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

                            -----------------------

                                   FORM 10-Q
                            -----------------------


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

For the quarter ended          December 31, 2001
                        -----------------------------
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.

February 13, 2002    59,970,265 shares (excluding 4,388 shares held in treasury)
--------------------------------------------------------------------------------
     (Date)                            (Number of Shares)

           NOTE: THIS IS PAGE 1 OF A DOCUMENT CONSISTING OF 26 PAGES.

<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES


                                      INDEX
                                      -----




                                                               PAGE
                                                               ----
PART I:  FINANCIAL INFORMATION
------   ---------------------

CONSOLIDATED BALANCE SHEETS
 December 31, 2001 and June 30, 2001                            3-4

CONSOLIDATED STATEMENTS OF EARNINGS
 Six and Three Months Ended December 31, 2001 and 2000          5-6

CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended December 31, 2001 and 2000                     7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                     8-17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS
    Six and Three Months Ended December 31, 2001 and 2000     18-24

PART II:  OTHER INFORMATION                                     25
-------   -----------------

SIGNATURES                                                      26

                                       -2-
<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                             December 31,       June 30,
                                                2001              2001
                                             ------------       --------
                                             (Unaudited)
                                                    (In thousands)
ASSETS
<S>                                           <C>               <C>
Current assets:
 Cash and cash equivalents                    $ 71,533          $ 69,896
 Marketable securities                           6,043            12,012
 Accounts receivable, less allowance for
   doubtful accounts of $477,000 and $459,000   46,504            49,409
 Inventories, net                               49,780            48,423
 Deferred income taxes                           7,202             7,148
 Prepaid expenses and other current assets       3,429             2,583
                                              --------          --------
   Total current assets                        184,491           189,471

Property, plant and equipment, net              59,798            62,137
Intangible assets with definite lives, net      15,869            20,286
Goodwill                                        23,212            21,006
Deferred income taxes                           10,361             8,538
Other assets                                     8,049             8,814
                                              --------          --------
   Total assets                               $301,780          $310,252
                                              ========          ========
</TABLE>

              See notes to consolidated financial statements.

                                    -3-
<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (continued)

<TABLE>
<CAPTION>
                                                 December 31,    June 30,
                                                    2001           2001
                                                 ------------    ---------
                                                  (Unaudited)
                                                       (In thousands)


LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                <C>           <C>
Current liabilities:
  Current portion of long-term debt                $  2,020      $  1,905
  Accounts payable                                    8,445        16,794
  Advance payments by customers                       1,622           425
  Accrued expenses and other current liabilities     14,038        17,973
                                                   --------      --------
    Total current liabilities                        26,125        37,097

Long-term debt                                       10,544        11,428
Other long-term liabilities                           6,885         6,606
                                                   --------      --------
    Total liabilities                                43,554        55,131
                                                   --------      --------
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 110,000; none issued                   -             -
  Common Stock, par value $.10 per share;
    authorized 110,000,000 shares; issued
    59,938,000 and 59,674,000 shares                  5,994         5,967
  Additional paid-in capital                        221,728       219,278
  Accumulated other comprehensive income (loss)        (143)         (154)
  Retained earnings                                  30,661        30,044
                                                   --------      --------
                                                    258,240       255,135

  Less:  Treasury stock, at cost (4,000 and
  4,000 shares)                                          14            14
                                                   --------      --------
    Total stockholders' equity                      258,226       255,121
                                                   --------      --------
    Total liabilities and stockholders' equity     $301,780      $310,252
                                                   ========      ========
</TABLE>

               See notes to consolidated financial statements.

                                     -4-
<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>

                                                Six Months Ended
                                                  December 31,
                                                ----------------
                                              2001              2000
                                            --------          --------
                                                    (Unaudited)
                                       (In thousands, except per share data)
<S>                                         <C>               <C>
Net sales                                   $ 85,691          $109,576
Cost of sales                                 55,677            65,284
                                            --------          --------
  Gross profit                                30,014            44,292
                                            --------          --------
Selling, general and administrative costs     20,173            20,293
Research and development costs                 9,327             7,478
Acquired in-process research and
  development (Note 3)                          -                1,500
                                            --------          --------
                                              29,500            29,271
                                            --------          --------
  Operating income                               514            15,021
                                            --------          --------
Other income (expense)
  Interest expense                              (659)             (758)
  Other income (expense)                       1,087             1,951
                                            --------          --------
    Total other income (expense)                 428             1,193
                                            --------          --------
Income before income taxes                       942            16,214
Provision for income taxes                       325             5,500
                                            --------          --------
Income before cumulative effect
  of a change in accounting                      617            10,714
Cumulative effect of a change
  in accounting, net of tax (Note 2)              -                132
                                            --------          --------
Net income                                  $    617          $ 10,846
                                            ========          ========
Net income per common share:
  Basic
    Income before cumulative effect           $.01                $.19
    Cumulative effect of a change
      in accounting                            -                   -
                                              ----                ----
    Net income                                $.01                $.19
                                              ====                ====
  Diluted
    Income before cumulative effect           $.01                $.18
    Cumulative effect of a change
      in accounting                            -                   -
                                              ----                ----
    Net income                                $.01                $.18
                                              ====                ====
Weighted average number of
  common shares outstanding:
    Basic                                     59,844             57,136
                                             =======            =======
    Diluted                                   61,771             60,808
                                             =======            =======
</TABLE>

               See notes to consolidated financial statements.

                                     -5-

<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>

                                              Three Months Ended
                                                 December 31,
                                              ------------------
                                            2001               2000
                                          --------           --------
                                                    (Unaudited)
                                       (In thousands, except per share data)

<S>                                        <C>               <C>
Net sales                                  $ 46,201          $ 58,448
Cost of sales                                29,260            33,621
                                           --------          --------
  Gross profit                               16,941            24,827
                                           --------          --------
Selling, general and administrative costs    10,386            10,828
Research and development costs                4,780             4,454
Acquired in-process research and
  development (Note 3)                         -                1,500
                                           --------          --------
                                             15,166            16,782
                                           --------          --------
  Operating income                            1,775             8,045
                                           --------          --------
Other income (expense)
  Interest expense                             (322)             (388)
  Other income (expense)                        511               843
                                           --------          --------
    Total other income (expense)                189               455
                                           --------          --------
Income before income taxes                    1,964             8,500
Provision for income taxes                      675             2,875
                                           --------          --------
Net income                                 $  1,289          $  5,625
                                           ========          ========
Net income per common share:
  Basic                                        $.02              $.10
                                               ====              ====
  Diluted                                      $.02              $.09
                                               ====              ====
Weighted average number of
  common shares outstanding:
    Basic                                    59,900            57,658
                                           ========          ========
    Diluted                                  62,442            61,601
                                           ========          ========
</TABLE>

                 See notes to consolidated financial statements.

                                       -6-

<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                    Six Months Ended
                                                       December 31,
                                                    ----------------
                                                   2001           2000
                                                   ----           ----
                                                        (Unaudited)
                                                      (In thousands)
<S>                                               <C>             <C>
Cash Flows From Operating Activities:
 Net income                                       $    617        $ 10,846
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
   Acquired in-process research and development       -              1,500
   Depreciation and amortization                     6,105           5,381
   Amortization of deferred gain                      (253)           (547)
   Tax benefit of stock option
     exercises                                        -              6,042
   Deferred income taxes                               325            (474)
   Other, net                                          454             153
 Change in operating assets and liabilities,
   net of effects from purchase of
   businesses:
   Decrease (increase) in accounts receivable        2,487           8,916
   Decrease (increase) in inventories               (1,357)         (2,926)
   Decrease (increase) in prepaid expenses
    and other assets                                   (83)         (1,128)
   Increase (decrease) in accounts payable, accrued
    expenses and other liabilities                 (10,574)         (5,351)
                                                   -------         -------
Net Cash Provided By (Used In) Operating Activities (2,279)         22,412
                                                   -------         -------
Cash Flows From Investing Activities:
  Payment for purchase of businesses, net of
    cash acquired                                     (283)        (14,724)
  Capital expenditures                              (2,389)         (6,921)
  Purchase of marketable securities                   -            (19,644)
  Proceeds from sale of marketable securities        5,962           5,356
  Other, net                                             1               1
                                                   -------         -------
Net Cash Provided By (Used In) Investing Activities  3,291         (35,932)
                                                   -------         -------
Cash Flows From Financing Activities:
  Borrowings under debt agreements                      89             542
  Debt repayments                                     (858)         (3,222)
  Proceeds from the exercise of stock options
    and warrants                                     1,394           2,424
  Amounts paid for withholding taxes on stock
    option exercises                                (1,256)        (17,442)
  Withholding taxes collected for stock option
    exercises                                        1,256          13,232
                                                   -------         -------
Net Cash Provided By (Used In) Financing Activities    625          (4,466)
                                                   -------         -------
Net Increase (Decrease) In Cash
  And Cash Equivalents                               1,637         (17,986)
Cash And Cash Equivalents At Beginning Of Period    69,896          54,732
                                                   -------         -------
Cash And Cash Equivalents At End Of Period         $71,533         $36,746
                                                   =======         =======
</TABLE>

                 See notes to consolidated financial statements.

                                       -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  December  31,  2001 and the  related  consolidated
     statements of earnings for the six and three months ended December 31, 2001
     and 2000 and the  consolidated  statements of cash flows for the six months
     ended  December 31, 2001 and 2000 have been prepared by the Company and are
     unaudited.  In the opinion of management,  all  adjustments  (which include
     normal  recurring  adjustments)  necessary to present  fairly the financial
     position, results of operations and cash flows at December 31, 2001 and for
     all periods  presented  have been made.  Certain  information  and footnote
     disclosures   normally  included  in  financial   statements   prepared  in
     accordance  with  accounting  principles  generally  accepted in the United
     States  of  America  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, 2001 annual
     report  to  shareholders.   There  have  been  no  changes  of  significant
     accounting  policies  since June 30,  2001,  except as disclosed in Note 2.
     Certain  reclassifications  have been made to previously reported financial
     statements to conform to current classifications.

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

2.   Recent Accounting Pronouncements
     --------------------------------

     Accounting for Derivative Instruments and Hedging Activities
     ------------------------------------------------------------

     Effective  July  1,  2000,  the  Company  adopted  Statement  of  Financial
     Accounting   Standards   ("SFAS")  No.  133,   "Accounting  for  Derivative
     Instruments and Hedging  Activities," as amended.  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.  The impact of this statement did not have a material effect on the
     Company's consolidated  financial statements.  The cumulative effect of the
     adoption of this  accounting  policy was a $132,000,  net of tax, credit in
     the quarter ended  September 30, 2000 which  represents the net of tax fair
     value of certain interest rate swap agreements at July 1, 2000.

     Accounting for Business Combinations, Goodwill and Other Intangible Assets
     --------------------------------------------------------------------------

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 141,  "Business  Combinations,"  and SFAS No. 142,  "Goodwill and Other
     Intangible  Assets." SFAS No. 141 specifies criteria that intangible assets
     acquired in a business  combination must meet to be recognized and reported
     apart from  goodwill.  SFAS No. 142 requires that  goodwill and  intangible
     assets with indefinite useful lives no longer be amortized,  but instead be
     tested for impairment at least  annually in accordance  with the provisions
     of SFAS No. 142. This  pronouncement  also requires that intangible  assets
     with estimable  useful lives be amortized over their  respective  estimated
     useful lives and reviewed for impairment in accordance with SFAS No. 121.

     The Company has adopted the  provisions of SFAS Nos. 141 and 142 as of July
     1, 2001.  The Company has  evaluated  its  existing  intangible  assets and
     goodwill that were acquired in prior purchase business combinations and has
     reclassified  $3.0  million  net  carrying  value of  intangible  assets to
     goodwill  in order  to  conform  to the new  criteria  in SFAS No.  141 for
     recognition apart from goodwill. In connection with this  reclassification,
     the  Company  has  reduced  goodwill  for  the  amount  of  deferred  taxes
     previously recorded on the reclassified intangible assets that is no longer

                                     -8-

<PAGE>
     required.  The Company has also  reassessed  the useful  lives and residual
     values  of all  intangible  assets  acquired,  and has  determined  that no
     amortization period adjustments were necessary.

     The Company has tested  goodwill  for  impairment  in  accordance  with the
     provisions of SFAS No. 142 as of July 1, 2001. Based on its evaluation, the
     Company is not required to recognize any impairment losses.

     The components of amortized intangible assets are as follows:
<TABLE>
<CAPTION>
                                      As of December 31, 2001
                                   ------------------------------
                                   Gross Carrying    Accumulated
                                       Amount        Amortization
                                   --------------    ------------
                                            (In thousands)

     <S>                             <C>               <C>
     Existing technology             $ 21,413          $  6,261
     Tradenames                         1,000               283
                                     --------          --------
         Total                       $ 22,413          $  6,544
                                     ========          ========
</TABLE>
     The aggregate  amortization expense for the amortized intangible assets was
     $1.4 million for the six months ended December 31, 2001.


     The carrying amount of goodwill is as follows:
<TABLE>
<CAPTION>
                     Balance                                         Balance
                      as of                                           as of
                     July 1,    Adjustment  Adjustment   Acquired  December 31,
                      2001       (Note a)    (Note b)    (Note c)       2001
                     -------    ----------  ----------   --------  ------------
                                          (In thousands)
<S>                  <C>         <C>         <C>         <C>         <C>
Microelectronic
  Solutions
  Segment            $  9,268    $  2,913    $ (1,116)   $   -       $ 11,065
Test Solutions
  Segment              10,949        126         -            283      11,358
Isolator Products
  Segment                 789         -          -           -            789
                     --------    --------    --------    --------    --------
   Total             $ 21,006    $  3,039    $ (1,116)   $    283    $ 23,212
                     ========    ========    ========    ========    ========
<FN>
Note a -  Reclassification  from  intangible  assets in accordance with SFAS No.
          141.

Note b -  Reversal  of  deferred   taxes  payable,   previously  recorded,   for
          reclassified intangible assets.

Note c -  Goodwill acquired during the period as a result of contingent payments
          made pursuant to purchase agreements.
</FN>
</TABLE>

     Goodwill   (including   intangible  assets   reclassified  to  goodwill  in
     accordance  with SFAS No. 141)  amortization  for the six and three  months
     ended  December  31, 2000 was  $592,000  and  $327,000,  respectively,  and
     generated a tax benefit of $97,000 and $61,000, respectively. The following
     table  shows the  results of  operations  as if SFAS No. 141 was applied to
     prior periods:

                                       -9-
<PAGE>
<TABLE>
<CAPTION>
                                             For the six months
                                              ended December 31,
                                             -------------------
                                            2001             2000
                                            ----             ----
                                     (In thousands, except per share amounts)

     <S>                                   <C>             <C>
     Net income, as reported               $   617         $10,846
     Add Back: Goodwill
       amortization, net of tax               -                495
                                           -------         -------
     Adjusted net income                   $   617         $11,341
                                           =======         =======

     Income per share - Basic
       Net income, as reported             $  .01          $  .19
       Goodwill amortization, net of tax      -               .01
                                           -------         -------
       Adjusted net income                 $  .01          $  .20
                                           =======         =======
     Income per share - Diluted
       Net income, as reported             $  .01          $  .18
       Goodwill amortization, net of tax      -               .01
                                           -------         -------
       Adjusted net income                 $  .01          $  .19
                                           =======         =======
</TABLE>
<TABLE>
<CAPTION>
                                             For the three months
                                              ended December 31,
                                             --------------------
                                             2001             2000
                                             ----             ----
                                     (In thousands, except per share amounts)
     <S>                                   <C>             <C>
     Net income, as reported               $ 1,289         $ 5,625
     Add Back: Goodwill
       amortization, net of tax               -                266
                                           -------         -------
     Adjusted net income                   $ 1,289         $ 5,891
                                           =======         =======

     Income per share - Basic
       Net income, as reported             $  .02          $  .10
       Goodwill amortization, net of tax      -               -
                                           -------         -------
       Adjusted net income                 $  .02          $  .10
                                           =======         =======
     Income per share - Diluted
       Net income, as reported             $  .02          $  .09
       Goodwill amortization, net of tax      -               .01
                                           -------         -------
       Adjusted net income                 $  .02          $  .10
                                           =======         =======
</TABLE>
     Accounting for the Impairment of Long-Lived Assets
     --------------------------------------------------

     In  October  2001,  the  FASB  issued  SFAS  No.  144,  Accounting  for the
     Impairment of Long-Lived Assets,  which addresses financial  accounting and
     reporting for the impairment or disposal of long-lived  assets. The Company
     will  adopt SFAS No. 144  effective  July 1, 2002 and does not expect  such
     adoption  to  have  a  material  impact  on  its   consolidated   financial
     statements.

3.   Acquisition of Businesses
     -------------------------

     TriLink
     -------

     Effective March 23, 2001, the Company acquired all of the outstanding stock
     of TriLink  Communications  Corp.  ("TriLink")  for 1.1  million  shares of
     Aeroflex Common Stock. TriLink designs, develops,  manufactures and markets
     fiber optic components for the communications  industry,  including Lithium
     Niobate modulators and optical switches.

                                   -10-
<PAGE>
     The Company  evaluated the acquired  tangible and  identifiable  intangible
     assets  to  serve as a basis  for  allocation  of the  purchase  price.  In
     accordance  with SFAS No. 141, the Company  allocated  the purchase  price,
     including acquisition costs of approximately $300,000, as follows:
<TABLE>
<CAPTION>
                                                            (In thousands)
               <S>                                             <C>
               Net tangible assets                             $ 1,171
               Existing technology                               6,000
               Deferred income taxes on identifiable
                 intangible assets                              (2,400)
               Goodwill                                          5,926
               In-process research and development               1,000
                                                               -------
                                                               $11,697
                                                               =======
</TABLE>


     The existing  technology is being amortized on a straight-line basis over 6
     years. The acquired  in-process research and development was not considered
     to  have  reached   technological   feasibility  and,  in  accordance  with
     accounting  principles  generally accepted in the United States of America,
     the value of such was expensed in the quarter  ended March 31, 2001. At the
     acquisition date, TriLink was conducting design,  development,  engineering
     and  testing  activities  associated  with  the  completion  of  its  10 GB
     modulator.

     Summarized  below are the  unaudited pro forma results of operations of the
     Company as if TriLink  had been  acquired  at the  beginning  of the fiscal
     period  presented.  The $1.0 million write-off has not been included in the
     December 31, 2000 pro forma income in order to provide comparability to the
     respective historical period.
<TABLE>
<CAPTION>
                                             Pro Forma
                                           Six Months Ended
                                          December 31, 2000
                                          -----------------
                                (In thousands, except per share data)
     <S>                                      <C>

     Net Sales                                $109,756
     Income before cumulative effect
       of a change in accounting                 9,666

     Income before cumulative effect
       of a change in accounting per share:
         Basic                                 $ .17
         Diluted                               $ .16
</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 period presented or of
     future operating results of the combined companies.

     RDL
     ---

     On October 23, 2000, the Company  acquired all of the outstanding  stock of
     RDL,  Inc.  ("RDL")  for $14.0  million of  available  cash.  RDL  designs,
     develops  and  manufactures  advanced  commercial  communications  test and
     measurement  products and defense  subsystems.  The acquired  company's net
     sales were approximately $15.0 million for the year ended March 31, 2000.


                                      -11-
<PAGE>
     The Company  evaluated the acquired  tangible and  identifiable  intangible
     assets  to serve as a basis  for  allocation  of the  purchase  price.  The
     Company  allocated  the  purchase  price,  including  acquisition  costs of
     approximately $100,000, as follows:
<TABLE>
<CAPTION>
                                                       (In thousands)
          <S>                                             <C>
          Net tangible assets                             $ 6,774
          Existing technology                               2,970
          Goodwill                                          2,856
          In-process research and development               1,500
                                                          -------
                                                          $14,100
                                                          =======
</TABLE>
     The existing  technology is being amortized on a straight-line basis over 7
     years. The acquired  in-process research and development was not considered
     to  have  reached   technological   feasibility  and,  in  accordance  with
     accounting  principles  generally accepted in the United States of America,
     the value of such was expensed in the quarter  ended  December 31, 2000. At
     the acquisition date, RDL was conducting design,  development,  engineering
     and testing  activities  associated  with the completion of its defense and
     commercial product lines representing next- generation technologies.

     Summarized  below are the  unaudited pro forma results of operations of the
     Company as if RDL had been  acquired at the  beginning of the fiscal period
     presented. The $1.5 million write-off has not been included in the December
     31,  2000  pro  forma  income  in  order to  provide  comparability  to the
     respective historical period.
<TABLE>
<CAPTION>
                                               Pro Forma
                                            Six Months Ended
                                           December 31, 2000
                                           -----------------
                                   (In thousands, except per share data)

     <S>                                         <C>
     Net sales                                   $114,458
     Income before cumulative effect
       of a change in accounting                   10,270

     Income before cumulative effect
       of a change in accounting per share:
         Basic                                     $ .18
         Diluted                                   $ .17
</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 period presented or of
     future operating results of the combined companies.

     Altair
     ------

     On October 16, 2000, the Company issued 550,000 shares(after adjustment for
     the two-for-one stock split effective in November 2000) of its Common Stock
     for all the  outstanding  common  stock  of  Altair  Aerospace  Corporation
     ("Altair").  Altair designs and develops advanced  object-oriented  control
     systems software based upon a proprietary  software  engine.  This business
     combination  has  been  accounted  for  as  a   pooling-of-interests   and,
     accordingly,  for  all  periods  prior  to the  business  combination,  the
     Company's historical  consolidated  financial statements have been restated
     to include the accounts and results of operations  of Altair.  The acquired
     company's  net sales were  approximately  $3.0  million  for the year ended
     December 31, 2000.

                                      -12-
<PAGE>
     For  periods   preceding  the  combination,   there  were  no  intercompany
     transactions  which  required  elimination  from the combined  consolidated
     results of operations  and there were no  adjustments  necessary to conform
     the accounting practices of the two companies.

     Amplicomm
     ---------

     Effective  September 7, 2000, Aeroflex  Amplicomm,  Inc.  ("Amplicomm") was
     formed as a wholly-owned  subsidiary of the Company. On September 20, 2000,
     Amplicomm acquired certain equipment and intellectual property from a third
     party for approximately  $300,000,  entered into employment agreements with
     this third  party's  former owners and issued 25% of the stock of Amplicomm
     to  them.  Amplicomm  designs  and  develops  fiber  optic  amplifiers  and
     modulator drivers used by manufacturers of advanced fiber optic systems. On
     a pro forma  basis,  had the  Amplicomm  acquisition  taken place as of the
     beginning of the periods presented, results of operations for those periods
     would not have been materially affected.

4.   Earnings Per Share
     ------------------

     In accordance with SFAS 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.

     A  reconciliation  of the numerators and  denominators of the Basic EPS and
     Diluted EPS calculations is as follows:
<TABLE>
<CAPTION>
                                                  Six Months
                                              Ended December 31,
                                              -----------------
                                              2001          2000
                                              ----          ----
                                       (In thousands, except per share data)
<S>                                         <C>           <C>

Income before cumulative effect
  of a change in accounting                 $   617       $ 10,714
Cumulative effect of a change in
  accounting, net of tax                       -               132
                                            -------       --------

Net income                                  $   617       $ 10,846
                                            =======       ========
Computation of Adjusted Weighted
  Average Shares Outstanding:
Weighted average shares outstanding          59,844         57,136
Add: Effect of dilutive options and
  warrants outstanding                        1,927          3,672
                                            -------       --------
Weighted average shares and common
  share equivalents used for computation
  of diluted earnings per common share       61,771         60,808
                                            =======       ========
Income per share - Basic:
  Income before cumulative effect             $ .01          $ .19
  Cumulative effect of a change in
    accounting                                  -              -
                                            -------       --------
  Net income                                  $ .01          $ .19
                                            =======       ========
Income per share - Diluted:
  Income before cumulative effect             $ .01          $ .18
  Cumulative effect of a change in
    accounting                                  -              -
                                            -------       --------
  Net income                                  $ .01          $ .18
                                            =======       ========
</TABLE>
                                     -13-
<PAGE>
<TABLE>
<CAPTION>
                                                 Three Months
                                              Ended December 31,
                                              ------------------
                                              2001          2000
                                              ----          ----
                                       (In thousands, except per share data)
<S>                                         <C>           <C>
Net income                                  $ 1,289       $ 5,625
                                            =======       =======
Computation of Adjusted Weighted
  Average Shares Outstanding:
Weighted average shares outstanding          59,900        57,658
Add: Effect of dilutive options and
  warrants outstanding                        2,542         3,943
                                            -------       -------
Weighted average shares and common
  share equivalents used for computation
  of diluted earnings per common share       62,442        61,601
                                            =======       =======
Net Income Per Share - Basic                 $ .02         $ .10
                                             ======        =====
                     - Diluted               $ .02         $ .09
                                             ======        =====
</TABLE>


     Stock Split
     -----------

     On  November  2,  2000,  the  Company's  Board of  Directors  authorized  a
     two-for-one stock split of the Common Stock,  effective  November 16, 2000.
     The share and per share amounts in these consolidated  financial statements
     give effect to the stock split.

5.   Comprehensive Income
     --------------------

     The components of comprehensive income are as follows:
<TABLE>
<CAPTION>
                                      Six Months                Three Months
                                   Ended December 31,         Ended December 31,
                                   ------------------         ------------------
                                    2001        2000          2001        2000
                                    ----        ----          ----        ----
                                                 (In thousands)
     <S>                           <C>         <C>         <C>          <C>
     Net income                    $   617     $10,846     $ 1,289      $ 5,625

     Unrealized gain (loss) on
       interest rate swap
       agreements, net of tax          (73)        (26)         52          (86)

     Unrealized investment
       gain (loss), net of tax          (5)        (71)        (11)         (25)

     Foreign currency
       translation adjustment           89         (42)        (44)           4
                                   -------     -------     -------      -------
     Total comprehensive income    $   628     $10,707     $ 1,286      $ 5,518
                                   =======     =======     =======      =======
</TABLE>
                                     -14-
<PAGE>

6.   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  provided 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 loan facility  expires in
     December  2002.  The term loan was fully  paid with the  proceeds  from the
     Company's  sale of its  Common  Stock in May  2000.  The  interest  rate on
     borrowings  under this agreement is at various rates depending upon certain
     financial ratios,  with the current rate substantially  equivalent to prime
     (4.75% at  December  31,  2001) on the  revolving  credit  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 fair market value of the interest  rate swap  agreement was $177,000 as
     of December 31, 2001 in favor of the banks.

     The terms of the loan 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  of $2.0  million.  At
     December  31,  2001,  the  Company's  available  unused  line of credit was
     approximately  $20.0 million after  consideration of this and other letters
     of credit.

7.   Inventories
     -----------

     Inventories, net, consist of the following:
<TABLE>
<CAPTION>
                                     December 31,        June 30,
                                        2001              2001
                                     -----------         --------
                                             (In thousands)
                    <S>               <C>                <C>
                    Raw Materials     $ 26,964           $ 28,999
                    Work in Process     16,557             13,071
                    Finished Goods       6,259              6,353
                                      --------           --------
                                      $ 49,780           $ 48,423
                                      ========           ========
</TABLE>
8.   Income Taxes
     ------------

     The Company is undergoing  routine audits by various taxing  authorities of
     several of its Federal and state income tax returns  covering  periods from
     1997 to 2000.  Management  believes  that  the  probable  outcome  of these
     various  audits should not  materially  affect the  consolidated  financial
     statements of the Company.

     The  Company  recorded  credits  of  $1.0  million  and  $17.5  million  to
     additional  paid- in capital  during the six months ended December 31, 2001
     and 2000,  respectively,  in  connection  with the tax  benefit  related to
     compensation deductions on the exercise of stock options.

 9.  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


                                     -15-
<PAGE>
     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.

10.  Business Segments
     -----------------

     The  Company's  business  segments  and  major  products  included  in each
     segment, are as follows:

     Microelectronic Solutions:              Test Solutions:
     a)Microelectronic Modules               a)Instrument Products
     b)Thin Film Interconnects               b)Motion Control Systems
     c)Integrated Circuits

   Isolator Products
<TABLE>
<CAPTION>
                                                      For The Six Months Ended
                                                             December 31,
                                                      ------------------------
     Business Segment Data:                              2001             2000
                                                         ----             ----
                                                             (In thousands)
     <S>                                             <C>                <C>
     Net sales:
       Microelectronic Solutions                     $  48,364          $  66,716
       Test Solutions                                   29,402             33,761
       Isolator Products                                 7,925              9,099
                                                     ---------          ---------
         Net sales                                   $  85,691          $ 109,576
                                                     =========          =========
     Operating income (loss):
       Microelectronic Solutions                     $   3,630          $  16,827
       Test Solutions                                   (1,441)             2,859
       Isolator Products                                   542                897
       General corporate expenses                       (2,217)            (4,062)
                                                     ---------          ---------
                                                           514             16,521
    Acquired in-process research
      and development (1)                                 -                (1,500)
    Interest expense                                      (659)              (758)
    Other income (expense), net                          1,087              1,951
                                                     ---------          ---------
         Income before income taxes                  $     942          $  16,214
                                                     =========          =========
</TABLE>
<TABLE>
<CAPTION>
                                                    For The Three Months Ended
                                                            December 31,
                                                    --------------------------
                                                       2001               2000
                                                       ----               ----
                                                            (In thousands)
     <S>                                             <C>                <C>
     Net sales:
       Microelectronic Solutions                     $  26,151          $  34,443
       Test Solutions                                   16,467             19,617
       Isolator Products                                 3,583              4,388
                                                     ---------          ---------
         Net sales                                   $  46,201          $  58,448
                                                     =========          =========
     Operating income (loss):
       Microelectronic Solutions                     $   2,525          $   8,727
       Test Solutions                                      445              2,627
       Isolator Products                                     6                402
       General corporate expenses                       (1,201)            (2,211)
                                                     ---------          ---------
                                                         1,775              9,545
    Acquired in-process research
      and development (1)                                 -                (1,500)
    Interest expense                                      (322)              (388)
    Other income (expense), net                            511                843
                                                     ---------          ---------
         Income before income taxes                  $   1,964          $   8,500
                                                     =========          =========
<FN>
(1)  The  charge  for the  write-off  of  in-process  research  and  development
     acquired in the  purchase of RDL is allocable  fully to the Test  Solutions
     segment.
</FN>
</TABLE>
                                      -16-
<PAGE>



11.  Subsequent Event
     ----------------

In February  2002,  the Company,  pursuant to a Board of  Directors  resolution,
decided to consolidate its Texas leased thin-film manufacturing  operations into
its existing owned  facilities in Pearl River,  New York. The Company intends to
cease  manufacturing  operations  in  Texas as of March  2002  and  expects  the
consolidation   to  be  complete  by  June  2002.   In   connection   with  this
restructuring,  the  Company  expects  to report  special  charges  to  earnings
aggregating  $5.5 to $6.0  million  in the third and fourth  quarters  of fiscal
2002,  representing  costs for  write-  off of excess  equipment  and  leasehold
improvements,  buyouts of certain equipment and facility leases, payroll related
items,  inventory not compatible with the Pearl River manufacturing platform and
other related items. This amount includes  non-cash costs of approximately  $2.0
million.



                                     -17-
<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:

        --  microelectronic solutions
        --  test solutions
        --  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 Aeroflex Amplicomm, Inc., which is 75% owned by us.

     Our microelectronic solutions segment has been designing, manufacturing and
selling  state-of-the-art  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.  In September 2000, we acquired all of the operating assets of
AmpliComm, Inc., which designs and develops fiber optic amplifiers and modulator
drivers used by manufacturers of advanced fiber optic systems. In March 2001, we
acquired TriLink Communications Corp. which designs, develops,  manufactures and
markets  fiber  optic  components  for the  communications  industry,  including
Lithium Niobate modulators and optical switches.

     Our test solutions  segment consists of two divisions:  (1) instruments and
(2) motion control products, including the following product lines:

     --   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  antenna  measurement
          systems,  radar systems and satellite test systems,  which we acquired
          in January 1995;

     --   Europtest,  S.A. (France),  which we acquired  effective  September 1,
          1998.  Europtest develops and sells specialized  software-driven  test
          equipment   used   primarily   in   cellular,   satellite   and  other
          communications applications.


                                     -18-
<PAGE>


     --   Altair, which we merged with in October 2000 in a pooling-of-interests
          business   combination.   Altair   designs   and   develops   advanced
          object-oriented  control  systems  software  based upon a  proprietary
          software engine.

     --   RDL, which we acquired in October 2000.  RDL designs,  develops and --
          manufactures  advanced commercial  communications test and measurement
          products and defense subsystems.

     --   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.  Additionally,  it is engaged in
          the design,  development  and  production  of  stabilization  tracking
          devices and systems and magnetic  motors used in satellites  and other
          high reliability applications.

     Our isolator products segment has been designing, developing, manufacturing
and selling  severe  service shock and vibration  isolation  systems since 1961.
These devices are primarily  used in defense  applications.  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  and  industrial  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  generally  recognized  based  upon  shipments.   Revenues
associated   with  certain   long-term   contracts  are  recognized   under  the
units-of-delivery  method which  includes  shipments and progress  billings,  in
accordance  with  Statement of Position  81-1  "Accounting  for  Performance  of
Construction-Type and Certain Production-Type Contracts." 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  29% of our  sales for  fiscal  2001 and 33% of our sales for
fiscal 2000 were to agencies of the United States Government or to prime defense
contractors or subcontractors of the United States Government.

Six Months  Ended  December 31, 2001  Compared to Six Months Ended  December 31,
2000

     Net Sales.  Net sales  decreased  21.8% to $85.7 million for the six months
ended  December 31, 2001 from $109.6  million for the six months ended  December
31, 2000. Net sales in the microelectronic  solutions segment decreased 27.5% to
$48.4 million for the six months ended  December 31, 2001 from $66.7 million for
the six months ended  December 31, 2000 due primarily to decreased  sales volume
in thin film  interconnects  and  microelectronic  modules due to the continuing
slowdown of the fiber optics market offset,  in part, by increased  sales volume
of integrated  circuits,  primarily in the satellite  and defense  markets.  Net
sales in the test solutions segment decreased 12.9% to $29.4 million for the six
months  ended  December  31, 2001 from $33.8  million  for the six months  ended
December  31,  2000  primarily  due to lower  volume in  frequency  synthesizers
partially  offset by increased  sales volume in satellite  test  equipment.  Net
sales in the  isolator  products  segment  were $7.9  million for the six months
ended  December 31, 2001 and $9.1 million for the six months ended  December 31,
2000.



                                     -19-
<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 decreased 32.2% to $30.0
million for the six months ended  December  31, 2001 from $44.3  million for the
six months ended December 31, 2000.  Gross margin decreased to 35.0% for the six
months ended  December 31, 2001 from 40.4% for the six months ended December 31,
2000. The decreases were primarily a result of the decreased sales volume in all
segments.  The gross profit  margin also  decreased in both the  microelectronic
solutions  and test  solutions  segments  due to the fixed nature of some of the
labor and overhead costs.

     Selling,   General  and   Administrative   Costs.   Selling,   general  and
administrative costs include office and management salaries, fringe benefits and
commissions. Selling, general and administrative costs were $20.2 million (23.5%
of net sales) for the six  months  ended  December  31,  2001 and $20.3  million
(18.5% of net sales) for the six months ended December 31, 2000. The increase of
the expenses of RDL and TriLink was more than offset by lower corporate expenses
and reduced expenses at our thin film division.

     Research and  Development  Costs.  Research and  development  costs include
material, engineering labor and allocated overhead. Our self-funded research and
development  costs  increased 24.7% to $9.3 million (10.9% of net sales) for the
six months ended December 31, 2001 from $7.5 million (6.8% of net sales) for the
six months ended  December 31, 2000. The increase was primarily due to increased
efforts in the  development  of  proprietary  integrated  circuits  utilized  in
broadband communications and the addition of the expenses of RDL.

     Acquired  In-Process  Research  and  Development.  In  connection  with the
acquisition  of RDL,  Inc. in October  2000,  we  allocated  $1.5 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  research  and  development  in progress  had no  alternative  future  uses.
Accordingly,  we expensed  these  costs as of the  acquisition  date.  The value
assigned  to this  asset was  determined  by  identifying  significant  research
projects for which technological feasibility had not been established.

     Other Expense (Income).  Interest expense decreased to $659,000 for the six
months ended  December 31, 2001 from $758,000 for the six months ended  December
31, 2000,  primarily due to reduced levels of  borrowings.  Other income of $1.1
million for the six months ended  December 31, 2001  consists  primarily of $1.2
million of interest  income  offset by a $113,000  decrease in the fair value of
our  interest  rate swap  agreements.  Other  income of $2.0 million for the six
months ended December 31, 2000  consisted  primarily of $2.1 million of interest
income partially offset by a $206,000 decrease in the fair value of our interest
rate swap  agreements.  Interest  income  decreased  primarily  due to the lower
market interest rates.

     Provision  for Income  Taxes.  The income tax  provision  was  $325,000 (an
effective  income tax rate of 34.5%) for the six months ended  December 31, 2001
and $5.5  million  (an  effective  income  tax rate of 33.9%) for the six months
ended December 31, 2000.  The income tax provision 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.

                                     -20-
<PAGE>
Three Months Ended December 31, 2001 Compared to Three Months Ended December 31,
2000

     Net Sales.  Net sales decreased 21.0% to $46.2 million for the three months
ended  December 31, 2001 from $58.4 million for the three months ended  December
31, 2000. Net sales in the microelectronic  solutions segment decreased 24.1% to
$26.2  million for the three months ended  December 31, 2001 from $34.4  million
for the three months ended  December 31, 2000 due  primarily to decreased  sales
volume  in  thin  film  interconnects  and  microelectronic  modules  due to the
continuing  slowdown of the fiber optic  market  offset,  in part,  by increased
sales volume of  integrated  circuits,  primarily in the  satellite  and defense
markets.  Net  sales  in the test  solutions  segment  decreased  16.1% to $16.5
million for the three months ended  December 31, 2001 from $19.6 million for the
three months ended  December 31, 2000 primarily due to lower volume in frequency
synthesizers  partially  offset by  increased  sales  volume in  satellite  test
equipment.  Net sales in the isolator products segment were $3.6 million for the
three months ended December 31, 2001 and $4.4 million for the three months ended
December 31, 2000.

     Gross Profit.  Gross profit  decreased 31.8% to $16.9 million for the three
months  ended  December  31, 2001 from $24.8  million for the three months ended
December  31, 2000.  Gross margin  decreased to 36.7% for the three months ended
December 31, 2001 from 42.5% for the three months ended  December 31, 2000.  The
decreases were primarily a result of the decreased sales volume in all segments.
The gross profit margin also decreased in both the microelectronic solutions and
test  solutions  segments  due to the  fixed  nature  of some of the  labor  and
overhead costs.

     Selling,   General  and   Administrative   Costs.   Selling,   general  and
administrative  costs  were  $10.4  million  (22.5% of net  sales) for the three
months ended  December 31, 2001 and $10.8  million  (18.5% of net sales) for the
three  months ended  December 31, 2000.  The addition of the expenses of TriLink
was more than offset by lower  corporate  expenses  and reduced  expenses at our
thin-film division.

     Research and Development  Costs.  Our self-funded  research and development
costs  increased  7.3% to $4.8 million (10.3% of net sales) for the three months
ended  December  31,  2001 from $4.5  million  (7.6% of net sales) for the three
months  ended  December 31, 2000.  The increase was  primarily  due to increased
efforts in the  development  of  proprietary  integrated  circuits  utilized  in
broadband communications.

     Acquired  In-Process  Research  and  Development.  In  connection  with the
acquisition  of RDL,  Inc. in October  2000,  we  allocated  $1.5 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  research  and  development  in progress  had no  alternative  future  uses.
Accordingly,  we expensed  these  costs as of the  acquisition  date.  The value
assigned  to this  asset was  determined  by  identifying  significant  research
projects for which technological feasibility had not been established.

     Other  Expense  (Income).  Interest  expense  decreased to $322,000 for the
three  months ended  December 31, 2001 from  $388,000 for the three months ended
December 31, 2000,  primarily due to reduced levels of borrowings.  Other income
of $511,000 for the three months ended  December 31, 2001 consists  primarily of
$406,000  of  interest  income and an $85,000  increase in the fair value of our
interest  rate swap  agreements.  Other  income of $843,000 for the three months
ended  December  31, 2000  consisted  primarily  of $960,000 of interest  income
offset  by a  $133,000  decrease  in the fair  value of our  interest  rate swap
agreements. Interest income decreased primarily due to the lower market interest
rates.

                                     -21-
<PAGE>
     Provision  for Income  Taxes.  The income tax  provision  was  $675,000 (an
effective income tax rate of 34.4%) for the three months ended December 31, 2001
and $2.9  million (an  effective  income tax rate of 33.8%) for the three months
ended December 31, 2000.  The income tax provision 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 December  31, 2001,  we had $158.4  million in working  capital.  Our
current  ratio was 7.1 to 1 at December  31, 2001.  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 provided 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 loan facility expires
in  December  2002.  The term loan was fully paid in May 2000 with the  proceeds
from the sale of our Common Stock.  The interest  rate on borrowings  under this
agreement is at various rates depending upon certain financial ratios,  with the
current rate  substantially  equivalent to prime (4.75% at December 31, 2001) on
the revolving credit 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 loan 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 of $2.0 million.

     Our backlog of orders was $126.9  million at  December  31, 2001 and $147.0
million at December 31, 2000.

     For the six months ended  December 31, 2001,  our  operations  used cash of
$2.3 million primarily to reduce accounts payable and accrued expenses offset in
part by collections of receivables.  For the six months ended December 31, 2001,
our investing  activities  provided cash of $3.3 million - $6.0 million from the
sale of  marketable  securities  partially  offset by $2.4  million  of  capital
expenditures.  For the  six  months  ended  December  31,  2001,  our  financing
activities  provided  cash of  $625,000  primarily  from the  exercise  of stock
options offset, in part, by debt repayments.

     We believe that existing cash, cash  equivalents and marketable  securities
coupled with  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 the foreseeable future. Our cash, cash equivalents
and marketable securities are available to fund acquisitions and other potential
large cash needs that may arise. At December 31, 2001, our available unused line
of credit was $20.0 million after consideration of letters of credit.


                                     -22-
<PAGE>
     Aggregate  long-term  debt as of December 31, 2001 matures in each calendar
year as follows:
<TABLE>
<CAPTION>

                          (In thousands)
                           ------------
             <S>            <C>
             2002           $  2,020
             2003              1,527
             2004              1,634
             2005              1,621
             2006              1,155
             Thereafter        4,607
                            --------
                            $ 12,564
                            ========
</TABLE>
     Future minimum  payments under operating leases as of December 31, 2001 are
as follows for the calendar years:
<TABLE>
<CAPTION>
                          (In thousands)
                           ------------
             <S>           <C>
             2002           $  4,398
             2003              3,545
             2004              2,418
             2005              1,645
             2006              1,063
             Thereafter        1,301
                            --------
                            $ 14,370
                            ========
</TABLE>
     In the normal course of business, the Company routinely enters into binding
and non-binding purchase obligations primarily covering anticipated purchases of
inventory and equipment. None of these obligations are individually significant.
The Company does not expect that these  commitments as of December 31, 2001 will
materially adversely affect its liquidity.

Subsequent Event

     In February 2002, the Company, pursuant to a Board of Directors resolution,
decided to consolidate its Texas leased thin-film manufacturing  operations into
its existing owned  facilities in Pearl River,  New York. The Company intends to
cease  manufacturing  operations  in  Texas as of March  2002  and  expects  the
consolidation   to  be  complete  by  June  2002.   In   connection   with  this
restructuring,  the  Company  expects  to report  special  charges  to  earnings
aggregating  $5.5 to $6.0  million  in the third and fourth  quarters  of fiscal
2002,  representing  costs for  write-off  of  excess  equipment  and  leasehold
improvements,  buyouts of certain equipment and facility leases, payroll related
items,  inventory not compatible with the Pearl River manufacturing platform and
other related items. This amount includes  non-cash costs of approximately  $2.0
million.

Market Risk

     We are exposed to market risk related to changes in interest  rates and, to
an immaterial  extent,  foreign currency  exchange rates. Most of 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 fixed rate
debt.  Therefore,  if  market  interest  rates  increase  by 10% from  levels at
December  31,  2001,  the  effect  on our net  income  would be a  reduction  of
approximately  $84,000  per  year.  Most of our  invested  cash  and  marketable
securities are at variable rates of interest.  If market interest rates decrease
by 10% from levels at December 31, 2001, the effect on our net income would be a
reduction of approximately $110,000 per year.


                                     -23-
<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. We undertake no
obligation to update such  forward-looking  statements  which are made as of the
date of this Report.



                                     -24-
<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

            None

       (b)  Reports on Form 8-K

            None


                                      -25-
<PAGE>


                                   SIGNATURES
                                   ----------

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



                                        AEROFLEX INCORPORATED
                                             (REGISTRANT)



February 14, 2002                By: s/Michael Gorin
                                     --------------------------------
                                       Michael Gorin
                                   President, Chief Financial Officer
                                     and Principal Accounting Officer




                                      -26-