herein.



BY: /s/ PAUL DURANDO                             BY: /S/ ARTHUR NADATA          
------------------------------                   --------------------------
      Paul Durando                                     Arthur Nadata
  Vice President, Finance and                             President and
      Treasurer                                   Chief Executive Officer

                                                                       Page F-19
<PAGE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES:

        The Company had no disagreements on accounting or financial disclosure
      matters with its accountants, nor did it change accountants, during the
      three year period ending February 28, 1997.

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY:

       NAME                AGE              POSITION
       ----                ---              --------

      Irving Lubman           58           Chief Operating Officer and
                                           Chairman of The Board

      Arthur Nadata           51           President, Chief Executive Officer
                                           and Director

      Richard S. Schuster     48           Vice-President, Secretary and
                                           Director

      Paul Durando            53           Vice President - Finance, Treasurer
                                           and Director

      Herbert M. Gardner      57           Director

      Harvey R. Blau          61           Director

        The Company's Certificate of Incorporation provides for a Board of
      Directors consisting of not less than three nor more than eleven
      directors, classified into three classes as nearly equal in number as
      possible, whose terms of office expire in successive years.  The following
      table sets forth the directors of the Company.


 
                Class I                Class II               Class III
         (To Serve Until the     (To Serve Until the     (To Serve Until the
          Annual Meeting of      Annual Meeting of       Annual Meeting of
        Stockholders in 1997)    Stockholders in 1998)   Stockholders in 1996)
        ---------------------    ---------------------   ---------------------
            Paul Durando         Harvey Blau (1)         Irving Lubman
          Herbert Gardner (1)    Richard S. Schuster     Arthur Nadata


(1) Member of Compensation and Audit Committees

        All officers serve at the discretion of the Board.  There are no family
      relationships among the directors and officers.

        Irving Lubman has been Chairman of the Board since October 1982 and
      Chief Operating Officer since September 1996.  Mr. Lubman was Chief
      Executive Officer from October 1982 to September 1996.  Mr. Lubman has
      been actively involved in electronic components distribution since 1957,
      when he joined Milgray Electronics Corp., holding the position of sales
      manager until 1968.  From 1968 through October 1982, when he joined the
      Company, Mr. Lubman was corporate vice president of Diplomat Electronics
      Corp., also a distributor of electronic components.

        Arthur Nadata has been President and a Director since October 1982 and
      Chief Executive Officer since September 1996.  Mr. Nadata was also the
      Treasurer of the Company from October 1982 to September 1996.  Prior to
      joining the Company in October 1982, Mr. Nadata worked for eighteen years
      for Diplomat Electronics Corp. in various operational and sales positions
      of increasing responsibility, eventually becoming corporate vice president
      of sales and marketing.

                                                                         Page 14
<PAGE>
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (Continued):

         Richard S. Schuster has been Vice President, Secretary and a Director
       since October 1982.  For the seven years prior to joining the Company in
       November 1982, Mr. Schuster served as manager of Capar Components Corp.,
       an importer and distributor of passive components, and a wholly-owned
       subsidiary of Diplomat Electronics Corp.  For the six years prior to
       1975, Mr. Schuster was employed by International Components Corp.,
       responsible for production, engineering and sales of imported
       semiconductor and passive components.

         Paul Durando has been Vice President, Finance since joining the Company
       in March 1991, Treasurer since September 1996 and has been a Director
       since September 1994.  Prior to joining the Company in March 1991, Mr.
       Durando served for six years as Executive Vice President of Sigma Quality
       Foods, Inc.  From 1977 to 1984, he was Vice President, Operations of the
       Wechsler Coffee Corp.  Mr. Durando was also associated with Deloitte
       Haskins & Sells for seven years.

         Herbert M. Gardner has been a Director of the Company since May 1984.
       For more than the past five years, Mr. Gardner has been Senior Vice
       President of Janney Montgomery Scott Inc., investment bankers and
       Underwriter of the Company's May 1984 public offering.  Mr. Gardner is
       Chairman of the Board of Supreme Industries Inc. and Comtempri Homes
       Inc., Inc., a director of Transmedia Network, Inc., TGC Industries Inc.,
       Shelter Components Corp., Hirsch International Corp. and The Western
       Systems Corp.

         Harvey R. Blau has been a director of the Company since May 1984.  Mr.
       Blau has been a practicing attorney in the State of New York since 1961,
       and is a member of the law firm of Blau, Kramer, Wactlar & Lieberman,
       P.C., Jericho, New York, counsel to the Company.  Mr. Blau is Chairman of
       the Board of Griffon Corporation and Aeroflex Incorporated and is a
       Director of Reckson Associates Realty Corp.

                                                                         Page 15
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION:

    The following table sets forth the compensation paid by the Company to its
    chief Executive Officer and each of the three remaining executive officers
    for the years ended February 28, 1997, February 29, 1996 and February 28,
    1995.

                           SUMMARY COMPENSATION TABLE

                                                  Long Term
                      Annual Compensation (1)    Compensation
                -------------------------------  ------------



                                                      Securities
Name of Principal and   Fiscal                         Underlying  All Other (2)
     Position           Year     Salary      Bonus      Options    Compensation
---------------------  -------   --------   ---------   --------   ------------

 Irving Lubman          1997     $229,893    $446,843    100,000        $ 9,697
 COO, Chairman          1996      226,545     586,608     50,000         11,412
 of the Board           1995      214,022     275,709    148,650         11,673

 Arthur Nadata          1997     $229,893    $446,843    100,000        $13,597
 President and          1996      226,545     586,608     50,000         17,497
 CEO                    1995      214,022     275,709    148,650          9,464

 Richard Schuster       1997     $229,893    $446,843    100,000        $11,612
 Vice President,        1996      226,545     586,608     50,000         13,053
 Secretary and          1995      214,022     275,709    148,650         12,249
 President, NIC
 Components Corp.

 Paul Durando           1997     $130,000    $33,514      20,000        $ 1,500
 Vice President,        1996      125,000     45,000      20,000          1,250
 Finance and            1995      115,000     10,000      10,000            850
 Treasurer


                     SUMMARY COMPENSATION TABLE - Footnotes


    (1) No Other Annual Compensation is shown because the amounts of perquisites
        and other non-cash benefits provided by the Company do not exceed the
        lesser of $50,000 or 10% of the total annual base salary and bonus
        disclosed in this table for the respective officer.

    (2) The amounts disclosed in this column include the Company's contributions
        on behalf of the named executive officer to the Company's 401(k)
        retirement plan in amounts equal to a maximum of 1% of the executive
        officer's annual salary.

                                                                         Page 16
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

   Employment Contracts

    The Company has signed employment contracts (the "Contracts"), as amended,
    with three of its senior executives for a six year period expiring February
    28, 2001.  The Contracts specify a base salary of $200,000 for each officer,
    which shall be increased each year by the change in the consumer price
    index, and also entitles each of the officers to an annual bonus equal to
    3.33% (10% in the aggregate) of the Company's consolidated earnings before
    income taxes.  Benefits are also payable upon the occurrence of either a
    change in control of the Company, as defined, or the termination of the
    officer's employment, as defined.  In the event the employee terminates his
    employment within six months after a change in control of the Company, he
    will receive a lump sum payment equal to three quarters of the remaining
    compensation under his employment agreement.  The contracts also provide for
    certain payments of the executive's salaries, performance bonuses and other
    benefits in the event of death or disability of the officer for the balance
    of the period covered by the agreement.

    The following table sets forth certain information with respect to stock
    options granted to the officers named in the Summary Compensation Table
    during the fiscal year ended February 28, 1997.

                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
 
 
                                                                     Potential
                                                                  Realizable Value
                          % of                                       at Assumed
                          Total                                      Annual Rates
                          Options     Exercise                       of Stock Price
              Options    Granted to     Price     Expiration       Appreciation for
             Granted(1)  Employees  ($ per share)    Date          Entire Term (2) (3)
             ----------  ---------- ------------- -----------    --------------------
                                                                        5%     10%
                                                                  ---------- --------            
<S>         <C>        <C>         <C>          <C>            <C>           <C> 
I. Lubman    100,000     22.2%          8.13        9/13/01         $225,000 $496,000 
A. Nadata    100,000     22.2%          8.13        9/13/01          225,000  496,000 
R. Schuster  100,000     22.2%          8.13        9/13/01          225,000  496,000 
P. Durando    20,000      4.3%          8.13        9/13/01           45,000   99,200  
</TABLE> 

                                                                         Page 17
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

               OPTIONS/SAR GRANTS IN LAST FISCAL YEAR - Footnotes


    (1) Options were granted for a term of five years, subject to earlier
        termination on termination of employment.  Options become exercisable in
        four equal annual installments commencing one year from the date of
        grant.

    (2) These amounts represent assumed rates of appreciation which may not
        necessarily be achieved.  The actual gains, if any, are dependent on the
        market value of the Company's stock at a future date as well as the
        option holder's continued employment throughout the vesting period.
        Appreciation reported is net of exercise price.

    (3) Potential Realizable Value is based on the assumed annual growth rates
        for the five-year option term.  Annual growth of 5% results in a stock
        price of $10.38 per share and 10% results in a price of $13.09, per
        share for Messrs. Lubman, Nadata, Schuster and Durando on the shares
        granted at $8.13.  Actual gains, if any, on stock option exercises are
        dependent on the future performance of the stock as well as the option
        holder's continued employment throughout the vesting period.  There can
        be no assurance that the amounts reflected in this table will be
        achieved.  Appreciation reported is net of exercise price.

    The following table sets forth certain information as to each exercise of
    stock options during the fiscal year ended February 28, 1997 by the persons
    named in the Summary Compensation Table and the fiscal year end value of
    unexercised options:

            AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR-END
                               OPTIONS/SAR VALUES

 
                                                                Value of
                                          Number of            Unexercised
                                         Unexercised          In-the-Money
                                        Options/SARs          Options/SARs
                      Shares            at FY End (2)           at FY End
                                 ---------------------------  -------------
                    Acquired on     Value      Exercisable/   Exercisable/
                     Exercise    Realized (1)  Unexercisable  Unexercisable
                    -----------  ------------  -------------  -------------
 
Irving Lubman            24,805     $374,062         111,488       $255,614
                                                     187,162        274,702
 
Arthur Nadata            24,805      371,728         111,488        255,614
                                                     187,162        274,702
 
Richard Schuster         24,805      371,728         111,488        255,614
                                                     187,162        274,702
 
Paul Durando              6,250       62,365          16,250         16,225
                                                      35,000         49,688

   1. Market value less exercise price, before payment of applicable federal or
      state taxes.

   2. The share quantities in this column give effect to 5% stock dividend
      declared by the Company on March 6, 1993 and a 3 for 2 stock split
      declared by the Company on September 7, 1993.

                                                                         Page 18
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

    Directors who are not employees of the Company receive a fee of $500 for
    each Board of Directors or Committee meeting attended.  There were three
    meetings of the Board of Directors during the fiscal year ended February 28,
    1997.  Each director attended or participated in all of the meetings of the
    Board of Directors and the committees thereof on which he served.

    For the fiscal year ended February 28, 1997, there was one meeting of the
    Audit Committee.  The Company's Audit Committee is involved in discussions
    with the Company's independent public accountants with respect to the scope
    and results of the Company's year-end audit, the Company's internal
    accounting controls and the professional services furnished by the
    independent auditors to the Company.  During fiscal 1997, the Company had no
    standing Nominating Committee or any committee performing similar functions.

Compensation Committee Interlocks and Insider Participation

    The Company's Compensation Committee consisted during fiscal 1997 of Messrs.
    Gardner (Chairman) and Blau.  Mr. Gardner is Senior Vice President of Janney
    Montgomery Scott, Inc., investment bankers, which acted as placement agent
    in connection with the Company's $15 million private placement of
    convertible subordinated notes in August 1994.  Mr. Blau is a partner in the
    law firm of Blau, Kramer, Wactlar & Lieberman, P.C.  The Company has
    utilized, and anticipates that it will continue to utilize, the services of
    Blau, Kramer, Wactlar & Lieberman, P.C. as its general counsel.

    In accordance with rules promulgated by the Securities and Exchange
    Commission, the information included under the captions "Compensation
    Committee Report on Executive Compensation" and "Company Stock Performance"
    will not be deemed to be filed or to be proxy soliciting material or
    incorporated by reference in any prior or future filings by the Company
    under the Securities Act of 1933 or the Securities Exchange Act of 1934.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

    The compensation of the Company's executive officers generally is determined
    by the Compensation Committee of the Board of Directors.  Each member of the
    Compensation Committee is a Director who is not an employee of the Company
    or any of its affiliates.  The following report with respect to certain
    compensation paid or awarded to the Company's executive officers during
    fiscal 1997 is furnished by the Compensation Committee.

General Policies

    The Company's compensation programs are intended to enable the Company to
    attract, motivate, reward and retain management talent required to achieve
    aggressive corporate objectives in a rapidly changing industry, and thereby
    increase stockholder value.  It is the Company's policy to provide
    incentives to its senior management to achieve both short-term and long-term
    objectives and to reward exceptional performance and contributions to the
    development of the Company's business.  To attain these objectives, the
    Company's executive compensation program includes a competitive base salary,
    coupled with, with respect to certain executives, a substantial cash bonus
    which is "at risk" based on the Company's earnings.

    Many of the Company's employees, including its executive officers, also are
    eligible to be granted stock options periodically in order to more directly
    align their interests with the long-term financial interests of the
    Company's stockholders.

                                                                         Page 19
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

Relationship of Compensation to Performance

    The Compensation Committee annually establishes, subject to any applicable
    employment agreements, the salaries which will be paid to the Company's
    executive officers during the coming year.  In setting salaries, the Board
    of Directors takes into account several factors, including competitive
    compensation data, the extent to which an individual may participate in the
    stock option plan maintained by the Company and its affiliates, and
    qualitative factors bearing on an individuals's experience,
    responsibilities, management and leadership abilities, and job performance.

    Stock options are granted to key employees, including the Company's
    executive officers, by the Compensation Committee of the Board of Directors
    under the Plans.  Among the Company's executive officers, the number of
    shares subject to to options granted to each individual generally depends
    upon his or her base salary and the level of that officer's management
    responsibility.

    During fiscal 1997, 10,000 options were granted to each outside director
    under the Company's Outside Director Stock Option Plan.  Options to purchase
    100,000 shares each were granted to Messrs. Lubman, Nadata and Schuster and
    options to purchase 20,000 shares were granted to Mr. Durando under the
    Company's Stock Option Plan.  Bonuses were paid to three executive officers,
    as set forth in the Summary Compensation Table, pursuant to the terms of
    their employment agreements with the Company and on a discretionary basis to
    Paul Durando, the Company's Vice President, Finance and Director.  This
    latter bonus was determined to be appropriate by the Compensation Committee
    in light of Mr. Durando's contributions to the Company's performance, his
    base salary level and the level of his management responsibilities.

Compensation of Chief Executive Officer

    The Company has entered into an employment agreement with Arthur Nadata, the
    Company's President and Chief Executive Officer, pursuant to which Mr.
    Nadata receives a base salary of $200,000, adjusted for CPI index increases,
    and an incentive bonus equal to three and thirty-three one-hundreths percent
    (3.33%) of the Company's consolidated pre-tax earnings.  In this way, Mr.
    Nadata's cash compensation is tied directly to the Company's profitability.
    In fiscal 1996, the Company granted Mr. Nadata's options to purchase 100,000
    shares of Common Stock at an exercise price of $8.125 per share, which
    represented the market price of the Common Stock on the date of grant.  In
    this way, Mr. Nadata's interest are directly aligned with the interests of
    the Company's stockholders.

                                 The Compensation Committee

                                 Herbert Gardner
                                 Harvey Blau


Compliance with Section 16(a) of the Securities Exchange Act

    Section 16(a) of the Exchange Act requires the Company's executive officers,
    directors and persons who own more than ten percent of a registered class of
    the Company's equity securities ("Reporting Persons") to file reports of
    ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
    and Exchange Commission (the "SEC") and the National Association of
    Securities Dealers (the "NASD").  These Reporting Persons are required by
    SEC regulation to furnish the Company with copies of all Forms 3, 4 and 5
    they file with the SEC and NASD.

                                                                         Page 20
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

Compliance with Section 16(a) of the Securities Exchange Act (continued)

    Based solely on the Company's review of the copies of the forms it has
    received, the Company believes that all Reporting Persons complied on a
    timely basis with all filing requirements applicable to them with respect to
    transactions during fiscal year 1997, except that Irving Lubman, Chairman of
    the Board; Arthur Nadata, President and Chief Executive Officer and
    Director; Richard Schuster, Vice President, Secretary and Director and Paul
    Durando, Vice President Finance, Treasurer and Director, each failed to
    timely file one Form 4 relating to the vesting of shares of Common Stock
    under the Company's Employee Stock Ownership Plan.


                        COMPANY STOCK PERFORMANCE GRAPH

    The following Performance Graph compares the Company's cumulative total
    stockholder return on its Common Stock for a five year period (February 28,
    1991 to February 28, 1997) with the cumulative total return of the NASDAQ
    Market Index (which includes the Company) and a peer group of companies
    selected by the Company for purposes of the comparison.  Dividend
    reinvestment has been assumed and, with respect to companies in the Peer
    Group, the returns of each such company have been weighted to reflect
    relative stock market capitalization.

                COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
   AMONG NU HORIZONS ELECTRONICS CORP., NASDAQ MARKET INDEX AND PEER GROUP **
 
                         Nu Horizons  NASDAQ
Measurement Period       Electronics  Market
(Fiscal Year Covered)       Corp.      Index   Peer Group
-----------------------  -----------  -------  ----------
 
 Measurement Pt.
 
  FYE 3/01/92                $100.00  $100.00     $100.00
  FYE 2/28/93                $206.06  $100.16     $138.44
  FYE 2/28/94                $451.84  $127.62     $190.04
  FYE 2/28/95                $381.38  $121.85     $182.63
  FYE 2/29/96                $795.49  $168.25     $245.88
  FYE 2/28/97                $470.93  $201.94     $278.59
 

    Assumes $100 Invested on March 1, 1992 in Nu Horizons Electronics Common
    Stock, NASDAQ Market Index and Peer Group.  Peer group includes All American
    Semiconductor, Arrow Electronics Inc., Avnet Inc., Bell Industries Inc.,
    Bell Microproducts Inc., Jaco Electronics Inc., Kent Electronics Corp.,
    Marshall Industries, Pioneer Standard Electronics, Reptron Electronics Inc.,
    Sterling Electronics Corp., Western Microtechnology and Wyle Laboratories
    Inc.


    * Total Return Assumes Reinvestment of Dividends
    ** Fiscal Year Ending February 28 and 29

                                                                         Page 21
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

   Key Employees Stock Incentive Plan:

      The Company has a Key Employees Stock Incentive Plan ("Plan"), approved by
    the stockholders in 1984, as amended in September 1987, which presently
    covers     712,765 shares of Common Stock.  Options are currently
    outstanding for 223,227 shares and no shares are currently available for
    grant.  The Plan is intended to provide an additional means of inducing
    executives and other "key salaried employees" of the Company (which is
    defined under Section 422A of the Internal Revenue Code) to join and remain
    with the Company by offering them a greater share of the Company's stock and
    a greater identification with the Company.

      The Board of Directors or a Committee which may be appointed and
    maintained by the Board shall have the power to administer the Plan.  The
    Board or Committee has full power and authority:  (i) to designate
    participants;  (ii) to designate options or any portion thereof as Incentive
    Stock Options ("ISO");  (iii) to determine the terms and provisions of
    respective option agreements (which need not be identical) including, but
    not limited to, provisions concerning the time or times when and the extent
    to which the stock options ("Options") and Stock Appreciation Rights
    ("SARs") may be exercised and the nature and duration of restrictions as to
    transferability or constituting substantial risk forfeiture;  (iv) to
    accelerate the right to an optionee to exercise in whole or in part any
    previously granted ISO including any options modified to qualify as ISO's;
    and  (v) to interpret the provisions and supervise the administration of the
    Plan.  The Board has appointed the Compensation Committee to administer the
    Plan.

      The purchase price of each share subject to an Option or any portion
    thereof which has been designated by the Board or the Committee as an ISO
    shall not be less than 100% (or 110%, if at the time of grant the optionee
    owns more than 10% of the voting stock of the Company) in the case of
    options designated as ISO's or 85% in case of options not designated as
    incentive stock options, of the fair market value of such shares on the date
    the option is granted.  In no event shall the option price be less than the
    par value of the stock.

   1994 Stock Option Plan:

      In September 1994, the Company's stockholders approved the 1994 Stock
    Option Plan (the "Plan"), as amended in September 1996, under which key
    employees and officers of the company, its subsidiaries and affiliates may
    be granted options to purchase an aggregate of 1,100,000 shares of the
    Company's Common Stock.  The plan is administered by the Compensation
    Committee, consisting of at least two members of the Board of Directors.
    The Compensation Committee, subject to provisions in the Plan, has the
    authority to designate, in its discretion, which persons are to be granted
    options, the number of shares subject to each option, and the period of each
    option.  Each recipient must be an employee of the Company at the time of
    grant and throughout the period ending on the day three months before the
    date of exercise.  Under the terms of the Plan, the exercise price of the
    shares subject to each option granted will be not less than 85% nor more
    than 100% of the fair market value at the date of grant, or 110% of such
    fair market value for options granted to any employee or director who owns
    stock possessing more than ten percent (10%) of the total combined voting
    power of all classes of stock of the Company.  Adjustments will be made to
    the purchase price in the event of stock dividends, corporate
    reorganizations, or similar events.  During fiscal 1997,    441,500 options
    were granted under the Plan at an exercise price of $8.125.  Options are
    currently outstanding for 1,019,000 shares and 81,000 options are currently
    available for grant.  No options to purchase shares granted under the 1994
    Plan have been exercised.

                                                                         Page 22
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

   1994 Stock Option Plan (continued):

      The Compensation Committee of the Board of Directors will have the
    responsibility and authority to administer and interpret the provisions of
    the Stock Option Plan.  The Compensation Committee shall appropriately
    adjust the number of shares for which awards may be granted pursuant to the
    1994 Stock Option  Plan in the event of reorganization, recapitalization,
    stock split, reverse stock split, stock dividend, exchange or combination of
    shares, merger, consolidation, rights offering or any change in
    capitalization.  The Board may, from time to time, amend, suspend or
    terminate any or all of the provisions of the Plan, provided that, without
    the Participant's approval, no change may be made which would prevent an ISO
    granted under the Plan from qualifying as an ISO under Section 422A of the
    Internal Revenue Code of 1986, as amended (the "Code") or results in a
    modification of the Incentive Stock Option under Section 425(h) of the Code
    or otherwise alter or impair any right theretofore granted to any
    Participant; and further provided that, without the consent and approval of
    the holders of a majority of the outstanding shares of Common Stock of the
    Company present at that meeting at which a quorum exists, neither the Board
    not the Committee may make any amendment which (i) changes the class of
    persons eligible for options; (ii) increases (except as provided under
    Section 1.6 of the 1994 Stock Option Plan) the total number of shares or
    other securities reserved for issuance under the 1994 Stock Option Plan;
    (iii) decreases the minimum option prices stated in Section 2.2 of the 1994
    Stock Option (other than to change the manner of determining Fair Market
    Value to conform to any then applicable provision of the Code or any
    regulation thereunder); (iv) extends the expiration date of the 1994 Stock
    Option Plan, or the limit on the maximum term of Options; or (v) withdraws
    the administration of the 1994 Stock Option Plan from a committee consisting
    of two or more members, each of whom is a Disinterested Person.  With the
    consent of the Participant affected thereby, the Committee may amend or
    modify any outstanding Option in any manner not inconsistent with the terms
    of the 1994 Stock Option Plan.

   Outside Director Stock Option Plan:

      In September 1994, the Company's stockholders approved the Outside
    Directors Stock Option Plan (the "Director Plan") which covers 150,000
    shares of the Company's Common Stock.  The primary purposes of the Director
    Plan are to attract and retain well-qualified persons for service as
    directors of the Company and to provide such outside directors with the
    opportunity to increase their proprietary interest in the Company's
    continued success and further align their interests with the interests of
    the stockholders of the Company through the grant of options to purchase
    shares of the Company's Common Stock.

      All directors of the Company who are not employees of the Company, of
    which there are presently two, are eligible to participate in the Director
    Plan.  None of the non-employee directors are eligible to participate in any
    of the other compensation plans of the Company.

      The Board of Directors of the Company may amend the Director Plan from
    time to time in such manner as it may deem advisable.  The provisions of the
    Director Plan relating to (i) which directors shall be granted Options; (ii)
    the amount of Shares subject to Options granted; (iii) the price at which
    Shares subject to Options may be purchased; and (iv) the timing of grants of
    Options shall not be amended more than once every six (6) months, other than
    to comport with changes in the Code or the Employee Retirement Income
    Security Act of 1974, as amended.  No amendment to the Director Plan shall
    adversely affect any outstanding Option, however, without the consent of the
    Optionee that holds such Option.

                                                                         Page 23
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

   Outside Director Stock Option Plan (continued):

      The Compensation Committee of the Board of Directors has the
    responsibility and authority to administer and interpret the provisions of
    the Director Plan.  The Compensation Committee shall appropriately adjust
    the number of shares for which awards may be granted pursuant to the
    Director Plan in the event of reorganization, recapitalization, stock split,
    reverse stock split, stock dividend, exchange or combination of shares,
    merger, consolidation, rights offering, or any change in capitalization.
 
      Under the Director Plan, each non-employee Director ("Outside Director")
    received options to purchase 10,000 shares of Common Stock at a price of
    $8.25 per share (the price of shares of Common Stock on June 1, 1994) and on
    the June 1 of each subsequent year each non-employee director has or will be
    granted options to purchase 10,000 shares of Common Stock at a price equal
    to the closing price of the Common Stock on a national securities exchange
    upon which the Company's stock is listed or the average of the mean between
    the last reported "bid" and "asked" prices if the Common Stock is not so
    listed for the five business days immediately preceding the date of grant.
    Options awarded to each outside director vest in three equal installments
    over a period of two years, subject to forfeiture under certain conditions
    and shall be exercisable by the Outside Director upon vesting.

   Summary of Fiscal 1997 Stock Option Grants:

      During fiscal 1997, the Company granted options to purchase 441,500 shares
    at a price of $8.125 per share.  Messrs. Lubman, Nadata and Schuster each
    received options to purchase 100,000 shares at a price of $8.125 per share.
    Mr. Durando received options to purchase 20,000 shares at price of to $8.125
    per share.

   Employee Stock Ownership Plan:

      In January 1987, the Company adopted an Employee Stock Ownership Plan
    ("ESOP" or "Plan"), which covers substantially all of the Company's
    employees.  The ESOP is managed by three Trustees, Messrs. Lubman, Nadata
    and Schuster (the "Trustees"), who vote the securities held by the Plan
    (other than securities of the Company which have been allocated to
    employees' accounts).

      The annual contributions to the Plan are to be in such amounts as the
    Board of Directors in its sole discretion shall determine.  Each employee
    who participates in the Plan has a separate account and the annual
    contribution by the Company to an employee's account is not permitted to
    exceed the lesser of $30,000 (or such other limit as may be the maximum
    permissible pursuant to the provisions of Section 415 of the Internal
    Revenue Code and Regulations issued hereunder) or 25% of such employee's
    annual compensation, as defined under the Plan.  No contributions are
    required of, nor shall any be accepted from, any employee.

                                                                         Page 24
<PAGE>
 
ITEM 11.  EXECUTIVE COMPENSATION (Continued):

   Employee Stock Ownership Plan (Continued):

      All contributions to the Plan are invested in the Company's securities
    (except for temporary investments), the Trustees having the right to
    purchase the Company's securities on behalf of employees.  The Trustees are
    considered the stockholder for the purpose of exercising all owners' and
    stockholders' rights, with respect to the Company's securities held in the
    Plan, except for voting rights which insure to the benefit of each employee
    who can vote all shares held in his account, even if said shares are not
    vested.  Vesting is based upon an employee's years of service, employees
    generally becoming fully vested after six years.

      Benefits are payable to employees at retirement or upon death, disability
    or termination of employment, with payments commencing no later than sixty
    days following the last day of the Plan year in which such event occurred.
    Subject to the right of the employee to demand payment in the form of the
    Company's Common Stock, all benefits are payable in cash or in Common Stock,
    at the discretion of the Trustees.

      The Trustees are empowered to borrow funds for the purpose of purchasing
    the Company's securities.  The securities so purchased are required to be
    held in an acquisition indebtedness account, to be released and made
    available for reallocation as principal is repaid.  In May, 1988 the
    Company, on behalf of the ESOP, entered into a revolving credit agreement
    with its bank which provides for a $2,000,000 revolving line of credit at a
    percentage of the bank's prime rate until April 8, 2000.  Direct borrowings
    under this line of credit are payable in forty-eight equal monthly
    installments commencing with the fiscal period subsequent to such
    borrowings.  At February 28, 1997 the ESOP owned 341,017 shares at an
    average price of approximately $2.45 per share.

   401(k) Savings Plan

      The Company sponsors a retirement plan intended to be qualified under
    Section 401(k) of the Code.  All non-union employees over age 21 who have
    been employed by the Company for at least six months are eligible to
    participate in the plan.  Employees may contribute to the plan on a tax
    deferred basis up to 15% of their total annual salary, but in no event more
    than the maximum permitted by the Code ($9,500 in calendar 1996).  Company
    contributions are discretionary.  Effective with the plan year ended
    February 28, 1995, the Company has elected to make matching contributions at
    the rate of $.25 per dollar contributed by each employee up to a maximum of
    1% of an employee's salary vesting at the cumulative rate of 20% per year of
    service starting one year after commencement of service and, accordingly,
    after five years of any employee's service with Company, matching
    contributions by the Company are fully vested.  As of February 28, 1997
    approximately 211 employees had elected to participate in the plan.  For the
    fiscal year ended February 28, 1997, the Company contributed approximately
    $111,585 to the plan, of which $6,000 was a matching contribution of $1,500
    for each of Mr. Lubman, Mr. Nadata, Mr. Schuster and Mr. Durando.

                                                                         Page 25
<PAGE>
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:

          The following table sets forth, as of May 19, 1997, certain
        information with regard to the record and beneficial ownership of the
        Company's Common Stock by (i) each shareholder owning of record or
        beneficially 5% or more of the Company's Common Stock, (ii) each
        director individually, and (iii) all officers and directors of the
        Company as a group:
 
NAME                                      SHARES         PERCENT
----------------------------------  -------------------  --------
 
      Paul Durando                       19,518 (1) (2)  *
      Herbert M. Gardner                     32,862 (3)  *
      Harvey R. Blau                         27,075 (3)  *
      Irving Lubman                     138,931 (4) (5)      1.3%
      Arthur Nadata                     397,585 (4) (5) (6)  3.7%
      Richard S. Schuster               416,503 (4) (5)      3.8%
      All officers and directors
      as a group (7 persons)                 1,032,474       9.5%

NOTES:
----- 

(*)  Less than 1% of the Company's outstanding stock.

(1)  Includes options exercisable within 60 days for 15,000 shares of common
     stock under the Company's Key Employees Stock Option Plan and the 1994
     Stock Option Plan.

(2)  Includes 4,518 shares of fully vested common stock owned through the
     Employee's Stock Ownership Plan, which include voting power.

(3)  Includes options exercisable within 60 days for 26,667 shares of common
     stock under the Company's Outside Director Stock Option Plan.

(4)  Includes options exercisable within 60 days for 111,488 shares of common
     stock under the Company's Key Employees Stock Option Plan and the 1994
     Stock Option Plan.

(5)  Includes 14,399 shares of fully vested common stock owned through the
     Employees Stock Ownership Plan, which include voting power.  These Officers
     are also  Trustees of the Plan.

(6)  Includes 45,398 shares held by his children as to which Mr. Nadata
     disclaims beneficial ownership.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

       Harvey R. Blau, a Director of the Company, is a member of Blau, Kramer,
     Wactlar & Lieberman, P.C., general counsel to the Company.  For the fiscal
     year ended February 28, 1997, the Company paid $67,906 in legal fees to
     Blau, Kramer, Wactlar & Lieberman, P.C.

       For the fiscal year ended February 28, 1997, the Company received an 
     aggregate $2,889,449 in respect to various electronic components sold to
     Procomponents, Inc. and PCI Manufacturing, two corporations in which
     Mitchell Lubman, Mr. Lubman's brother, is an officer and owns greater than
     ten percent equity interest.

       For the fiscal year ended February 28, 1997, the Company received an 
     aggregate $647,992 in respect of various electronic components sold to
     Brevan Electronics, a corporation in which Stuart Schuster, Mr. Schuster's
     brother, is an officer and owns a greater than ten percent equity interest.

        

                                                                         Page 26
<PAGE>
 
PART IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K:

     (a)  (1)  The following consolidated financial statements of the registrant
             and its subsidiaries are filed as a part of this report:

                                                                 Page
                                                                 ----
 
 Independent Auditors' Report                                     F-1
 
 Consolidated Balance Sheets as of February 28, 1997
 and February 29, 1996                                            F-2
 
 Consolidated Statements of Income for the three
 years in the period ended February 28, 1997                      F-3
 
 Consolidated Statements of Changes in Shareholders'
 Equity for the three years in the period ended
 February 28, 1997                                                F-4
 
 Consolidated Statements of Cash Flows for the three
 years in the period ended February 28, 1997                      F-5
 
 Notes to Consolidated Financial Statements                       F-7
 
 Schedule II - Valuation and Qualifying  Accounts and Reserves     33
 
     (a) (3)  See exhibits required - Item (c) below

     (b)      No reports were filed by the Company on Form 8-K during the last
              quarter of the fiscal year.
 
     (c)      Exhibits
 
         EXHIBIT
         NUMBER                                DESCRIPTION
         ---------------------------------------------------------------------
 
          3.1      Certificate of Incorporation, as amended (Incorporated by
                   Reference to Exhibit 3.1 to the Company's Annual Report on
                   Form 10-K for the year ended February 29, 1988)

          3.2      By-laws, as amended (Incorporated by Reference to Exhibit 3.2
                   to the Company's Annual Report on Form 10-K for the year
                   ended February 29, 1988)

          3.3      Certificate of Amendment to Certificate of Incorporation
                   (Incorporated by Reference to Exhibit 3.1 to the Company's
                   Quarterly Report on Form 10-Q for the Quarter ended August
                   31, 1994)

          4.1      Specimen Common Stock Certificate (Incorporated by Reference
                   as Exhibit 4.1 to the Company's Registration Statement on
                   Form S-1, Registration No. 2-89176).

                                                                         Page 27
<PAGE>
 
PART IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K:

  (c)      Exhibits (continued):

        EXHIBIT
        NUMBER                              DESCRIPTION
        ----------------------------------------------------------------------

          10.1     The Registrant's Key Employee Incentive Stock Option Plan, as
                   amended (Incorporated by Reference to the Company's
                   Registration statement on form S-8 Registration No. 33-
                   20661).

          10.2     Agreement between the Company and Trustees relating to the
                   Company's Employee Stock Ownership Plan (Incorporated by
                   Reference to Exhibit 10.5 to the Company's Annual Report on
                   Form 10-K for the year ended February 28, 1987)

          10.3     Employment Agreements, as amended, between the Company and
                   Messrs. Lubman, Nadata and Schuster. (Incorporated by
                   Reference to Exhibit 10.7 to the Company's annual report on
                   Form 10-K for the year ended February 28, 1994).

          10.4     Amended and restated Revolving Credit Agreement with National
                   Westminster Bank USA dated as of April 29, 1994 (Incorporated
                   by Reference to Exhibit 10 to the Company's Report on Form 8-
                   K dated April 29, 1994).

          10.5     Asset Purchase Agreement dated April 29, 1994 between Nu
                   Horizons/Merit Electronics Corp., Merit Electronics, Inc. and
                   Robert G. Pipkin (Incorporated by Reference to Exhibit 2 to
                   the Company's Report on Form 8-K dated April 29, 1994).

          10.6     Note Agreement dated August 15, 1994 between the Company and
                   Massachusetts Mutual Life Insurance Company (Incorporated by
                   Reference to Exhibit 10.1 to the Company's Quarterly Report
                   on Form 10-Q for the quarter ended August 31, 1994).

          10.7     Amendment No. 1 to Amended and Restated Revolving Credit
                   Agreement dated as of August 24, 1994 between the Company and
                   National Westminster Bank USA (Incorporated by Reference to
                   Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
                   for the quarter ended August 31, 1994).

          10.8     1994 Stock Option Plan (Incorporated by Reference to Exhibit
                   10.3 to the Company's Quarterly Report on Form 10-Q for the
                   quarter ended August 31, 1994).

          10.9     Outside Director Stock Option Plan (Incorporated by Reference
                   to Exhibit 10.4 to the Company's Quarterly Report on Form 10-
                   Q for the quarter ended August 31, 1994).

          10.10    Agreement dated September 22, 1995 between the Company and
                   Paul Durando (Incorporated by Reference to Exhibit 10.13 to
                   the Company's Quarterly Report on Form 10-Q for the quarter
                   ended August 31, 1995).

                                                                         Page 28
<PAGE>
 
PART IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K:

  (c)      Exhibits (continued):

        EXHIBIT
        NUMBER                              DESCRIPTION
        ----------------------------------------------------------------------

          10.11    Amendment No. 2 to Amended and Restated Revolving Credit
                   Agreement and Tenth Amendment to Revolving Credit and Term
                   Loan Agreement dated as of November 29, 1995 between the
                   Company and National Westminster Bank, USA (Incorporated by
                   Reference to Exhibit 10.14 to the Company's Quarterly Report
                   on Form 10Q for the quarter ended November 30, 1995).

          10.12    Amendment No. 3 to Amended and Restated Revolving Credit
                   Agreement and Eleventh Amendment to Revolving Credit and Term
                   Loan Agreement dated as of November 30, 1995 between the
                   Company and National Westminster Bank, USA (Incorporated by
                   Reference to Exhibit 10.15 to the Company's Quarterly Report
                   on Form 10Q for the quarter ended November 30, 1995).

          10.13    Amendment No. 4 to Amended and Restated Revolving Credit
                   Agreement and Twelfth Amendment to Revolving Credit and Term
                   Loan Agreement dated as of April 8, 1996 between the Company
                   and NatWest Bank N.A. (formerly known as National Westminster
                   Bank, USA)  (Incorporated by Reference to Exhibit 10.13 to
                   the Company's Annual Report on Form 10K for the fiscal year
                   ended February 29, 1996).

          10.14    Amendment No. 5 to Amended and Restated Revolving Credit
                   Agreement and Thirteenth Amendment to Revolving Credit and
                   Term Loan Agreement dated as of June 10, 1996 between the
                   Company and Fleet Bank, N.A., formerly known as NatWest Bank
                   N.A., formerly known as National Westminster Bank USA.
                   (Incorporated by Reference to Exhibit 10.14 to the Company's
                   Quarterly Report on Form 10Q for the quarter ended May 31,
                   1996).

          10.15    Employment and Change of Control Agreements dated September
                   13, 1996, between and Company and Irving Lubman.
                   (Incorporated by Reference to Exhibit 10.15 to the Company's
                   Quarterly Report on Form 10Q for the quarter ended August 31,
                   1996).

          10.16    Employment and Change of Control Agreements dated September
                   13, 1996, between and Company and Irving Lubman.
                   (Incorporated by Reference to Exhibit 10.16 to the Company's
                   Quarterly Report on Form 10Q for the quarter ended August 31,
                   1996).

          10.17    Employment and Change of Control Agreements dated September
                   13, 1996, between and Company and Irving Lubman.
                   (Incorporated by Reference to Exhibit 10.17 to the Company's
                   Quarterly Report on Form 10Q for the quarter ended August 31,
                   1996).

                                                                         Page 29
<PAGE>
 
PART IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K:

  (c)      Exhibits (continued):

        EXHIBIT
        NUMBER                              DESCRIPTION
        ----------------------------------------------------------------------

          10.18    Revolving Credit Agreement dated May 23, 1997 between the
                   Company and two banks, Mellon Bank, N.A. and KeyBank National
                   Association.

          11.      Computation of Per Share Earnings

          22.      The following is a list of the Company's subsidiaries:


                                                            State of
                             Name                         Incorporation
                     ------------------------------       -------------

                      NIC Components Corp.                     New York
                      Nu Horizons International Corp.          New York
                      Nu Visions Manufacturing, Inc.           Massachusetts
                      Nu Horizons/Merit Electronics Corp.      Delaware

          23.      Accountant's Consent

          27.      Financial Data Schedule

          99.      Additional Exhibit

                                                                         Page 30
<PAGE>
 
      24.  Accountants' Consent
           --------------------



      We consent to the incorporation by reference in Registration Statement
      numbers 33-11032, 33-20661, 33-88952 and 33-88958 on Form S-8 of our
      opinion dated May 22, 1997 on the consolidated financial statements of Nu
      Horizons Electronics Corp. and subsidiaries included in the Corporation's
      annual report on Form 10-K for the fiscal year ended February 28, 1997.



                               /s/ LAZAR, LEVINE & COMPANY LLP
                               -------------------------------
                               LAZAR, LEVINE & COMPANY LLP
                               Certified Public Accountants



          New York, New York
          May 22, 1997

                                                                         Page 31
<PAGE>
 
      99.  Additional Exhibit:
           ------------------ 

          The following undertakings are incorporated by reference into the
      Company's Registration Statement on Form S-8 (Registration Nos. 33-11032,
      33-20661, 33-88952 and 33-88958).

          (a)  The undersigned registrant hereby undertakes:

                (1) To file, during any period in which offers or sales are
                being made, a post-effective amendment to this registration
                statement:

                     (i) To include any prospectus required by section 10(a)(3)
                     of the Securities Act of 1933;

                     (ii) To reflect in the prospectus any facts or events
                     arising after the effective date of the registration
                     statement (or the most recent post-effective amendment
                     thereof) which, individually or in the aggregate, represent
                     a fundamental change in the information set forth in the
                     registration statement;

                     (iii)  To include any material information with respect to
                     the plan of distribution not previously disclosed in the
                     registration statement or any material change to such
                     information in the registration statement;

                     Provided, however, that paragraphs (a) (1) (i) and (a) (1)
                     (ii) do not apply if the registration statement is on Form
                     S-3 or Form S-8, and the information required to be
                     included in a post-effective amendment by those paragraphs
                     is contained in periodic reports filed by the registrant
                     pursuant to section 13 or section 15(d) of the Securities
                     Exchange Act of 1934 that are incorporated by reference in
                     the registration statement.

                (2)  That, for the purpose of determining any liability under
                the Securities Act of 1933, each such post-effective amendment
                shall be deemed to be a new registration statement relating to
                the securities offered therein, and the offering of such
                securities at that time shall be deemed to be the initial bona
                fide offering thereof.

                (3)  To remove from registration by means of a post-effective
                amendment any of the securities being registered which remain
                unsold at the termination of the offering.

           (b)  The undersigned registrant hereby undertakes that, for purposes
           of determining any liability under the Securities Act of 1933, each
           filing of the registrant's annual report pursuant to section 13(a) or
           section 15(d) of the Securities Exchange Act of 1934 (and, where
           applicable, each filing of an employee benefit plan's annual report
           pursuant to section 15(d) of the Securities Exchange Act of 1934)
           that is incorporated by reference in the registration statement shall
           be deemed to be a new registration statement relating to the
           securities offered therein, and the offering of such securities at
           that time shall be deemed to be the initial bona fide offering
           thereof.

                                                                         Page 32
<PAGE>
 
      99.  Additional Exhibit (Continued):
           ------------------             

           (f) (1) The undersigned registrant hereby undertakes to deliver or
           cause to be delivered with the prospectus to each employee to whom
           the prospectus is sent or given a copy of the registrant's annual
           report to stockholders for its last fiscal year, unless such employee
           otherwise has received a copy of such report, in which case the
           registrant shall state in the prospectus that it will promptly
           furnish, without charge, a copy of such report on written request of
           the employee.  If the last fiscal year of the registrant has ended
           within 120 days prior to the use of the prospectus, the annual report
           for the fiscal year will be furnished to each such employee.

                (2) The undersigned registrant hereby undertakes to transmit or
                cause to be transmitted to all employees participating in the
                plan who do not otherwise receive such material as stockholders
                of the registrant, at the time and in the matter such material
                is sent to its stockholders, copies of all reports, proxy
                statements and other communications distributed to its
                stockholders generally.

                (3) Where interests in a plan are registered herewith, the
                undersigned registrant and plan hereby undertake to transmit or
                cause to be transmitted promptly, without charge, to any
                participant in the plan who makes a written request, a copy of
                the then latest annual report of the plan filed pursuant to
                section 15(d) of the Securities Exchange Act of 1934 (Form 11-
                K).  If such report is filed separately on Form 11-K, such form
                shall be delivered upon written request.  If such report is
                filed as a part of the registrant's annual report to
                stockholders delivered pursuant to paragraph (1) or (2) of this
                undertaking, additional delivery shall not be required.

                (4) If the registrant is a foreign private issuer, eligible to
                use Form 20-F, then the registrant shall undertake to deliver or
                cause to be delivered with the prospectus to each employee to
                whom the prospectus is sent or given, a copy of the registrant's
                latest filing on Form 20-F in lieu of the annual report to
                stockholders.

           (i)  Insofar as indemnification for liabilities arising under the
           Securities Act of 1933 may be permitted to directors, officers and
           controlling persons of the registrant pursuant to the foregoing
           provisions, or otherwise, the registrant has been advised that in the
           opinion of the Securities and Exchange Commission such
           indemnification is against public policy as expressed in the Act and
           is, therefore, unenforceable.  In the event that a claim for
           indemnification against such liabilities (other than the payment by
           the registrant of expenses incurred or paid by a director, officer or
           controlling person of the registrant in the successful defense of any
           action, suit or proceeding) is asserted by such director, officer or
           controlling person in connection with the securities being
           registered, the registrant will, unless in the opinion of its counsel
           the matter has been settled by controlling precedent, submit to a
           court of appropriate jurisdiction the question whether such
           indemnification by it is against public policy as expressed in the
           act and will be governed by the final adjudication of such issue.

                                                                         Page 33
<PAGE>
 
SCHEDULE II



                 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
                 ----------------------------------------------


                     SCHEDULE II--VALUATION AND QUALIFYING
                             ACCOUNTS AND RESERVES

                      Three Years Ended February 28, 1997



                                    Additions
                     Balance at     charged to                    Balance at
                     beginning      costs and                        end of
Description          of period       expenses     Deductions (A)     period
-----------          ----------     ----------    --------------  -----------

Valuation account
deducted in the
balance sheet from
the asset to which
it applies:
 Allowance for
 doubtful accounts-
 accounts receivable
 
     1997             $1,509,802      $701,500       $19,223       $2,192,079
                      ==========      ========       =======       ==========
 
     1996             $  898,359      $635,000       $23,557       $1,509,802
                      ==========      ========       =======       ==========
 
     1995             $  500,463      $442,500       $44,604       $  898,359
                      ==========      ========       =======       ==========
 

(A)  Accounts written off.

                                                                         Page 34
<PAGE>
 
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
     Exchange Act of 1934, the Company has duly caused this report to be signed
     on its behalf by the undersigned, thereunto duly authorized.

                                                 NU HORIZONS ELECTRONICS CORP.
                                                          (Registrant)


                                                 By:/s/ ARTHUR NADATA
                                                    ------------------------
                                                       Arthur Nadata,
                                                       President (Principal
                                                       Operating Officer)


                                                 By:/s/ PAUL DURANDO
                                                    ------------------------
                                                       Paul Durando,
                                                       Vice President, Finance 
                                                       (Principal Financial and
                                                       Accounting Officer)


     Pursuant to the requirements of the Securities Act of 1934, this report has
     been signed below by the following persons on behalf of the Registrant and
     in the capacities and on the date indicated:
 
SIGNATURE                         CAPACITY                          DATE
-------------------------  -----------------------              ------------
 
By:/s/ IRVING LUBMAN        Chairman of The Board,                May 27, 1997
-------------------------   Chief Operating Officer 
Irving Lubman                                       
 

By:/s/ ARTHUR NADATA        President, Chief Executive            May 27, 1997
-------------------------   Officer and Director  
       Arthur Nadata                 


By:/s/ RICHARD SCHUSTER     Vice President, Secretary             May 27, 1997
-------------------------   and Director  
       Richard Schuster              


By:/s/ PAUL DURANDO         Vice President, Finance,              May 27, 1997
-------------------------   Treasurer and Director 
       Paul Durando                  


By:/s/ HERBERT M. GARDNER   Director                              May 27, 1997
-------------------------
        Herbert M. Gardner


By:/s/ HARVEY R. BLAU       Director                              May 27, 1997
-------------------------
       Harvey R. Blau

                                                                         Page 35
<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

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

                                 EXHIBIT INDEX

                                       to

                                   FORM 10-K

                  FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1997

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

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


                         NU HORIZONS ELECTRONICS CORP.

             (Exact Name of Registrant as Specified in Its Charter)



     EXHIBIT
     NUMBER                                   DESCRIPTION
     ----------------------------------------------------------------------

     10.18             Revolving Credit Agreement dated May 23, 1997 between 
                       the Company and two banks, Mellon Bank, N.A. and 
                       KeyBank National Association

     11                Computation of Per Share Earnings

     27                Financial Data Schedule