<PAGE>
 
                                   FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

 [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
       
                        Commission File Number  0-21838

                       INDUSTRIAL SCIENTIFIC CORPORATION
            (Exact name of registrant as specified in its charter)
 
             PENNSYLVANIA                               25-1481281
   (State or other jurisdiction of                  (I.R.S. Employer
    incorporation or organization)                 Identification No.)
 
   1001 Oakdale Road, Oakdale, PA                         15071
   (Address of principal executive offices)             (Zip Code)
 
      (Registrant's telephone number, including area code):  412-788-4353

          Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $.01 per share
                              (Title of Class)

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 (or for such shorter period that the registrant was
required  to file such reports), and (2)  has been subject to such filing
requirements for the past 90 days.    Yes [X]   No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

As of April 16, 1998, there were 3,376,307 shares of Common Stock, par value
$.01 per share of the Registrant outstanding.  The aggregate market value of
such shares, other than shares held by persons who may be deemed affiliates of
the Registrant, was $20,396,208 based on the closing sales price reported on
Nasdaq National Market for April 16, 1998.
 
Documents Incorporated by Reference.

Portions of the 1997 Annual Report to Shareholders are incorporated by reference
into Part II and Part IV hereof.

Portions of the Proxy Statement for the 1997 Annual Meeting of Shareholders are
incorporated by reference into Part III hereof.

Portions of the Registrants Registration Statement No. 33-63182 on Form S-1 are
incorporated by reference into Part IV hereof.
<PAGE>
 
                                    PART I.

ITEM 1.   BUSINESS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

The statements contained in this Annual Report on Form 10-K, specifically those
contained in Item 1 "Business" and Item 7 "Management's Discussion and Analysis
of Financial Condition and Results of Operation," and statements incorporated by
reference into this Form 10-K from the 1997 Annual Report to Shareholders, along
with statements in other reports filed with the Securities and Exchange
Commission, external documents and oral presentations, which are not historical
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended.  These forward-looking statements represent Industrial
Scientific Corporation's (the "Company") present expectations or beliefs
concerning future events.  The Company cautions that such statements are
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements.  Results actually
achieved may differ materially from expected results included in these
statements.  Those factors which specifically related to the Company's business
include the following:  rapid technological change along with the need to
continually develop new products; risks of product liability claims;
competition; dependence on key employees; management of Company's growth;
dependence on certain customers; dependence on one key supplier for toxic and
oxygen sensors; proprietary rights and risks of third party claims of
infringement; government regulation and risks associated with international
business operations, including foreign currency fluctuations, tariffs, trade
barriers, foreign taxes, repatriation of earnings and the burden of complying
with foreign laws and regulations.

Overview

Industrial Scientific Corporation designs, manufactures, markets, and services
instruments for detecting, measuring and monitoring a wide variety of gases,
including toxic and combustible gases and oxygen, to protect and preserve human
life.  The Company's gas monitoring instruments are used by individuals for
safety and industrial hygiene purposes in many different industries, often in
confined spaces posing risks of asphyxiation, poisoning and explosion.  Each
instrument detects, measures and monitors gases singly or in combination,
including oxygen, carbon monoxide, hydrogen sulfide, chlorine, nitrogen dioxide,
sulfur dioxide and flammable hydrocarbons such as methane (natural gas), hexane
and propane.  The Company also manufactures and markets various instrument
accessories such as sampling pumps, external warning devices and battery
chargers.

Industrial Scientific Corporation was incorporated in Pennsylvania in 1985.  Its
principal offices are located at 1001 Oakdale Road, Oakdale, Pennsylvania,
15071.  Its telephone number is 412-788-4353.

                                       1
<PAGE>
 
Gas Monitoring Instruments

The Company manufactures gas monitoring instruments ranging from single-gas to
four-gas portable monitors.  All but two of the Company's instruments
continuously monitor, rather than spot-check, gases during their period of use.
Audible and visual alarms are included in each instrument and are activated if
gases reach specified limits.  The Company's instruments are designed for
ruggedness and shock resistance.  In addition, the instruments are designed to
eliminate erratic readings and false alarms from radio frequency interference
("RFI").  All of the instruments are designed to function for at least an entire
10-hour shift without battery recharging or replacement.  Generally, single-gas
toxic or oxygen monitors use alkaline batteries which last from 1,300 to 2,400
hours.  Combustible gas monitors, which require higher power, generally have
rechargeable battery packs.  Multiple-gas monitors also generally use
rechargeable battery packs since combustible gas sensors are commonly included
in these monitors.  Accurate measurement of gas concentrations is a basic
requirement of gas monitors.  The Company's products combine sensors with
proprietary circuitry designed by the Company for accurate and consistent
performance across a broad range of temperatures and humidities.

The Company also sells replacement sensors, other replacement parts and a full
line of accessories for its gas monitoring instruments.  These accessories
include sampling pumps and probes (for remote monitoring prior to entry),
battery chargers, carrying cases, calibration kits and gases and external alarm
devices.  Sales of gas monitoring instruments, accessories, replacement parts
and service accounted for 97%, 97% and 98% of the Company's net sales for fiscal
years 1995, 1996, and 1997.

Other Products
 
In addition to its gas monitoring instruments and accessories, the Company
manufactures and sells Lifeline--air filtration and monitoring products which
filter compressed air and monitor carbon monoxide levels; conveyor belt fire
detection systems for unmanned areas in coal mines; water deluge systems
triggered by heat sensors; and carbon monitoring systems for enclosed areas such
as coal preparation storage areas, parking garages and motor pools.  Sales of
these products accounted for 3%, 3% and 2% of the Company's net sales for fiscal
years 1995, 1996, and 1997.
 
Recent Acquisitions

In 1997, the Company invested $350,000 in HEG Industrial Scientific Company
Limited to establish a joint venture in Harbin, China.  This joint venture will
design, manufacture and sell gas monitoring products for the Chinese market.
This investment is accounted for using the equity method.

In February 1996, the Company invested $267,000 in Industrial Scientific Arabia
Limited, a joint venture with a Saudi Arabian partner.  This joint venture
provides service and promotes the sale of the Company's products throughout the
middle east.  This investment is accounted for using the equity method.

                                       2
<PAGE>
 
In October 1996, the Company acquired all of the gas monitoring systems products
manufactured by McNeill International.  The acquisition was accounted for as a
purchase and, accordingly, the purchase price has been allocated to the
respective assets acquired based on their estimated fair market values as of the
date of the acquisition.  The acquisition resulted in intangible assets of
$310,000 consisting principally of drawings, kits and software.

Marketing, Sales and Distribution

The Company's products are primarily sold through a network of independent
distributors.  The Company has 27 regional sales managers located throughout the
United States, Canada, Europe, the Middle East, and Pacific Rim to support these
distributors.  At its corporate headquarters, the Company has 24 sales and
customer service representatives who support distribution and 22 employees
dedicated to prompt product service and repair.  The Company's sales and
marketing efforts include advertising, product management, training, customer
service and sales functions.

The Company continues to concentrate on international sales growth and expects
that foreign sales will continue to contribute significantly to the Company's
revenues.  International sales accounted for approximately 13%, 20%, and 21% of
net sales for fiscal years 1995, 1996, and 1997, respectively. The Company has a
Managing Director located in Sydney, Australia, three regional sales managers
located in Canada, a regional sales manager in the Netherlands, eighteen full
time employees working at its Industrial Scientific Arabia, Ltd. joint venture
in the Middle East, approximately fifteen employees working on the establishment
of a manufacturing and distribution facility at its HEG Industrial Scientific
Limited joint venture in Harbin, China, and an international sales manager and
two sales coordinators located at corporate headquarters who support foreign
distribution and concentrate on international sales growth.
 
The Company's five largest distributors accounted for approximately 56%, 48%,
and 51% of net sales for fiscal years 1995, 1996, and 1997, respectively.  Of
these five, Vallen Safety Supply Company, which comprised approximately 21% and
26% of sales in fiscal 1996 and 1997, is based in Houston, Texas and specializes
in the distribution of safety products.

The Company advertises extensively in trade journals and provides extensive
training materials, including videotapes, on the use and maintenance of its
products.  The Company's representatives call on customers directly and with
distributor representatives.  Additionally, the Company exhibits at most major
trade shows in the United States and Canada which emphasize safety, industrial
hygiene and environmental issues.

Research, Development and Engineering

The Company conducts research, development and engineering for existing and new
products at its primary facility near Pittsburgh, Pennsylvania.  The Company
spent approximately $2.4 million, $3.0 million, and $2.7 million for research
and development in fiscal years 1995, 1996, and 1997, respectively, representing
7.0%, 8.3%, and 6.7% of net sales in such fiscal years.

                                       3
<PAGE>
 
In 1997, the Company introduced three new portable gas monitoring instruments
and several fixed systems.  The T80 Single Gas Monitor has six interchangeable
'smart' sensors and is capable of 4,400 hours of continuous operation.  The
ATX612 Multi-Gas Aspirated Monitor offers continuous monitoring of up to four
gases and datalogging for up to 110 hours of data storage and industrial hygiene
functions.  The ATX620 Multi-Gas Utility Monitor has patented Infared Methane
detection for monitoring three levels of combustible gas, one toxic gas plus
oxygen, and datalogging for 60 hours of survey data.

In 1997, the Company sold Monitor Group, a developer of portable mass
spectrometers which had been acquired by the Company in June 1995.

Raw Materials and Supplies

With the exception of toxic gas and oxygen sensors, the materials and supplies
used to produce the Company's products are generally available from several
suppliers.  Since 1988, the Company has purchased all of its toxic gas and
oxygen sensors from a single supplier.  The Company believes that its
relationship with this supplier is good and has not experienced any difficulties
in obtaining sensors or any other materials and supplies needed to produce its
products.

Competition

The market for gas detection and monitoring instruments is highly competitive.
The Company is in competition with many small and large enterprises.  Some of
the Company's competitors are subsidiaries or divisions of larger corporations
that have substantially greater financial resources than the Company.  The
Company believes that the principal competitive factors in all markets for its
products are the performance and reliability of products and service, product
size, technical features and price.

Patents, Trademarks and Licenses

The Company relies primarily upon trade secret laws and confidentiality
agreements with its employees, suppliers and other third parties to protect the
Company's proprietary technology and other information.  Although the Company
does not deem patents to be critical to its ability to compete, when in its best
interests, the Company seeks patent protection for certain of its products.

Regulatory Matters

The Company's products are subject to regulation by, among other governmental
entities, the federal Mine Safety and Health Administration and, to a lesser
extent, corresponding foreign agencies.  In order to ensure that products
distributed for use in the mining industry in the United States are safe and
effective, MSHA regulates the introduction, manufacture, servicing, labeling,
distribution of and record-keeping for such products.

                                       4
<PAGE>
 
In manufacturing its products, the Company must comply with applicable safety
regulations and is subject to various record-keeping requirements and to
inspections.  Certain of these agencies conduct periodic inspections of the
Company's facilities.  The Company has satisfactorily passed each of its
inspections and believes that its manufacturing, documentation and quality
control procedures meet the requirements of these regulations.  If any of these
regulatory agencies were to determine that the Company's products were not
manufactured in accordance with applicable regulations, they would have the
authority, in addition to less drastic remedies, to order the Company to cease
distributing its products to the affected group of customers.

Environmental Matters

The Company is subject to various environmental laws and regulations pertaining
to the storage and handling of materials, the management and disposal of solid
wastes and emissions or discharges from its operations.  The Company believes
that its current operations are in material compliance with all currently
applicable environmental laws and regulations.  There are no current legal
proceedings or expenditures for environmental compliance which would at present
have an expected material adverse effect on the Company.
 
Employees

As of April 16, 1998, the Company had 215 employees.

ITEM 2.    PROPERTIES

The Company owns a 52,000 square foot corporate headquarters and manufacturing
facility in Oakdale, Pennsylvania near Pittsburgh.  Manufacturing and related
support departments occupy approximately 26,000 square feet in this facility,
with the remaining 26,000 square feet devoted to research and development,
engineering, sales and administration.  The Company also owns a 25,000 square
foot manufacturing, service and distribution facility approximately 1/8th of a
mile from its corporate headquarters, in which metalworking, service and repair,
warehousing and shipping and receiving operations are located.

ITEM 3.   LEGAL PROCEEDINGS
 
There are currently no outstanding or pending material legal proceedings with
respect to the Company or its business.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF
          SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during the
fourth quarter of Fiscal year 1997.

                                       5
<PAGE>
 
ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages, positions and areas of responsibility of the executive officers
of the Registrant as of January 31, 1998, are listed below:

Kent D. McElhattan, age 49, has been a Director, President and Chief Executive
Officer of the Company since January, 1985.  Prior to 1985, he was Vice
President and General Manager of the Industrial Safety Division of National Mine
Service Company, the predecessor to the Company.

James P. Hart, age 43, has been Vice President and Chief Financial Officer since
August 1994.  Between 1985 and August 1994 he was Treasurer and Corporate
Controller.  Prior to 1985, he was Controller of the Industrial Safety Division
of National Mine Service Company, the predecessor to the Company.

Garth F. Miller, age 41, has been Vice President of Sales and Service since
August 1994.  Between 1985 and August 1994 he was Manager of Sales and Manager
of Engineering.  Prior to 1985, he was Sales Engineer of the Industrial Safety
Division of National Mine Service Company, the predecessor to the Company.


Part II.

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY
          AND RELATED STOCKHOLDER MATTERS

The information required by this item is set forth on page 22 of the 1997 Annual
Report to Shareholders under the caption "Market for the Company's Common Stock"
and is incorporated herein by reference.

ITEM 6.   SELECTED FINANCIAL DATA

The information required by this item is set forth on page 3 of the Company's
1997 Annual Report to Shareholders under the caption "Selected Financial Data"
and is incorporated herein by reference.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS
 
The information required by this item is set forth on pages 8 through 9 of the
Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.


                                       6
<PAGE>
 
ITEM 8.   FINANCIAL STATEMENTS

The Company's consolidated financial statements, the notes thereto and the
report of the independent accountants are set forth on pages 10 through 20 of
the Company's 1997 Annual Report and are incorporated herein by reference.

ITEM 9.   CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE

Not applicable.


                           PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding Directors is contained under the caption "Elections Of
Directors" of the Registrant's definitive Proxy Statement for the Annual Meeting
of shareholders on June 10, 1998 (the Proxy Statement) and is incorporated
herein by reference.
 
The information regarding executive officers is set forth in Part 1, Item 4A
under "Executive Officers of the Registrant."  Item 405 of Regulation S-K calls
for disclosure of any known late filings or failure by an insider to file a
report required by Section 16 of the Exchange Act.  The information with respect
to this item is contained under caption "Section 16(a) Beneficial Ownership
Reporting Compliance" of the Proxy Statement and is incorporated herein by
reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information required by this item is contained under the caption "Executive
Compensation" of the Proxy Statement and is incorporated by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

The information required by this item is contained under the caption "Beneficial
Ownership Of Equity Securities" of the Proxy Statement and is incorporated
herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is contained under the caption "Certain
Relationships And Related Transactions" of the Proxy Statement and is
incorporated herein by reference.

                                       7
<PAGE>
 
                          PART IV.


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
          REPORTS ON FORM 8-K
 
(a)  1. Financial Statements:  The following consolidated financial statements
of the registrant are filed pursuant to Item 8 of this form 10-K and are
incorporated herein by reference to the page numbers indicated below in the 1997
Annual Report to Shareholders which accompanies this report.

<TABLE>
<CAPTION>
 
Description                                                                   Page No.
----------------------------------------------------------------------------  --------
<S>                                                                           <C>
 
Consolidated Statement of Income  -  Fiscal Years Ended
January 31, 1998, January 25, 1997, and January 27, 1996                         10
                                                                               
Consolidated Statement of Changes in Shareholders' Equity  -  Fiscal Years     
Ended January 31, 1998, January 25, 1997, and January 27, 1996                   10
                                                                               
Consolidated Balance Sheet - January 31, 1998, and January 25, 1997              11
                                                                               
Consolidated Statement of Cash Flows  -  Fiscal Years Ended                    
January 31, 1998, January 25, 1997, and January 27, 1996                         12
                                                                               
Notes to Consolidated Financial Statements                                       13
                                                                               
Report of Independent Accountants                                                21
 
</TABLE>

2.  Financial Statement Schedules:  Financial statement schedules have been
omitted for the reason that the information is not required or is otherwise
given in the consolidated financial statements and notes thereto.


                                       8
<PAGE>
 
3.  Exhibits:

<TABLE>
<CAPTION>
Exhibit No.
----------
<S>             <C>                         <C>             
3.01             Amended and Restated        Filed herewith.
                 Articles of
                 Incorporation of
                 Corporation
                 Industrial Scientific
          
3.02             By-laws of the Company      Incorporated herein by
                                             reference is Exhibit 3.02
                                             to the Form S-1.
          
4.01             Form of Stock Certificate   Incorporated herein by
                                             reference is Exhibit 4.01
                                             to the Form S-1.
          
 10.01        *  Employment Agreement,       Incorporated herein by reference 
                 dated January 25, 1985,     is Exhibit 10.01 to the Form S-1.
                 between the Company and                                            
                 Kent D. McElhattan
          
10.02         *  Employment Agreement,       Incorporated herein by
                 dated January               reference is
                 25, 1985, between the       Exhibit 10.02 to the
                 Company and                 Form S-1.
                 James P. Hart
          
10.03         *  1993 Stock Option Plan      Incorporated herein by reference is
                                             Exhibit 10.03 to the Form S-1.
          
10.04            PEDFA Loan Documents        Incorporated herein by reference is
                 dated as of February 1,     Exhibit 10.04 to the Form S-1.
                 1993, relating to the 
                 $4,200,000 PEDFA bond
                 financing
          
10.05            Documents relating to the   Incorporated herein by
                 $2,000,000                  reference is
                 PIDA financing              Exhibit 10.05 to the
                                             Form S-1.
          
10.06            License Agreement           Incorporated herein by 
                 relating to toxic           reference is Exhibit 10.06 
                 gas sensor technology       to the Form S-1.
                 dated as of
                 November 19, 1991
          
10.07            Distribution Agreement      Incorporated herein by
                 between the                 reference is
                 Company and Vallen Safety   Exhibit 10.07 to the
                 Supply as amended as        Form S-1.
                 of November 17, 1989
</TABLE>

*  -  Indicates management contract or compensatory plan, contract or
arrangement.


                                9
<PAGE>
 
<TABLE>
<S>             <C>                          <C>
10.08            Resolutions of the Board    Incorporated herein by reference
                 of Directors from a         is Exhibit 10.08 to the 1995 Form
                 meeting held on August 10,  10-K.
                 1988, as amended on March
                 10, 1993 and June 8, 1994,  
                 setting forth the terms
                 of the President's
                 Incentive Plan

10.09*           Unanimous Consent of the    Incorporated herein by reference
                 Board of Directors dated    is Exhibit 10.09 to the 1995 Form
                 April 14, 1992, as          10-K.
                 amended on January 27,
                 1995, setting forth the
                 terms of the Key Managers'
                 Performance Incentive Plan

10.10*           Employment Agreement, dated  Incorporated herein by reference is
                 January 25, 1985, between    Exhibit 10.10 to the 1995 Form 10-K.
                 the Company and Garth F.
                 Miller
 
13.01            1997 Annual Report to        Filed herewith.
                 Shareholders
 
21.01            List of Subsidiaries of the  Incorporated herein by reference is
                 Company                      Exhibit 21.01 to the Form S-1.
 
23.01            Consent of Independent       Filed herewith.
                 Certified Public
                 Accountants
 
27.0             Financial Data Schedule      Filed herewith.
</TABLE>

b)  Reports on Form 8-K:  No reports on Form 8-K were filed by the Company
during the fiscal year ended January 31, 1998.

*  -  Indicates management contract or compensatory plan, contract or
      arrangement.

                                10
<PAGE>
 
                          SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

               INDUSTRIAL SCIENTIFIC CORPORATION AND SUBSIDIARIES

April 28, 1998                   /s/ Kent D. McElhattan
                          -------------------------------------
                                   Kent D. McElhattan
                          President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities on the dates indicated.

<TABLE> 
<CAPTION> 
Signature                             Title                    Date
---------                             -----                    ----
<S>                            <C>                        <C> 
/s/  Kenton E. McElhattan       Director and               April 28, 1998
---------------------------     Chairman of the Board
Kenton E. McElhattan        


/s/  Kent D. McElhattan         President, Chief          April 28, 1998
----------------------------    Executive Officer, 
Kent D. McElhattan              Director 
 
/s/  James P. Hart              Vice President and        April 28, 1998
-------------------------       Chief Financial Officer
James P. Hart              
 
/s/  Herbert F. Gerhard         Director                  April 28, 1998
-------------------------
Herbert F. Gerhard
 
/s/  Donald J. McGraw           Director                  April 28, 1998
-------------------------
Donald J. McGraw

/s/  James D. Morton            Director                  April 28, 1998
-----------------------------                                        
James D. Morton


/s/  Thomas M. Thompson         Director                  April 28, 1998
------------------------                                             
Thomas M. Thompson

</TABLE> 

                                      11