<PAGE>

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

[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 
1934 for fiscal year ended August 31, 1997.

[ ] 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)

                           RIGHTS TO PURCHASE COMMON STOCK
                           --------------------------------
                                   (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, 1997 were $30,962,000.

The aggregate market value as of November 1, 1997 (based on the closing price 
as reported by The Nasdaq National Market) of the voting stock held by 
non-affiliates was approximately $18,000,000.

As of November 21, 1997, 4,068,576 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, 1997 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 21, 1998 are incorporated by reference in Part III.

<PAGE>

HEI, Inc. is referred to herein as the Company, unless the context indicates 
otherwise.

                                        PART I

ITEM 1.  DESCRIPTION OF BUSINESS

(a)  BUSINESS DEVELOPMENT
     HEI, Inc., a Minnesota corporation, was incorporated as Hybrid Electronics
     Inc. in 1968 and changed its name to HEI, Inc. in 1969.

(b)  BUSINESS OF THE COMPANY

     PRINCIPAL PRODUCTS AND SERVICES - HEI, Inc. is a designer and manufacturer
     of ultraminiature microelectronic devices and high technology products
     incorporating these devices.  HEI's custom-built microelectronics are
     employed in medical, industrial and computer markets.  The optical switch
     product line and light pen product line, which represented minor parts of 
     the Company's sales, were sold in August 1997 and August 1996, 
     respectively.

     DISTRIBUTION METHODS - HEI sells through its Company-employed sales force
     based at corporate headquarters.

     SOURCES AND AVAILABILITY OF RAW MATERIALS - There are many sources of raw
     material supplies available nationally and internationally for Company
     operations.  The manufacture of Company products involves assembly of
     components purchased from a wide variety of vendors.  The Company's 
     business is not dependent on any single supplier.

     DEPENDENCE ON SINGLE OR FEW CUSTOMERS - Following is the approximate
     percentage of the Company's sales to major customers which accounted for 
     more than 10% of total sales in fiscal years 1997, 1996 and 1995.


     Customer            1997           1996           1995
     --------            ----           ----           ----
     Customer A          55%            16%
     Customer B          27%            38%            12%
     Customer C                         10%
     Customer D                                        30%
     Customer E                                        27%


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     COMPETITION - In each of its product lines, the Company has significant
     competition, including users who may produce their own alternative devices.
     The Company obtains new business by identifying customer needs and
     engineering its products to meet those needs.  It competes on the basis of
     engineering expertise, quality, service and price to obtain new and repeat
     orders.

     RESEARCH AND DEVELOPMENT - The estimated amount spent on Company-sponsored
     research and development activities was approximately $843,000 and $849,000
     for the years ended August 31, 1997 and 1996.

     EMPLOYEES - At August 31, 1997, the Company employed approximately 120
     persons of which 2 were part-time.


ITEM 2.  DESCRIPTION OF PROPERTY

The Company owns a 48,000 square foot facility for administration and 
production in Victoria, Minnesota, which was completed in August 1981.  The 
facility was expanded during fiscal 1996 from the original 25,000 square feet 
with an addition of 23,000 square feet to increase production capacity.  Due 
to the sale of the optical switch business in August 1997, the Company no 
longer leases a facility in Sauk Centre, Minnesota.

ITEM 3.  LEGAL PROCEEDINGS

There are no legal proceedings pending against the Company or its properties.


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

None.


                                         -3-
<PAGE>

                                       PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information called for by Item 5 is incorporated by reference from the 
Annual Report on page 20.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

The information called for by Item 6 is incorporated by reference from the 
Annual Report on pages 4-8.

ITEM 7.  FINANCIAL STATEMENTS

The information called for by Item 7 is incorporated by reference from the 
Annual Report on pages 9-18 as follows:

                                                                Page in
                                                                Annual Report:
                                                                --------------

Balance Sheet as of August 31, 1997 and 1996                    9

Statement of Operations for the Years Ended
  August 31, 1997, 1996 and 1995                                10

Statement of Changes in Shareholders' Equity
  for the Years Ended August 31, 1997, 1996 and 1995            11

Statement of Cash Flows for the Years Ended
  August 31, 1997, 1996 and 1995                                12

Notes to Financial Statements                                   13-17

Report of Independent Accountants                               18


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE

None.


                                         -4-
<PAGE>

                                       PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT

The information regarding directors called for by Item 9 is contained in the 
Proxy Statement under the caption "Election of Directors."

The following is a list of HEI, Inc. executive officers, their ages, 
positions and offices as of November 1, 1997.

NAME                       AGE     POSITION
----                       ---     --------

Eugene W. Courtney         61      President, Chief Executive Officer

Jerald H. Mortenson        63      Vice President of Finance and Administration,
                                   Chief Financial Officer and Treasurer

Dale A. Nordquist          43      Vice President of Sales and Marketing

BUSINESS EXPERIENCE

EUGENE W. COURTNEY became President and Chief Executive Officer of the 
Company in June 1990.  He had served as Executive Vice President and 
Operating Officer since August 1988 and has served as a Director since 1989.  
From 1980 to 1988, Mr. Courtney served as Vice President and Group Vice 
President of National Computer Systems.

JERALD H. MORTENSON joined the Company in March 1990.  Prior thereto he had 
spent ten years with CTS Fabri-tek, first as Chief Financial Officer and the 
last five years as Group President.

DALE A. NORDQUIST joined the Company on July 16, 1981 as Western Regional 
Manager. In December 1986, he was appointed Vice President of Sales.

ITEM 10.  EXECUTIVE COMPENSATION

The information called for by Item 10 is contained in the Proxy Statement 
under the captions "Executive Compensation" and "Proposal No. 1 Election of 
Directors."

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by Item 11 is incorporated in the Proxy Statement 
under the caption "Shares and Principal Shareholders."

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:  See Exhibit Index on Page 7

(b)  Reports  on Form 8-K:  No reports on Form 8-K were filed during the fourth
     quarter of the fiscal year ended August 31, 1997.



                                         -5-
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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/ Eugene W. Courtney
               ------------------------------------------
               Eugene W. Courtney, President and Chief Executive Officer

Date:     November 24, 1997


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/ Eugene W. Courtney                                      November 24, 1997
-----------------------------------------------             -----------------
Eugene W. Courtney, Director                                       Date

/s/ Jerald H. Mortenson
-----------------------------------------------
Jerald H. Mortenson, Vice President of Finance
and Administration, Chief Financial Officer and             November 24, 1997
Treasurer                                                   -----------------
                                                                   Date

/s/ Craig E. Roble                                          November 24, 1997
-----------------------------------------------             -----------------
Craig E. Roble, Company Controller                                 Date

/s/ Robert L. Brueck                                        November 24, 1997
-----------------------------------------------             -----------------
Robert L. Brueck, Director                                         Date

/s/ William R. Franta                                       November 24, 1997
-----------------------------------------------             -----------------
William R. Franta, Director                                        Date

/s/ Kenneth A. Schoen                                       November 24, 1997
-----------------------------------------------             -----------------
Kenneth A. Schoen, Director                                        Date

/s/ Frederick M Zimmerman                                   November 24, 1997
-----------------------------------------------             -----------------
Frederick M Zimmerman, Director                                    Date


                                         -6-

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                                    EXHIBIT INDEX

<TABLE>
<CAPTION>

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

    *3.2           Bylaws, as amended.

    4.1            Rights Agreement dated May 27, 1988 between HEI, Inc. and Norwest               Note 2
                   Bank Minnesota, N.A., as amended.

    4.2a           Credit Agreement with Norwest Bank Minnesota, N.A. dated April 1, 1996.         Note 3

    4.2b           Current Note and Security Agreement with Norwest Bank Minnesota,                Note 3
                   N.A. dated April 1, 1996.

    4.3a           Reimbursement Agreement by and between HEI, Inc. and Norwest Bank               Note 3
                   Minnesota, N.A. dated April 1, 1996.

    4.3b           Mortgage Security Agreement Fixture Financing Statement and                     Note 3
                   Assignment of Leases and Rents by HEI, Inc. as Mortgagor to Norwest
                   Bank Minnesota, N.A. as Mortgagee dated April 1, 1996.

    4.3c           Security Agreement by HEI, Inc. in favor of Norwest Bank Minnesota,             Note 3
                   N.A. dated April 1, 1996.

    10.1           Form of Indemnification Agreement between HEI and officers and directors.       Note 4

    **10.2         HEI 1989 Omnibus Stock Compensation Plan adopted April 3, 1989, as              Note 5
                   amended to date.

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

    ***10.4        Form of Agreement regarding Employment/Compensation upon change
                   in control with Messrs. Courtney, Mortenson and Nordquist.


    *13            Annual Report to Shareholders for the year ended August 31, 1997.

    23             Consent of Independent Accountants.

    *27            Financial Data Schedule.

</TABLE>


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<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 Registration Statement on Form 8-A filed May 31,
         1988, as amended by Form 8 filed June 27, 1988, and incorporated herein
         by reference.

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

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

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


   *   Filed herein as an exhibit.

  **   Denotes management contract or compensation plan or arrangement.

 ***   Denotes management contract or compensation plan or arrangement and filed
       herein as an exhibit.



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