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

                                    ---------

                                    FORM 10-Q



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

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


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

                              AEROFLEX INCORPORATED


             (Exact name of Registrant as specified in its Charter)

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

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

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


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

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

May 11, 1998         17,358,437 shares (excluding 1,092 shares held in treasury)
--------------------------------------------------------------------------------
   (Date)                                 (Number of Shares)

           NOTE: THIS IS PAGE 1 OF A DOCUMENT CONSISTING OF 16 PAGES.
<PAGE>
                              AEROFLEX INCORPORATED

                                AND SUBSIDIARIES


                                      INDEX
                                      -----  

                                                              PAGE
                                                              ----
PART I:  FINANCIAL INFORMATION
------   ---------------------
CONSOLIDATED BALANCE SHEETS
 March 31, 1998 and June 30, 1997                              3-4

CONSOLIDATED STATEMENTS OF OPERATIONS
 Nine Months Ended March 31, 1998 and 1997                      5

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

CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended March 31, 1998 and 1997                      7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                     8-10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS
    Nine and Three Months Ended March 31, 1998 and 1997       11-14

PART II:  OTHER INFORMATION
-------   -----------------
ITEM 6 Exhibits and Reports on Form 8-K                        15

SIGNATURES                                                     16

                                -2-
<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                             March 31,          June 30,
                                               1998               1997
                                             ---------------------------
                                                   (In thousands)

<S>                                           <C>               <C>
ASSETS

Current assets:
 Cash and cash equivalents                    $ 23,141          $    600
 Accounts receivable, less allowance for
   doubtful accounts of $538,000 and $417,000   19,627            21,843
 Inventories                                    29,909            20,319
  Deferred income taxes                          2,059             2,043
  Prepaid expenses and other current assets      1,415               812
                                              --------           -------
   Total current assets                         76,151            45,617

Property, plant and equipment, at cost, net     22,913            14,487
Intangible assets acquired in connection with
  the purchase of businesses, net                7,770             8,046
Cost in excess of fair value of net assets
  of businesses acquired, net                    9,910             9,903
Other assets                                     2,214             2,994
                                              --------          --------

   Total assets                               $118,958          $ 81,047
                                              ========          ========

<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>
                                    -3-
<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (continued)
<TABLE>
<CAPTION>

                                                      March 31,         June 30,
                                                        1998             1997
                                                      ---------         -------- 
                                                            (In thousands)

<S>                                                  <C>                <C>

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
  Current portion of long-term debt                  $  5,010           $  4,247
  Accounts payable                                      7,384              5,093
  Accrued expenses and other current liabilities       12,072              8,564
  Income taxes payable                                  2,126              1,841
                                                     --------           --------
    Total current liabilities                          26,592             19,745

Long-term debt                                          6,777             14,688
Deferred income taxes                                      43                334
Other long-term liabilities                             2,540              1,259
Senior subordinated convertible debentures               -                 9,981
                                                     --------           --------  
    Total liabilities                                  35,952             46,007
                                                     --------           --------  
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 150,000 shares                             -                  -
 Common Stock, par value $.10 per share;
  authorized 25,000,000 shares; issued
  17,340,000 and 12,658,000 shares                      1,734              1,266
 Additional paid-in capital                            99,966             58,110
 Accumulated deficit                                  (18,689)           (23,584)
                                                     --------           --------    
                                                       83,011             35,792

 Less:  Treasury stock, at cost (1,000 and
  169,000 shares)                                           5                752
                                                     --------           --------     
    Total stockholders' equity                         83,006             35,040
                                                     --------           --------  
    Total liabilities and stockholders' equity       $118,958           $ 81,047
                                                     ========           ========  
<FN>
               See notes to consolidated financial statements.
</FN>
</TABLE>
                                     -4-
<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                              Nine Months Ended
                                                   March  31,
                                              -----------------
                                             1998               1997
                                           --------          --------
                                    (In thousands, except per share data)

<S>                                        <C>               <C>     
Net sales                                  $ 84,431          $ 64,912
Cost of sales                                55,417            43,618
                                           --------          --------  
  Gross profit                               29,014            21,294
                                           --------          --------  
Selling, general and administrative costs    16,020            12,898
Research and development costs                3,510             2,293
                                           --------          --------  
                                             19,530            15,191
                                           --------          --------
  Operating income                            9,484             6,103
                                           --------          --------  
Other expense (income)
  Interest expense                            1,798             2,263
  Other expense (income)                         41               (71)
                                           --------          --------
  Total other expense (income)                1,839             2,192
                                           --------          --------  
Income before income taxes                    7,645             3,911

Provision for income taxes                    2,750             1,450
                                           --------          --------
Net income                                 $  4,895          $  2,461
                                           ========          ========
Net income per common share:
    -  Basic                                 $ .35             $ .20
                                             ======            ======
    -  Diluted                               $ .32             $ .19
                                             =====             ======
Weighted   average  number  of  common
 shares  and  common  share   equivalents
 outstanding:
    -  Basic                                 13,948            12,431
                                            =======           ======= 
    -  Diluted                               15,749            14,695
                                            =======           =======
<FN>
              See notes to consolidated financial statements.
</FN>
</TABLE>
                                    -5-
<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                              Three Months Ended
                                                  March  31,
                                              ------------------
                                             1998               1997
                                           --------          --------  
                                      (In thousands, except per share data)

<S>                                        <C>               <C>     
Net sales                                  $ 31,221          $ 22,937
Cost of sales                                20,338            15,178
                                           --------          --------
  Gross profit                               10,883             7,759
                                           --------          --------
Selling, general and administrative costs     5,655             4,744
Research and development costs                1,481               871
                                           --------          --------  
                                              7,136             5,615
                                           --------          --------  
  Operating income                            3,747             2,144
                                           --------          --------
Other expense (income)
  Interest expense                              548               712
  Other expense (income)                        (33)              (10)
                                           --------          --------  
  Total other expense (income)                  515               702
                                           --------          --------
Income before income taxes                    3,232             1,442

Provision for income taxes                    1,175               525
                                           --------          --------
Net income                                 $  2,057          $    917
                                           ========          ========  
Net income per common share:
    -  Basic                                 $ .14             $ .07
                                             ======            ======
    -  Diluted                               $ .13             $ .07
                                             =====             ======
Weighted   average  number  of  common
 shares  and  common  share   equivalents
 outstanding:
    -  Basic                                 14,749            12,523
                                            =======           ======= 
    -  Diluted                               16,132            14,597
                                            =======           ======= 
<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>
                                    -6-
<PAGE>


                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                           Nine Months Ended
                                                               March 31,
                                                       -------------------------
                                                          1998            1997
                                                       ---------        --------   
                                                              (In thousands)

<S>                                                     <C>             <C>
Cash Flows From Operating Activities:
 Net income                                             $  4,895        $  2,461
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
   Depreciation and amortization                           3,791           3,292
   Amortization of deferred gain                            (441)           -
   Other, net                                               (123)            (26)
 Change in operating  assets and  liabilities,
   net of effects from  purchase of business:
   Decrease (increase) in accounts receivable              2,027           5,238
   Decrease (increase) in inventories                     (8,455)         (5,197)
   Decrease (increase) in prepaid expenses, income
    tax refund receivable and other assets                  (522)            654
   Increase (decrease) in accounts payable, accrued
    expenses and other long-term liabilities               4,644          (1,095)
   Increase (decrease) in income taxes payable             1,584            (208)
                                                        --------        --------
Net Cash Provided By (Used In)
 Operating Activities                                      7,400           5,119
                                                        --------        --------
Cash Flows From Investing Activities:
  Purchase of equipment, inventory and
    technology rights from Lucent Technologies            (4,435)           -
  Capital expenditures                                    (5,710)         (2,075)
  Other, net                                                  35            (106)
                                                        --------        --------
Net Cash Provided By (Used In)
 Investing Activities                                    (10,110)         (2,181)
                                                        --------        --------
Cash Flows From Financing Activities:
  Proceeds from issuance of common shares in
    public offering                                       31,781            -
  Costs in connection with public offering                  (488)           -
  Borrowings under debt agreements                         6,232            -
  Debt repayments                                        (13,380)         (3,228)
  Proceeds from the exercise of stock options
    and warrants                                           1,106             652
  Purchase of treasury stock                                -               (437)
                                                        --------        --------
Net Cash Provided By (Used In)
 Financing Activities                                     25,251          (3,013)
                                                        --------        --------
Net Increase (Decrease) In Cash
  And Cash Equivalents                                    22,541             (75)
Cash And Cash Equivalents At Beginning Of Period             600             661
                                                        --------        --------
Cash And Cash Equivalents At End Of Period              $ 23,141        $    586
                                                        ========        ========
<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>
                                    -7-
<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 1.  Basis of Presentation
     ---------------------
     The  consolidated  balance sheet of Aeroflex  Incorporated and Subsidiaries
     ("the  Company")  as  of  March  31,  1998  and  the  related  consolidated
     statements of operations for the nine and three months ended March 31, 1998
     and 1997 and the  statements  of cash flows for the nine months ended March
     31, 1998 and 1997 have been prepared by the Company and are  unaudited.  In
     the opinion of management,  all adjustments (which include normal recurring
     adjustments) necessary to present fairly the financial position, results of
     operations  and cash flows at March 31, 1998 and for all periods  presented
     have been made.  Certain  information  and  footnote  disclosures  normally
     included in financial  statements  prepared in  accordance  with  generally
     accepted  accounting  principles  have been omitted.  It is suggested  that
     these  consolidated  financial  statements be read in conjunction  with the
     financial  statements and notes thereto  included in the Company's June 30,
     1997  annual  report  to  shareholders.  There  have  been  no  changes  of
     significant accounting policies since June 30, 1997, except as described in
     Note 3. Certain  reclassifications  have been made to  previously  reported
     financial statements to conform to current classifications.

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

 2.  Common Stock Offering
     ---------------------
     In March 1998, the Company sold  2,597,000  shares of its Common Stock in a
     public  offering  for  $31,293,000,  net  of an  underwriting  discount  of
     $1,973,000  and  issuance  costs  of  $488,000.   Of  these  net  proceeds,
     $9,639,000  was used to repay  bank  indebtedness.  The  balance of the net
     proceeds, which is included in cash and cash equivalents,  will be used for
     general   corporate   purposes,    including   working   capital,   capital
     expenditures, facilities expansion and potential acquisitions.

 3.  Earnings Per Share
     ------------------
     The Company adopted Statement of Financial  Accounting  Standards  ("SFAS")
     No. 128 "Earnings Per Share" during the quarter ended December 31, 1998. In
     accordance  with SFAS No. 128,  earnings per common share  ("Basic EPS") is
     computed by  dividing  net income by the  weighted  average  common  shares
     outstanding.  Earnings per common share,  assuming dilution ("Diluted EPS")
     is computed by dividing  net income plus a pro forma  addback of  debenture
     interest by the weighted  average common shares  outstanding plus potential
     dilution  from the  conversion  of  debentures  and the  exercise  of stock
     options and  warrants.  Earnings per share  amounts for prior  periods have
     been restated to conform to SFAS No. 128.

                                    -8-
<PAGE>
     A  reconciliation  of the numerators and  denominators of the Basic EPS and
     Diluted EPS calculations is as follows:
<TABLE>
<CAPTION>
                                                            Nine Months
                                                           Ended March 31,
                                                  -----------------------------------
                                                          1998           1997
                                                          ----           ----  
                                                 (In thousands, except per share data)
     <S>                                                 <C>            <C>
     Computation of Adjusted Net Income:
     Net income for basic earnings per common share      $  4,895       $  2,461
     Add:  Debenture interest and amortization
       expense, net of income taxes                           103            369
     Adjusted net income for diluted                     --------       --------
       earnings per common share                         $  4,998       $  2,830
     Computation of Adjusted Weighted Average            ========       ========
       Shares Outstanding:
     Weighted average shares outstanding                   13,948         12,431
     Add:  Effect of dilutive options and warrants
         outstanding                                        1,279            490
     Add:  Shares assumed to be issued upon
       conversion of debentures                               522          1,774
     Weighted average shares and common share            --------       --------   
       equivalents used for computation of
       diluted earnings per common share                   15,749         14,695
     Net Income Per Common Share:                        ========       ========   
       Basic                                               $ .35          $ .20
                                                           ======         ====== 
       Diluted                                             $ .32          $ .19
                                                           =====          ====== 
</TABLE>
<TABLE>
<CAPTION>
                                                              Three Months
                                                             Ended March 31,
                                                   -----------------------------------
                                                           1998           1997
                                                           ----           ----
                                                  (In thousands, except per share data)

     <S>                                                 <C>            <C>
     Computation of Adjusted Net Income:
     Net income for basic earnings per common share      $  2,057       $    917
     Add:  Debenture interest and amortization
       expense, net of income taxes                          -               123
     Adjusted net income for diluted
       earnings per common share                         $  2,057       $  1,040
     Computation of Adjusted Weighted Average            ========       ========   
       Shares Outstanding:
     Weighted average shares outstanding                   14,749         12,523
     Add:  Effect of dilutive options and warrants
       outstanding                                          1,383            300
     Add:  Shares assumed to be issued upon
       conversion of debentures                              -             1,774
     Weighted average shares and common share            --------       --------
       equivalents used for computation of
       diluted earnings per common share                   16,132         14,597
     Net Income Per Common Share:                        ========       ========
       Basic                                               $ .14          $ .07
                                                           ======         ====== 
       Diluted                                             $ .13          $ .07
                                                           ======         ======
</TABLE>
 4.  Acquisition of Business
     -----------------------
     Effective   July  1,  1997,  the  Company's   subsidiary,   MIC  Technology
     Corporation, acquired certain equipment, inventory, licenses for technology
     and patents of two of Lucent Technologies' microelectronics component units
     -  multi-chip  modules  and film  integrated  circuits - for  approximately
     $4,400,000 in cash.  These units  manufacture  microelectronic  modules and
     interconnect  products.  The Company has also  signed a  multi-year  supply
     agreement  to  provide  Lucent  with film  integrated  circuits  for use in
     telecommunications  applications.  The purchase price has been allocated to
     the assets acquired,  based on their fair values,  and certain  obligations
     assumed relating to the agreements.

                                       -9-
<PAGE>

 5.  Bank Loan Agreements
     --------------------
     As of March 15,  1996 the  Company  replaced  a previous  agreement  with a
     revised  revolving  credit and term loan  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
     $22,000,000  and a term loan of  $16,000,000.  The  revolving  credit  line
     expires in March 1999.  There are no borrowings under this line as of March
     31, 1998.  The term loan is payable in quarterly  installments  of $900,000
     with  final  payment on  September  30,  2000.  As of March 31,  1998,  the
     outstanding term loan was $4,720,000. The interest rate on borrowings under
     this agreement is at various rates depending upon certain financial ratios,
     with the current rate substantially equivalent to the prime rate (8-1/2% at
     March 31, 1998) plus 1/4% on the revolving credit borrowings and prime plus
     1/2% on the  term  loan  borrowings.  The  terms of the  agreement  require
     compliance with certain covenants including minimum  consolidated  tangible
     net worth and pre-tax  earnings,  maintenance of certain  financial ratios,
     limitations on capital expenditures and indebtedness and prohibition of the
     payment of cash  dividends.  Management  is in the process of amending  the
     existing  agreement to extend the term of the revolving  credit line, among
     other changes.

 6.  Inventories
     -----------
     Inventories consist of the following:
<TABLE>
<CAPTION>
                                      March 31,          June 30,
                                        1998               1997
                                      --------           --------  
                                            (In thousands)
                    <S>               <C>                <C>     
                    Raw Materials     $ 13,836           $ 11,191
                    Work in Process     11,249              6,642
                    Finished Goods       4,824              2,486
                                      --------           --------
                                      $ 29,909           $ 20,319
                                      ========           ========  
</TABLE>
 7.  Income Taxes
     ------------
     At June 30,  1997 the  Company  had net  operating  loss  carryforwards  of
     approximately  $4,000,000  for Federal  income tax  purposes  which  expire
     through 2006.

     The Company is undergoing  routine audits by various taxing  authorities of
     several  of its state and  local  income  tax  returns  covering  different
     periods from 1994 to 1996. Management believes that the probable outcome of
     these  various  audits  should  not  materially   affect  the  consolidated
     financial statements of the Company.

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

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

                                      -10-
<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview

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

   Effective July 1, 1997, the Company  acquired certain  equipment,  inventory,
licenses   for   technology   and   patents  of  two  of  Lucent   Technologies'
microelectronics   component  units,  multi-chip  modules  and  film  integrated
circuits.  These units  manufacture  microelectronic  modules  and  interconnect
products.  The Company has also signed a multi-year  supply agreement to provide
Lucent with film integrated circuits for use in the telecommunications industry.

   Approximately  50% and 65% of the  Company's  sales for fiscal years 1997 and
1996, respectively, were to agencies of the United States Government or to prime
defense  contractors  or  subcontractors  of the United States  Government.  The
Company's  overall  dependence  on the defense  market has been  declining  as a
result  of  the  acquisition  of  MIC  Technology  Corporation,  which  is  more
commercially  oriented,  and a focusing of resources towards developing standard
products for the commercial market.

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

   In June 1997, the Financial  Accounting  Standards Board issued  Statement of
Finanical  Accounting  Standards  No.  131,  "Disclosure  About  Segments  of an
Enterprise  and  Related  Information",  which is  effective  for  fiscal  years
beginning  after  December 15, 1997.  This statement  establishes  standards for
reporting  information  about operating  segments and related  disclosures about
products and services, geographic areas and major customers. The Company has not
determined  the impact that the adoption of this new  accounting  standard  will
have on its consolidated financial statement disclosures. The Company will adopt
this standard effective July 1, 1998, as required.

                                   -11-

<PAGE>
Nine Months Ended March 31, 1998 Compared to Nine Months Ended March 31, 1997

   Net Sales.  Net sales  increased  30.1% to $84.4  million for the nine months
ended  March 31, 1998 from $64.9  million  for the nine  months  ended March 31,
1997. Net sales in the Microelectronics segment increased 64.3% to $52.7 million
for the nine months ended March 31, 1998 from $32.1  million for the nine months
ended  March  31,  1997  due  to  increased  sales  volume  in  both  thin  film
interconnects  and  microelectronic  modules.  Sales of thin film  interconnects
increased  primarily due to the commencement of a strategic supply contract with
Lucent Technologies  effective July 1, 1997. Net sales in the Test,  Measurement
and Other  Electronics  segment  decreased  12.2% to $18.0  million for the nine
months  ended March 31, 1998 from $20.5  million for the nine months ended March
31, 1997 primarily as a result of reduced sales volume of frequency synthesizers
which was partially offset by increased sales of high speed instrumentation test
systems.  The  decrease  in  frequency  synthesizer  sales  was due to the early
completion  of  the  current  Consolidated  Automated  Support  System  ("CASS")
contract.  Net sales in the Isolator  Products segment  increased 11.5% to $13.7
million for the nine months ended March 31, 1998 from $12.3 million for the nine
months  ended  March  31,  1997 due to  increased  sales  volume  in each of the
commercial, industrial and military isolator product lines.

   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 36.3% to $29.0
million for the nine months ended March 31, 1998 from $21.3 million for the nine
months ended March 31, 1997. Gross margin increased to 34.4% for the nine months
ended March 31, 1998 from 32.8% for the nine months  ended March 31,  1997.  The
increase  was  primarily a result of increased  margins in the  Microelectronics
segment reflecting the greater efficiencies of higher volume.

   Selling,   General   and   Administrative   Costs.   Selling,   general   and
administrative  costs include office and management  salaries,  fringe benefits,
commissions and advertising costs.  Selling,  general and  administrative  costs
increased  24.2% to $16.0 million (19.0% of net sales) for the nine months ended
March 31, 1998 from $12.9 million (19.9% of net sales) for the nine months ended
March 31,  1997.  The  increase  was  primarily  due to labor  related  expenses
including  salaries for additional  hires,  recruitment and relocation  costs in
connection with the Company's growth.

   Research and Development  Costs.  Research and  development  costs consist of
material,  engineering labor and allocated overhead.  Company sponsored research
and  development  costs  increased 53.1% to $3.5 million (4.2% of net sales) for
the nine months ended March 31, 1998 from $2.3  million  (3.5% of net sales) for
the nine months ended March 31, 1997. The increase was primarily attributable to
the costs for  development  of a new  low-cost,  high  speed,  high  performance
frequency synthesizer intended for commercial communication test systems.

   Other Expense (Income).  Other expense decreased by 16.1% to $1.8 million for
the nine months ended March 31, 1998 from $2.2 million for the nine months ended
March 31, 1997.  Interest  expense  decreased 20.5% to $1.8 million for the nine
months  ended March 31, 1998 from $2.3  million for the nine months  ended March
31, 1997.  The decrease was primarily due to the  conversion of $10.0 million of
debentures.  Other expense included  $102,000 of debenture  redemption costs for
the nine months ended March 31, 1998.

   Provision for Income Taxes.  Income taxes  recorded by the Company  increased
89.7% to $2.8  million  (an  effective  income  tax rate of 36.0%)  for the nine
months ended March 31, 1998 from $1.5 million (an  effective  income tax rate of
37.1%) for the nine months ended March 31, 1997.  The income tax  provisions for
the two periods  differed from the amount computed by applying the U.S.  Federal
income tax rate to income before  income taxes  primarily due to state and local
income taxes.
                                   -12-

<PAGE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997

   Net Sales.  Net sales  increased  36.1% to $31.2 million for the three months
ended March 31, 1998 from $22.9  million  for the three  months  ended March 31,
1997. Net sales in the Microelectronics segment increased 64.8% to $19.6 million
for the three  months  ended  March 31,  1998 from $11.9  million  for the three
months  ended March 31,  1997 due to  increased  sales  volume in both thin film
interconnects  and  microelectronic  modules.  Sales of thin film  interconnects
increased  primarily due to the commencement of a strategic supply contract with
Lucent Technologies  effective July 1, 1997. Net sales in the Test,  Measurement
and Other  Electronics  segment  increased  1.0% to $6.7  million  for the three
months  ended March 31, 1998 from $6.6  million for the three months ended March
31, 1997. Net sales in the Isolator  Products  segment  increased  11.5% to $4.9
million for the three  months  ended  March 31,  1998 from $4.4  million for the
three  months  ended  March  31,  1997  due to  increased  sales  volume  in the
commercial and industrial product lines.

   Gross  Profit.  Gross profit  increased  40.3% to $10.9 million for the three
months  ended March 31, 1998 from $7.8  million for the three months ended March
31, 1997.  Gross margin  increased to 34.9% for the three months ended March 31,
1998 from 33.8% for the three  months  ended March 31,  1997.  The  increase was
primarily  a  result  of  increased  margins  in  the  Microelectronics  segment
reflecting the greater efficiencies of higher volume.

   Selling,   General   and   Administrative   Costs.   Selling,   general   and
administrative  costs  increased  19.2% to $5.7 million (18.1% of net sales) for
the three months ended March 31, 1998 from $4.7 million (20.7% of net sales) for
the three months ended March 31, 1997.  The increase was  primarily due to labor
related  expenses  including  salaries for  additional  hires,  recruitment  and
relocation costs in connection with the Company's growth.

   Research and Development  Costs.  Company sponsored  research and development
costs  increased  70.0% to $1.5 million (4.7% of net sales) for the three months
ended  March 31,  1998 from  $871,000  (3.8% of net sales) for the three  months
ended March 31, 1997. The increase was primarily  attributable  to the costs for
development  of  a  new  low-cost,   high  speed,  high  performance   frequency
synthesizer intended for commercial communication test systems.

   Other Expense (Income).  Other expense decreased by 26.6% to $515,000 for the
three months ended March 31, 1998 from $702,000 for the three months ended March
31,  1997.  Interest  expense  decreased  23.0% to $548,000 for the three months
ended March 31, 1998 from  $712,000  for the three  months ended March 31, 1997.
The decrease was primarily due to the conversion of $10.0 million of debentures.

   Provision for Income Taxes.  Income taxes  recorded by the Company  increased
123.8% to $1.2  million  (an  effective  income tax rate of 36.4%) for the three
months  ended  March 31, 1998 from  $525,000  (an  effective  income tax rate of
36.4%) for the three months ended March 31, 1997.  The income tax provisions for
the two quarters  differed from the amount computed by applying the U.S. Federal
income tax rate to income before  income taxes  primarily due to state and local
income taxes.
                                      -13-

<PAGE>

Liquidity and Capital Resources

     In March 1998, the Company sold  2,597,000  shares of its Common Stock in a
public offering for $31,293,000,  net of an underwriting  discount of $1,973,000
and issuance  costs of $488,000.  Of these net proceeds,  $9,639,000 was used to
repay bank indebtedness.  The balance of the net proceeds,  which is included in
cash  and  cash  equivalents,  will  be used  for  general  corporate  purposes,
including  working  capital,  capital  expenditures,  facilities  expansion  and
potential acquisitions.

     As of March 31, 1998, the Company had $49.6 million in working capital.  As
of March 15,  1996,  the Company  replaced a previous  agreement  with a revised
revolving  credit  and term loan  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 $22.0 million and a term loan
of $16.0 million. The revolving credit line expires in March 1999. The term loan
is payable in quarterly installments of $900,000 with final payment on September
30, 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 the prime rate (8-1/2% at March 31, 1998) plus 1/4%
on the  revolving  credit  borrowings  and  prime  plus  1/2% on the  term  loan
borrowings. The terms of the agreement require compliance with certain covenants
including  minimum  consolidated   tangible  net  worth  and  pre-tax  earnings,
maintenance of certain financial ratios, limitations on capital expenditures and
indebtedness  and  prohibition  of the payment of cash  dividends.  At March 31,
1998, the outstanding borrowings under the term loan were $4.7 million and there
were no  outstandings  under the  revolving  credit line.  Management  is in the
process of amending the existing  agreement to extend the term of the  revolving
credit line, among other changes.

     During June 1994, the Company  completed a sale of $10.0 million  principal
amount of 7-1/2% Senior Subordinated Convertible Debentures  ("Debentures").  On
September 8, 1997,  the Company  called for  redemption  all of its  outstanding
Debentures at 104-1/2% of the principal amount.  The Debentures were convertible
into the Company's  Common Stock at a price of $5-5/8 per share through  October
6,  1997.  As of October  1997,  all of the  principal  amount  outstanding  was
converted into Common Stock.  In connection  with the  conversions,  $599,000 of
deferred bond issuance costs were charged to additional paid-in capital.

   The Company's order backlog at March 31, 1998 and 1997 was $69.4  million and
$49.1 million, respectively.

     At June 30,  1997,  the Company had net  operating  loss  carryforwards  of
approximately $4.0 million for Federal income tax purposes.

     The Company's net cash  provided by operating  activities  was $7.4 million
for the nine months ended March 31, 1998. Net cash used in investing  activities
was $10.1 million for the nine months ended March 31, 1998, consisting primarily
of $4.4 million of cash used to purchase  equipment,  inventory  and  technology
rights from Lucent Technologies and $5.7 million for capital  expenditures.  Net
cash  provided by  financing  activities  was $25.3  million for the nine months
ended March 31, 1998  including  $31.8 million from the issuance of Common Stock
as discussed above.

     Management has initiated a company-wide  program to prepare it for the Year
2000  issue.  The  Company  expects  to incur  internal  staff  costs as well as
consulting  and other  expenses  related to Year 2000  compliance.  The  Company
believes the total costs to be incurred for all Year 2000 related  projects will
not have a material impact on the Company's business,  results of operations and
financial condition.

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

                                      -14-
<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:

                  3    - Amended By-Laws
                  10   - 1998 Stock Option Plan  
                  27.a - Financial Data Schedule
                  27.b - Restated Financial Data Schedules
                  27.c - Restated Financial Data Schedules

        (b)  Reports on Form 8-K

             None

                                      -15-
<PAGE>

                                   SIGNATURES
                                   ----------

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



                                        AEROFLEX INCORPORATED
                                             (REGISTRANT)




May 11, 1998                     By:      s/Michael Gorin
                                    --------------------------------
                                            Michael Gorin
                                   President, Chief Financial Officer
                                     and Principal Accounting Officer


                                      -16-