<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                      ****
                                  FORM 10-KSB/A
                                      ****

[X]  Annual report under Section 13 or 15(d) of the Securities Exchange Act of
     1934 for fiscal year ended August 31, 1998.


[ ]  Transition report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934. For the transition period from    to    .
Commission File Number 0-10078

                                    HEI, Inc.
                 (Name of Small Business Issuer in Its Charter)

         Minnesota                                      41-0944876
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

P.O. Box 5000, 1495 Steiger Lake Lane, Victoria, MN      55386
(Address of principal executive offices)               (Zip Code)

Issuer's telephone number, including area code:  (612) 443-2500

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

                     COMMON STOCK, PAR VALUE $.05 PER SHARE
                                (Title of Class)

Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will 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-KSB. [ ]

HEI, Inc. revenues for the fiscal year ended August 31, 1998 were $20,805,000.

The aggregate market value as of November 23, 1998 (based on the closing price
as reported by The Nasdaq National Market) of the voting stock held by
non-affiliates was approximately $21,000,000.

As of November 23, 1998, 4,095,195 Common Shares (par value $.05) were
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the fiscal year ended August
31, 1998 are incorporated by reference into Parts I and II. Portions of the
Proxy Statement for Registrant's Annual Meeting of Shareholders to be held
January 20, 1999 are incorporated by reference into Part III.


<PAGE>

SIGNATURES
----------

In accordance with Section 13 or 15(c) of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized

HEI, Inc.

BY:               /s/ Anthony J. Fant
                  ----------------------------------------
                  Anthony J. Fant, Chief Executive Officer

Date:    January 7, 1999




In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.


/s/ Anthony J. Fant                                  January 7, 1999
----------------------------------------------       ---------------
Anthony J. Fant, Chairman                                  Date

/s/ Jerald H. Mortenson                              January 7, 1999
----------------------------------------------       ---------------
Jerald H. Mortenson, Vice President of Finance             Date
and Administration, Chief Financial Officer and
Treasurer

/s/ Craig E. Roble                                   January 7, 1999
----------------------------------------------       ---------------
Craig E. Roble, Company Controller                         Date

/s/ Eugene W. Courtney                               January 7, 1999
----------------------------------------------       ---------------
Eugene W. Courtney, Director                               Date

/s/ Edwin W. Finch, III                              January 7, 1999
----------------------------------------------       ---------------
Edwin W. Finch, Director                                   Date

/s/ David W. Ortlieb                                 January 7, 1999
----------------------------------------------       ---------------
David W. Ortlieb, Director                                 Date

/s/ Steve E. Tondera, Jr.                            January 7, 1999
----------------------------------------------       ---------------
Steve E. Tondera, Jr., Director                            Date

/s/ Mack V. Traynor, III                             January 7, 1999
----------------------------------------------       ---------------
Mack V. Traynor, III, Director                             Date



                                       6
<PAGE>

                                  EXHIBIT INDEX
                                  -------------
<TABLE>
<CAPTION>

                                                                                              Page Number or
                                                                                              Incorporated by
Exhibit Number      Description                                                               Reference
--------------      -----------                                                               ---------------
       <S>          <C>                                                                       <C>
       3.1          Restated Articles of Incorporation, as amended.                           Note 1

       3.2+         Bylaws, as amended.

      4.1a+         Credit Agreement with Norwest Bank Minnesota, N.A. dated May 14, 1998.

      4.1b+         Current Note with Norwest Bank Minnesota, N.A. dated May 14, 1998.

       4.2a         Reimbursement Agreement by and between HEI, Inc. and Norwest Bank         Note 2
                    Minnesota, N.A. dated April 1, 1996.

       4.2b         Mortgage Security Agreement Fixture Financing Statement and Assignment    Note 2
                    of Leases and Rents by HEI, Inc. as Mortgagor to Norwest Bank
                    Minnesota, N.A. as Mortgagee dated April 1, 1996.

       4.2c         Security Agreement by HEI, Inc. in favor of Norwest Bank Minnesota,       Note 2
                    N.A. dated April 1, 1996.

       10.1         Form of Indemnification Agreement between HEI and officers and            Note 3
                    directors.

      *10.2         HEI 1989 Omnibus Stock Compensation Plan adopted April 3, 1989, as        Note 4
                    amended to date.

      *10.3         1991 Stock Option Plan for Non-employee Directors, as amended to date.    Note 5

      *10.4+        1998 Stock Option Plan adopted November 18, 1998.

      *10.5+        1998 Stock Option Plan for Non-employee Directors adopted
                    November 18, 1998.

      *10.6         Form of Agreement regarding Employment/Compensation upon change in        Note 5
                    control with Messrs. Mortenson, Nordquist and Reynolds.

      *10.7+        Agreement regarding Employment/Compensation upon change in control with
                    Mr. Courtney, dated November 20, 1998.

       13+          Annual Report to Shareholders for the year ended August 31, 1998.

        15          Report of PricewaterhouseCoopers LLP.

        23          Consent of KPMG Peat Marwick LLP.

        24          Consent of PricewaterhouseCoopers LLP.

        27          Financial Data Schedule.



</TABLE>


                                       7
<PAGE>

Notes to Exhibits above:

[1]        Filed as an exhibit to Annual Report on Form 10-K for the year ended
           August 31, 1990, and incorporated herein by reference.

[2]        Filed as an exhibit to Form 10-QSB for the quarter ended June 1,
           1996, and incorporated herein by reference.

[3]        Filed as an exhibit to Registration Statement on Form S-2 (SEC no.
           33-37285) filed October 15, 1990, and incorporated herein by
           reference.

[4]        Filed as an exhibit to Annual Report on Form 10-KSB for the year
           ended August 31, 1996 and incorporated herein by reference.

[5]        Filed as an exhibit to Annual Report on Form 10-KSB for the year
           ended August 31, 1997 and incorporated herein by reference.


  *   Denotes management contract or compensation plan or arrangement.

  +  Filed herewith.



                                       8
<PAGE>

HEI, Inc.
Statements of Cash Flows
------------------------

(In thousands)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Years Ended August 31                                             1998         1997        1996
-----------------------------------------------------------------------------------------------------
<S>                                                            <C>           <C>          <C>
Cash flow provided by operating activities:
  Net income (loss)                                            $ (2,627)     $  2,550     $  2,113
  Depreciation                                                    1,358         1,376          907
  Amortization                                                       60            70           31
  Accounts receivable and inventory allowances                       (1)           59         (222)
  Deferred income tax expense (benefit)                            (242)            8         (198)
  Gain on sale of product line, net                                  --          (215)         (45)
  Other                                                               1            35           51
Change in current operating items:
  Accounts receivable                                            (1,056)        1,701       (1,539)
  Inventories                                                       (15)          (60)         537
  Income taxes                                                   (1,089)         (656)         394
  Other current assets                                             (512)         (133)        (112)
  Accounts payable                                                1,106           256           88
  Accrued employee related costs and accrued liabilities            (26)         (121)         311
-----------------------------------------------------------------------------------------------------
Net cash flow provided by (used for) operating activities        (3,043)        4,869        2,316
-----------------------------------------------------------------------------------------------------
Cash flow used for investing activities:
  Purchases of investments                                      (15,165)      (10,892)      (7,033)
  Maturities of investments                                      16,170         7,205        5,365
  Additions to property and equipment                            (1,025)       (1,605)      (4,621)
  Proceeds on sales of product lines and equipment                  237           494           --
  Decrease (increase) in restricted cash                            389         2,066       (2,455)
-----------------------------------------------------------------------------------------------------
Net cash flow provided by (used by) investing activities            606        (2,732)      (8,744)
-----------------------------------------------------------------------------------------------------
Cash flow provided by financing activities:
  Proceeds from long-term debt                                       --            --        5,625
  Repayment of long-term debt                                      (650)         (440)          --
  Increase in deferred financing costs                              (47)          (54)        (170)
  Issuance of common stock and other                                159           807          648
  Tax benefit of nonqualified stock options                          --           422           73
  Repurchase of common shares                                      (186)         (600)          --
-----------------------------------------------------------------------------------------------------
Net cash flow provided by (used for) financing activities          (724)          135        6,175
-----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents             (3,161)        2,272         (252)
Cash and cash equivalents, beginning of year                      3,458         1,186        1,438
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                         $    297      $  3,458      $ 1,186
-----------------------------------------------------------------------------------------------------

Supplemental disclosures of cash flow information:
-----------------------------------------------------------------------------------------------------
Interest paid                                                  $    201      $    218      $    80
Income taxes paid                                                   100         1,656          515
-----------------------------------------------------------------------------------------------------

</TABLE>

The accompanying notes are an integral part of the financial statements.