<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549

                                  FORM 10-KSB


               Annual Report Pursuant to Section 13 or 15 (d) of
                      The Securities Exchange Act of 1934

For Fiscal Year Ended                             Commission File Number
December 31, 1997                                       0-4671

                               ISOMET CORPORATION
                               ------------------
                                        
State of Incorporation                          IRS Employer Identification
   New Jersey                                           No. 22-1591074

                     Address of Principal Executive Offices
                              5263 Port Royal Road
                          Springfield, Virginia 22151

                   Company's Telephone Number: (703) 321-8301

          Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

          Securities Registered Pursuant to Section 12(g) of the Act:

                          Common Stock Par Value $1.00

             1,909,090 Shares Were Outstanding on January 31, 1998

Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during
the preceeding 12 months (or for such shorter period the Company was required to
file such report(s)), and (2) has been subject to such filing requirements for
the past ninety (90) days.  Yes  X   No 
                               -----   -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation SB is not contained herein and will not be contained, to the best
of registrant knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. (X)

On January 31, 1998 the approximate aggregate market value of the voting stock
held by non-affiliates of the Company was $6,019,000.
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                                   SIGNATURES


     Pursuant to the requirement of The Securities and Exchange Act of 1934, the
Registrant has duly caused this Annual Report to be signed on it's behalf by the
undersigned thereunto duly authorized.



     _________________________
     ISOMET CORPORATION
     (Registrant)



Date:     April 24, 1998        By:  /S/ Jerry W. Rayburn
     -------------------           ----------------------
                                   Jerry W. Rayburn
                                   Executive Vice President, Finance
                                   and Treasurer and Director



     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 27th day of March 1998.

<TABLE>
<CAPTION>
 
 
/S/  Henry Zenzie    /S/  Leon Bademian  /S/  Lee R. Marks
-------------------  ------------------  -----------------
<S>                  <C>                 <C>
Henry Zenzie         Leon Bademian       Lee R. Marks
Director             Director            Director
 
</TABLE>

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