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 September 30, 1999
                         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.

November 11, 1999   18,391,427 shares(excluding 260,845 shares held in treasury)
-----------------   ------------------------------------------------------------
    (Date)                           (Number of Shares)

           NOTE: THIS IS PAGE 1 OF A DOCUMENT CONSISTING OF 18 PAGES.

<PAGE>


                              AEROFLEX INCORPORATED

                                AND SUBSIDIARIES


                                      INDEX



                                                         PAGE
                                                         ----


PART I:  FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEETS
 September 30, 1999 and June 30, 1999                     3-4

CONSOLIDATED STATEMENTS OF EARNINGS
 Three Months Ended September 30, 1999 and 1998             5

CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended September 30, 1999 and 1998             6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS               7-11

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS
    Three Months Ended September 30, 1999 and 1998      12-16

PART II:  OTHER INFORMATION

ITEM 6 Exhibits and Reports on Form 8-K                    17

SIGNATURES                                                 18









                                -2-

<PAGE>


                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                September 30,       June 30,
                                                    1999              1999
                                                -------------    --------------
                                                        (In thousands)

<S>                                               <C>               <C>
ASSETS
------
Current assets:
 Cash and cash equivalents                        $    907          $  2,714
 Accounts receivable, less allowance for
   doubtful accounts of $404,000 and $381,000       40,398            39,967
 Inventories                                        33,327            32,637
 Deferred income taxes                               5,113             5,291
 Prepaid expenses and other current assets           3,247             2,314
                                                  --------          --------
   Total current assets                             82,992            82,923

Property, plant and equipment, at cost, net         50,782            50,802
Intangible assets acquired in connection with
  the purchase of businesses, net                   13,380            13,777
Cost in excess of fair value of net assets
  of businesses acquired, net                       13,859            14,019
Other assets                                         3,714             3,695
                                                  --------          --------
   Total assets                                   $164,727          $165,216
                                                  ========          ========

</TABLE>


              See notes to consolidated financial statements.

                                    -3-

<PAGE>
                            AEROFLEX INCORPORATED
                               AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS
                                 (continued)


<TABLE>
<CAPTION>
                                                   September 30,       June 30,
                                                       1999             1999
                                                   --------------      --------
                                                            (In thousands)

<S>                                                  <C>               <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
  Current portion of long-term debt                  $  6,471          $  6,509
  Accounts payable                                      7,134             8,070
  Accrued expenses and other current liabilities       13,861            16,923
  Income taxes payable                                  2,413             1,055
                                                     --------          --------
    Total current liabilities                          29,879            32,557

Long-term debt                                         23,068            24,608
Deferred income taxes                                   3,413             3,582
Other long-term liabilities                             2,328             2,376
                                                     --------          --------
    Total liabilities                                  58,688            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
  18,651,000 and 18,429,000 shares                      1,865             1,843
 Additional paid-in capital                           107,462           105,720
 Accumulated deficit                                   (2,491)           (5,421)
                                                     --------          --------
                                                      106,836           102,142

 Less:  Treasury stock, at cost (43,000 and
  6,000 shares)                                           797                49
                                                     --------          --------
    Total stockholders' equity                        106,039           102,093
                                                     --------          --------
    Total liabilities and stockholders' equity       $164,727          $165,216
                                                     ========          ========

</TABLE>
                 See notes to consolidated financial statements.

                                     -4-

<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS


<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                         September 30,
                                                      -------------------
                                                      1999           1998
                                                      ----           ----
                                               (In thousands, except per share data)
<S>                                                <C>            <C>

Net sales                                          $ 42,072       $ 31,629
Cost of sales                                        26,933         20,504
                                                   --------       --------
  Gross profit                                       15,139         11,125
                                                   --------       --------
Selling, general and administrative costs             7,330          5,630
Research and development costs                        2,430          1,991
                                                   --------       --------
                                                      9,760          7,621
                                                   --------       --------
  Operating income                                    5,379          3,504
                                                   --------       --------
Other expense (income)
  Interest expense                                      612            299
  Other expense (income)                                262           (303)
                                                   --------        --------
    Total other expense (income)                        874             (4)
                                                   --------        --------
Income before income taxes                            4,505           3,508

Provision for income taxes                            1,575           1,250
                                                   --------        --------
Net income                                         $  2,930        $  2,258
                                                   ========        ========
Net income per common share and common
  share equivalent:
    -  Basic                                          $ .16           $ .13
                                                   ========        ========
    -  Diluted                                        $ .15           $ .12
                                                   ========        ========
Weighted   average  number  of  common  shares
  and  common  share   equivalents outstanding:
    -  Basic                                         18,586          17,447
                                                   ========        ========
    -  Diluted                                       19,882          18,562
                                                   ========        ========
</TABLE>

                 See notes to consolidated financial statements.

                                       -5-

<PAGE>


                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                           September 30,
                                                        --------------------
                                                        1999            1998
                                                        ----            ----
                                                          (In thousands)

<S>                                                   <C>             <C>
Cash Flows From Operating Activities:
 Net income                                            $  2,930        $ 2,258
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
   Depreciation and amortization                          2,265          1,427
   Amortization of deferred gain                           (147)          (147)
   Deferred income taxes                                      8           (289)
   Other, net                                               118             53
 Change in operating  assets and  liabilities,
   net of effects from  purchase of business:
   Decrease (increase) in accounts receivable              (466)           430
   Decrease (increase) in inventories                      (690)        (1,458)
   Decrease (increase) in prepaid expenses
    and other assets                                       (963)          (618)
   Increase (decrease) in accounts payable, accrued
    expenses and other long-term liabilities             (3,900)        (2,146)
   Increase (decrease) in income taxes payable            1,487          1,014
                                                        -------        -------
Net Cash Provided By (Used In)
 Operating Activities                                       642            524
                                                        -------        -------
Cash Flows From Investing Activities:
  Payment for purchase of business, net of cash acquired     -            (929)
  Capital expenditures                                   (1,687)        (3,877)
  Proceeds from sale of equipment                             3            967
  Other, net                                                  9            164
                                                        -------        -------
Net Cash Provided By (Used In)
 Investing Activities                                    (1,675)        (3,675)
                                                        -------        -------

Cash Flows From Financing Activities:
  Debt repayments                                        (1,578)          (558)
  Proceeds from the exercise of stock options
    and warrants                                            805             20
  Amounts paid for withholding taxes on stock
    option exercises                                        (41)          (502)
  Withholding taxes collected for stock option
    exercises                                                40             11
  Purchase of treasury stock                                 -            (343)
                                                        -------        -------

Net Cash Provided By (Used In)
 Financing Activities                                      (774)        (1,372)
                                                        -------        -------
Net Increase (Decrease) In Cash
  And Cash Equivalents                                   (1,807)        (4,523)
Cash And Cash Equivalents At Beginning Of Period          2,714         24,408
                                                        -------        -------
Cash And Cash Equivalents At End Of Period               $  907        $19,885
                                                        =======        =======
</TABLE>

              See notes to consolidated financial statements.

                                    -6-
<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 September 30, 1999 and the related
          consolidated  statements  of  earnings  for  the  three  months  ended
          September  30, 1999 and 1998 and the  consolidated  statements of cash
          flows for the three months ended September 30, 1999 and 1998 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 September 30, 1999 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 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 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>
                                                            (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.


                                       -7-
<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. The $3.5 million write-off has been included
          in the June 30, 1999 pro forma income but not the  September  30, 1998
          pro forma income in order to provide  comparability  to the respective
          actual results.

<TABLE>
<CAPTION>
                                           Pro Forma           Pro Forma
                                          Year Ended       Three Months Ended
                                        June 30, 1999      September 30, 1998
                                        -------------      ------------------
                                        (In thousands, except per share data)

           <S>                            <C>                 <C>
          Net Sales                      $   177,149         $   39,983
          Net Income                           9,469              2,745
          Net Income Per Share
            Basic                        $       .53         $      .16
            Diluted                              .50                .15
</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.  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.

                                       -8-

<PAGE>

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

<TABLE>
<CAPTION>
                                                          Three Months
                                                       Ended September 30,
                                                       -------------------
                                                      1999            1998
                                                      ----            ----
                                            (In thousands, except per share data)

<S>                                                 <C>             <C>
     Net income for basic and diluted earnings
       per common share                              $  2,930        $  2,258
                                                     ========        ========

     Computation of Adjusted Weighted Average
       Shares Outstanding:
     Weighted average shares outstanding               18,586          17,447
     Add: Effect of dilutive options and warrants
       outstanding                                      1,296           1,115
                                                     --------        --------

     Weighted average shares and common share
       equivalents used for computation of
       diluted earnings per common share               19,882          18,562
                                                     ========        ========
     Net Income Per Common Share and Common Share
       Equivalent:
         Basic                                          $ .16           $ .13
                                                     ========        ========
         Diluted                                        $ .15           $ .12
                                                     ========        ========
</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 its  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 September 30, 1999,
     the  outstanding  term  loan  was  $16.3  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 90-day
     LIBOR  (approximately  6.0%  at  September  30,  1999)  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  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 September 30, 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.  These borrowings are payable in annual
     installments of approximately $200,000 through 2019.


                                       -9-

<PAGE>

 5.  Inventories
     Inventories consist of the following:


<TABLE>
<CAPTION>
                                     September 30,          June 30,
                                        1999                 1999
                                     -------------          ---------
                                               (In thousands)

           <S>                        <C>                   <C>
           Raw Materials              $ 18,837              $ 18,441
           Work in Process              11,038                11,148
           Finished Goods                3,452                 3,048
                                      --------              --------
                                      $ 33,327              $ 32,637
                                      ========              ========
</TABLE>


 6.  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.

 7.  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.

 8.  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

                                      -10-

<PAGE>


<TABLE>
<CAPTION>
                                           For The Three Months Ended
                                                  September 30,
                                           ---------------------------

                                            1999               1998
                                            ----               ----
                                                 (In thousands)
<S>                                      <C>               <C>

Business Segment Data:
    Net sales:
       Microelectronics                   $ 25,036           $ 21,499
       Test, Measurement and
         Other Electronics                  12,543              5,703
       Isolator Products                     4,493              4,427
                                          --------           --------
         Net sales                        $ 42,072           $ 31,629
                                          ========           ========

     Operating income:
       Microelectronics                   $  4,935           $  3,554
       Test, Measurement and
         Other Electronics                     843                126
       Isolator Products                       528                724
       General corporate expenses             (927)              (900)
                                          --------           --------
                                             5,379              3,504

       Interest expense                       (612)              (299)
       Other income  (expense), net           (262)               303
                                          --------           --------
         Income before income taxes       $  4,505           $  3,508
                                          ========           ========
</TABLE>

                                      -11-
<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   state-of-the-art    microelectronic   module,    integrated   circuit,
interconnect  and  testing  solutions.  Our  products  are  used  in  satellite,
wireless,  wireline  (including  fiber  optic),  cable  television  ("CATV") and
defense  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., of which we own 90%.

     Effective  February 25, 1999, we acquired all of the  outstanding  stock of
UTMC  Microelectronic  Systems,  Inc.  for $42.5  million of cash.  Prior to the
acquisition,   UTMC   distributed  by  dividend  to  its   then-parent,   United
Technologies  Corporation,  the  assets  and  United  Technologies  assumed  the
liabilities  of the  circuit  card  assembly  portion  of UTMC's  business.  The
purchase  price was paid with  available  cash of $22.5  million and  borrowings
under our bank loan  agreement of $20.0  million.  UTMC is a leader in supplying
radiation-tolerant   integrated  circuits  for  satellite  communications.   The
acquired company's net sales, excluding the circuit card assembly business, were
approximately $33.4 million for the year ended December 31, 1998.

     Effective  September 1, 1998,  we acquired  90% of the stock of  Europtest,
S.A.  (France) for  approximately  $1.1  million.  The purchase  agreement  also
requires  that we  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 $1.9 million
for the year ended March 31, 1998.

     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 a
focusing of resources  towards  developing  standard products for the 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.

                                      -12-

<PAGE>

     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.

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 $20.9 million at September 30,
1999. If market  interest  rates increase by 10 percent from levels at September
30, 1999,  the effect on our net income  would be a reduction  of  approximately
$100,000 per year.

Year 2000 Readiness

     We have initiated a  company-wide  program and have developed a formal plan
of  implementation to prepare us for the year 2000. This includes taking actions
designed  to  ensure  that our  information  technology  systems,  products  and
infrastructure  are year 2000  compliant and that our  customers,  suppliers and
service providers have taken similar action. We have evaluated all of our:

        --  information technology systems
        --  products
        --  equipment
        --  other facilities systems

     We have completed  substantially  all of our  remediation  and  contingency
planning activities for all mission critical systems and areas. We have incurred
internal  staff costs,  as well as consulting  and other  expenses in connection
with our internal year 2000  compliance and expect to continue to do so. We have
spent an aggregate  $54,000 on third-party costs for year 2000 compliance and do
not expect  total costs to exceed  $100,000.  Accordingly,  we believe the total
costs incurred and to be incurred for all internal year 2000  readiness  related
projects will not have a material impact on our business,  results of operations
or financial condition.

     We have surveyed our  customers,  suppliers and service  providers  through
written  correspondence  regarding their year 2000  readiness.  We have received
written  correspondence  from  substantially  all mission critical third parties
indicating  their  compliance  but have also created  contingency  plans such as
increasing  inventory  levels and  identifying  alternative  sources.  Our risks
involved with not solving the year 2000 problem include, but are not limited to,
the  following:   loss  of  local  or  regional   electrical   power,   loss  of
telecommunication  services,  delays or cancellations of merchandise  shipments,
manufacturing shutdowns, delays in processing customer transactions, bank errors
and  computer  errors by  suppliers.  Despite our  efforts to survey  customers,
suppliers and service providers, we cannot be certain as to the actual year 2000
readiness  of these  third  parties  and  because  our year 2000  compliance  is
dependent upon certain third parties (including  infrastructure  providers) also
being year 2000  compliant on a timely  basis,  there is no  assurance  that our
efforts  will  prevent a material  adverse  impact on our  business,  results of
operations or financial condition.

                                   -13-

<PAGE>

Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998

     Net Sales.  Net sales increased 33.0% to $42.1 million for the three months
ended September 30, 1999 from $31.6 million for the three months ended September
30, 1998. Net sales in the  microelectronics  segment  increased  16.5% to $25.0
million for the three months ended September 30, 1999 from $21.5 million for the
three months ended September 30, 1998 due to the acquisition of UTMC in February
1999 partially offset by reductions in sales in both thin film interconnects and
microelectronic   modules.  Net  sales  in  the  test,   measurement  and  other
electronics segment increased 119.9% to $12.5 million for the three months ended
September  30, 1999 from $5.7 million for the three months ended  September  30,
1998  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).  Net sales in the isolator  products segment  increased 1.5% to
$4.5 million for the three months ended September 30, 1999 from $4.4 million for
the three  months ended  September  30, 1998.  We are  experiencing  softness in
bookings and  shipments in the  satellite  communications  and certain thin film
interconnect  product  areas which is expected to continue for the near term and
have an adverse  impact on our sales and operating  profits for the next several
quarters.  We  currently  anticipate  that  our  second  quarter  sales  will be
approximately the same as in the first quarter.

     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 36.1% to $15.1
million for the three months ended September 30, 1999 from $11.1 million for the
three months ended September 30, 1998.  Gross margin  increased to 36.0% for the
three  months  ended  September  30, 1999 from 35.2% for the three  months ended
September 30, 1998. The increase was primarily a result of increased  margins in
the microelectronics  segment due to product mix, partially offset by the impact
of a  greater  sales  growth  in the test,  measurement  and  other  electronics
segment, which has lower gross margins than our business as a whole, and further
reduced as a result of 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 30.2% to $7.3
million (17.4% of net sales) for the three months ended  September 30, 1999 from
$5.6 million (17.8% of net sales) for the three months ended September 30, 1998.
The increase was primarily due to the additional costs 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  22.0% to $2.4 million (5.8% of net sales) for the
three months ended  September 30, 1999 from $2.0 million (6.3% of net sales) for
the  three  months  ended   September  30,  1998.  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 for the development of a new
low-cost,  high speed,  high  performance  frequency  synthesizer  intended  for
commercial communication test systems which is substantially complete.

     Other  Expense  (Income).  Interest  expense  increased to $612,000 for the
three months ended  September  30, 1999 from $299,000 for the three months ended
September  30, 1998,  primarily  due to increased  levels of  borrowings.  Other
expense of $262,000  for the three  months  ended  September  30, 1999  consists
primarily of a $300,000  expense for the  settlement of a lawsuit and $33,000 of
interest  income.  Other income of $303,000 for the three months ended September
30, 1998 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.

                                      -14-

<PAGE>



     Provision for Income Taxes.  Income taxes  increased  26.0% to $1.6 million
(an effective income tax rate of 35.0%) for the three months ended September 30,
1999 from $1.3  million  (an  effective  income tax rate of 35.6%) for the three
months ended  September 30, 1998. 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

     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  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 beginning September 30, 1999
with  final  payment on  December  31,  2002.  As of  September  30,  1999,  the
outstanding  term loan was $16.3 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 90-day LIBOR (approximately 6.0% at
September 30, 1999) 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.   These   borrowings  are  payable  in  annual   installments  of
approximately $200,000 payable through 2019.

     In March 1998,  we sold 2.6 million  shares of our common stock in a public
offering for $31.3 million, net of an underwriting  discount of $2.0 million and
issuance  costs of  $496,000.  Of these net  proceeds,  $9.6 million was used to
repay bank indebtedness.  The balance of the net proceeds was used primarily for
the acquisition of UTMC in February 1999.

     Our  backlog of orders was $93.6  million at  September  30, 1999 and $78.5
million at September 30, 1998.

     As of September 30, 1999, we had $53.1 million in working capital. Net cash
provided  by  operating  activities  was  $642,000  for the three  months  ended
September 30, 1999.  Net cash used in investing  activities was $1.7 million for
the three  months ended  September  30,  1999,  consisting  primarily of capital
expenditures.  Net cash used in financing  activities was $774,000 for the three
months ended September 30, 1999,  consisting  primarily of debt payments of $1.6
million  partially  offset by  proceeds  from  exercises  of stock  options  and
warrants of $805,000.

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

                                      -15-

<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  operations,  results of
operations, growth strategy and liquidity.

















                                      -16-
<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

      None

Item 6.    Exhibits and Reports on Form 8-K

(a)  Exhibits

     10.1 Amendment No. 1 to Employment Agreement between Harvey R. Blau and
          Aeroflex Incorporated dated as of September 1, 1999.

     10.2 Amendment No. 1 to Employment Agreement between Michael Gorin and
          Aeroflex Incorporated dated as of September 1, 1999.

     10.3 Amendment No. 1 to Employment Agreement between Leonard Borow and
          Aeroflex Incorporated dated as of September 1, 1999.

     27   Financial Data Schedule

(b)  Reports on Form 8-K

         None

                                      -17-
<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)

                                        /s/ Michael Gorin
                                        ---------------------------------------
November 11, 1999                       By:  Michael Gorin
                                             President, Chief Financial Officer
                                             and Principal Accounting Officer


                                      -18-