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 March 31, 2000
Commission File Number 000-02324



                              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.

May 9, 2000       18,906,755 shares (excluding 34,005 shares held in treasury)
--------------------------------------------------------------------------------
 (Date)                                  (Number of Shares)

NOTE:  THIS IS PAGE 1 OF A DOCUMENT CONSISTING OF 20 PAGES.

<PAGE>

                              AEROFLEX INCORPORATED

                                AND SUBSIDIARIES


                                      INDEX

                                                                       PAGE
                                                                       ----

PART I:  FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEETS
 March 31, 2000 and June 30, 1999                                       3-4

CONSOLIDATED STATEMENTS OF EARNINGS
 Nine Months Ended March 31, 2000 and 1999                                5

CONSOLIDATED STATEMENTS OF EARNINGS
 Three Months Ended March 31, 2000 and 1999                               6

CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended March 31, 2000 and 1999                                7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                             8-12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS
    Nine and Three Months Ended March 31, 2000 and 1999               13-18

PART II:  OTHER INFORMATION

ITEM 5 Other Information                                                19

ITEM 6 Exhibits and Reports on Form 8-K                                 19

SIGNATURES                                                              20

                                       -2-


<PAGE>


                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                     March 31,         June 30,
                                                       2000              1999
                                                     ---------         --------
                                                             (In thousands)

<S>                                                  <C>               <C>
ASSETS
------
Current assets:
 Cash and cash equivalents                           $  6,285          $  2,714
 Accounts receivable, less allowance for
   doubtful accounts of $413,000 and $381,000          39,705            39,967
 Inventories, net                                      37,982            32,637
 Deferred income taxes                                  4,890             5,291
 Prepaid expenses and other current assets              3,431             2,314
                                                     --------          --------
   Total current assets                                92,293            82,923

Property, plant and equipment, at cost, net            49,474            50,802
Intangible assets acquired in connection with
  the purchase of businesses, net                      12,640            13,777
Cost in excess of fair value of net assets
  of businesses acquired, net                          13,540            14,019

Other assets                                            4,018             3,695
                                                     --------          --------
   Total assets                                      $171,965          $165,216
                                                     ========          ========

</TABLE>

              See notes to consolidated financial statements.

                                       -3-


<PAGE>

                              AEROFLEX INCORPORATED

                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                   (continued)

<TABLE>
<CAPTION>
                                                   March 31,         June 30,
                                                     2000              1999
                                                   ---------         ---------
                                                         (In thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S>                                                 <C>               <C>
Current liabilities:
  Current portion of long-term debt                 $  6,450          $6,509
  Accounts payable                                     9,045           8,070
  Accrued expenses and other current liabilities      15,216          16,923
  Income taxes payable                                   147           1,055
                                                    --------        --------
    Total current liabilities                         30,858          32,557

Long-term debt                                        18,989          24,608
Deferred income taxes                                  3,059           3,582
Other long-term liabilities                            2,455           2,376
                                                    --------        --------
    Total liabilities                                 55,361          63,123
                                                    --------        --------

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 40,000; none issued                       -               -
 Common Stock, par value $.10 per share;
  authorized 40,000,000 shares; issued
  18,895,000 and 18,429,000 shares                     1,890           1,843
 Additional paid-in capital                          113,158         105,720
 Retained earnings (accumulated deficit)               1,882          (5,421)
                                                    --------        --------
                                                     116,930         102,142

 Less:  Treasury stock, at cost (41,000 and
  6,000 shares)                                          326              49
                                                    --------        --------

    Total stockholders' equity                       116,604         102,093
                                                    --------        --------
    Total liabilities and stockholders' equity      $171,965        $165,216
                                                    ========        ========
</TABLE>

               See notes to consolidated financial statements.

                                       -4-


<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>

                                                    Nine Months Ended
                                                        March 31,
                                                   -------------------
                                                   2000           1999
                                                   ----           ----
                                          (In thousands, except per share data)
<S>                                             <C>             <C>
Net sales                                       $129,878        $108,430
Cost of sales                                     84,459          69,504
                                               ---------        --------
  Gross profit                                    45,419          38,926
                                               ---------        --------
Selling, general and administrative costs         24,456          18,306
Research and development costs                     7,930           6,874
Acquired in-process research and development
  (Note 2)                                          -              3,500
                                               ---------        --------
                                                  32,386          28,680
                                               ---------        --------
  Operating income                                13,033          10,246
                                               ---------        --------
Other expense (income)
  Interest expense                                1,846            1,024
  Other expense (income)                            (16)            (734)
                                               --------         --------
    Total other expense (income)                  1,830              290
                                               --------         --------
Income before income taxes                       11,203            9,956

Provision for income taxes                        3,900            4,700
                                               --------         --------
Net income                                     $  7,303         $  5,256
                                               ========         ========
Net income per common share:

    -  Basic                                      $ .39            $ .30
                                                  =====            =====
    -  Diluted                                    $ .37            $ .28
                                                  =====            =====

Weighted average number of common
   shares outstanding:

    -  Basic                                     18,546           17,628
                                                =======          =======
    -  Diluted                                   19,788           18,973
                                                =======          =======


              See notes to consolidated financial statements.
</TABLE>

                                       -5-


<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS


<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                       March 31,
                                                  -------------------
                                                  2000         1999
                                                  ----         ----
                                         (In thousands, except per share data)

<S>                                            <C>           <C>
Net sales                                      $ 46,275      $ 40,604
Cost of sales                                    29,554        25,205
                                               --------      --------
  Gross profit                                   16,721        15,399
                                               --------      --------

Selling, general and administrative costs         8,751         6,914
Research and development costs                    2,992         2,580
Acquired in-process research and development
  (Note 2)                                         -            3,500
                                               --------      --------
                                                 11,743        12,994
                                               --------      --------
  Operating income                                4,978         2,405
                                               --------      --------
Other expense (income)
  Interest expense                                  597           457
  Other expense (income)                           (251)         (190)
                                               --------      --------
  Total other expense (income)                      346           267
                                               --------      --------
Income before income taxes                        4,632         2,138

Provision for income taxes                        1,600         1,950
                                               --------      --------
Net income                                     $  3,032      $    188
                                               ========      ========
Net income per common share:

    -  Basic                                      $ .16         $ .01
                                               ========      ========
    -  Diluted                                    $ .15         $ .01
                                               ========      ========
Weighted average number of common shares
  outstanding:

    -  Basic                                     18,580        17,839
                                               ========      ========
    -  Diluted                                   20,481        19,416
                                               ========      ========

              See notes to consolidated financial statements.
</TABLE>

                                       -6-


<PAGE>


                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         Nine Months Ended
                                                             March 31,
                                                        -------------------
                                                        2000           1999
                                                        ----           ----
                                                          (In thousands)

<S>                                                  <C>             <C>
Cash Flows From Operating Activities:
 Net income                                            $  7,303       $  5,256
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
   Acquired in-process research and development             -            3,500
   Depreciation and amortization                          6,828          4,853
   Amortization of deferred gain                           (441)          (441)
   Deferred income taxes                                   (122)          (531)
   Other, net                                               288             55
 Change in operating  assets and  liabilities,
   net of effects from  purchase of
   business:
   Decrease (increase) in accounts receivable               209         (8,946)
   Decrease (increase) in inventories                    (5,345)         2,386
   Decrease (increase) in prepaid expenses
    and other assets                                     (1,463)        (2,225)
   Increase (decrease) in accounts payable, accrued
    expenses and other long-term liabilities               (271)         1,693
   Increase (decrease) in income taxes payable            3,212          3,129
                                                       --------       --------

Net Cash Provided By

 Operating Activities                                    10,198          8,729
                                                       --------       --------

Cash Flows From Investing Activities:
  Payment for purchase of businesses, net
    of cash acquired                                        -          (43,475)
  Capital expenditures                                   (5,424)        (6,902)
  Proceeds from sale of equipment                         1,690            967
  Other, net                                                (39)           (10)
                                                       --------       --------
Net Cash Used In

 Investing Activities                                    (3,773)       (49,420)
                                                       --------       --------
Cash Flows From Financing Activities:
  Debt repayments                                        (5,678)        (3,910)
  Borrowings under debt agreements                          -           24,188
  Bank debt financing costs                                 -             (438)
  Proceeds from the exercise of stock options
    and warrants                                          4,816          1,341
  Amounts paid for withholding taxes on stock
    option exercises                                     (2,434)        (2,381)
  Withholding taxes collected for stock option
    exercises                                             2,432          1,341
  Purchase of treasury stock                             (1,990)          (343)
                                                       --------       --------

Net Cash Provided By (Used In)
 Financing Activities                                    (2,854)        19,798
                                                       --------       --------
Net Increase (Decrease) In Cash
  And Cash Equivalents                                    3,571        (20,893)
Cash And Cash Equivalents At Beginning Of Period          2,714         24,408
                                                       --------       --------
Cash And Cash Equivalents At End Of Period             $  6,285       $  3,515
                                                       ========       ========
              See notes to consolidated financial statements.

</TABLE>

                                       -7-
<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  March  31,  2000  and  the  related  consolidated
     statements  of earnings  for the nine and three months ended March 31, 2000
     and 1999 and the consolidated  statements of cash flows for the nine months
     ended  March 31,  2000 and 1999 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 March 31, 2000 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, 1999 annual report to  shareholders.  There have been no
     changes of significant  accounting  policies  since June 30, 1999.  Certain
     reclassifications   have  been  made  to  previously   reported   financial
     statements to conform to current classifications.

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

 2.  Acquisition of Businesses
     -------------------------
     UTMC
     ----
     Effective  February 25, 1999, the Company  acquired all of the  outstanding
     stock of UTMC Microelectronic  Systems,  Inc. ("UTMC") for $42.5 million of
     cash.  The purchase price was paid with available cash of $22.5 million and
     borrowings  under the Company's bank loan agreement of $20.0 million.  UTMC
     designs, develops and manufactures  radiation-tolerant  integrated circuits
     primarily for satellite  communications.  The acquired  company's net sales
     were approximately $33.4 million for the year ended December 31, 1998.

     The  Company had  commissioned  an  independent  asset  valuation  study of
     acquired  tangible and identifiable  intangible  assets to serve as a basis
     for  allocation  of the purchase  price.  Based on this study,  the Company
     allocated the purchase price,  including acquisition costs of approximately
     $500,000, as follows:

<TABLE>
<CAPTION>
                                                                (In thousands)
               <S>                                                  <C>
               Net tangible assets                                  $28,771
               Identifiable intangible assets                         6,300
               Excess costs over fair value of net assets             4,429
               In-process research and development                    3,500
                                                                    -------
                                                                    $43,000
                                                                    =======
</TABLE>

     The identifiable  intangible assets include existing  technology,  customer
     relationships  and assembled work force. The  identifiable  intangibles and
     costs in excess  of fair  value of net  assets  are  being  amortized  on a
     straight-line  basis over 6 to 15 years based on the study described above.
     The acquired in- process  research and  development  was not  considered to
     have reached  technological  feasibility  and, in accordance with generally
     accepted accounting principles, the value of such was expensed in the third
     quarter of fiscal 1999.

                                       -8-


<PAGE>

     Summarized  below are the  unaudited pro forma results of operations of the
     Company as if UTMC had been acquired at the beginning of the fiscal periods
     presented.

<TABLE>
<CAPTION>

                            Pro Forma         Pro Forma            Pro Forma
                            Year Ended     Nine Months Ended    Three Months Ended
                          June 30, 1999      March 31, 1999       March 31, 1999
                          -------------    ------------------   ------------------
                                   (In thousands, except per share data)

     <S>                    <C>              <C>                 <C>
     Net Sales              $ 177,149         $ 128,475         $  44,348
     Net Income (Loss)          9,469             4,968               (36)
     Net Income (Loss)
       Per Share
         Basic             $     .53          $     .28          $    .00
         Diluted                 .50                .26               .00

</TABLE>

     The pro forma  financial  information  presented  above is not  necessarily
     indicative of either the results of operations that would have occurred had
     the acquisition taken place at the beginning of the periods presented or of
     future operating results of the combined companies.

     Europtest

     Effective  September  1, 1998,  the  Company  acquired  90% of the stock of
     Europtest,  S.A.  (France) for  approximately  $1.1  million.  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.  In October 1999, the Company purchased an
     additional 3.4% of Europtest's stock for approximately  $54,000.  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 $1.9 million 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.

 3.  Earnings Per Share
     ------------------
     In  accordance  with  Statement of Financial  Accounting  Standards No. 128
     "Earnings Per Share", net income per common share ("Basic EPS") is computed
     by dividing net income by the weighted  average common shares  outstanding.
     Net income per common share,  assuming dilution ("Diluted EPS") is computed
     by dividing net income by the weighted  average  common shares  outstanding
     plus potential dilution from the exercise of stock options and warrants.

                                       -9-

<PAGE>


     A  reconciliation  of the numerators and  denominators of the Basic EPS and
     Diluted EPS calculations is as follows:

<TABLE>
<CAPTION>
                                                       Nine Months
                                                     Ended March 31,
                                                   -------------------
                                                   2000           1999
                                                   ----           ----
                                          (In thousands, except per share data)

<S>                                             <C>             <C>
   Net income for basic and diluted earnings
     per common share                           $  7,303        $  5,256
                                                ========        ========
   Computation of Adjusted Weighted Average
     Shares Outstanding:
   Weighted average shares outstanding            18,546          17,628
   Add:  Effect of dilutive options and warrants
       outstanding                                 1,242           1,345
                                                 -------        --------
   Weighted average shares and common share
       equivalents used for computation of
       diluted earnings per common share          19,788          18,973
                                                 =======        ========
   Net Income Per Common Share:
         Basic                                     $ .39           $ .30
                                                   =====           =====
         Diluted                                   $ .37           $ .28
                                                   =====           =====
</TABLE>

<TABLE>
<CAPTION>
                                                         Three Months
                                                         Ended March 31,
                                                   2000           1999
                                                   ----           ----
                                          (In thousands, except per share data)

   <S>                                          <C>             <C>

   Net income for basic and diluted earnings
     per common share                            $  3,032         $    188
                                                 ========         ========

   Computation of Adjusted Weighted Average
     Shares Outstanding:
   Weighted average shares outstanding             18,580           17,839
   Add:  Effect of dilutive options and warrants
       outstanding                                  1,901            1,577
                                                 --------         --------
   Weighted average shares and common share
       equivalents used for computation of
       diluted earnings per common share           20,481           19,416
                                                 ========         ========
   Net Income Per Common Share:
         Basic                                      $ .16            $ .01
                                                    =====            =====
         Diluted                                    $ .15            $ .01
                                                    =====            =====
</TABLE>


4.   Bank Loan Agreements
     --------------------
     As of February 25, 1999, the Company  replaced a previous  agreement with a
     revised revolving credit,  term loan and mortgage  agreement with two banks
     which is secured by substantially all of the Company's assets not otherwise
     encumbered.  The  agreement  provides for a revolving  credit line of $23.0
     million,  a term loan of $20.0  million  and a  mortgage  on the  Company's
     Plainview  property for $4.5 million.  The revolving  credit and term loans
     expire in December 2002. The term loan is payable in quarterly installments
     of $1.25  million with final  payment on December 31, 2002. As of March 31,
     2000, the  outstanding  term loan was $13.0  million.  The interest rate on
     borrowings  under this agreement is at various rates depending upon certain
     financial ratios, with the current rate substantially  equivalent to 30-day
     LIBOR  (approximately  6.1% at March 31, 2000) plus 1.50% on the  revolving
     credit  borrowings  and LIBOR plus 1.75% on the term loan  borrowings.  The
     Company paid a facility fee of $100,000 and is required to pay a commitment
     fee of .25% per annum of the average unused portion of the credit line. The

                                      -10-
<PAGE>


     mortgage  is payable  in  monthly  installments  of  approximately  $26,000
     through March 2008 and a balloon payment of $1.6 million in April 2008. The
     Company  has  entered  into  an  interest  rate  swap   agreement  for  the
     outstanding  amount under the mortgage  agreement at approximately  7.6% in
     order to reduce the interest rate risk associated with these borrowings.

     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 $2.0 million.
     At December 31, 1999,  the  Company's  available  unused line of credit was
     approximately $21.0 million 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 $4.2 million.  The Company  currently intends to pay
     these borrowings in annual  installments of approximately  $200,000 through
     2019.

 5.  Inventories
     -----------

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                          March 31,         June 30,
                                            2000             1999
                                          ----------        --------
                                                (In thousands)

                    <S>                   <C>                <C>
                    Raw Materials         $ 20,472           $ 18,441
                    Work in Process         13,304             11,148
                    Finished Goods           4,206              3,048
                                          --------           --------
                                          $ 37,982           $ 32,637
                                          ========           ========
</TABLE>


 6.  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.

 7.  Business Segments
     -----------------
     The  Company's  business  segments  and  major  products  included  in each
     segment, are as follows:

     Microelectronics:                Isolator Products:
     a)Microelectronic Modules        a)Commercial spring and rubber isolators
     b)Thin Film Interconnects        b)Industrial spring and rubber isolators
     c)Integrated Circuits            c)Military wire-rope isolators

     Test, Measurement and
     Other Electronics:
     a)Instrument Products
     b)Motion Control Systems

      - Scanning devices
      - Stabilization and tracking

          devices
      - Magnetic devices

                                      -11-

<PAGE>

  Business Segment Data:

<TABLE>
<CAPTION>
                                                      For The Nine Months Ended
                                                               March 31,
                                                      -------------------------
                                                        2000              1999
                                                        ----              ----
                                                             (In thousands)
     <S>                                             <C>                <C>
     Net sales:
       Microelectronics                              $ 75,986           $ 68,094
       Test, Measurement and
         Other Electronics                             39,743             26,938
       Isolator Products                               14,149             13,398
                                                     --------           --------
         Net sales                                   $129,878           $108,430
                                                     ========           ========

     Operating income:
       Microelectronics                              $ 12,710           $ 13,647
       Test, Measurement and
         Other Electronics                              1,651              1,528
       Isolator Products                                1,776              1,544
       General corporate expenses                      (3,104)            (2,973)
                                                     --------           --------
                                                       13,033             13,746

    Acquired in-process research and development          -               (3,500)
       Interest expense                                (1,846)            (1,024)
       Other income (expense), net                         16                734
                                                     --------           --------
         Income before income taxes                  $ 11,203           $  9,956
                                                     ========           ========

</TABLE>


<TABLE>
<CAPTION>
                                                      For The Three Months Ended
                                                               March 31,
                                                      -------------------------
                                                        2000              1999
                                                        ----              ----
                                                             (In thousands)
     <S>                                             <C>                <C>
     Net sales:
       Microelectronics                              $ 26,114           $ 25,777
       Test, Measurement and
         Other Electronics                             15,046             10,111
       Isolator Products                                5,115              4,716
                                                     --------           --------
         Net sales                                   $ 46,275           $ 40,604
                                                     ========           ========

     Operating income:
       Microelectronics                              $  4,342           $  5,989
       Test, Measurement and
         Other Electronics                                969                557
       Isolator Products                                  784                531
       General corporate expenses                      (1,117)            (1,172)
                                                     --------           --------
                                                        4,978              5,905

    Acquired in-process research and development          -               (3,500)
       Interest expense                                  (597)              (457)
       Other income  (expense), net                       251                190
                                                     --------           --------
         Income before income taxes                  $  4,632           $  2,138
                                                     ========           ========
</TABLE>


                                      -12-


<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     We use our advanced  design,  engineering  and  manufacturing  abilities to
produce microelectronic, integrated circuit, interconnect and testing solutions.
Our products are used in fiber optic,  broadband  cable,  wireless and satellite
communications  markets.  We also design and manufacture  motion control systems
and  shock  and  vibration  isolation  systems  which  are used for  commercial,
industrial  and defense  applications.  Our  operations  are grouped  into three
segments:

          --  microelectronics
          --  test, measurement and other electronics
          --  isolator products

     Our  consolidated  financial  statements  include the  accounts of Aeroflex
Incorporated  and  all  of  our  subsidiaries.   All  of  our  subsidiaries  are
wholly-owned, except for Europtest, S.A., which is 93.4% owned by us.

     Our microelectronics segment has been designing,  manufacturing and selling
microelectronics  for the  electronics  industry since 1974. In January 1994, we
acquired  substantially all of the net operating assets of the  microelectronics
division of Marconi Circuit  Technology  Corporation,  which manufactures a wide
variety of microelectronic assemblies. In March 1996, we acquired MIC Technology
Corporation which designs,  develops,  manufactures and markets microelectronics
products in the form of passive thin film circuits and interconnects.  Effective
July 1, 1997, MIC Technology acquired certain equipment, inventory, licenses for
technology  and  patents  of  two  of  Lucent  Technologies'  telecommunications
component units - multi-chip modules and film integrated  circuits.  These units
manufacture microelectronic modules and interconnect products. In February 1999,
we acquired all of the outstanding stock of UTMC Microelectronic  Systems,  Inc.
consisting of UTMC's integrated circuit business.

     Our  test,  measurement  and  other  electronics  segment  consists  of two
divisions:  (1)  instruments  and (2) motion control  products.  Our instruments
division consists of:

     --   Comstron, a leader in radio frequency and microwave technology used in
          the  manufacture of fast  switching  frequency  signal  generators and
          components,  which we acquired in November 1989. Comstron is currently
          an operating division of Aeroflex Laboratories,  Incorporated,  one of
          our wholly-owned subsidiaries;

     --   Lintek,  a leader in high speed  instrumentation  measurement  systems
          which we acquired in January 1995; and

     --   Europtest, S.A. (France), of which we acquired 90% effective September
          1, 1998, under a purchase  agreement which requires us to purchase the
          remaining 10% of Europtest pro rata over a three-year period at prices
          determined  based  upon net sales of  Europtest  products.  In October
          1999, we purchased an additional  3.4%.  Europtest  develops and sells
          specialized software-driven test equipment used primarily in cellular,
          satellite and other communications applications.

     Our motion control  products  division has been engaged in the  development
and  manufacture of  electro-optical  scanning  devices used in infra-red  night
vision since 1975. This division has been engaged in the design, development and
production of  stabilization  tracking  devices and systems and magnetic  motors
since 1961.

                                   -13-

<PAGE>

     Our isolator products segment has been designing, developing, manufacturing
and selling severe service shock and vibration  isolation systems since 1961. In
October  1983,  we  acquired  Vibration   Mountings  &  Controls,   Inc.,  which
manufactures  a line of  off-the-shelf  rubber and spring  shock,  vibration and
structure  borne noise  control  devices  used in  commercial  applications.  In
December 1986, we acquired the operating assets of Korfund Dynamics Corporation,
a  manufacturer  of an  industrial  line of heavy duty  spring and rubber  shock
mounts.

     Our revenue is recognized based upon shipments or billings. We record costs
on our long-term  contracts  using  percentage-of-completion  accounting.  Under
percentage of  completion  accounting,  costs are  recognized on revenues in the
same relation that total  estimated  manufacturing  costs bear to total contract
value.  Estimated costs at completion are based upon  engineering and production
estimates.  Provisions for estimated losses or revisions in estimated profits on
contracts-in-process  are  recorded  in the  period  in  which  such  losses  or
revisions are first determined.

     Approximately  41% of our  sales for  fiscal  1999 and 42% of our sales for
fiscal 1998 were to agencies of the United States Government or to prime defense
contractors  or  subcontractors  of the United  States  Government.  Our overall
dependence  on the military has been  declining  due to the  acquisition  of MIC
Technology in fiscal 1996 which is more commercially  oriented, and our focusing
of resources towards developing standard products for commercial markets.

     We  believe  that  potential   reductions  in  defense  spending  will  not
materially  affect our  operations.  In certain  product areas, we have suffered
reductions  in sales  volume due to cutbacks in the  military  budget.  In other
product areas, we have  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 our operations.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and  Hedging  Activities,"  as  amended,  which is  effective  for fiscal  years
beginning  after June 15,  2000.  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.  We believe  that the impact of this
statement  will  not  have  a  material  effect  on our  consolidated  financial
statements.

Results of Operations
Nine Months Ended March 31, 2000 Compared to Nine Months Ended March 31, 1999

     Net Sales.  Net sales increased 19.8% to $129.9 million for the nine months
ended  March 31, 2000 from  $108.4  million for the nine months  ended March 31,
1999. Net sales in the microelectronics segment increased 11.6% to $76.0 million
for the nine months ended March 31, 2000 from $68.1  million for the nine months
ended March 31, 1999 due to the acquisition of UTMC in February 1999,  partially
offset by  reductions  in sales in both  microelectronic  modules  and thin film
interconnects.  Net sales in the test, measurement and other electronics segment
increased  47.5% to $39.7  million for the nine months ended March 31, 2000 from
$26.9  million  for the nine  months  ended  March  31,  1999  primarily  due to
increased sales volume in both frequency  synthesizers  (primarily  shipments of
the new FS-1000 for use in  commercial  communications  test  systems)  and high
speed  automatic test systems  (primarily  satellite  payload test equipment for
Hughes Space and  Communications).  Net sales in the isolator  products  segment
increased  5.6% to $14.1  million for the nine months  ended March 31, 2000 from
$13.4 million for the nine months ended March 31, 1999.

                                      -14-

<PAGE>

     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 16.7% to $45.4
million for the nine months ended March 31, 2000 from $38.9 million for the nine
months ended March 31, 1999. Gross margin decreased to 35.0% for the nine months
ended March 31, 2000 from 35.9% for the nine months  ended March 31,  1999.  The
increase in gross  profit was  primarily a result of the  increased  sales.  The
decrease in gross margin was due primarily to low margins on the satellite  test
system development program.

     Selling,   General  and   Administrative   Costs.   Selling,   general  and
administrative costs include office and management salaries, fringe benefits and
commissions.  Selling, general and administrative costs increased 33.6% to $24.5
million (18.8% of net sales) for the nine months ended March 31, 2000 from $18.3
million  (16.9% of net sales) for the nine  months  ended  March 31,  1999.  The
increase was primarily due to the additional costs relating to the operations of
UTMC.

     Research and Development  Costs.  Research and development costs consist of
material, engineering labor and allocated overhead. Our self-funded research and
development  costs  increased  15.4% to $7.9 million (6.1% of net sales) for the
nine months ended March 31, 2000 from $6.9  million  (6.3% of net sales) for the
nine months ended March 31, 1999. The increase was primarily attributable to the
additional  costs of UTMC,  partially  offset by reduced  costs  relative to the
comparable period in the prior year related to the development of the FS-1000, a
new low-cost,  high speed, high performance  frequency  synthesizer intended for
commercial  communication  test systems which is complete and the satellite test
system development program.

     Acquired  In-Process  Research  and  Development.  In  connection  with the
acquisition  of UTMC in February 1999, we allocated $3.5 million of the purchase
price  to  incomplete  research  and  development   projects.   This  allocation
represents  the  estimated  fair value based on future cash flows that have been
adjusted by the projects'  completion  percentage.  At the acquisition date, the
development of these projects had not yet reached technological  feasibility and
the R&D in progress had no  alternative  future uses.  Accordingly,  these costs
were expensed as of the acquisition date.

     Other Expense (Income).  Interest expense increased to $1.8 million for the
nine months  ended March 31,  2000 from $1.0  million for the nine months  ended
March 31, 1999, primarily due to increased levels of borrowings. Other income of
$16,000  for the nine  months  ended  March 31,  2000  consists  primarily  of a
$300,000  expense for the settlement of a lawsuit,  $100,000 of interest  income
and $193,000  gain on the sale of  securities.  Other income of $734,000 for the
nine months ended March 31, 1999 consists primarily of interest income. Interest
income  decreased  due to decreased  levels of cash  equivalents.  The increased
levels of borrowings and the decreased  levels of cash  equivalents  were due to
the acquisition of UTMC.

     Provision for Income Taxes.  Income taxes  decreased  17.0% to $3.9 million
(an effective income tax rate of 34.8%) for the nine months ended March 31, 2000
from $4.7 million (an effective income tax rate of 34.9%,  exclusive of the non-
deductible  write-off of acquired  in-process  research and development) for the
nine months ended March 31, 1999.  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.

                                      -15-

<PAGE>

Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999

     Net Sales.  Net sales increased 14.0% to $46.3 million for the three months
ended March 31, 2000 from $40.6  million  for the three  months  ended March 31,
1999. Net sales in the microelectronics  segment increased 1.3% to $26.1 million
for the three  months  ended  March 31,  2000 from $25.8  million  for the three
months  ended March 31, 1999 due to the  acquisition  of UTMC in February  1999,
partially offset by reductions in sales in microelectronic modules. Net sales in
the test,  measurement and other  electronics  segment  increased 48.8% to $15.0
million for the three  months  ended  March 31, 2000 from $10.1  million for the
three months  ended March 31, 1999  primarily  due to increased  sales volume in
frequency  synthesizers  (primarily  shipments  of the  new  FS-1000  for use in
commercial  communication  test  systems).  Net sales in the  isolator  products
segment increased 8.5% to $5.1 million for the three months ended March 31, 2000
from $4.7 million for the three months ended March 31, 1999.

     Gross Profit.  Gross profit  increased  8.6% to $16.7 million for the three
months ended March 31, 2000 from $15.4  million for the three months ended March
31, 1999.  Gross margin  decreased to 36.1% for the three months ended March 31,
2000 from 37.9% for the three months ended March 31, 1999. The increase in gross
profit was  primarily a result of the  increased  sales.  The  decrease in gross
margin was due primarily to a change in the product mix.

     Selling,   General  and   Administrative   Costs.   Selling,   general  and
administrative  costs  increased  26.6% to $8.8 million (18.9% of net sales) for
the three months ended March 31, 2000 from $6.9 million (17.0% of net sales) for
the three  months ended March 31, 1999.  The increase was  primarily  due to the
additional costs relating to the operations of UTMC.

     Research and Development  Costs.  Our self-funded  research and development
costs  increased  16.0% to $3.0 million (6.5% of net sales) for the three months
ended March 31, 2000 from $2.6 million  (6.4% of net sales) for the three months
ended March 31, 1999. The increase was primarily  attributable to the additional
costs of UTMC.

     Other  Expense  (Income).  Interest  expense  increased to $597,000 for the
three months ended March 31, 2000 from $457,000 for the three months ended March
31, 1999,  primarily  due to  increased  levels of  borrowings.  Other income of
$251,000  for the three  months  ended March 31, 2000  consists  primarily  of a
$193,000  gain on the the sale of  securities  and $51,000 of  interest  income.
Other income of $190,000  for the three  months  ended March 31, 1999  consisted
primarily of interest income.  Interest income decreased due to decreased levels
of cash equivalents. The increased levels of borrowings and the decreased levels
of cash equivalents were due to the acquisition of UTMC.

     Provision for Income Taxes.  Income taxes  decreased  17.9% to $1.6 million
(an  effective  income tax rate of 34.5%) for the three  months  ended March 31,
2000 from $2.0 million (an effective income tax rate of 34.6%,  exclusive of the
non- deductible  write-off of acquired  in-process research and development) for
the three  months ended March 31, 1999.  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.

Liquidity and Capital Resources

     As of March 31, 2000, we had $61.4 million in working capital.  Our current
ratio was 3.0 to 1 at March 31, 2000.  As of February  25,  1999,  we replaced a
previous  agreement  with a revised  revolving  credit,  term loan and  mortgage
agreement with two banks which is secured by substantially all of our assets not
otherwise  encumbered.  The  agreement  provides for a revolving  credit line of
$23.0  million,  a term loan of $20.0  million and a mortgage  on our  Plainview


                                      -16-

<PAGE>

property  for $4.5  million.  The  revolving  credit  and term  loans  expire in
December  2002.  The term loan is payable  in  quarterly  installments  of $1.25
million  with final  payment on December 31,  2002.  As of March 31,  2000,  the
outstanding  term loan was $13.0 million.  The interest rate on borrowings under
this agreement is at various rates depending upon certain financial ratios, with
the current rate substantially equivalent to 30-day LIBOR (approximately 6.1% at
March 31, 2000) plus 1.50% on the  revolving  credit  borrowings  and LIBOR plus
1.75%  on  the  term  loan  borrowings.  The  mortgage  is  payable  in  monthly
installments of  approximately  $26,000 through March 2008 and a balloon payment
of $1.6  million in April  2008.  We have  entered  into an  interest  rate swap
agreement  for  the   outstanding   amount  under  the  mortgage   agreement  at
approximately  7.6% in order to reduce the interest  rate risk  associated  with
these borrowings.

     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,  we have a
letter of credit facility of $2.0 million.

     In December  1998, we financed the  acquisition  and renovation of the land
and building of our Pearl River, NY facility and received proceeds  amounting to
$4.2 million. We currently intend to pay these borrowings in annual installments
of approximately $200,000 payable through 2019.

     Our  backlog  of orders  was  $103.8  million  at March 31,  2000 and $92.1
million at March 31, 1999.

     Net cash  provided by operating  activities  was $10.2 million for the nine
months ended March 31,  2000.  Net cash used in  investing  activities  was $3.8
million  for the nine months  ended  March 31,  2000,  consisting  primarily  of
capital  expenditures of $5.4 million offset,  in part, by the proceeds from the
sale of equipment of $1.7 million under a sale-leaseback  arrangement.  Net cash
used in  financing  activities  was $2.9 million for the nine months ended March
31, 2000, consisting primarily of debt payments of $5.7 million and the purchase
of treasury stock of $2.0 million,  partially  offset by proceeds from exercises
of stock options and warrants of $4.8 million.

     We believe that  internally  generated  funds and available lines of credit
together with the proceeds from our anticipated offering of common stock will be
sufficient for our working capital  requirements,  capital expenditure needs and
the servicing of our debt for at least the next twelve  months.  As of March 31,
2000, our available unused line of credit was $21.0 million after  consideration
of the letter of credit.

Market Risk

     We are exposed to market risk related to changes in interest  rates and, to
an immaterial  extent,  to foreign currency exchange rates. Some of the our debt
is at fixed rates of interest or at a variable  rate with an interest  rate swap
agreement which effectively converts the variable rate debt into a fixed rate of
debt. Our debt which is subject to a floating rate of interest and is not hedged
by an interest  rate swap amounts to  approximately  $17.3  million at March 31,
2000. If market  interest  rates increase by 10 percent from levels at March 31,
2000, the effect on our net income would be a reduction of approximately $70,000
per year.

                                      -17-

<PAGE>

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 our financial position,  business strategy and plans and objectives of
our management 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 us or  our
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of our management,  as well as assumptions  made by and
information  currently available to our 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  and  general  economic  conditions.  Such  statements  reflect our
current  views with respect to future  events and are subject to these and other
risks,  uncertainties  and  assumptions  relating  to our  financial  condition,
results of operations, growth strategy and liquidity.

                                      -18-

<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

        None

Item 5. Other Information

     On March 21, 2000, our common stock  commenced  trading on the Nasdaq Stock
     Market under the symbol ARXX.

     On April 6, 2000,  we filed a  registration  statement on Form S-3 with the
     Securities  and  Exchange  Commission  covering the sale by us of 2,500,000
     shares of common stock.

Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits

             Exhibit 27 - Financial Data Schedule

         (b) Reports on Form 8-K

             None

                                   -19-

<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)

May 9, 2000                             By:  /s/ Michael Gorin
                                             Michael Gorin
                                             President, Chief Financial Officer
                                             and Principal Accounting Officer

                                      -20-