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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

QUARTERLY REPORT

Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarter Ended May 31, 2004

Commission file number 1-8798

Nu Horizons Electronics Corp.

(Exact name of registrant as specified in its charter)

(631) 396 -5000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

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 checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x    No  ¨

Indicated the number of shares outstanding of each of the issuer’s classes of common stock, as of the close of the period covered by this report.

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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

INDEX

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PART 1. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

See notes to interim consolidated condensed financial statements.

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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

See notes to interim consolidated condensed financial statements.

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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

See notes to interim consolidated condensed financial statements.

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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

In the opinion of management, the accompanying unaudited interim consolidated condensed financial statements of Nu Horizons Electronics Corp. (the “Company”), its wholly owned subsidiaries NIC Components Corp., NUHC Inc., Nu Horizons International Corp., Nu Horizons Asia PTE LTD, Nu Horizons Electronics Hong Kong Limited, Nu Horizons Europe Limited, Titan Supply Chain Services Corp. and Titan Supply Chain Services PTE LTD and its majority owned subsidiaries, NIC Components Asia PTE LTD and NIC Europe Limited, contain all adjustments necessary to present fairly the Company’s financial position as of May 31, 2004 and February 29, 2004 and the results of its operations for the three month periods ended May 31, 2004 and 2003, and its cash flows for the three month periods ended May 31, 2004 and 2003.

See Note 3 regarding the sale of the net assets of the Company’s majority-owned subsidiary, Nu Visions Manufacturing, Inc.

The accounting policies followed by the Company are set forth in Note 2 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended February 29, 2004, which is incorporated herein by reference. Specific reference is made to that report for a description of the Company’s securities and the notes to consolidated financial statements included therein. The accompanying unaudited interim financial statements have been prepared in accordance with instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the United States of America

The results of operations for the three-month period ended May 31, 2004 is not necessarily indicative of the results to be expected for the full year.

Property, plant and equipment consists of the following:

On August 23, 2001, the Company completed the sale of the assets of its contract-manufacturing subsidiary, Nu Visions Manufacturing, Inc., (“Nu Visions”). The selling price of $31,563,000 consisted of $2,000,000 in a Junior Subordinated Note and $29,563,000 in cash.

The $2,000,000 Junior Subordinated Note, dated August 23, 2001 and issued by the buyer, has a maturity date of May 14, 2007 and is subordinate in right of payment to all existing and future indebtedness of the issuer. The note bears interest from the issue date, on the principal amount, to, and including the maturity date, at a rate of 8% per annum. Interest shall be payable on the maturity date and shall compound quarterly as of each anniversary of the issue date. Prepayment of the note and interest accrued is permitted if and when certain conditions in the subordination agreement have been met.

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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

On September 4, 2003, the Company entered into a secured revolving line of credit with three banks which provides for maximum borrowings of $41,500,000 at either (i) the lead bank’s prime rate or (ii) LIBOR plus 100 to 275 basis points, depending on the ratio of the Company’s liabilities to its tangible net worth, at the option of the Company through September 4, 2007. Direct borrowings under the line of credit were $31,700,000 at May 31, 2004 and $5,300,000 at February 29, 2004. There were no borrowings at May 31, 2003. As of the end of each reporting period, the Company had met all of the required covenants. On July 2, 2004, subsequent to the balance sheet date, the Company entered into an amendment to the line of credit to increase the maximum amount available thereunder to $51,500,000.

Earnings per share has been computed in accordance with the provisions of SFAS No. 128. The following table sets forth the components of basic and diluted earnings per share

The Company accounts for its stock-based compensation using the intrinsic value method provided for under Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under APB No. 25 and related interpretations, compensation cost is recognized based on the difference, if any, on the date of grant between the fair value of the Company’s stock and the amount an employee must pay to acquire the stock. SFAS No. 123, “Accounting for Stock Based Compensation” (as amended by SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment to FASB Statement No. 123”), establishes a fair-value based method of accounting for stock-based compensation plans. The Company has adopted the disclosure-only alternative under SFAS No. 123, which requires the disclosure of the pro forma effects on net income (loss) per share as if the fair value accounting prescribed by SFAS No. 123 had been adopted. Compensation expense related to stock options granted to non-employees is accounted for under SFAS 148, whereby compensation expense is recognized over the vesting period based on the fair value of the options on the date of grant.

No stock-based employee compensation cost is reflected in net income (loss), as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.

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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

The following table illustrates the effect on net income (loss) per share as if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock based compensation.

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 the quarters ended May 31, 2004, and May 31, 2003, respectively: expected volatility of 39.2% and 40.0%, respectively; risk free interest rate of 2.5% and 4.0%, respectively; and expected lives of 2 to 7 years.

The effects of applying SFAS 123 in the above pro forma disclosures are not indicative of future amounts, as they are likely to be affected by the number of grants awarded since additional awards are generally expected to be made at varying amounts.

Management believes that the Company is operating in a single business segment, distribution of electronic components, in accordance with the rules of SFAS No. 131 (“Disclosure About Segments of an Enterprise and Related Information”).

Although the Company’s business is primarily conducted in the United States, operations are also carried out overseas through its foreign subsidiaries in different geographic areas.

Revenues, by geographic area, for the first quarter of each of our last two fiscal years are as follows:

Total assets, by geographic area, for the first quarter ended in each of our last two fiscal years are as follows:

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Introduction:

Nu Horizons Electronics Corp. (the “Company”) and its wholly-owned subsidiaries, NIC Components Corp. (“NIC”), NUHC Inc. (“NUC”), Nu Horizons International Corp. (“International”), Nu Horizons Asia PTE LTD (“NUA”), Nu Horizons Electronics Hong Kong Limited (“NHK”), Nu Horizons Europe Limited (“NUE”), Titan Supply Chain Services Corp. (“TLC”) and Titan Supply Chain Services PTE LTD (“TSC”) and its majority owned subsidiaries NIC Components ASIA PTE LTD (“NIA”) and NIC Europe Ltd (“NIE”), are engaged in the distribution of high technology active and passive electronic components to a wide variety of original equipment manufacturers (“OEMs”) 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, NIA and NIE, principally to OEMs and other distributors, consists of a high technology line of chip and leaded components including capacitors, resistors and related networks.

The financial information presented herein includes: (i) Consolidated Condensed Balance Sheets as of May 31, 2004 and February 29, 2004; (ii) Consolidated Condensed Statements of Operations for the three month periods ended May 31, 2004 and 2003 and (iii) Consolidated Condensed Statements of Cash Flows for the three month periods ended May 31, 2004 and 2003.

Overview:

The electronics manufacturing and the electronics distribution industries suffered one of the most severe downturns in the industries’ history beginning in calendar 2001 and continuing through most of calendar 2003. This downturn was marked by an oversupply of components, excess manufacturing capacity and a significant decline in the demand for electronic components. However, during the second half of calendar 2003 there was industry wide double digit sequential and year over year increases in sales dollar volume, albeit accompanied by continued downward margin pressures. Management believes that this improvement in the components market worldwide will continue. The Company’s strategy of maintaining its infrastructure and investing during the electronic industry’s severe downturn is now beginning to see positive results. Sales in Asia increased almost 200% from fiscal 2003 to 2004 and the Company’s book to bill ratio, company wide, remains positive. Year over year and quarter over quarter the Company has increased market share with all of its major suppliers for both the semiconductor and passive component businesses.

For the quarter ended May 31, 2004, net sales increased to $118,176,000 from $72,803,000 for the prior year quarter with net income of $1,186,000 or $.07 per share as compared to a loss of $831,000 or $.05 per share in last year’s first quarter. The Company has now reported five sequential quarters of sales growth, with the fiscal 2005 first quarter experiencing a 62% increase in sales over the fiscal 2004 first quarter and a 16% sequential increase in sales over the fourth quarter of fiscal year 2004. The Company believes that the industry is in recovery mode and that Nu Horizons should continue to participate in the benefits of this increased demand.

For an understanding of the significant factors that influenced the company’s performance during the past three years, the following discussion should be read in conjunction with the consolidated financial statements and other information appearing elsewhere in this quarterly report on Form 10-Q.

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Overview (continued):

The following table sets forth for the years ended February 2004, 2003 and 2002, certain items in the Company’s consolidated statements of operations expressed as a percentage of net sales.

The following table sets forth for the quarters ended May 31, 2004 and 2003, certain items in the Company’s consolidated statements of operations expressed as a percentage of net sales.

Critical Accounting Policies and Estimates

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Company evaluates its estimates, including those related to bad debts, inventories, income taxes, litigation and other contingencies, on an ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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The Company believes the following critical accounting policies, among others, involve the more significant judgments and estimates used in the preparation of its consolidated financial statements:

- The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). Under SAB 104, revenue is recognized when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable and collectibility is reasonably assured. The Company recognizes revenues at time of shipment of its products and sales are recorded net of discounts and returns.

- The Company maintains allowances for doubtful accounts for estimated bad debts. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required.

- Inventories are recorded at the lower of cost or market. Write-downs of inventories to market value are based upon product franchise agreements governing price protection, stock rotation and obsolescence, as well as assumptions about future demand and market conditions. If assumptions about future demand/or actual market conditions are less favorable than those projected by management, additional write-downs of inventories could be required.

Results of Operations:

Sales for the three-month period ended May 31, 2004 were $118,176,000 as compared to $72,803,000 for the comparable period of the prior year, an increase of approximately $45,400,000 or 62.4%. On a sequential basis, sales for the current three-month period increased from $102,024,000 for the quarter ended February 29, 2004, an increase of approximately $16,152,000 or 15.8%. Given the historically cyclical nature of the Company’s industry, management attributes this increase in sales performance in the latter part of fiscal 2004 and the first quarter of fiscal 2005 as the break out period the electronic component industry has long been expecting. This was evidenced by the industry-wide double digit sequential increases in sales dollar volume over the last four quarters. Management believes this improvement in the components market worldwide will continue through our fiscal 2005 year, although no assurances can be given in this regard.

The gross profit margin for the quarter ended May 31, 2004 was 16.6% as compared to 19.3% for the prior year quarter ended May 31, 2003 and 16.3% for the immediate prior quarter ended February 29, 2004. Management believes that the gross margin pressure experienced in the latter part of fiscal 2004 and the first quarter of fiscal 2005 resulted from a change in the Company’s product mix and increased order size, coupled with increased sales in the Asian market which requires lower selling prices due to volume demand from large Asian contract manufacturers. Margin pressures appear to have stabilized during the first quarter of fiscal 2005 and management believes they will not continue to decline, however, no assurances can be given in this regard.

Operating expenses increased to $17,184,000 for the three months ended May 31, 2004, from $15,354,000 for the three- month period ended May 31,2003, an increase of $1,830,000 or 11.9%. The dollar increase in operating expenses was due to increases in the following expense categories: approximately $1,206,000 or 66% of the increase for the three-month period was for personnel related costs such as bonuses, commissions, salaries, travel and fringe benefits resulting from increased staffing levels in connection with the expansion of the Company’s Asian and U.S. operational capabilities during the first fiscal quarter. The remaining increases were a result of increases in various other general and administrative expenses required to support the Company’s increased sales volume and the aforementioned increased operational capabilities. Management believes that this investment will enable the Company to take advantage of the current and future rebound the industry is experiencing, although no assurances can be given in this regard.

Interest expense increased to $329,000 for the three months ended May 31, 2004, from $20,600 for the three month period ended May 31, 2003. This increase in interest expense for the current period resulted from bank borrowings incurred to support the increased levels of accounts receivable and inventory needed to support the Company’s increased sales volume. There were no bank borrowings in the quarter ended May 31, 2003.

Net income for the quarter ended May 31, 2004 was $1,186,000 or $.07 per basic and diluted share as compared to a net loss for the three-month period ended May 31, 2003 of $ 831,000 or $.05 per basic share basic. Management attributes the increase in earnings for the period to increased sales volume resulting in increased gross margin dollars exceeding the increase in operating expenses incurred in connection with the expansion of the Company’s Asian and U.S. operational capabilities.

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Liquidity and Capital Resources:

At May 31, 2004, the Company’s current ratio was 5.8:1 as compared to 5.6:1 at February 29, 2004. Working capital increased from approximately $123,494,000 at February 29, 2004 to approximately $151,073,000 at May 31, 2004, while cash decreased from February 29, 2004 to May 31, 2004 by approximately $4,405,000 to $8,065,000. The increase in working capital resulted from the increase in inventory and accounts receivable, net of an increase in accounts payable, required to sustain the substantial increase in the Company’s sales volume.

On September 4, 2003, the Company entered into a secured revolving line of credit with three banks, which was amended on July 2, 2004 and currently provides for maximum borrowings of $51,500,000 at either (i) the lead bank’s prime rate or (ii) LIBOR plus 100 to 275 basis points depending on the ratio of the Company’s liabilities to its tangible net worth, at the option of the Company through September 4, 2007. Borrowings under this line of credit were $31,700,000 at May 31, 2004 and $5,300,000 at February 29, 2004. There were no borrowings at May 31, 2003. As of the end of both fiscal quarters and year, the Company was in compliance with all the required covenants.

The Company has contacted its banks to discuss entering into a new loan agreement to address the Company’s need to increase its available revolving credit line to approximately $100,000,000 and to revise certain financial covenants contained in the current loan agreement. The Company is currently in full compliance with all of the covenants contained in its current agreement. However, the Company believes that, due to increased borrowing requirements resulting from current and projected substantial overall increases in sales in the electronic components market, the Company will need additional availability under its credit line. In addition, the Company believes that commencing November 2004, it is likely to have insufficient twelve month trailing earnings to insure compliance with the covenant related to earnings before interest and depreciation. Several banks have advised the Company that they are willing to enter into a new loan agreement that would enable the Company to remain in compliance with all covenants, as revised, as well as provide a sufficient increase in the available borrowing limits for the foreseeable future. There can be no assurances that the Company and its lenders will actually enter into such an agreement.

The Company anticipates that its resources provided by its cash flow from operations, without entering into the aforementioned new loan agreement, will be insufficient to meet its financing requirements for 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.

Forward Looking Statement Disclaimer:

Except for historical information contained herein, the matters set forth above may be forward-looking statements. Such forward-looking statements are based on the current beliefs of the Company’s management. Certain risks and uncertainties could cause actual results to differ from those in the forward-looking statements. Potential risks and uncertainties include such factors as those described under Risk Factors below. The Company does not undertake any obligation to update its forward looking statements.

Risk Factors:

The Company may not have adequate liquidity or capital resources to finance its operations for the next twelve months.

The Company expects that it will require cash beyond the amount currently available under its existing credit agreement and its cash flow from operations in order to enable it to purchase inventory for the projected substantial overall sales increase in the electronics components market. The Company is engaged in discussions with its banks to discuss an increase in its existing line of credit to $51,500,000 and entry into a new loan agreement with a revolving credit line of

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Risk Factors (continued):

approximately $100,000,000; however, there is no assurance that the Company and its lenders will enter into either the amendment or a revised loan agreement and, if the Company fails to do so, it may not have sufficient cash flow from operations to meet its financing requirements for the next twelve months.

A large portion of the Company’s revenues come from sales of semiconductors, which is a highly cyclical industry, and an industry down-cycle could significantly affect the Company’s operating results.

The semiconductor industry historically has experienced periodic fluctuations in product supply and demand, often associated with changes in technology and manufacturing capacity, and is generally considered to be highly cyclical. According to the Semiconductor Industry Association, the semiconductor industry experienced its worst annual downturn in history with revenue from worldwide semiconductor sales estimated to have fallen by approximately 50% from calendar 2000 to 2001. The Company’s revenues closely follow the strength or weakness of the semiconductor market. The Company’s total sales of semiconductors in fiscal years 2004, 2003, 2002 and 2001 were $346,000,000, $302,000,000 $282,000,000 and $634,000,000 respectively. Although the Company’s results have recently shown signs of an industry upturn, a technology industry downcycle, particularly in the semiconductor sector, could negatively affect the Company’s operating results in the future.

The Company’s revenues and profitability have declined significantly from historical highs and, although revenues have started to increase in recent quarters, the Company may be unable to achieve consistent profitability at levels experienced in the past.

The Company’s operations have been significantly and negatively affected by the recent downturn in the technology industry and the general economy. From a high of approximately $191 million in sales in the fiscal quarter ended November 2000, the Company’s sales stabilized in the $70 to $80 million range per quarter for eight quarters. In the two most recent quarters, the Company’s revenues have begun to show signs of growth and an industry up-cycle, with $118,000,000 of revenues in the quarter ended May 31, 2004. Despite this recent growth, the Company has not yet been able to achieve consistent profitability at a level deemed acceptable to management. As a result, the Company has continued to implement substantial cost-cutting measures designed to align its expenses to provide profitability at current revenue levels. The success of these cost-cutting measures, as well as the timing of any economic recovery, will affect the Company’s ability to achieve consistent profitability at reasonable levels. Although the Company does not anticipate any further restructuring charges in the near term, if the Company is not able to maintain an acceptable level of profitability, the Company may need to consider expense reductions.

If the Company were unable to maintain its relationships with key suppliers, it could adversely affect the Company’s sales.

In fiscal 2004, sales of products and services from three suppliers exceeded 10% of the Company’s inventory on a consolidated basis. As a result, to the extent that those suppliers are not willing to do business with the Company in the future on terms acceptable to the Company, the loss of these suppliers could materially adversely affect the Company’s business, results of operations, financial condition or liquidity. If any of these industry leading suppliers was unwilling to do business with the Company, the Company’s relationships with its customers could be materially adversely affected because the Company’s customers depend on the Company’s distribution of electronic components and computer products from the industry’s leading suppliers.

Declines in the value of the Company’s inventory could materially adversely affect the Company’s business, results of operations, financial condition or liquidity.

The electronic components and computer products industry is subject to rapid technological change, new and enhanced products and evolving industry standards, which can contribute to decline in value or obsolescence of inventory. During an economic downturn it is possible that prices will decline due to an oversupply of product and, therefore, there may be greater risk of declines in inventory value. Although it is the policy of many of the Company’s suppliers to offer

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Risk Factors (continued):

distributors like the Company certain protections from the loss in value of inventory (such as price protection, limited rights of return and rebates), the Company cannot assure you that such return policies and rebates will fully compensate it for the loss in value, or that the vendors will choose to, or be able to, honor such agreements. The Company cannot assure you that unforeseen new product developments or declines in the value of its inventory will not materially adversely affect its business, results of operations, financial condition or liquidity, or that the Company will successfully manage its existing and future inventories.

Substantial defaults by the Company’s customers on the Company’s accounts receivable could have a significant negative impact on the Company’s business, results of operations, financial condition or liquidity.

A significant portion of the Company’s working capital consists of accounts receivable from customers. If customers responsible for a significant amount of accounts receivable were to become insolvent or otherwise unable to pay for products and services, or were to become unwilling or unable to make payments in a timely manner, the Company’s business, results of operations, financial condition or liquidity could be adversely affected. If the economic and industry downturn were to continue, it could have an adverse affect on the servicing of these accounts receivable, which could result in longer payment cycles, increased collection costs and defaults in excess of management’s expectations.

Electronics component and computer industries are highly competitive and if the Company cannot effectively compete, its revenues may decline.

The market for the Company’s products and services is very competitive and subject to rapid technological advances. Not only does the Company compete with other distributors, it also competes for customers with some of its own suppliers. The Company’s failure to maintain and enhance its competitive position could adversely affect its business and prospects.

The sizes of the Company’s competitors vary across market sectors, as do the resources the Company has allocated to the sectors in which it does business. Therefore, some of the competitors may have greater financial, personnel, capacity and other resources than the Company has in one or more of its market sectors. As a result, the Company’s competitors may be in a stronger position to respond quickly to potential acquisitions and other market opportunities, new or emerging technologies and changes in customer requirements.

The Company’s non-U.S. locations represent a significant and growing portion of its revenue, and consequently, the Company is increasingly exposed to risks associated with operating internationally.

In fiscal 2004, approximately 18.5% of the Company’s sales came from its operations outside the United States. During fiscal 2003 and 2002 approximately 8% and 11.8% of sales, respectively, were from locations outside the United States. Most notable in this growth of non-U.S. sales is the increasing volume of sales activity in the Asia region, which accounted for approximately 17.1% of consolidated sales in fiscal 2004. As a result of the Company’s foreign sales and locations, its operations are subject to a variety of risks that are specific to international operations, including the following:

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Risk Factors (continued):

Manufacturing of electronic component and computer products is increasingly shifting to lower-cost production facilities in Asia, and most notably the People’s Republic of China. The Company’s business and prospects could be materially adversely affected if this shift continues and the Company is unable to develop distribution relationships with these or other manufacturers on acceptable terms. In particular, if the Company is unable to develop relationships with manufacturers that provide profit margins comparable to the margins maintained under existing relationships, the Company’s operating results may be negatively affected. In addition, the Company has operations in several locations in emerging or developing economies that have a potential for higher risk. The risks associated with these economies include currency volatility and other economic or political risks. While the Company has and will continue to adopt measures to reduce the impact of losses resulting from volatile currencies and other risks of doing business abroad, the Company cannot ensure that such measures will be adequate.

The Company’s credit facility bears interest based on interest rates tied to the prime or LIBOR rate, either of which may fluctuate over time based on economic conditions. As a result, the Company is subject to market risk for changes in interest rates and could be subjected to increased or decreased interest payments if market rates fluctuate and the Company is in a borrowing mode.

The Company has several foreign subsidiaries and acquires certain inventory from foreign suppliers and as such, faces risk due to adverse movements in foreign currency exchange rates. These risks could have a material impact on the Company’s results in future periods.

The electronic component industry is cyclical which can cause significant fluctuations in sales, gross profit margins and profits, from year to year. For example, during calendar 2001, the industry experienced a severe decline in the demand for electronic components, which caused sales to decrease by 56%. The prior year reflected a 74% increase in net sales. It is difficult to predict the timing of the changing cycles in the electronic component industry.

The Company’s chief executive officer and chief financial officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of May 31, 2004. Based on such evaluation, they have concluded that, as of May 31, 2004, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There were no changes in the Company’s internal control over financial reporting or in other factor that have, or is reasonably likely to, materially affect the Company’s internal control over financial reporting during the period covered by this report.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

There are no material legal proceedings against the Company or in which any of their property is subject.

ITEM 2. Changes in Securities

None

ITEM 3. Defaults upon Senior Securities

None

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

None

ITEM 5. Other Information

None

ITEM 6. Exhibits and Reports:

(a) Exhibits:

31.1 – Section 302 Certification of Chief Financial Officer

31.2 – Section 302 Certification of Chief Executive Officer

32.1 – Section 1350 Certification of Chief Financial Officer

32.2 – Section 1350 Certification of Chief executive Officer

(b) Reports on Form 8-K

None

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SIGNATURES

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

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

EXHIBIT INDEX

to

FORM 10-Q

FOR THE FIRST QUARTER ENDED MAY 31, 2004

QUARTERLY 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)