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                    U.S. Securities and Exchange Commission
                                Washington, D.C.

                                  FORM 10-KSB

(Mark One)

        [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
            EXCHANGE ACT OF 1934 [FEE REQUIRED] 

            For the Fiscal year ended   April 30, 1998
                                      --------------------------

        [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
            EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

            For the transition period from __________ to __________

            Commission file number  0-22760
                                   -----------------------

                      Airport Systems International, Inc.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

                    Kansas                                 48-1099142
        -------------------------------                -------------------
        (State or other jurisdiction of                 (I.R.S. Employer
        incorporation or organization)                 Identification No.)

     11300 West 89th Street, Overland Park, Kansas              66214
     ---------------------------------------------            ----------
    (Address of principal executive offices)                  (Zip Code)

Issuer's telephone number         (913) 495-2600
                         --------------------------------------------
Securities registered under Section 12(b) of the Exchange Act:   None

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of class)

        Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
                                                                      ---   ---

        Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [X]

        State issuer's revenues for its most recent fiscal year.   $23,846,000

        The aggregate market value of the voting stock held by non-affiliates
of the issuer on June 1, 1998, based upon the average bid and ask prices for
such stock on that date was $9,930,195. The number of shares of Common Stock of
the issuer outstanding as of June 1, 1998 was 2,230,500 .

        Documents incorporated by reference:

               - Portions of the Annual Report to Shareholders for the year
                 ended April 30, 1998 are incorporated by reference into Part
                 II.

               - Portions of the Proxy Statement for the Annual Meeting of
                 Shareholders to be held September 15, 1998, are incorporated
                 by reference into Part III.


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                                     Part I

Item 1.  DESCRIPTION OF BUSINESS

(A)    BUSINESS DEVELOPMENT

The Company engages in the design, manufacture, marketing and installation of
ground-based navaids as well as airfield signage. Navaids provide enroute and
approach to landing guidance to aircraft, allowing them to safely navigate and
land in poor visibility conditions. Navaids are required by the United States
Federal Aviation Administration ("FAA") and the International Civil Aviation
Organization ("ICAO") regulations at all airports in the world that conduct
all-weather operations. Airfield signage is used to direct aircraft along
runways, taxiways and to terminals.

The Company's revenues are generated principally from sales of its products and
services to government agencies internationally and in the United States. The
products are sold directly to such agencies or through prime contractors for
integration into systems procured by those agencies. The Company's sales are
largely dependent upon government construction and procurement contracts. The
majority of the Company's revenues in any single quarter is typically derived
from relatively few customers and quarterly revenue will, therefore, fluctuate
based on a number of factors, including the timing and magnitude of orders,
customer installation schedules, and political and economic factors.

Sales are typically made pursuant to fixed price contracts and cost overruns,
if any, are assumed by the Company. Historically, the Company has not had any
contracts which have required significant product development efforts, however,
the Company may, in the future, enter into fixed price contracts which require
significant product development efforts. See "Certain Factors That May Effect
Future Results - Dependence on Fixed Price Contracts."

Generally, the time from when an order is accepted until the first equipment is
shipped is approximately six months. Training is normally completed during the
production of the equipment. Final acceptance of the installed equipment (and
thus completion of the installation portion of the contract) normally occurs
two to four months after the equipment is shipped. Installation time can vary,
however, with weather and site conditions, and the progress of other portions
of the construction project into which the Company's products are incorporated.
The Company generally provides a limited product warranty with its equipment.
Warranty costs are tracked by the Company and have historically not varied
materially from management's estimates.

The Company was incorporated in Kansas on May 1, 1991, and completed an initial
public offering on November 30, 1993. In that offering, 1,550,000 shares of
common stock were sold, including an over-allotment of 150,000 shares, 700,000
shares being sold by the Company and 850,000 shares being sold by certain
existing stockholders.


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(B)  BUSINESS OF THE COMPANY

Products, Markets and Distribution

The Company's primary products are Instrument Landing Systems (ILS), Very High
Frequency Omni-Range Transmitters (VOR), Distance Measuring Equipment (DME),
and Airfield Signage. ILS, VOR, and DME's are generally referred to as navaids.
Navaid products, such as those manufactured by the Company, are an integral
part of the air traffic control system used worldwide for navigation of
aircraft operating in Instrument Meteorological Conditions (IMC) under
Instrument-flight Rules (IFR). Signals generated by these products are received
by electronic avionics equipment installed in all aircraft equipped for IFR.
The avionics include cockpit displays which provide navigational guidance to
the pilot. Most navaids are radio frequency devices which use measurement of
angles and distance to establish aircraft position coordinates.

An ILS system provides the close-in navigation support to an aircraft during
the approach to landing phase. An ILS consists of three separate navaids: the
localizer provides lateral guidance to the left and right of the runway
centerline; the glide-slope provides vertical guidance above and below a
glidepath which intersects the runway touchdown point at about a three degree
angle; and between one and three marker beacon transmitters which provide an
indication of the aircraft's position at specific points on the approach path.
The Company manufactures and sells null reference and capture effect ILS
configurations, offering both single and dual transmitters. The null reference
configuration is less expensive, while the capture effect configuration is used
when difficult terrain conditions are present near the runway. Single
transmitter systems prevail in the United States, while dual systems are
generally required at international sites to provide redundancy.

An ILS is certified for use according to criteria which specify the applicable
landing decision height which is required for a particular approach procedure.
Decision height is that point above the approach end of the runway at which the
pilot must either establish positive visual contact with the runway, or execute
a missed approach. Category I ILS permits a landing decision height of 200
feet; Category II ILS permits a landing decision height of 100 feet; and
Category III ILS permits a landing decision height of 50 feet or less. The
Company produces Category I and II ILS and is nearing completion on research
and development efforts for an enhanced Category II and new Category III ILS
which is planned for completion and certification in the second quarter of
fiscal 1999.

VOR, in combination with DME, provide the principal means for enroute
navigation currently used in the air traffic control system. A VOR located
either at an airport or at enroute points between airports provides a line of
bearing from a ground station to an aircraft based on 360 specific radials
(each radial representing a point on the compass). Position accuracy is a
function of range from the ground station, since a VOR provides angular
bearings with an accuracy of plus or minus one degree. The Company offers both
conventional and doppler effect VOR. A doppler effect VOR typically is used
where difficult terrain conditions can affect signal quality.

A DME provides distance measurement from the aircraft to the DME with an
accuracy of approximately 500 feet. A DME uses a pulsed system, like radar, in
which the ground-based DME station replies with a pulse to an interrogating
signal received from an aircraft. The distance is computed by measuring the
time between signals. The Company manufactures and sells a low power DME for
use at airports and a high power DME for use enroute. A DME can be used in
place of marker beacons in an ILS to provide distance information to the pilot.


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Airfield signage is used to direct aircraft along runways, taxiways, and to
terminals. The signs offer value-added design features, which reduce airfield
activity disruption, and readily adapt to all categories and sizes of airports.
The signs incorporate a unique two-post swinging design, which reduces damage
from jet blasts and lowers installation costs when compared with traditional
fixed-position signs.

The Company serves three primary markets: international; United States
non-federal; and the United States government.

The international market consists of all sales where the installation of the
Company's products is outside the United States. Almost all countries have
civil aviation authorities which regulate the airways within their borders and
procure equipment for their air traffic control systems and airports. The
Company sells either directly to these international organizations through a
network of representatives and distributors, or through prime contractors. The
Company has over 29 independent sales representatives covering over 27
countries. The Company's international sales were 75% and 88%, of total sales
for the fiscal years ended April 30, 1998, and 1997, respectively.

The United States non-federal market is comprised primarily of state and local
governmental entities which have responsibility for airport development,
improvement and management. The Company either contracts directly with the
governmental entity constructing or improving an airport for the navaids
portion of the project, or acts as a subcontractor to a prime contractor. The
Company's United States non-federal sales were 13% and 11%, of total sales for
the fiscal years ended April 30, 1998, and 1997, respectively.

The United States government market includes all governmental agencies which
have a need for navaid products for installation in the United States. The
primary customer for Airport Systems in this market is the FAA. The Company's
sales to the United States Government were approximately 12% and 1%, of total
sales for the fiscal periods ended April 30, 1998, and 1997, respectively. The
Company has, to date, approached this market as both a subcontractor and direct
provider.

Status of Publicly Announced New Product

Satellite-based navigation systems for aircraft navigation and landing is an
emerging technology in the navaids industry. The Global Positioning System
("GPS"), controlled jointly by the Department of Defense and Department of
Transportation, uses 24 orbiting satellites and is the only such system
currently operating. Approach-to-landing satellite guidance, however, is
currently affected by accuracy and integrity limitations. These limitations
are, however, overcome through the use of a Differential Global Positioning
System ("DGPS"). DGPS measures the GPS signal from a precisely known ground
location, calculates signal errors and transmits corrections to the GPS system
aboard the aircraft.

The Company entered into a strategic alliance with Interstate Electronics
Corporation ("Interstate") in fiscal 1995 to jointly develop a DGPS. During
1998, the Company completed development of the DGPS data link transmitter and
receiver used in the ground station and airborne GPS receiver. The related
software was certified by the FAA to be compliant with DO-178B software
development standards. Several events occurred during 1998 which the Company
believes will significantly impact not only the implementation of GPS-based
landing systems, but also its viability as the sole means of aircraft
navigation. In particular, the FAA made changes to the DGPS design
specifications as well as the development program structure and schedule; and
experienced delays in program funding. In addition, significant risks were
identified regarding the use of GPS, in particular its susceptibility to
wide-area jamming and single point failures. Because of this, the Company
believes the market for DGPS is delayed


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for an indeterminable period of time, and it is unlikely the GPS will replace
conventional navaids as the sole means of air navigation anytime in the
foreseeable future. As a result, the Company and Interstate jointly terminated
their existing agreement and the Company was granted a full manufacturing
license to the current design with the ability to make future enhancements to
the product that resulted from the joint work with Interstate. The Company is
considering several alternatives for pursuing the GPS market, including
developing a teaming relationship with a partner to revise the current design,
providing certain ground station components including the data link to other
vendors and modifying the design internally.

The Company announced in July of 1998 that it had signed a marketing and
manufacturing agreement with Idman Airfield Products ("Idman"), a manufacturer
of airport lighting products based in Finland. Idman, a wholly owned subsidiary
of Philips Electronics, N.V., manufactures a complete line of airport lighting
including approach, taxiway and runway lights. Under the terms of the
agreement, the Company will have exclusive marketing and manufacturing rights
for these products in North and South America and non-exclusive distribution
rights in a number of other major international markets.

Competition

The Company competes against several large multi-national companies which
provide a broad spectrum of products and which serve a wide customer base. Most
contracts in the navaid and sign markets are awarded through a sealed bid or
competitive request for proposal process. The principal competitive factors in
these markets are (i) product conformance with FAA and ICAO specifications,
(ii) quality of product manufactured and ease of customer usability and
maintenance, (iii) delivery time, (iv) customer training and support, and (v)
price. To date, the international and United States non-federal markets have
accounted for a substantial portion of the Company's revenues. It is the
Company's belief that significant barriers to entry into the markets for its
existing products are presented by the difficulty and expense of developing the
products and obtaining FAA and ICAO approvals.

The Company's principal conventional navaid competitor in the United States
non-federal market is Airsys ATM (previously Wilcox Electric Company), which
is, to the Company's knowledge, the only other United States manufacturer of
ground-based navaids of the type sold by the Company that has products
certified for use in projects partially funded by the Airport Improvement
Program (AIP).

The Company has several competitors both domestically and internationally in
airfield signage. Domestically, the Company's primary competitors are ADB
Alnaco (a division of Siemens A.G.), Crouse Hinds (a division of Cooper
Industries) and Standard Signs, Inc. (a privately held company).
Internationally, the Company competes primarily against Siemens ADB and local
indigenous sign manufacturers.

Sources and Availability of Raw Materials and Principle Suppliers

Raw materials used in the manufacture of the Company's products are readily
available from a number of sources in the United States.

Dependence on One or a Few Major Customers

The Company had sales to two customers which, in the aggregate, accounted for
46% of total sales in fiscal 1998, and sales to four customers which accounted
for 54% of total sales in fiscal 1997. Because of the nature of the Company's
business, it is possible that future revenues could be dependent on one or a
few major customers.


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Patents, Trademarks, Licenses

The Company holds no United States or foreign patents. The Company's only
trademark is the "AIRPORT SYSTEMS" name and design which is registered with the
United States Patent and Trademark office. The Company's material intellectual
property consists of drawings, plans, software, specifications and engineering
and manufacturing know how which the Company maintains as confidential
proprietary information. In November, 1992, the Company paid Fernau Avionics,
Ltd. $217,225 for an irrevocable, fully transferrable, non-exclusive perpetual
royalty-free license to manufacture, sell and maintain products using DME
technology owned by FAL, replacing an earlier license agreement. In addition,
the Company has been granted a full manufacturing license to the current design
with the ability to make future enhancements to the product that resulted from
our joint work with Interstate for the development and sale of DGPS equipment.

Government Approvals

All navigation aids to be installed in the United States, whether purchased by
airport owners, local or state governments or the FAA, require FAA and United
States Federal Communications Commission ("FCC") approval. Except for the
Category II and III ILS, the Company has received all applicable approvals for
the products it sells in the United States.

FAA approval takes different forms depending on how the equipment is procured.
When the FAA purchases equipment it typically issues a detailed specification
describing the functional performance requirements, and the design and
production methods. FAA design and production requirements historically have
contained more detailed specifications than those required in the international
and the United States non-federal markets, resulting in products which are more
costly to produce.

Local or state governments typically procure equipment in accordance with the
technical requirements of FAA Federal Airways Regulations ("FAR") Part 171. FAR
Part 171 is a functional performance requirement which does not include
specific design and construction methods. Because no design or construction
specifications are required to be met, products sold in the United States
non-federal market cost less than similar products procured by the FAA. The
types of ILS, VOR and DME sold by the Company in the United States non-federal
market have been approved in accordance with FAR Part 171 by the FAA.

In addition, certain local or state airport projects for which the Company
contracts are partially funded by the AIP, a United States government
trust-fund program funded by airport user fees. When ILS or DME equipment is
procured under a program funded by the AIP, the buyer of the equipment
typically transfers ownership, maintenance and operation of the equipment to
the FAA after installation is complete. There is an additional FAA approval
process required for AIP funded contracts which requires demonstration that the
FAA can successfully maintain and operate the equipment. The Company's ILS and
DME products are approved by the FAA for AIP funded contracts. To the Company's
knowledge, Airsys ATM is the only other company in the United States with
approval to supply ILS and DME equipment for AIP funded contracts.

The ICAO is a United Nations chartered organization which establishes
international standards for navigation equipment, and member countries' navaids
must conform with ICAO functional standards.


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Equipment for international procurement normally is tested after installation
to insure conformance with ICAO standards. In some cases, international
programs may require proof of FAA FAR 171 approval prior to bid. Airfield
signage must meet the requirements of FAA Circular AC150/5345-44F. The
Company's airfield signage line meets these requirements.

Effect of Existing or Probable Governmental Regulations on the Business

The Company is subject to federal, state and local regulations concerning the
environment, occupational safety and health. The Company has not experienced
any difficulty in complying with such regulations and compliance has not had a
material impact on the Company's business or its financial results.

Research and Development

During fiscal 1998, approximately 53% of the Company's engineering staff time
was spent on research and development activities, none of which was borne by
the customer. In fiscal 1997, the amount of engineering time spent on research
and development was 43%, none of which was borne by the customer.

Total Number of Employees

At April 30, 1998, the Company had 122 full time employees. Of these, 68 are
engaged in manufacturing, 9 in sales and marketing, 16 in engineering, 8 in
quality assurance and 21 in administration. The Company's employees are not
represented by a labor organization.

Certain Factors That May Effect Future Results

This annual report on Form 10-KSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In addition,
from time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but are not limited to, various filings made by
the Company with the Securities and Exchange Commission, press releases or oral
statements made by or with the approval of an authorized executive officer of
the Company. Forward-looking statements consist of any statement other than a
recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may," "expect," "anticipate," "estimate,"
or "continue" or the negative thereof or other variations thereon or comparable
terminology. Actual results could differ materially from those projected or
suggested in any forward-looking statements as a result of a wide variety of
factors and conditions, including, but not limited to, the factors summarized
below and the factors and conditions which are described under the headings
"Backlog," and "Quarterly Results" in the discussion of "Results of Operations"
contained in Management's Discussion and Analysis of Financial Condition and
Results of Operations under Item 6 of this Form 10-KSB, as well as those which
have been included in other documents the Company files from time to time with
the Securities and Exchange Commission, including the Company's quarterly
reports on Form 10-QSB and current reports on Form 8-K, and holders of the
Company's securities are specifically referred to these documents with regard
to the factors and conditions that may affect future results. The reader or
listener is cautioned that the Company does not have a policy of updating or
revising forward-looking statements and thus he or she should not assume that
silence by management of the Company over time means that actual events are
bearing out as estimated in such forward-looking statements.


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Emerging Technology - The Company's products are based upon proven ground-based
radio technology which has been the standard for navaids worldwide and is the
technology used in the vast majority of navaids currently in service. However,
currently there are potentially competitive technologies being procured or
actively considered by the FAA, ICAO and civil aviation authorities around the
world, the most significant of which is GPS. Based on future FAA, ICAO and
other civil aviation authorities' actions with regard to satellite
technologies, the long-term ability of the Company to compete successfully will
depend in large measure on its ability to acquire or develop products which are
compatible with technological changes and advances in the navaids industry. The
Company's ability to develop a GPS-based landing system depends to some degree
on the alternatives being evaluated for pursuing the GPS market. See "Business
of the Company - Status of Publicly Announced New Product."

Competition - The Company is in direct competition with one other supplier of
navaids in the United Sates. This competitor, Airsys ATM (formerly Wilcox
Electric, Inc.), is a joint venture between Thomson-CSF, a French defense and
electronics company partially owned by the French government, and Siemens A.G.,
a German defense and electronics company. Both Thomson-CSF and Siemens A.G.
have substantially greater resources than the Company, and Airsys ATM has been,
for many years, the principal supplier of navaids to the FAA. In the
international market, there are several foreign competitors for one or more of
the products produced by the Company, most of which are substantially larger
and have greater resources than the Company. See "Business of the Company -
Competition."

The market potential for satellite based landing systems has resulted in
alliances being formed between industry participants and companies not
historically involved in ground-based navigation and will over time result in
additional competitors. See "Business of the Company - Competition."

Dependence on FAA Approvals - The Company's products used in the United States'
national airspace system have been approved by the FAA. These approvals are
required in order for the Company to sell its navaids to public use airports in
the United States. Furthermore, although not specifically required, FAA
approval of the Company's navaids is a very strong selling point in
international sales. While the Company has no reason to expect withdrawal of
FAA approvals of the Company's navaids, withdrawal of any such approvals would
have an adverse impact on the ability of the Company to sell its products both
domestically and internationally. See "Business of The Company - Government
Approvals."

Product Liability - The Company currently carries a $50 million product
liability insurance policy, however, it is possible that judgment in an amount
greater than the policy limits could be awarded in the event the Company's
equipment was found to have been a contributing cause to an aircraft crash. Any
judgment in excess of the Company's product liability insurance limits could
have a material adverse effect on the Company.

The United States Dollar Exchange Rates - The Company competes internationally
with competitors from Europe and Japan and is thus subject to the effects of
changes in United States dollar exchange rates. The strength of the U.S. Dollar
compared to the German Mark and French Franc during 1998 negatively impacted
the Company's competitiveness on international projects. Prior to 1998, though,
this had not had an adverse effect on the Company's international
competitiveness. If the United States dollar continues to gain strength against
the currencies of its principal competitors, it could impede the marketing of
the Company's products by making them relatively more expensive in
international markets compared to competitors' products. The Company's
contracts are denominated in United States dollars.


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International Currency Devaluations - The current economic difficulties in
Southeast Asia that have resulted in tighter monetary and fiscal policies
following the currency devaluations in Indonesia, Thailand, Korea, Malaysia and
the Philippines have had and will for the foreseeable future, have an impact on
the Company's operations. The current difficulties are not, at this time,
having an impact on the Company's contract with the Republic of Indonesia. Work
has been progressing on the contract satisfactorily, and because the financing
for the project was established through the Export Import Bank of the United
States, the Company is assured of payment for work completed. However, should
the Republic of Indonesia default on any of its obligations to the Export
Import Bank, the Export Import Bank may suspend payments on the contract to the
Company. This would force the Company to stop work until such time as the
Company can be assured of receiving payment for work completed.

While the Company has reallocated its marketing resources to other regions of
the world, the Company is susceptible to currency devaluations in these other
regions. Further currency devaluations and tighter monetary and fiscal policy
may make the Company's products too expensive in these international markets
and delay funding of government programs.

Dependence on Key Personnel - The future success of the Company is highly
dependent upon several executive officers. The Company has signed employment
agreements with two executives and has purchased key man life insurance on five
executive officers. There can be no assurance that the loss of any one of these
individuals would not have a material adverse effect on the Company's
operations or profits.

See "Executive Officers of the Company."

Possible Volatility of Stock Price - Company's Trading Volume Historically
Limited - The trading price of the Common Stock could be subject to significant
fluctuations in response to announcements of developments related to the
Company's business, the Company's financial results, general conditions in the
industry, the United States dollar exchange rates and the general economy.
Historically, the trading volume of the Company's Common Stock on the NASDAQ
National Market has been limited.

Dependence on Fixed-Price Contracts - Sales are typically made pursuant to
fixed price contracts and cost overruns, if any, are assumed by the Company.
Revenues from fixed-price contracts are recognized using
percentage-of-completion units of delivery method. Revisions in revenue and
profit estimates are reflected in the period in which the conditions that
require the revision become known and are estimable. Therefore, adjustments for
profits or losses may have a material effect on results for the quarter in
question. The risks inherent in fixed-price contracts include the forecasting
of costs and schedules, while the recognition of contract revenues relates to
delivery of equipment and completion of contract services.

Competitive Bidding - Airport Systems generally obtains its contracts through
the process of competitive bidding. There can be no assurance that the Company
will continue to be successful in having its bids accepted or, if accepted,
that awarded contracts will generate sufficient revenues to result in
profitability for the Company. To the extent that actual costs exceed the
projected costs on which bids or contract prices were based, the Company's
profitability could be materially adversely affected.

Additional Financing Requirements - Although at April 30, 1998 the Company had
$2.4 million in cash, the financing requirements of all of the various
opportunities it is currently considering, if funded solely by the Company, may
exceed this amount. This includes working capital to meet current and future
contract obligations as well as funding for product expansion either through
acquisition or internal development. The extent of such total capital
requirements cannot be quantified at this time since many of these
opportunities are at an early stage of consideration. In order to fully fund
all such projects, the


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Company may need to issue debt or equity securities or engage in other
financing activities. There can be no assurance that such financing will be
available on favorable terms or on a timely basis, if at all. Any issuance of
equity securities by the Company may result in a dilution of shareholders'
equity. In addition, additional debt may have an adverse impact on operating
results.

Item 2.   DESCRIPTION OF PROPERTY

Real Estate. The Company conducts all of its operations from its facility at
11300 West 89th Street in Overland Park, Kansas, which consists of
approximately 50,000 square feet. Approximately 26,000 square feet is used for
manufacturing, approximately 17,000 is used for engineering and training, while
the remaining 7,000 square feet is used for administration and marketing. The
building and the seven acres on which it is located are owned by the Company,
subject to a mortgage due June, 2011. The principal balance of the mortgage at
April 30, 1998, was $1,203,000, with a final payment of approximately $788,200
due on the due date assuming no prepayments. The Company believes that its
existing facility provides adequate capacity for growth for the foreseeable
future. No specific plans have been formed at the present time for expanding
the facility, however, the Company believes that it has a range of suitable
alternatives for future expansion.

The Company conducts production of airfield signage along with planned
production of the airfield lighting product line from a leased facility at 8920
Bond in Overland Park, Kansas, which consists of approximately 7,200 square
feet. The Company has a 2 year renewable lease for this facility. The Company
believes this facility will provide adequate capacity for the remaining lease
term.

Manufacturing and Engineering Equipment. The Company's manufacturing equipment,
including automatic lead forming/cutting and wave solder capability, is
suitable for its low volume electronics production. Through-hole components are
manually placed with the assistance of semi-automatic component insertion
equipment. Surface mount components are manually placed and attached. The test
department is equipped with general purpose and automatic test equipment such
as network analyzers, spectrum analyzers and vector voltmeters. Hot mock-up
test beds are used to ensure subassembly functionality, with all Navaid
assemblies tested environmentally in a temperature chamber. The Company's
engineering department is equipped with state of the art design and test
equipment, including advanced computer-aided design systems, radio frequency
signal modeling software and necessary test and design equipment.

Item 3.   LEGAL PROCEEDINGS

The Company is not a party to any lawsuits, but is subject to contract disputes
arising in the ordinary course of business, which the Company believes will not
have, either individually or in the aggregate, a material adverse effect on the
Company's business.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matter to a vote of security holders, through a
solicitation of proxies or otherwise, during the fourth quarter of the
Company's fiscal year ended April 30, 1998.


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                                    Part II

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

The information required by Item 5 is set forth on the inside back cover of the
Company's 1998 Annual Report to Shareholders, included herein as Exhibit 13.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The information required by Item 6 is set forth on pages 8 through 11 of the
Company's 1998 Annual Report to Shareholders, included herein as Exhibit 13.

Item 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 7 is set forth on pages 12 through 23 of the
Company's 1998 Annual Report to Shareholders, included herein as Exhibit 13.

Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

There have been no changes in, or disagreements with, the Company's independent
accountants on accounting or financial disclosure matters.


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<PAGE>   12



                                    Part III

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information relating to the Company's Directors required by Item 9 will be
set forth in the Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders and such information is incorporated herein by reference.

The information relating to Section 16(a) Beneficial Ownership Reporting
Compliance will be set forth in the Company's Proxy Statement for its 1998
Annual Meeting of Shareholders and such information is incorporated herein by
reference.

The information relating to the Company's Executive Officers, as required by
Item 9, is set forth in the following table and description of backgrounds:

<TABLE>
<CAPTION>

     NAME              AGE          POSITION
--------------        -----        -------------------
<S>                   <C>          <C>
Keith S. Cowan         44           President, Chief Executive Officer and 
                                    Director

Thomas C. Cargin       43           Vice President-Finance and Administration, 
                                    Secretary and Director

Anthony G. Bommarito   46           Vice President-Engineering

Michael M. Warner      44           Vice President-Business Development

John R. Wharton        56           Vice President-Sales

Gregory C. Brand       48           Vice President-Field Operations and Training

Wayne S. Howard        58           Vice President-Indonesia Programs

Karl B. Gemperli       34           Vice President-Manufacturing

Ronald E. Peck         37           Vice President-Quality
</TABLE>

Each of the executive officers is a full-time employee of the Company. Set
forth below are descriptions of the backgrounds of the executive officers of
the Company.

Keith S. Cowan has served as President and a Director of the Company since
September, 1991, and as Chief Executive Officer of the Company since August,
1993. Prior to joining the Company, Mr. Cowan was an employee of the Teledyne
Controls Division of Teledyne, Inc. for more than five years, last serving as
Vice President, Airport and Instrumentation Products. Mr. Cowan has over 24
years of system engineering, project management and corporate experience in the
development, manufacturing and sale of electronic systems. He is also a
licensed pilot holding an instrument rating.

Thomas C. Cargin has served as Vice President-Finance and Administration of the
Company since December, 1991, as its Secretary since March, 1993, and as a
Director of the Company since October, 1993. Prior to joining the Company, Mr.
Cargin was a partner in the accounting firm of Ifft & Barber since 1989 and
prior to that was an employee of DYMON, Inc., a specialty chemical manufacturer
located in


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<PAGE>   13



Kansas City, Kansas, since 1983, last serving as Vice President of Finance and
Chief Financial Officer. Mr. Cargin is a Certified Public Accountant with over
21 years of public accounting and private industry accounting experience. He is
also a licensed pilot holding an instrument rating.

Anthony G. Bommarito has served as Vice President-Engineering of the Company
since June, 1998. Prior to joining the Company, Mr. Bommarito was an employee
of Airsys ATM, Inc. (formerly Wilcox Electric), for more than 18 years, last
serving as Director of Engineering and Product Development. Mr. Bommarito has
over 25 years in engineering experience.

Michael M. Warner has served as Vice President-Business Development since
January, 1995. Prior to that, he held the position of Director-Business
Development with Harris Corporation from 1993 to 1995. From 1982 to 1993 he
held various positions with Hughes Aircraft Company, last serving as Manager,
New Business Development. He has over 16 years experience in marketing and
managing air traffic control systems projects.

John R. Wharton has served as Vice President-Sales of the Company since May,
1991. Prior to joining the Company, Mr. Wharton was employed by Aviation
Systems, Inc., since 1988, last serving as Vice President of Marketing, and
prior thereto by Wilcox for over 20 years. Mr. Wharton has over 34 years
experience in marketing airport navigation aids both in the United States and
internationally.

Gregory C. Brand has served as Vice President-Field Operations and Training
since May, 1997. Prior to that, he was Manager of Field Services since
September, 1996. Prior to joining the Company, Mr. Brand was an employee of
Wilcox Electric, Inc. Mr. Brand has over 21 years experience in field
installation and program management.

Wayne S. Howard has served as Vice President-Indonesia Programs since January,
1997. Prior to that he was Vice President of Manufacturing Operations of the
Company since March, 1994. Prior to joining the Company, Mr. Howard was an
employee of New Bedford Panoramics Corporation for more than five years, last
serving as Manufacturing Manager. Mr. Howard has over 30 years of electronic
components manufacturing and program management experience.

Karl B. Gemperli has served as Vice President of Manufacturing since March,
1996. Prior to joining the Company, Mr. Gemperli was an employee of BF Goodrich
Aerospace, Test Systems Division for more than five years, last serving as
Director of Manufacturing. Mr. Gemperli has over 13 years of electronic
manufacturing experience.

Ronald E. Peck has served as Vice President of Quality since May, 1998. Prior
to that he served as Director of Quality since April 1997. Prior to joining the
Company, Mr. Peck was an employee of Raytheon Company, last serving as a
Principal Quality Assurance Engineer. Mr. Peck has over 15 years of quality
assurance experience.

Item 10.  EXECUTIVE COMPENSATION

The information required by Item 10 will be set forth in the Company's
definitive Proxy Statement for its 1998 Annual Meeting of Shareholders and such
information is incorporated herein by reference.



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<PAGE>   14



Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

The information required by Item 11 will be set forth in the Company's
definitive Proxy Statement for its 1998 Annual Meeting of Shareholders and such
information is incorporated herein by reference.

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There are no transactions of the type required to be disclosed by Item 12.

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits: The following exhibits have been previously filed or are
        being filed herewith, and are numbered in accordance with Item 601 of
        Regulation S-B:

<TABLE>
<CAPTION>

NUMBER                                DESCRIPTION
------                ------------------------------------------
<S>                   <C>
  3.1                 ARTICLES OF INCORPORATION

                      The amended Articles of Incorporation of the Company
                      dated September 14, 1994, attached as Exhibit 3.1 pages
                      19-55 of the Company's Form 10-KSB, filed July 31, 1995
                      with the Securities and Exchange Commission is
                      incorporated herein by reference.

  3.2                 BY-LAWS

                      The Restated By-Laws of the Company dated October 1,
                      1993, attached as Exhibit 3.2, of the Company's
                      Registration Statement, Form SB-2, filed November 29,
                      1993 with the Securities and Exchange Commission, are
                      incorporated herein by reference.

  4                   INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS

                      A specimen stock certificate representing shares of the
                      common stock, par value $.01 per share, attached as
                      Exhibit 4.1 of the Company's Registration Statement, Form
                      SB-2, filed November 29, 1993 with the Securities and
                      Exchange Commission, is incorporated herein by reference.

  10                  MATERIAL CONTRACTS

                      (a)    Teaming agreement between Airport Systems
                             International, Inc. and Interstate Electronics
                             Corporation (Portions omitted pursuant to a
                             request for confidential treatment) attached as
                             exhibit 10.1 of the Company's Form 10-QSB, filed
                             March 17, 1995 with the Securities and Exchange
                             Commission, is incorporated herein by reference.
</TABLE>



Page 14
<PAGE>   15

<TABLE>
<CAPTION>


NUMBER                                DESCRIPTION
------                --------------------------------------------
<S>                   <C>
                      (b)    A copy of the warrant issued by the Company to
                             Fahnestock & Company, Inc., attached as Exhibit
                             4.7 of the Company's Registration Statement, Form
                             SB-2, filed November 29, 1993 with the Securities
                             and Exchange Commission, is incorporated herein by
                             reference.

                      (c)    Restated 1991 Stock Option Plan attached as
                             Exhibit 10.5 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.

                      (d)    Stock Option Agreement dated September 3, 1991, by
                             and between the Company and Keith S. Cowan, as
                             amended, attached as Exhibit 10.6 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (e)    Stock Option Agreement dated January 15, 1992, by
                             and between the company and Thomas C. Cargin,
                             attached as Exhibit 10.7 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (f)    Stock Option Agreement dated January 15, 1992, by
                             and between the Company and John C. Roos, attached
                             as Exhibit 10.8 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.

                      (g)    Stock Option Agreement dated January 15, 1992, by
                             and between the Company and John R. Wharton,
                             attached as Exhibit 10.9 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (h)    Stock Option Agreement dated June 25, 1993, by and
                             between the Company and Keith S. Cowan, attached
                             as Exhibit 10.11 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is 
                             incorporated herein by reference.

                      (i)    Stock Option Agreement dated June 25, 1993, by and
                             between the Company and Thomas C. Cargin, attached
                             as Exhibit 10.12 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.
</TABLE>



Page 15 
<PAGE>   16

<TABLE>
<CAPTION>


NUMBER                                DESCRIPTION
------                ---------------------------------------------
<S>                   <C>
                      (j)    Stock Option Agreement dated June 25, 1993, by and
                             between the Company and John C. Roos, attached as
                             Exhibit 10.13 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.

                      (k)    Stock Option Agreement dated June 25, 1993, by and
                             between the Company and John R. Wharton, attached
                             as Exhibit 10.14 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.

                      (l)    Stock Option Agreement dated October 1, 1993, by
                             and between the Company and Keith S. Cowan,
                             attached as Exhibit 10.15 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (m)    Stock Option Agreement dated October 1, 1993, by
                             and between the Company and Thomas C. Cargin,
                             attached as Exhibit 10.16 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (n)    Stock Option Agreement dated October 1, 1993, by
                             and between the Company and John C. Roos, attached
                             as Exhibit 10.17 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.

                      (o)    Stock Option Agreement dated October 1, 1993, by
                             and between the Company and John R. Wharton,
                             attached as Exhibit 10.18 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (p)    Stock Option Agreement dated October 1, 1993, by
                             and between the Company and Barry L. Harris,
                             attached as Exhibit 10.19 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (q)    Stock Option Agreement dated April 15, 1994, by
                             and between the Company and Wayne Howard, attached
                             as Exhibit 10 of the Company's Form 10-KSB, filed
                             July 28, 1994 with the Securities and Exchange
                             Commission, is incorporated herein by reference.
</TABLE>



Page 16
<PAGE>   17

<TABLE>
<CAPTION>


NUMBER                                DESCRIPTION
------                ---------------------------------------------
<S>                   <C>
                      (r)    Stock Option agreement dated January 23, 1995, by
                             and between the Company and Michael M. Warner,
                             attached as exhibit 10.1 of the Company's Form
                             10-QSB, filed March 17, 1995 with the Securities
                             and Exchange Commission, is incorporated herein by
                             reference.

                      (s)    Employment Agreement dated June 22, 1993, by and
                             between the Company and Keith S. Cowan, attached
                             as Exhibit 10.1 of the Company's Registration
                             Statement, Form SB-2, filed November 29, 1993 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.

                      (t)    Employment Agreement dated October 11, 1993, by
                             and between the Company and Thomas C. Cargin,
                             attached as Exhibit 10.2 of the Company's
                             Registration Statement, Form SB-2, filed November
                             29, 1993 with the Securities and Exchange
                             Commission, is incorporated herein by reference.

                      (u)    Covenant Not To Compete Agreement dated March 20,
                             1997, By and between the Company and Michael M.
                             Warner, attached as Exhibit 10.(u) of the
                             Company's Form 10-KSB, filed July 31, 1997 with
                             the Securities and Exchange Commission, is
                             incorporated herein by reference.

                      (v)    Stock Option Agreement dated February 13, 1997, by
                             and between the Company and Karl B. Gemperli,
                             attached as Exhibit 10.(v), of the Company's Form
                             10-KSB, filed July 31, 1997 with the Securities
                             and Exchange Commission, is incorporated herein by
                             reference.

                      (w)    Sales contract by and between the Company and the
                             Government of Indonesia attached as Exhibit 5 of
                             the Company's Form 8-K, filed November 15, 1996
                             with the Securities and Exchange Commission, is
                             incorporated herein by reference.

 11.                  STATEMENT OF COMPUTATION OF PER SHARE EARNINGS

 13.                  ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
                      APRIL 30, 1998 (only those portions of such Annual Report
                      to Shareholders which are specifically incorporated by
                      reference into this Form 10-KSB shall be deemed filed
                      with the Commission)

 21.                  SUBSIDIARIES OF THE COMPANY

 23.                  CONSENT OF INDEPENDENT AUDITORS

 27.                  FINANCIAL DATA SCHEDULE (for SEC use only)
</TABLE>


(b)  REPORTS ON FORM 8-K:  None



Page 17
<PAGE>   18



                                    PART IV

                                   Signatures

        Pursuant to the requirements of Section 13 or 15 (d) 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.

                                       AIRPORT SYSTEMS INTERNATIONAL, INC.

                                By:

                                       /s/ Keith S. Cowan
                                       ----------------------------------------
                                       Keith S. Cowan
                                       President and Chief Executive Officer

Date:  July 28, 1998

        Pursuant to the requirements of the Securities Exchange 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:


/s/ Keith S. Cowan                                 Date:  July 28, 1998
------------------------------------
Keith S. Cowan
President, and Director
(Chief Executive Officer)


/s/ Thomas C. Cargin                               Date:  July 28, 1998
------------------------------------
Thomas C. Cargin
Director
(Vice President-Finance and
Administration, Principal Financial
Officer, and Secretary)

/s/ Michael J. Meyer                               Date:  July 28, 1998
------------------------------------
Michael J. Meyer
Director

/s/ Thomas C. Blackburn                            Date:  July 28, 1998
------------------------------------
Thomas C. Blackburn
Director



Page 18
<PAGE>   19



EXHIBIT INDEX
<TABLE>
<CAPTION>

Number                Description
------                -----------
<S>                   <C>
11.                   STATEMENT OF COMPUTATION OF PER SHARE EARNINGS

13.                   ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
                      APRIL 30, 1998 (only those portions of such Annual Report
                      to Shareholders which are specifically incorporated by
                      reference into this Form 10-KSB shall be deemed filed
                      with the Commission)

21.                   SUBSIDIARIES OF THE COMPANY

23.                   CONSENT OF INDEPENDENT AUDITORS

27.                   FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
</TABLE>




Page 19