UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    ---------


                                    FORM 10-Q

                                    ---------


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

For the quarter ended            December 31, 1998
                      -------------------------------------   
Commission File Number 1-8037

                                    ---------


                              AEROFLEX INCORPORATED


             (Exact name of Registrant as specified in its Charter)

                DELAWARE                          11-1974412
      (State or other jurisdiction             (I.R.S. Employer
     of incorporation or organization)         Identification No.)

           35 South Service Road
              Plainview, N.Y.                       11803
(Address of principal executive offices)          (Zip Code)
                                 (516) 694-6700
              (Registrant's telephone number, including area code)


                                    ---------


 *Indicate  by check  mark  whether  the  Registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  12 months,  and (2) has been  subject to such filing
requirements for the past 90 days.

                             Yes    X      No
                                  -----        -----
        
  Indicate the number of shares  outstanding of each of the issuer's  classes of
common stock as of the latest practicable date.

February 9, 1999    17,785,419 shares (excluding 32,027 shares held in treasury)
--------------------------------------------------------------------------------
    (Date)                              (Number of Shares)

<PAGE>
                              AEROFLEX INCORPORATED

                                AND SUBSIDIARIES


                                      INDEX
                                      -----        

                                                              PAGE
                                                              ----   
PART I:  FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEETS
 December 31, 1998 and June 30, 1998                           3-4

CONSOLIDATED STATEMENTS OF OPERATIONS
 Six Months Ended December 31, 1998 and 1997                    5

CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended December 31, 1998 and 1997                  6

CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended December 31, 1998 and 1997                    7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                     8-10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS
    Six and Three Months Ended December 31, 1998 and 1997     11-15

PART II:  OTHER INFORMATION

ITEM 4 Submission of Matters to a Vote of Security Holders      16

ITEM 6 Exhibits and Reports on Form 8-K                         16

SIGNATURES                                                      17



<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                            December 31,        June 30,
                                               1998              1998
                                            ------------        --------
                                                    (In thousands)
<S>                                           <C>               <C>

ASSETS
------
Current assets:
 Cash and cash equivalents                    $ 21,402          $ 24,408
 Accounts receivable, less allowance for
   doubtful accounts of $434,000 and $317,000   24,467            19,853
 Inventories                                    29,359            29,851
 Deferred income taxes                           2,283             1,861
 Prepaid expenses and other current assets       2,222             1,197
                                              --------          --------    
   Total current assets                         79,733            77,170

Property, plant and equipment, at cost, net     29,111            26,994
Intangible assets acquired in connection with
  the purchase of businesses, net                8,118             7,578
Cost in excess of fair value of net assets
  of businesses acquired, net                    9,862             9,827
Other assets                                     3,267             2,532
                                              --------          --------    
   Total assets                               $130,091          $124,101
                                              ========          ========
<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (continued)

<TABLE>
<CAPTION>

                                                   December 31,        June 30,
                                                       1998             1998
                                                   ------------        --------    
                                                          (In thousands)


<S>                                                <C>                 <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
  Current portion of long-term debt                $  1,777            $  1,755
  Accounts payable                                    5,145               6,668
  Accrued expenses and other current liabilities     10,627              12,932
  Income taxes payable                                2,108               1,850
                                                   --------            --------    
    Total current liabilities                        19,657              23,205

Long-term debt                                       13,287               9,726
Deferred income taxes                                   982               1,156
Other long-term liabilities                           2,513               2,978
                                                   --------            --------    
    Total liabilities                                36,439              37,065
                                                   --------            --------    
Stockholders' equity:
 Preferred Stock, par value $.10 per share;
  authorized 1,000,000 shares:
   Series A Junior  Participating  Preferred
   Stock,  par value  $.10 per share,
   authorized 25,000 and 150,000 shares,
   none issued                                         -                   -
 Common Stock, par value $.10 per share;
  authorized 25,000,000 shares; issued
  17,706,000 and 17,378,000 shares                    1,771               1,738
 Additional paid-in capital                         102,335             100,481

 Accumulated deficit                                (10,110)            (15,178)
                                                   --------            --------    
                                                     93,996              87,041

 Less:  Treasury stock, at cost (39,000 and
  1,000 shares)                                         344                   5
                                                   --------            --------    
    Total stockholders' equity                       93,652              87,036
                                                   --------            --------    
    Total liabilities and stockholders' equity     $130,091            $124,101
                                                   ========            ========       

<FN>
               See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                               Six Months Ended
                                                 December 31,
                                               ----------------   
                                             1998              1997
                                           -------           -------  
                                     (In thousands, except per share data)

<S>                                        <C>               <C>     
Net sales                                  $ 67,826          $ 53,210
Cost of sales                                44,299            35,079
                                           --------          --------
  Gross profit                               23,527            18,131
                                           --------          --------
Selling, general and administrative costs    11,392            10,365
Research and development costs                4,294             2,029
                                           --------          --------
                                             15,686            12,394
                                           --------          --------
  Operating income                            7,841             5,737
                                           --------          --------
Other expense (income)
  Interest expense                              567             1,250
  Other expense (income)                       (544)               74
                                           --------          --------
    Total other expense (income)                 23             1,324
                                           --------          --------
Income before income taxes                    7,818             4,413

Provision for income taxes                    2,750             1,575
                                           --------          --------
Net income                                 $  5,068          $  2,838
                                           ========          ========  
Net income per common share:
    -  Basic                                  $ .29            $ .21
                                              =====            =====
    -  Diluted                                $ .27            $ .19
                                              =====            =====
Weighted   average  number  of  common
  shares  and  common  share   equivalents
  outstanding:
    -  Basic                                 17,523           13,547
                                           ========          ========  
    -  Diluted                               18,751           15,557
                                           ========          ========  
<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>

<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                              Three Months Ended
                                                 December 31,
                                              ------------------    
                                             1998              1997
                                           -------           -------
                                     (In thousands, except per share data)

<S>                                        <C>               <C>     
Net sales                                  $ 36,197          $ 29,325
Cost of sales                                23,795            19,406
                                           --------          -------- 
  Gross profit                               12,402             9,919
                                           --------          -------- 
Selling, general and administrative costs     5,762             5,759
Research and development costs                2,303             1,031
                                           --------          -------- 
                                              8,065             6,790
                                           --------          -------- 
  Operating income                            4,337             3,129
                                           --------          -------- 
Other expense (income)
  Interest expense                              268               527
  Other expense (income)                       (241)               (9)
                                           --------          -------- 
  Total other expense (income)                   27               518
                                           --------          -------- 
Income before income taxes                    4,310             2,611

Provision for income taxes                    1,500               925
                                           --------          -------- 
Net income                                 $  2,810          $  1,686
                                           ========          ========
Net income per common share:
    -  Basic                                  $ .16             $ .12
                                              =====             =====
    -  Diluted                                $ .15             $ .11
                                              =====             =====
Weighted   average  number  of  common
 shares  and  common  share   equivalents
 outstanding:
    -  Basic                                 17,599            14,347
                                           ========          ========  
    -  Diluted                               18,939            15,750
                                           ========          ========  
<FN>
                 See notes to consolidated financial statements
</FN>
</TABLE>

<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                    Six Months Ended
                                                       December 31,
                                                    ----------------

                                                    1998           1997
                                                  -------        -------
                                                      (In thousands)

<S>                                               <C>             <C>
Cash Flows From Operating Activities:
 Net income                                       $ 5,068         $ 2,838
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
   Depreciation and amortization                    3,046           2,511
   Amortization of deferred gain                     (294)           (338)
   Deferred income taxes                             (525)           (285)
   Other, net                                         139             124
 Change in operating  assets and  liabilities,
   net of effects from  purchase of
   business:
   Decrease (increase) in accounts receivable      (4,556)          3,624
   Decrease (increase) in inventories                 698          (7,265)
   Decrease (increase) in prepaid expenses
     and other assets                              (1,777)         (1,420)
   Increase (decrease) in accounts payable,
    accrued expenses and other long-term 
    liabilities                                    (4,594)          1,880
   Increase (decrease) in income taxes payable      1,559           1,091
                                                  -------         -------        
Net Cash Provided By (Used In)
 Operating Activities                              (1,236)          2,760
                                                  -------         -------     
Cash Flows From Investing Activities:
  Payment for purchase of business, net of cash
   acquired                                          (968)           -
  Purchase of equipment, inventory and
    technology rights from Lucent Technologies       -             (4,435)
  Capital expenditures                             (5,472)         (1,348)
  Proceeds from sale of equipment                     967              47
  Other, net                                          (20)           (142)
                                                  -------         -------   
Net Cash Provided By (Used In)
 Investing Activities                              (5,493)         (5,878)
                                                  -------         -------        
Cash Flows From Financing Activities:
  Borrowings under debt agreements                  4,187           6,232
  Debt repayments                                    (796)         (3,439)
  Proceeds from the exercise of stock options
    and warrants                                      675             400
  Purchase of treasury stock                         (343)           -
                                                  -------         -------        
Net Cash Provided By (Used In)
 Financing Activities                               3,723           3,193
                                                  -------         -------        
Net Increase (Decrease) In Cash
  And Cash Equivalents                             (3,006)             75
Cash And Cash Equivalents At Beginning Of Period   24,408             600
                                                  -------         -------        
Cash And Cash Equivalents At End Of Period        $21,402         $   675
                                                  =======         =======
<FN>
              See notes to consolidated financial statements
</FN>
</TABLE>

<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 1.  Basis of Presentation
     ---------------------
     The  consolidated  balance sheet of Aeroflex  Incorporated and Subsidiaries
     ("the  Company")  as of  December  31,  1998 and the  related  consolidated
     statements  of operations  for the six and three months ended  December 31,
     1998 and 1997 and the  consolidated  statements  of cash  flows for the six
     months ended  December 31, 1998 and 1997 have been  prepared by the Company
     and are unaudited.  In the opinion of management,  all  adjustments  (which
     include  normal  recurring  adjustments)  necessary  to present  fairly the
     financial  position,  results of operations  and cash flows at December 31,
     1998 and for all periods presented have been made. Certain  information and
     footnote  disclosures normally included in financial statements prepared in
     accordance with generally accepted accounting principles have been omitted.
     It is suggested  that these  consolidated  financial  statements be read in
     conjunction with the financial statements and notes thereto included in the
     Company's June 30, 1998 annual report to  shareholders.  There have been no
     changes of significant  accounting  policies  since June 30, 1998.  Certain
     reclassifications   have  been  made  to  previously   reported   financial
     statements to conform to current classifications.

     Results  of  operations  for  the  six  and  three  month  periods  are not
     necessarily  indicative  of results  of  operations  for the  corresponding
     years.

 2.  Common Stock Offering
     ---------------------
     In March 1998, the Company sold  2,597,000  shares of its Common Stock in a
     public  offering  for  $31,285,000,  net  of an  underwriting  discount  of
     $1,973,000  and  issuance  costs  of  $496,000.   Of  these  net  proceeds,
     $9,639,000  was used to repay  bank  indebtedness.  The  balance of the net
     proceeds, which is included in cash and cash equivalents, has been and will
     be used for general corporate purposes,  including working capital, capital
     expenditures, facilities expansion and potential acquisitions.

 3.  Earnings Per Share
     ------------------
     The Company adopted Statement of Financial  Accounting  Standards  ("SFAS")
     No. 128 "Earnings Per Share" during the quarter ended December 31, 1997. In
     accordance  with SFAS No. 128,  earnings per common share  ("Basic EPS") is
     computed by  dividing  net income by the  weighted  average  common  shares
     outstanding.  Earnings per common share,  assuming dilution ("Diluted EPS")
     is computed by dividing  net income plus a pro forma  addback of  debenture
     interest by the weighted  average common shares  outstanding plus potential
     dilution  from the  conversion  of  debentures  and the  exercise  of stock
     options and  warrants.  Earnings per share  amounts for prior  periods have
     been restated to conform to SFAS No. 128.


<PAGE>
     A  reconciliation  of the numerators and  denominators of the Basic EPS and
     Diluted EPS calculations is as follows:
<TABLE>
<CAPTION>
                                                                   Six Months
                                                                Ended December 31,
                                                                ------------------
                                                                  1998        1997
                                                                  ----        ----    
                                                     (In thousands, except per share data)
     <S>                                                         <C>       <C>
     Computation of Adjusted Net Income:
     Net income for basic earnings per common share              $  5,068  $  2,838
     Add:  Debenture interest and amortization
       expense, net of income taxes                                  -          103
                                                                 --------  --------
     Adjusted net income for diluted
       earnings per common share                                 $  5,068  $  2,941
                                                                 ========  ========
     Computation of Adjusted Weighted Average
       Shares Outstanding:
     Weighted average shares outstanding                           17,523    13,547
     Add:  Shares assumed to be issued upon
       conversion of debentures                                      -          783
     Add:  Effect of dilutive options and warrants
       outstanding                                                  1,228     1,227
                                                                 --------  --------
     Weighted average shares and common share
       equivalents used for computation of
       diluted earnings per common share                           18,751    15,557
                                                                 ========  ========
     Net Income Per Common Share:
       Basic                                                        $ .29     $ .21
                                                                    =====     =====  
       Diluted                                                      $ .27     $ .19
                                                                    =====     =====  
</TABLE>
<TABLE>
<CAPTION>
                                                                   Three Months
                                                                Ended December 31,
                                                                ------------------ 
                                                                  1998       1997
                                                                  ----       ----
                                                       (In thousands, except per share data)
      <S>                                                        <C>       <C>
     Net income for basic and diluted earnings per
       common share                                              $  2,810  $  1,686
                                                                 ========  ========  
     Computation of Adjusted Weighted Average
       Shares Outstanding:
     Weighted average shares outstanding                           17,599    14,347
     Add:  Shares assumed to be issued upon
       conversion of debentures                                      -           15
     Add:  Effect of dilutive options and warrants
       outstanding                                                  1,340     1,388
                                                                 --------  --------
     Weighted average shares and common share
       equivalents used for computation of
       diluted earnings per common share                           18,939    15,750
                                                                 ========  ========  
     Net Income Per Common Share:
       Basic                                                        $ .16     $ .12
                                                                    =====     =====  
       Diluted                                                      $ .15     $ .11
                                                                    =====     =====  
</TABLE>
<PAGE>
 4.  Acquisition of Business
     -----------------------
     Effective  September  1, 1998,  the  Company  acquired  90% of the stock of
     Europtest,  S.A.  (France)  for  approximately  $1,100,000.   The  purchase
     agreement  also  requires  that the Company  purchase the  remaining 10% of
     Europtest pro rata over a three-year period at prices determined based upon
     net sales of Europtest  products.  Europtest develops and sells specialized
     software-driven  test equipment  used primarily in cellular,  satellite and
     other  communications  applications.  The acquired company's net sales were
     approximately  $1,900,000 for the year ended March 31, 1998. On a pro forma
     basis, had the Europtest acquisition taken place as of the beginning of the
     periods  presented,  results of operations for those periods would not have
     been  materially  affected.  The purchase  price has been  allocated to the
     assets acquired and liabilities assumed based on their fair values.

5.   Bank Loan Agreements
     --------------------
     As of March 31,  1998,  the Company  replaced a previous  agreement  with a
     revised  revolving  credit  agreement  with two banks  which is  secured by
     substantially  all of the Company's  assets.  The agreement  provides for a
     revolving credit line of $27,000,000,  which expires on March 31, 2001. The
     interest  rate on  borrowings  under this  agreement  is at  various  rates
     depending   upon   certain   financial   ratios,   with  the  present  rate
     substantially  equivalent  to the prime rate (7.75% at December 31,  1998).
     The Company  entered into an interest  rate swap  agreement for the initial
     $4,720,000  outstanding under the revolving credit line at 7.6% in order to
     reduce the interest rate risk associated with these outstanding borrowings.
     The  Company  paid a  facility  fee of  $20,000  and is  required  to pay a
     commitment  fee of 1/4% per  annum of the  average  unused  portion  of the
     credit line.

     The  terms of the  agreement  require  compliance  with  certain  covenants
     including  minimum  consolidated  tangible  net worth and pretax  earnings,
     maintenance   of  certain   financial   ratios,   limitations   on  capital
     expenditures  and  indebtedness  and  prohibition  of the  payment  of cash
     dividends.  In connection with the purchase of certain materials for use in
     manufacturing,  the Company has a letter of credit  facility of $2,000,000.
     At December 31, 1998,  the  Company's  available  unused line of credit was
     approximately $20,000,000 after consideration of the letter of credit.

     On December 29, 1998, the Company  financed the  acquisition and renovation
     of the land and  building  of its Pearl  River,  NY facility  and  received
     proceeds amounting to $4,165,000. These borrowings are payable in quarterly
     installments of approximately $50,000 through 2019.
<PAGE>
 6.  Inventories
     -----------
     Inventories consist of the following:
<TABLE>
<CAPTION>
                                     December 31,         June 30,
                                        1998                1998
                                     ------------        ---------     
                                             (In thousands)
                    <S>               <C>                <C>     
                    Raw Materials     $ 14,850           $ 12,012
                    Work in Process     10,815             12,737
                    Finished Goods       3,694              5,102
                                      --------           --------
                                      $ 29,359           $ 29,851
                                      ========           ========
</TABLE>
 7.  Income Taxes
     ------------
     The Company is undergoing  routine audits by various taxing  authorities of
     several of its state and local  income tax returns  covering  periods  from
     1994 to 1996.  Management  believes  that  the  probable  outcome  of these
     various  audits should not  materially  affect the  consolidated  financial
     statements of the Company.

 8.  Contingencies
     -------------
     A subsidiary of the Company whose operations were  discontinued in 1991, is
     one of several  defendants  named in a personal injury action  initiated in
     August, 1994, by a group of plaintiffs.  The plaintiffs are seeking damages
     which cumulatively exceed $500 million. The complaint alleges,  among other
     things,  that the plaintiffs  suffered injuries from exposure to substances
     contained in products sold by the subsidiary to one of its customers.  This
     action is in the discovery  stage.  Based upon  available  information  and
     considering  its various  defenses,  together  with its  product  liability
     insurance,  in the opinion of management of the Company, the outcome of the
     action against its subsidiary will not have a materially  adverse effect on
     the Company's consolidated financial statements.

 9.  Conversion of 7-1/2% Debentures
     -------------------------------
     On September 8, 1997,  the Company  called for the redemption of all of its
     outstanding 7-1/2% Senior Subordinated  Convertible Debentures ($9,981,000)
     at  104-1/2%  of the  principal  amount.  As of  October  1997,  all of the
     principal amount  outstanding was converted into Common Stock at $5-5/8 per
     share.  In  connection  with the  conversions,  $599,000 of  deferred  bond
     issuance costs were charged to additional paid-in capital.


<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview

   Aeroflex,  founded in 1937,  utilizes its advanced  design,  engineering  and
manufacturing  capabilities to provide state-of-the-art  microelectronic module,
interconnect  and  testing  solutions  used in  communication  applications  for
commercial  and defense  markets.  Its products are used in satellite,  personal
wireless,  cable television ("CATV") and defense communications markets. It also
designs  and  manufactures  motion  control  systems  and  shock  and  vibration
isolation systems used for commercial,  industrial and defense applications. The
Company's  operations are grouped into three segments:  Microelectronics;  Test,
Measurement  and  Other  Electronics;   and  Isolator  Products.  The  Company's
consolidated  financial  statements  include the  accounts  of Aeroflex  and its
subsidiaries, all of which are wholly-owned,  except for Europtest, as discussed
below.

   Effective  September  1,  1998,  the  Company  acquired  90% of the  stock of
Europtest,  S.A. (France) for approximately  $1,100,000.  The purchase agreement
also requires that the Company  purchase the remaining 10% of Europtest pro rata
over a three-year period at prices  determined based upon net sales of Europtest
products.   Europtest  develops  and  sells  specialized   software-driven  test
equipment  used  primarily  in  cellular,  satellite  and  other  communications
applications. The acquired company's net sales were approximately $1,900,000 for
the year ended March 31, 1998.

     Approximately  42% and 50% of the Company's sales for fiscal years 1998 and
1997, respectively, were to agencies of the United States Government or to prime
defense  contractors  or  subcontractors  of the United States  Government.  The
Company's overall dependence on the defense market has been declining  following
its 1996  acquisition  of MIC  Technology  and the  resulting  expansion  of its
microelectronics business which is more commercially oriented, and a focusing of
resources towards developing standard products for the commercial market.

   Management  believes that potential  reductions in defense  spending will not
materially  affect its  operations.  In certain  product areas,  the Company has
suffered  reductions in sales volume due to cutbacks in the military budget.  In
other product areas, the Company has experienced increased sales volume due to a
realignment of government spending towards upgrading existing systems instead of
purchasing  completely  new  systems.  The overall  effect of the  cutbacks  and
realignment has not been material to the Company.

   In June 1997,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting Standards ("SFAS") No. 131, "Disclosure About
Segments of an  Enterprise  and Related  Information",  which is  effective  for
fiscal years  beginning  after  December 15, 1997.  This  statement  establishes
standards  for  reporting  information  about  operating  segments  and  related
disclosures  about products and services,  geographic areas and major customers.
The Company adopted this standard effective July 1, 1998, as required,  and does
not  believe  the  adoption  will  result in a  material  change to its  segment
disclosures in its fiscal 1999 annual financial statements.

   In June 1998,  the FASB  issued  SFAS No.  133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities,"  which is  effective  for  fiscal  years
beginning  after June 15,  1999.  This  statement  requires  companies to record
derivatives  on the balance sheet as assets or  liabilities at their fair value.
In  certain  circumstances  changes  in the  value  of such  derivatives  may be
required to be recorded as gains or losses.  Management believes that the impact
of this statement will not have a material effect on the Company's  consolidated
financial statements.


<PAGE>
Market Risk

   The  Company is exposed to market risk  related to changes in interest  rates
and, to an immaterial  extent,  to foreign currency  exchange rates. Some of the
Company's  debt is at fixed  rates of  interest  or at a  variable  rate with an
interest rate swap  agreement to  effectively  make it a fixed rate of interest.
That debt which is subject to a floating  rate of interest  and is not hedged by
an interest  rate swap  amounts to  approximately  $9.4  million at December 31,
1998.  The Company  intends to enter into an interest rate swap  agreement  with
respect to $4.2  million of this amount  before the end of fiscal year 1999.  If
market  interest  rates increase by 10 percent from levels at December 31, 1998,
the effect on the Company's results of operations would not be material.

Year 2000 Compliance

   Management  has initiated a  company-wide  program and has developed a formal
plan of  implementation  to prepare the Company for the Year 2000. This includes
taking  actions  designed to ensure that the  Company's  information  technology
("IT") systems, products and infrastructure are Year 2000 compliant and that its
customers,  suppliers  and service  providers  have taken  similar  action.  The
Company is in the  process of  evaluating  its  internal  issues - all of its IT
systems,  products,  equipment and other facilities  systems and modifying items
that are not  compliant.  With  respect  to its  external  issues  -  customers,
suppliers  and  service  providers  - the Company is  surveying  them  primarily
through written correspondence.

     The Company  expects to incur internal  staff costs,  as well as consulting
and other expenses, and believes the total costs to be incurred for all internal
Year 2000  compliance  related  projects will not have a material  impact on the
Company's  business,  results of operations or financial  condition.  Management
expects to complete its  investigation,  remediation  and  contingency  planning
activities for all mission  critical systems and areas by the middle of calendar
1999, although there can be no assurance that it will. At this time,  Management
believes that the Company does not have any internal  mission critical Year 2000
issues that it cannot remedy. With respect to mission critical third parties, in
some  instances the Company has protection  under  contracts and the Company has
begun to create  contingency  plans to attempt to mitigate  its  exposure in the
event such third  parties  are not Year 2000  compliant.  Despite its efforts to
survey its  customers,  suppliers and service  providers,  Management  cannot be
certain as to the  actual  Year 2000  readiness  of these  third  parties or the
impact that any non-compliance on their part may have on the Company's business,
results of operations or financial condition, which impact may be material.

Results of Operations

Six Months  Ended  December 31, 1998  Compared to Six Months Ended  December 31,
1997

   Net Sales.  Net sales  increased  27.5% to $67.8  million  for the six months
ended December 31, 1998 from $53.2 million for the six months ended December 31,
1997. Net sales in the Microelectronics segment increased 28.1% to $42.3 million
for the six months ended December 31, 1998 from $33.1 million for the six months
ended  December  31,  1997 due to  increased  sales  volume  in both  thin  film
interconnects and microelectronic  modules.  Net sales in the Test,  Measurement
and Other  Electronics  segment  increased  48.7% to $16.8  million  for the six
months  ended  December  31, 1998 from $11.3  million  for the six months  ended
December  31, 1997  primarily  due to increased  sales volume in both  frequency
synthesizers  (including  shipments on the new Navy CASS program) and high speed
automatic test systems  (primarily  satellite  payload test equipment for Hughes
Space  and  Communications)   offset  in  part  by  decreased  sales  volume  in
stabilization and tracking  devices.  Net sales in the Isolator Products segment
decreased  1.9% to $8.7 million for the six months ended  December 31, 1998 from
$8.8 million for the six months ended December 31, 1997.

   Gross Profit.  Cost of sales  includes  materials,  direct labor and overhead
expenses such as engineering labor, fringe benefits,  allocable occupancy costs,
depreciation and manufacturing  supplies.  Gross profit increased 29.8% to $23.5
million for the six months ended  December  31, 1998 from $18.1  million for the
six months ended December 31, 1997.  Gross margin increased to 34.7% for the six
months ended  December 31, 1998 from 34.1% for the six months ended December 31,
1997.  The  increase  was  primarily  a  result  of  increased  margins  in  the
Microelectronics  segment  reflecting the greater  efficiencies of higher volume
and a favorable sales mix in that segment.

 
<PAGE>
   Selling,   General   and   Administrative   Costs.   Selling,   general   and
administrative  costs include office and management  salaries,  fringe benefits,
commissions and advertising costs.  Selling,  general and  administrative  costs
increased  9.9% to $11.4  million  (16.8% of net sales) for the six months ended
December  31,  1998 from $10.4  million  (19.5% of net sales) for the six months
ended  December  31,  1997.  The increase  was  primarily  due to labor  related
expenses, including salaries for additional hires.

   Research and Development  Costs.  Research and  development  costs consist of
material,  engineering labor and allocated overhead.  Company sponsored research
and development  costs increased  111.6% to $4.3 million (6.3% of net sales) for
the six months ended December 31, 1998 from $2.0 million (3.8% of net sales) for
the six months ended December 31, 1997. The increase was primarily  attributable
to the costs for  development of a new low-cost,  high speed,  high  performance
frequency synthesizer intended for commercial communication test systems.

   Other Expense  (Income).  Interest expense  decreased to $567,000 for the six
months  ended  December  31,  1998 from $1.3  million  for the six months  ended
December 31, 1997,  primarily due to reduced levels of borrowings.  Other income
of $544,000 for the six months ended  December 31, 1998  consisted  primarily of
interest income. Other expense was $74,000 for the six months ended December 31,
1997  comprised  primarily  of $102,000  of  debenture  redemption  costs net of
$26,000 of interest income. Interest income increased due to increased levels of
cash  equivalents.  The reduced levels of borrowings and the increased levels of
cash  equivalents  resulted  from the net  proceeds of $31.3  million from stock
issued in a public offering completed in March 1998.

   Provision for Income Taxes.  Income taxes  recorded by the Company  increased
74.6% to $2.8 million (an effective income tax rate of 35.2%) for the six months
ended  December  31,  1998 from $1.6  million (an  effective  income tax rate of
35.7%) for the six months ended December 31, 1997. The income tax provisions for
the two periods  differed from the amount computed by applying the U.S.  Federal
income tax rate to income before  income taxes  primarily due to state and local
income taxes and research and development credits.

Three Months Ended December 31, 1998 Compared to Three Months Ended December 31,
1997

   Net Sales.  Net sales  increased  23.4% to $36.2 million for the three months
ended  December 31, 1998 from $29.3 million for the three months ended  December
31, 1997. Net sales in the  Microelectronics  segment  increased  12.1% to $20.8
million for the three months ended  December 31, 1998 from $18.6 million for the
three months ended December 31, 1997 due to increased  sales volume in both thin
film  interconnects  and  microelectronic   modules.  Net  sales  in  the  Test,
Measurement and Other  Electronics  segment increased 73.8% to $11.1 million for
the three months ended  December 31, 1998 from $6.4 million for the three months
ended  December  31, 1997  primarily  as a result of  increased  sales volume of
frequency  synthesizers  (including  shipments on the new Navy CASS program) and
high speed automatic test systems  (primarily  satellite  payload test equipment
for Hughes Space and Communications). Net sales in the Isolator Products segment
were $4.3 million for the three months ended December 31, 1998 and 1997.

   Gross  Profit.  Gross profit  increased  25.0% to $12.4 million for the three
months  ended  December  31, 1998 from $9.9  million for the three  months ended
December  31, 1997.  Gross margin  increased to 34.3% for the three months ended
December 31, 1998 from 33.8% for the three months ended  December 31, 1997.  The
increase  was  primarily a result of increased  margins in the  Microelectronics
segment reflecting the greater efficiencies of higher volume.

   Selling,   General   and   Administrative   Costs.   Selling,   general   and
administrative  costs were $5.8 million for the three months ended  December 31,
1998 and 1997. Selling, general and administrative expenses represented 15.9% of
net sales for the three  months  ended  December 31, 1998 and 19.6% of net sales
for the three months ended December 31, 1997.

   Research and Development  Costs.  Company sponsored  research and development
costs increased  123.4% to $2.3 million (6.4% of net sales) for the three months
ended  December  31,  1998 from $1.0  million  (3.5% of net sales) for the three
months ended December 31, 1997. The increase was primarily  attributable  to the
development  of  a  new  low-cost,   high  speed,  high  performance   frequency
synthesizer intended for commercial communication test systems.

 
<PAGE>
   Other Expense (Income).  Interest expense decreased to $268,000 for the three
months ended December 31, 1998 from $527,000 for the three months ended December
31, 1997,  primarily due to reduced levels of borrowings.  Other income, net was
$241,000 for the three months ended December 31, 1998 including  interest income
of $248,000.  Other  income was $9,000 for the three  months ended  December 31,
1997. Interest income increased due to increased levels of cash equivalents. The
reduced  levels of  borrowings  and the  increased  levels  of cash  equivalents
resulted  from the net  proceeds of $31.3  million from stock issued in a public
offering completed in March 1998.

   Provision for Income Taxes.  Income taxes  recorded by the Company  increased
62.2% to $1.5  million  (an  effective  income  tax rate of 34.8%) for the three
months ended  December 31, 1998 from $925,000 (an  effective  income tax rate of
35.4%) for the three months ended  December 31, 1997.  The income tax provisions
for the two  quarters  differed  from the amount  computed by applying  the U.S.
Federal income tax rate to income before income taxes primarily due to state and
local income taxes and research and development credits.

Liquidity and Capital Resources

     On December 29, 1998, the Company  financed the  acquisition and renovation
of the land and building of its Pearl River,  NY facility and received  proceeds
amounting to $4,165,000.  These borrowings are payable in quarterly installments
of approximately $50,000 through 2019.

     In March 1998, the Company sold  2,597,000  shares of its Common Stock in a
public offering for $31,285,000,  net of an underwriting  discount of $1,973,000
and issuance  costs of $496,000.  Of these net proceeds,  $9,639,000 was used to
repay bank indebtedness.  The balance of the net proceeds,  which is included in
cash and cash  equivalents,  has  been  and will be used for  general  corporate
purposes, including working capital, capital expenditures,  facilities expansion
and potential acquisitions. As of December 31, 1998, the Company had $60,076,000
in working capital.

   As of March 31,  1998,  the  Company  replaced  a previous  agreement  with a
revised   revolving  credit  agreement  with  two  banks  which  is  secured  by
substantially  all  of  the  Company's  assets.  The  agreement  provides  for a
revolving  credit line of  $27,000,000,  which  expires on March 31,  2001.  The
interest rate on borrowings  under this agreement is at various rates  depending
upon certain financial ratios, with the present rate substantially equivalent to
the prime rate  (7.75% at  December  31,  1998).  The  Company  entered  into an
interest rate swap agreement for the initial  $4,720,000  outstanding  under the
revolving  credit  line at 7.6% in  order  to  reduce  the  interest  rate  risk
associated with these outstanding borrowings. The Company paid a facility fee of
$20,000 and is required to pay a commitment fee of 1/4% per annum of the average
unused portion of the credit line.

   The  terms  of  the  agreement  require  compliance  with  certain  covenants
including  minimum   consolidated   tangible  net  worth  and  pretax  earnings,
maintenance of certain financial ratios, limitations on capital expenditures and
indebtedness  and  prohibition of the payment of cash  dividends.  In connection
with the purchase of certain materials for use in manufacturing, the Company has
a letter of credit  facility of $2,000,000.  At December 31, 1998, the Company's
available   unused   line  of  credit  was   approximately   $20,000,000   after
consideration of the letter of credit.

   During June 1994,  the Company  completed a sale of $10.0  million  principal
amount of 7-1/2% Senior Subordinated Convertible Debentures  ("Debentures").  On
September 8, 1997,  the Company  called for  redemption  all of its  outstanding
Debentures at 104-1/2% of the principal amount.  The Debentures were convertible
into the Company's  Common Stock at a price of $5-5/8 per share through  October
6,  1997.  As of October  1997,  all of the  principal  amount  outstanding  was
converted into Common Stock.

   The  Company's  order backlog at December 31, 1998 and 1997 was $83.3 million
and $66.1 million, respectively.



<PAGE>
   The Company's net cash used in operating  activities was $1.2 million for the
six months  ended  December  31,  1998 which was due to  reductions  in accounts
payable and accrued liabilities and increases in accounts  receivables which was
offset, in part, by the continued profitability of the Company. Net cash used in
investing  activities  was $5.5  million for the six months  ended  December 31,
1998,  consisting primarily of $5.5 million for capital expenditures  (including
$2.5 million for the acquisition of a previously  leased  operating  facility in
Pearl River, NY) and $1.0 million used to purchase Europtest offset, in part, by
the proceeds from the sale of equipment of $1.0 million  under a  sale-leaseback
arrangement.  Net cash provided by financing activities was $3.7 million for the
six months ended December 31, 1998, consisting primarily of the financing of the
Pearl River,  NY facility  for $4.2  million and proceeds  from stock option and
warrant exercises offset, in part, by debt payments and the purchase of treasury
stock.

   Management  of the  Company  believes  that  internally  generated  funds and
available   lines  of  credit  will  be  sufficient  for  its  working   capital
requirements,  capital  expenditure  needs and the  servicing of its debt for at
least the next twelve months.

   On February 3, 1999,  the  Company  announced  that it had agreed with United
Technologies  Corporation's  Hamilton Standard division to revise and extend its
Letter of Intent of November 17, 1998 under which the parties are  negotiating a
definitive   agreement  for  the  Company  to  acquire  the  integrated  circuit
operations of UTMC  Microelectronic  Systems,  Inc.  ("UTMC").  The transaction,
which is now expected to close by early March, 1999, remains subject to standard
conditions,  including that Aeroflex  satisfactorily  complete its due diligence
investigation,  obtain  financing for a portion of the purchase price and obtain
certain  required  approvals.  UTMC is a leader in supplying  radiation-hardened
integrated  circuits for satellite  communications.  UTMC's  Commercial  RadHard
products,  services and foundry  partners are expected to  complement  Aeroflex'
line of microelectronic  module and interconnect products for the communications
marketplace.

Forward-Looking Statements

   All  statements  other than  statements of  historical  fact included in this
Report on Form 10-Q, including without limitation statements under "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
regarding  the Company's  financial  position,  business  strategy and plans and
objectives   of   management   of  the  Company  for  future   operations,   are
forward-looking statements. When used in this Report on Form 10-Q, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they  relate  to the  Company  or its  management,  identify  forward-looking
statements.  Such  forward-looking  statements  are based on the  beliefs of the
Company's  management,  as well as assumptions made by and information currently
available to the Company's  management.  Actual results could differ  materially
from  those  contemplated  by the  forward-looking  statements,  as a result  of
certain  factors,  including but not limited to competitive  factors and pricing
pressures, changes in legal and regulatory requirements, technological change or
difficulties,  product development risks,  commercialization  difficulties,  the
ability of the Company to integrate the production  facilities of UTMC,  whether
the  acquisition  will  be  consummated  as  anticipated  and  general  economic
conditions.  Such  statements  reflect  the current  views of the  Company  with
respect to future events and are subject to these and other risks, uncertainties
and  assumptions  relating  to the  operations,  results of  operations,  growth
strategy and liquidity of the Company.


<PAGE>
     AEROFLEX INCORPORATED AND SUBSIDIARIES PART II - OTHER INFORMATION


Item 1. Legal Proceedings

      None

Item 2. Changes in Securities

      None

Item 3. Defaults upon Senior Securities

      None

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

          A. The Registrant  held its Annual Meeting of Stockholders on November
     17, 1998.

          B. Four  directors  were elected at the Annual  Meeting to serve until
     the Annual Meeting of Stockholders in 2001. The name of these Directors and
     votes cast in favor of their election and shares withheld are as follows:
<TABLE>
<CAPTION>
           Name                         Votes For       Votes Withheld
           ----                         ---------       --------------
           <S>                          <C>                <C>
           Paul Abecassis               15,655,421         269,656  
           Leonard Borow                15,655,421         269,656   
           Milton Brenner               15,655,421         269,656   
           Eugene Novikoff              15,654,421         270,656 
</TABLE>

       In addition to the election of directors,  the  stockholders  approved to
       amend article FOURTH of the Certificate of  Incorporation to increase the
       number of authorized shares of the Company from 26,000,000 to 41,000,000.

Item 5.    Other Information

       None

Item 6.    Exhibits and Reports on Form 8-K

      (a)  Exhibits

           Exhibit 27 - Financial Data Schedule

      (b)  Reports on Form 8-K

           None


<PAGE>
                                   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.



                                        AEROFLEX INCORPORATED
                                             (REGISTRANT)




February 9, 1999                 By:    /s/ Michael Gorin
                                     --------------------------------   
                                            Michael Gorin
                                   President, Chief Financial Officer
                                     and Principal Accounting Officer