SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------

                                    FORM 10-K
                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 0-4988

                              AEROSONIC CORPORATION
                              ---------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                 74-1668471
     (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                  Identification No.)

                           1212 North Hercules Avenue
                            Clearwater, Florida 33765
                    (Address of principal executive offices)
                                   (Zip Code)
         Registrant's telephone no., including area code: (813) 461-3000

        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 $.40
                          -----------------------------
                                (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 15, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $38,709,540.

As of April 15, 1998, the issuer had 3,937,669 shares of Common Stock
outstanding, net of treasury shares.
--------------------------------------------------------------------------------
                       Documents Incorporated by Reference

                  Document                                Part of 10K
                  --------                                -----------
         Proxy Statement for the 1998          Part II, Items 10, 11, 12 and 13
        Annual Meeting of Stockholders

<PAGE>

                                     PART I

THIS REPORT CONTAINS CERTAIN 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, WHICH ARE INTENDED TO BE COVERED BY
THE SAFE HARBORS CREATED THEREUNDER. FORWARD-LOOKING STATEMENTS CAN BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL,"
"SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE," "CONTINUE," "PLANS" AND "INTENDS."
ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THE
ASSUMPTIONS COULD BE INACCURATE AND THEREFORE, THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS SET FORTH HEREIN IN "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

Item l.  Business.
         --------

Aerosonic Corporation ("the Company") is principally engaged in one business
segment: the manufacture of aircraft instruments ("Instruments"). Prior to June
1996, the Company was engaged in a second business segment: the manufacture of
ordnance products ("Ordnance") which consisted of military products as well as
commercial truck and automotive parts. The sale of this segment is more fully
described in Note 8 to the Consolidated Financial Statements and, accordingly,
has been presented as discontinued operations.

The Company was incorporated under the laws of Delaware in l969, and in l970
merged with a Florida company (formerly known as "Aerosonic Corporation"). As
used herein, unless the context requires otherwise, "Aerosonic" or the "Company"
includes Aerosonic Corporation and its operating subsidiary, Avionics
Specialties, Inc.

The aircraft instrument segment consists of three operating divisions: The
Clearwater, Florida Instrumentation Division ("Clearwater Instruments"), the
Aerosonic Wichita, Kansas Instrumentation Division and Avionics Specialties,
Inc. ("Avionics"), a Virginia Corporation wholly owned by Aerosonic Corporation.
Clearwater Instruments was started in 1953 and primarily manufactures
Altimeters, Airspeed Indicators, Rate of Climb Indicators, Microprocessor
Controlled Air Data Test Sets, and a variety of other flight instrumentation.
Avionics was a division of Teledyne Industries, Inc. prior to January 1993.
Avionics maintains four major product lines in the aircraft instrument segment:
1) Angle of Attack ("AOA")/Stall Warning Systems; 2) Inertial-Lead Vertical
Speed Indicator ("IVSI"); 3) Power Analyzer and Recorder ("PAR") System (a
turbine engine monitoring system); 4) Vibration Monitoring and Analysis. For a
description of the general development of these businesses, see the narrative
below.

                                       2
<PAGE>

               PRODUCTS, SERVICES AND RECENT BUSINESS DEVELOPMENTS

Products and Distribution

The Company's products are sold to the U.S. military services and to
manufacturers of commercial and private aircraft, both domestic and foreign.
Commercial sales decreased to $12,790,000 from $15,153,000 in the prior fiscal
year. Sales to the U.S. military have increased to $6,536,000 during the current
fiscal year from $5,079,000 in the prior fiscal year. For the year ended January
31, l998, approximately 66% of the Company's total sales were to the private
sector and the remaining 34% to the military services.

Most of the Company's instrument sales are made directly through Company
employees to original equipment manufacturers or to the military, with the
Company's remaining sales being made through other dealers (who resell to
aircraft operators).

The products manufactured by the Company, together with the approximate
percentage of total sales contributed by each such product for the years ended
January 31, l998, 1997 and 1996 are as follows:

                                          1998          1997          1996
                                          ----          ----          ----
 AOA/Stall Warning Systems                33%            38%           33%
 Other Aircraft Instruments               19%            13%           27%
 Repairs                                  14%            13%           12%
 Altimeters                               14%            10%            9%
 Air Speed Indicators                     14%            11%            8%
 Spare Parts                               6%            10%            3%
 Ordnance -  Commercial                    0%             2%            7%
 Ordnance - Military                       0%             3%            1%
                                      -----------    ----------    -----------
                                         100%           100%          100%
                                      ===========    ==========    ===========

The aggregate amount of foreign sales were $2,470,000, $6,208,000 and $4,751,000
for the years ended January 31, 1998, 1997 and 1996, respectively. Domestic
sales of the Company's products are made to many different commercial
(non-government) customers, none of which comprised over ten percent (l0%) of
total sales during the year ended January 3l, l998.

                                       3
<PAGE>
Backlog

The Company's sales order backlog as of January 3l, l998 was $19,273,000, as
compared to $18,512,000 in the previous fiscal year. The backlog includes
$7,388,000, which is related to Avionics, and $11,885,000, which is related to
Clearwater Instruments. Management estimates that approximately 90% of the total
backlog, or $17,345,000, can reasonably be expected to be filled during the
current fiscal year.

U.S. Government contracts are subject to termination at the election of the
Government and contain specific procedures for equitable settlement in the event
of termination. It is not possible to predict whether, or to what extent, the
present backlog may be reduced or postponed in the event of reductions or
changes in U.S. Government programs. Some U.S. Government contracts contain
fixed price options for future performance and are subject to exercise by the
Government within specified time periods. These options are not included in the
Company's contractual backlog. The U.S. Government represents approximately 30%
of the Company's backlog at January 31, 1998.

Employees

As of the year ended January 3l, l998, the Company employed approximately 253
employees in its business operations. This consisted of 157 Clearwater/Kansas
Instrument employees and 96 Avionics employees. The Company's employees are not
represented by labor unions. Management regards its relations with its employees
to be good.

Research and Development

The Company expended approximately $443,000 and $460,000 in research and
development costs for potential new products and enhancements during the years
ended January 31, 1998 and 1997. There are approximately 33 engineers at
Aerosonic and Avionics, on a full- or part-time basis, involved in these
activities.

Research and development at the Company's Clearwater Instrument division
consisted of numerous activities during fiscal year 1998. To meet market
requirements for additional cockpit panel space, the Company's R&D group
designed, tested and began production on a new line of two-inch instruments,
including a Counter-Drum Encoding Altimeter, Mach Airspeed Indicator, Max
Allowable Airspeed Indicator, Rate-Of-Climb Indicator, Cabin Differential
Pressure Indicator and Artificial Horizon Indicator. R&D activities were also
focused on software upgrades to the Air Data Test Set, which is currently in
full-scale production. Ongoing activities throughout the year included upgrades
to existing products to enhance functionality and reduce cost.

Research and development at Avionics Specialties has focused on extending the
Angle of Attack and Stall Warning product lines. The Air Data Transmitter
program benefited from a cooperative flight test program with Lockheed Martin
using an F-16 aircraft. Two flight tests were used to improve the design in the
high performance, highly maneuverable and supersonic environment of this
aircraft. The transmitter is now fully capable of providing accurate air data in
both subsonic and supersonic flight. First production units will be delivered in
June of 1998 for use on the Lockheed FSX concept 

                                       4
<PAGE>

demonstration aircraft. The first production Angle-Of-Attack transmitters
incorporating built-in stall warning have been delivered and several new
programs have selected this device to provide aircraft stall warning. These
development programs are in the process of defining the aircraft interface and
software necessary for certification of the aircraft. The Engine Monitoring
product line has begun the definition of the next generation system with
increased capacity and incorporating vibration testing. The Engine Vibration and
Monitoring System will be developed in fiscal year 1999.

Competition

Most of the Company's products are sold in highly competitive markets. The
Company manufactures a larger variety of aircraft instruments than its
competitors, who, in most instances, compete with the Company on no more than a
few types of aircraft instruments. Some competitors have larger overall sales
and financial resources than the Company. Management believes that the Company's
products are priced to sell competitively with those of its competitors.

Raw Materials

The principal materials used in the Company's manufacturing processes are glass
lenses, raw metals and castings. These items, as well as other raw materials,
parts and components used by the Company are generally available from a number
of sources and in sufficient quantities to meet current requirements subject to
normal lead times.

Item 2.  Properties.
         ----------

The following sets forth the locations and general characteristics of the
Company's principal plants:

                                                  Approximate No. Square Feet
             Location                            of  Factory and Office Area
             --------                            ----------------------------

         Clearwater, Florida                                 90,000
         Wichita, Kansas                                      7,500
         Charlottesville, Virginia                           53,000

All properties are well maintained, fully occupied by the Company and suitable
for the Company's present level of production. All locations operate more than
one shift, five days a week. The property in Wichita, Kansas is owned by the
Company and is unencumbered. The Clearwater, Florida property is mortgaged in
accordance with an Industrial Revenue Bond executed in l988. (See Note 7,
"Financial Statements".)

The Charlottesville, Virginia property was purchased from Teledyne Industries in
April 1994 for $1,260,000, and is mortgaged by a long-term note with the
Company's bank. The property consists of a 53,000 square foot manufacturing
facility on approximately 12 acres of land.

                                       5
<PAGE>

The Company sold its Newport, Arkansas manufacturing operation during fiscal
1994. The land and building are still owned by Aerosonic and leased to the
purchaser under a five-year lease agreement with a purchase option.

Item 3.  Legal Proceedings.
         -----------------

Sensonics, Inc. v. Aerosonic: In 1993, the Company was named as a codefendant in
a patent infringement suit filed by Sensonics Inc. claiming that the Company
infringed Sensonics' expired patent for an electromagnetic tapping device that
the Company used as a component part. During June 1996, the Company's Board of
Directors approved a proposed settlement of the lawsuit for $2,000,000. Pursuant
to this settlement, the Company recorded a $225,000, $960,000 and $815,000
provision for the settlement of litigation during the years ended January 31,
1997, 1996 and 1995, respectively. All amounts related to the settlement were
paid during the year ended January 31, 1997.

The Company was sued in September of 1996 by David S. Goldman, former President
and Chief Executive Officer of Aerosonic Corporation, for an alleged breach of a
consulting agreement between Mr. Goldman and the Company. The suit seeks damages
in excess of $15,000. The Company has filed a motion to dismiss this action,
which is currently under review. During fiscal year 1997, the Company sued Mr.
Goldman and Mil-Spec Finishers, Inc., a former subcontractor to Aerosonic
Corporation controlled by Mr. Goldman, seeking damages in excess of $15,000, for
alleged fraud and misappropriation of funds, appropriation of corporate
opportunity, breach of fiduciary duty and conversion.

In accordance with a consent agreement signed by the company in 1993, the
Company's environmental consultant has developed an interim remedial action plan
to contain and remediate certain contamination on and underlying the Company's
property. This plan has been submitted to the Florida Department of
Environmental Protection (FDEP) in 1997 and is currently under review and
discussion. Before approval of the plan, the FDEP may require further assessment
and testing. Company management believes that any liability in excess of amounts
accrued at January 31, 1998 will not have a material affect on the financial
condition of the company.

The Company is also involved in certain claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of the above matters will not have a material adverse effect on the
Company's financial position, results of operations, or liquidity.


Item 4.  Submission of Matters to a Vote of Security Holders.
         ---------------------------------------------------
None.

                                       6
<PAGE>


                                     PART II

Item 5.  Market for Registrant's Common Stock and Related Security Holder
         ----------------------------------------------------------------
         Matters.
         -------

The Company's Common Stock is traded on the American Stock Exchange under the
symbol "AIM". The range of high and low bid quotations as reported by the
American Stock Exchange for each of the quarters of the fiscal years ended
January 3l, l998 and January 3l, l997 is as follows:

Fiscal Year Ended January 31, 1998
----------------------------------

   Quarter                         Bid                          Bid
 ------------------------------------------------------------------------
      1             High          10-3/8          Low          3-7/16
 ------------------------------------------------------------------------
      2             High          13-5/8          Low          9-1/16
 ------------------------------------------------------------------------
      3             High          12-5/8          Low          8-1/2
 ------------------------------------------------------------------------
      4             High          15-1/4          Low         10-1/16
 ------------------------------------------------------------------------


Fiscal Year Ended January 31, 1997
----------------------------------

   Quarter                         Bid                          Bid
 ------------------------------------------------------------------------
      1             High            2             Low          1-5/16
 ------------------------------------------------------------------------
      2             High            3             Low          1-1/2
 ------------------------------------------------------------------------
      3             High            3             Low          1-7/8
 ------------------------------------------------------------------------
      4             High          4-3/8           Low          2-5/8
 ------------------------------------------------------------------------

During those same periods, no cash dividends were paid. The payment of future
dividends, if any, on the Company's common stock and the amount thereof will be
dependent upon the Company's earnings, financial requirements, and other factors
deemed relevant by the Company's Board of Directors.

As of April 15, l998, the Company's outstanding shares of common stock were
owned by 2,289 shareholders of record.


                                       7

<PAGE>


Item 6.  Selected Financial Data.
         -----------------------

The following selected financial data for the five years in the period ended
January 31, 1998 have been derived from the Company's Consolidated Financial
Statements.
<TABLE>
<CAPTION>


                                                              Years Ended January 31,
                                                              -----------------------
               
                                         1998              1997            1996             1995             1994
                                   ---------------  ---------------- ---------------  ---------------  ---------------
<S>                                <C>              <C>              <C>              <C>              <C>          
 Revenue                           $  19,326,000    $   20,232,000   $  17,360,000    $  17,774,000    $  19,417,000
                                   ===============  ================ ===============  ===============  ===============

 Income (loss) from
   continuing operations           $   1,201,000    $    1,123,000   $  (1,293,000)   $    (299,000)   $   1,712,000
                                   ===============  ================ ===============  ===============  ===============

 Basic and diluted earnings
 (loss) per share from continuing  $        0.31    $         0.29   $       (0.34)   $       (0.08)   $        0.45
 operations
                                   ===============  ================ ===============  ===============  ===============

 Total assets                      $  18,315,000    $   17,215,000   $  17,851,000    $  17,965,000    $  18,293,000
                                   ===============  ================ ===============  ===============  ===============

 Long-term obligations             $   3,601,000    $    2,444,000   $   2,814,000    $   3,114,000    $   2,880,000
                                   ===============  ================ ===============  ===============  ===============

</TABLE>
 

                                      8

<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations.
         -------------

The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and notes thereto included elsewhere
herein.

Discontinued Operations

During fiscal year ended 1998, the Company operated in one business segment, the
Instrument Division. During the fiscal years ended 1997 and 1996, the Company
operated in two business segments i) the Ordnance Division and ii) the
Instrument Division.

In order to focus on its core business, Company management decided to
discontinue the Ordnance Division and during May 1996, the Company sold
substantially all of the assets of this segment. The $1,700,000 sale, consisting
primarily of property and equipment, was paid in cash and resulted in a $41,000
gain.

For financial reporting purposes, the Company is accounting for the disposition
of its Ordnance segment as a discontinued operation. Accordingly, the Company's
Consolidated Statements of Operations present the results of the Company's
discontinued operations separately from the results of Company's continuing
operations.

Results of Continuing Operations

Net sales for fiscal 1998 were $19,326,000 which represent a $906,000 or 4%
decrease from the prior year. The net decrease in sales during fiscal 1998 is
related to a temporary delay in new programs related to the OEM customer base.
Certain product lines experienced a lag period where sales related to older
aircraft were slowing down and new aircraft introductions were slowly coming on
line. This downward trend is expected to be short lived as the Company moves to
increased production on new aircraft applications. Clearwater Instrument
Division sales increased by 7% in the current year to $10,810,000 as compared to
$10,074,000 in the preceding year. The Avionics Division sales were $8,516,000,
a 16% decrease from the prior year.

Net Sales for fiscal 1997 were $20,232,000 which represent a $2,872,000 or 17%
increase from the prior year. Clearwater Instrument Division sales increased 35%
during fiscal 1997 to $10,074,000 compared to $7,448,000 during fiscal 1996.
Avionics Division sales were $10,158,000, a 9% increase from fiscal year 1996.

The increase in sales during fiscal 1997 is attributable to an overall expansion
in the aircraft marketplace inclusive of increased requirements for new
production aircraft and modification of existing aircraft worldwide.

The sales increase experienced by Avionics during fiscal 1997 was primarily
attributed to the resumption of sales of the F-16 to the U.S. Government and
consequently increased orders within the AOA/Stall Warning Systems line of
business. Sales for the F-16 products were $716,000 in 

                                       9

<PAGE>

fiscal 1997 as compared to $98,000 in the preceding year. Similarly, the
decrease in sales during Fiscal 1996 from the preceding year was primarily due
to the U.S. Government rescheduling shipments for the F-16 aircraft due to
excess inventory. Sales for these products were $98,000 in fiscal 1996 as
compared to $1,096,000 for the prior fiscal year.

Gross Margins

The Company's gross margin percentage increased to 39% during fiscal 1998
compared to 35% in the prior year. This is primarily due to management's
continued efforts to minimize costs within the manufacturing and service
processes of the Company as well as increased focus on expanding profitable
product lines and ceasing production on unprofitable lines.

From fiscal year 1996 to 1997, the Company's gross margin percentage increased
to 35% from 25%. Exclusive of a $925,000 write-off of inventory during fiscal
year 1996, the Company's gross margin percentage approximates 30%. These
increases result in a 17% increase in sales with only a 1% increase in cost of
goods sold. This is due primarily to management's efforts to expand profitable
product lines while de-emphasizing the unprofitable lines.

Selling, General and Administrative Expenses

As a percentage of total sales, selling, general and administrative expenses
increased to 28% during fiscal 1998 from 24% and 27% during fiscal years 1997
and 1996, respectively. The increase in fiscal year 1998 results primarily from
increased engineering and employee compensation related costs..

Provision for Settlement of Litigation

In connection with the Sensonics litigation previously described under Item 3.
Legal Proceedings, the Company recorded provisions totaling $225,000 and
$960,000 during fiscal years 1997 and 1996, respectively. In November 1996, the
Company made the final payment to fully satisfy the judgment related to this
lawsuit.

Interest Expense

Interest expense for fiscal l998, net of interest income, totaled $232,000
compared to $278,000 in the prior year. The reduction in fiscal 1998 is due
primarily to reduced borrowings and a reduced interest rate on borrowings
concurrent with a restructure of short-term debt to long-term. Also, higher cash
balances in short term investments generated additional interest income in
fiscal year 1998. The Company's short- and long-term borrowings decreased
$452,000 during fiscal 1998 compared to $4,249,000 at the end of fiscal 1997.

Interest expense for fiscal 1997, net of interest income, decreased $2,000 from
fiscal 1996, due to increased rates and periodic utilization of the Company's
line of credit. The Company's short- and long-term borrowings increased by
$428,000 during fiscal 1997 compared to $3,821,000 at the end of fiscal 1996.

                                       10
<PAGE>

Income Tax Expense

Income tax expense increased in fiscal 1998 to $734,000 as compared to income
tax of $606,000 during fiscal 1997. The increase was primarily due to increases
in pretax income. Income tax expense as a percent of income before taxes was
approximately 38% in fiscal 1998, and 36% in fiscal 1997.

Income tax expense increased during fiscal 1997 to $606,000 as compared to an
income tax benefit of $517,000 during fiscal 1996. The increase was primarily
due to increases in pretax income. Income tax expense (benefit) as percent of
income before taxes was approximately 36% during fiscal 1997 and (29%) during
fiscal 1996.

Basic and Diluted Earnings (Loss) Per Share

The Company recorded net income of $1,201,000, or $.31 per share during fiscal
1998 as compared to a net income of $924,000 or $.24 per share in the preceding
year. Included in the prior year income was a provision for settlement of the
Sensonics litigation of $225,000.

Net income from continuing operations (exclusive of the ordnance segment) was
$1,201,000 or $.31 per share during fiscal 1998 as compared to a net income of
$1,123,000, or $.29 per share in the preceding year. Net loss from continuing
operations (exclusive of the ordnance segment) was $1,293,000 or ($.34) per
share during fiscal 1996 which includes the $960,000 Sensonics provision.
Discontinued ordnance operations generated a loss of $199,000 or ($.05) during
fiscal 1997 as compared to a net loss of $593,000 or ($.16) per share during the
preceding year

Liquidity and Capital Resources

Management considers liquidity to be the Company's ability to generate adequate
cash to meet its short- and long-term business needs. The principal internal
source of such cash is the Company's operations, while external sources include
borrowings under the Company's credit facilities.

Net cash provided by operating activities during fiscal year l998 was $1,490,000
compared to net cash used of $528,000 in the prior year. During fiscal year
1998, significant cash provided by operating activities resulted primarily from
a net increase in income tax related accounts, noncash expending of depreciation
and employee stock bonuses offset by increases in inventory and reductions in
accounts payable. During fiscal year 1997, significant net cash used in
operating activities resulted primarily from decreases in accrued expenses
(payment of settlement expenses related to the Sensonics and other litigation)
and increases in inventories.

                                       11
<PAGE>


Net cash used in investing activities during fiscal 1998 was $395,000 compared
to cash generated of $1,340,000 in the prior year. Capital expenditures during
fiscal year 1998 of $459,000 consisted primarily of machinery and equipment
which was funded by operations. The sale of the Ordnance Division during fiscal
year 1997 provided $1,700,000 in cash from investing activities. Capital
expenditures during fiscal year 1997 of $399,000 primarily consisted of
machinery and equipment used in the Instrument Division. These expenditures were
funded by operations. Capital expenditures during fiscal year 1996 of $1,156,000
were funded from a $450,000 long-term note and working capital provided from
operations.

Net cash used in financing activities during fiscal year 1998 was $270,000
compared to fiscal year 1997, in which $428,000 was provided through financing
activities. This was due primarily to payments on debt, which were partially
offset by funds received from the exercise of employee stock options.

The Company has a $1,500,000 line of credit facility, which expires on April 30,
1998 and bears interest at the 90 day treasury index plus 2.75%. At January 31,
1998, there were no fundings under this facility. The proceeds and uses of the
Company's credit facilities are outlined in the Consolidated Statements of Cash
Flows and Note 7 to the Consolidated Financial Statements

The Company's current ratio was strong at 5 to 1 at January 31, 1998 compared to
3 to 1 at January 31, 1997. In addition, working capital increased by $2,614,000
to $11,156,000 in fiscal year 1998. The increase primarily relates to an
increase in cash combined with a restructure of the balance on the Company's
line of credit to long-term debt.

Funds necessary for future capital expenditures, notes payable and long-term
 debt payments and other cash flow needs in the ordinary course of business are
expected to be funded primarily from current cash resources and internally
generated funds.

Year 2000 Impact on Internal Operations

The Company's management has evaluated the Year 2000 impact on the Company's
internal financial and operational systems. The Company has undertaken remedial
measures based upon this evaluation. The Company anticipates that any changes,
if necessary, to its information systems to make them Year 2000 compliant will
be completed by January 31, 1999. The Company currently does not expect that the
Year 2000 will cause operational problems or result in the Company incurring
costs material to the Company's financial condition or results of operations.

Acquisitions

Currently, the Company has no arrangements or understandings with respect to any
acquisitions. However, the Company continues to monitor acquisition
opportunities.

                                       12
<PAGE>


Accounting Standards

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income," which is effective for periods ending
after December 15, 1998. This statement establishes standards for computing and
presenting comprehensive income, which includes translation adjustments. In June
1997, FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which is also effective for periods ending after December
15, 1998. This statement establishes additional disclosure requirements for
business segments. In February 1998, FASB issued SFAS No. 132, "Employers'
Disclosure about Pensions and Other Post retirement Benefits" which is effective
for periods ending after December 15, 1998. This Statement revises employers'
disclosures about pension and other post retirement benefit plans.

Management is currently assessing the future period impact of SFAS Nos. 130, 131
and 132 on the Company's presentation of results of operations, changes in
shareholders' equity and segment and pension benefit disclosures.

                                       13
<PAGE>


Other Matters
-------------

Company management has placed a high priority on further penetrating the
aviation marketplace both domestically and internationally with the development
of new products, enhancing functionality on existing products and further
streamlining the production process to exceed customers' requirements on
delivery and product quality. Internal structural changes as well as upgrades to
the Company's information systems have further enabled the Company to maximize
its opportunities in the marketplace.

Item 8. Financial Statements and Supplementary Data.
        --------------------------------------------

The consolidated financial statements and supplementary data required by Item 8
are listed in the index beginning in item 14 and are included in this Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and 
        ---------------------------------------------------------------
        Financial Disclosure.
        --------------------

Not applicable.


Item l0.  Directors and Executive Officers.
          --------------------------------

Information concerning the Directors and Executive Officers of the Company is
incorporated by reference to the Company's definitive proxy statement which will
be filed with the Securities and Exchange Commission (Commission) within 120
days after the close of fiscal 1998.

Item ll.  Executive Compensation.
          ----------------------

Information concerning executive compensation is hereby incorporated by
reference to the Company's definitive proxy statement which will be filed with
the Commission within 120 days after the close of fiscal 1998.

                                       14
<PAGE>


Item l2.  Security Ownership of Certain Beneficial Owners to Management.
          -------------------------------------------------------------

Information concerning security ownership of certain beneficial owners and
management is hereby incorporated by reference to the Company's definitive proxy
statement which will be filed with the Commission within 120 days after the
close of fiscal 1998.

Item l3.  Certain Relationships and Related Transactions.
          ----------------------------------------------

Information concerning certain relationships and related transactions is hereby
incorporated by reference to the Company's definitive proxy statement which will
be filed with the Commission within 120 days after the close of fiscal 1998.

Item l4.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.
          ----------------------------------------------------------------

(a) (1)             Financial Statements:

The following consolidated financial statements of the Company are included
herein.

                                                                      Page

Report of Independent Accountants                                      16

Consolidated Balance Sheets at January 31, 1998 and 1997               17

Consolidated Statements of Operations for the years ended
   January 31, 1998, 1997 and 1996                                     18

Consolidated Statements of Shareholders' Equity for the years
   ended January 31, 1998, 1997 and 1996                               19

Consolidated Statements of Cash Flows for the years ended
   January 31, 1998, 1997 and 1996                                     20

Notes to Consolidated Financial Statements                           21-31

(a) (2)             Financial Statement Schedules:

All schedules have been omitted inasmuch as the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the Company's
Consolidated Financial Statements, including the notes thereto.
                                                          
(a) (3)             Exhibits:

None.

(b)                 Reports on Form 8-K

                    No reports on Form 8-K were filed by the Registrant during
                    the quarter ended January 31, 1998.

                                       15
<PAGE>



Report of Independent Accountants


To the Board of Directors and Shareholders of Aerosonic
Corporation

Clearwater, Florida

We have audited the accompanying consolidated balance sheets of Aerosonic
Corporation and subsidiary (the Company) as of January 31, 1998 and 1997, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the years ended January 31, 1998, 1997 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aerosonic
Corporation and subsidiary as of January 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for the years ended January 31,
1998, 1997, and 1996 in conformity with generally accepted accounting
principles.



/s/ Coopers & Lybrand, L.L.P.

Tampa, Florida
April 3, 1998

                                       16

<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Balance Sheets
January 31, 1998 and 1997
<TABLE>
<CAPTION>

                                ASSETS                                         1998                    1997
                                                                         --------------          ---------------     
<S>                                                                      <C>                     <C>   
Current assets:
  Cash and cash equivalents                                               $    2,075,000            $  1,250,000
  Receivables                                                                  3,348,000               3,398,000
  Income tax receivable                                                                0                 149,000
  Inventories                                                                  8,057,000               7,286,000
  Costs and estimated earnings in excess of billings on
    uncompleted contract                                                          48,000                  58,000
  Prepaid expenses                                                                36,000                  66,000
  Deferred income taxes                                                          314,000                 397,000
                                                                          --------------          --------------
      Total current assets                                                    13,878,000              12,604,000
                                                                          --------------          --------------

Property, plant and equipment, net                                             4,369,000               4,491,000
Other assets                                                                      68,000                 120,000
                                                                          --------------          --------------
                                                                               4,437,000               4,611,000
                                                                          --------------          --------------
                                                                          $   18,315,000           $  17,215,000
                                                                          ==============          ==============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-term debt and notes payable                  $      196,000           $   1,805,000
  Accounts payable, trade                                                        409,000                 964,000
  Compensation and benefits                                                      619,000                 772,000
  Income taxes payable                                                           836,000                       0
  Other accrued expenses                                                         662,000                 521,000
                                                                          --------------          --------------
       Total current liabilities                                               2,722,000               4,062,000

Long-term debt and notes payable, net of current maturities                    3,376,000               1,944,000
Note payable, related party                                                      225,000                 500,000
Deferred income taxes                                                            214,000                 582,000
                                                                          --------------          --------------
       Total liabilities                                                       6,537,000               7,088,000
                                                                          --------------          --------------

Commitments and contingencies (Note 12)

Shareholders' equity:
  Common stock, $.40 par value; authorized 8,000,000 shares,
    issued 3,986,262                                                           1,595,000               1,595,000
  Additional paid-in capital                                                   3,684,000               3,410,000
  Retained earnings                                                            6,631,000               5,430,000
  Less treasury stock; 76,393 shares in 1998 and 178,753 shares
    in 1997, at cost                                                            (132,000)               (308,000)
                                                                          --------------          --------------
       Total shareholders' equity                                             11,778,000              10,127,000
                                                                          --------------          --------------
                                                                          $   18,315,000           $  17,215,000
                                                                          ==============          ==============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                       17

<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Operations
for the years ended January 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                                            1998                    1997                 1996
                                                                        -------------         ---------------     ---------------
<S>                                                                     <C>                    <C>                 <C>           
Net sales                                                               $  19,326,000          $   20,232,000      $   17,360,000

Cost of goods sold                                                         11,780,000              13,225,000          13,063,000
                                                                        -------------         ---------------     ---------------
     Gross profit                                                           7,546,000               7,007,000           4,297,000

Selling, general and administrative expenses                                5,490,000               4,767,000           4,754,000
                                                                        -------------         ---------------     ---------------
     Operating income (loss)                                                2,056,000               2,240,000            (457,000)
                                                                        -------------         ---------------     ---------------
Other income (deductions):
  Provision for settlement of litigation (Note 12)                                  0                (225,000)           (960,000)
  Interest expense, net                                                      (232,000)               (278,000)           (280,000)
  Other, net                                                                  111,000                  (8,000)           (113,000)
                                                                        -------------         ---------------     ---------------
                                                                             (121,000)               (511,000)         (1,353,000)
                                                                        -------------         ---------------     ---------------

Income (loss) from continuing operations before income taxes                1,935,000               1,729,000          (1,810,000)

Income tax benefit (expense)                                                 (734,000)               (606,000)            517,000
                                                                        -------------         ---------------     ---------------
    Income (loss) from continuing operations                                1,201,000               1,123,000          (1,293,000)

Discontinued ordnance operations:
  Loss from discontinued operations, net of income tax benefit of
   $0, $94,000, and $353,000, respectively                                          0                (240,000)           (593,000)
  Gain on sale of discontinued operations                                           0                  41,000                   0
                                                                        -------------         ---------------     ---------------
    Net income (loss)                                                     $ 1,201,000         $       924,000     $    (1,886,000)
                                                                        =============         ===============     ===============
Basic and diluted earnings (loss) per share:
  Continuing operations                                                   $      0.31         $          0.29     $         (0.34)
  Discontinued operations                                                        0.00                   (0.05)              (0.16)
                                                                        -------------         ---------------     ---------------
                                                                          $      0.31         $          0.24     $         (0.50)
                                                                        =============         ===============     ===============

Basic weighted average shares outstanding                                   3,867,057               3,806,173           3,797,690
                                                                        =============         ===============     ===============

Diluted weighted average shares outstanding                                 3,893,579               3,806,173           3,797,690
                                                                        =============         ===============     ===============

</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

                                       18
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Shareholders' Equity
for the years ended January 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                                           Additional                                    Total
                                                          Common             Paid-In      Retained       Treasury     Shareholders'
                                                          Stock              Capital      Earnings        Stock         Equity      
                                                          ------           ----------     --------       --------     ------------
<S>                                                    <C>              <C>             <C>             <C>          <C>         
Balances at February 1, 1995                           $  1,595,000     $  3,407,000    $  6,392,000    $ (336,000)  $ 11,058,000

  Net loss                                                        0                0      (1,886,000)            0     (1,886,000)

  Reissuance of 7,799 shares of treasury stock                    0            3,000               0        14,000         17,000
                                                       ------------     ------------    ------------   -----------   ------------
Balances at January 31, 1996                              1,595,000        3,410,000       4,506,000      (322,000)     9,189,000

  Net income                                                      0                0         924,000             0        924,000

  Reissuance of 8,019 shares of treasury stock                    0                0               0        14,000         14,000
                                                       ------------     ------------    ------------   -----------   ------------

Balances at January 31, 1997                              1,595,000        3,410,000       5,430,000      (308,000)    10,127,000

  Net income                                                      0                0       1,201,000             0      1,201,000

  Exercise of 60,500 stock options                                0           78,000               0       104,000        182,000

  Reissuance of 14,960 shares of treasury stock                   0          148,000               0        26,000        174,000

  Employee stock bonus of 26,900 shares                           0           48,000               0        46,000         94,000
                                                       ------------     ------------    ------------   -----------   ------------
Balances at January 31, 1998                           $  1,595,000     $  3,684,000    $  6,631,000    $ (132,000)  $ 11,778,000
                                                       ============     ============    ============   ===========   ============

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
  
                                       19

<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Cash Flows
for the years ended January 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>

                                                                             1998             1997            1996
                                                                       ------------      ----------      ------------
<S>                                                                   <C>               <C>              <C>   
Cash flows from operating activities:
    Net income (loss)                                                  $  1,201,000      $  924,000      $ (1,886,000)
    Adjustments to reconcile net income (loss) to net cash provided
        by (used in) operating activities:
      Increase (decrease) in allowance for doubtful accounts                (29,000)         27,000            13,000
      Stock compensation                                                    268,000               0                 0
      Write-off of inventory                                                      0               0           925,000
      Depreciation                                                          533,000         674,000           789,000
      (Gain) loss on disposal of equipment                                   14,000               0           (11,000)
      Gain on disposal of ordnance division                                       0         (41,000)                0
      Deferred income taxes                                                (285,000)        693,000          (479,000)
      Gain on sale of unconsolidated subsidiary                                   0               0           (48,000)
      Provision for litigation                                                    0               0           960,000
      Changes in current assets and liabilities:
        Receivables                                                          79,000         (55,000)           (7,000)
        Income tax receivable                                               149,000         287,000          (146,000)
        Inventories                                                        (771,000)     (1,254,000)         (694,000)
        Cost and estimated earnings in excess of 
            billings on uncompleted contract                                 10,000         204,000            28,000
        Prepaid expenses                                                     30,000         (29,000)           27,000
        Other assets                                                         22,000         121,000           (78,000)
        Accounts payable                                                   (555,000)         (5,000)          291,000
        Income taxes payable                                                836,000               0                 0
        Accrued expenses and other liabilities                              (12,000)     (2,074,000)          605,000
                                                                        -----------    ------------     -------------
          Net cash provided by (used in) operating activities             1,490,000        (528,000)          289,000
                                                                        -----------    ------------     -------------

Cash flows from investing activities:
    Proceeds from sale of property and equipment                             34,000           9,000            79,000
    Proceeds from sale of ordnance division                                       0       1,700,000                 0
    Proceeds from sale of investment in and repayment of 
      advances to unconsolidated subsidiary                                       0               0           282,000
    Capital expenditures                                                   (459,000)       (399,000)       (1,156,000)
    Collection of note receivable                                            30,000          30,000            53,000
                                                                        -----------    ------------     -------------
          Net cash provided by (used in) investing activities              (395,000)      1,340,000          (742,000)
                                                                        -----------    ------------     -------------
Cash flows from financing activities:
    Proceeds from long-term debt and notes payable                        1,432,000       2,524,000         3,225,000
    Proceeds from related party notes payable                                     0       1,250,000                 0
    Principal payments on long-term debt and notes payable               (1,609,000)     (2,596,000)       (3,335,000)
    Principal payments on related party notes payable                      (275,000)       (750,000)                0
    Proceeds from exercise of stock options                                 182,000               0                 0
                                                                        -----------    ------------     -------------
          Net cash provided by (used in) financing activities              (270,000)        428,000          (110,000)
                                                                        -----------    ------------     -------------

Net increase (decrease) in cash and cash equivalents                        825,000       1,240,000          (563,000)
Cash and cash equivalents at beginning of year                            1,250,000          10,000           573,000
                                                                        -----------    ------------     -------------
Cash and cash equivalents at end of year                                $ 2,075,000    $  1,250,000       $    10,000
                                                                        ===========    ============     =============
Supplemental disclosure of cash flow information:
    Cash paid during the year for:      
      Interest                                                          $   232,000    $    353,000       $   294,000    
                                                                        ===========    ============     =============    
      Income taxes                                                      $    95,000    $          0       $     7,000    
                                                                        ===========    ============     =============    
</TABLE>                                                                        
                                                                    
The accompanying notes are an integral part of these consolidated financial
statements.

                                       20
<PAGE>

Aerosonic Corporation and Subsidiary
Notes to Consolidated Financial Statements


1.   Description of Business and Summary of Significant Accounting Policies:

     Description of Business - The primary business of Aerosonic Corporation and
     subsidiary (the Company) is to manufacture and sell aircraft
     instrumentation to government and commercial users (instrument division)
     from its plants located in Florida, Virginia and Kansas. Prior to June
     1996, the Company also sold non-munitions components for artillery
     projectiles to the U.S. Government and automotive and truck parts to
     commercial customers (ordnance division) from its plant located in Florida.
     The sale of this division is more fully described in Note 8. The Company's
     customers are located worldwide.

     Principles of Consolidation - The consolidated financial statements include
     the financial statements of Aerosonic Corporation (which operates as the
     Clearwater, Florida and Wichita, Kansas Instrument divisions) and its
     wholly owned subsidiary, Avionics Specialties, Inc. All significant
     intercompany balances and transactions have been eliminated in
     consolidation.

     Cash and Cash Equivalents - For purposes of the consolidated balance sheets
     and consolidated statements of cash flows, the Company considers all
     short-term investments purchased with an original maturity of three months
     or less to be cash equivalents.

     Concentrations of Credit Risk - Financial instruments which potentially
     subject the Company to concentrations of credit risk consist principally of
     cash and receivables. As of January 31, 1998 and 1997, substantially all of
     the Company's cash balances, including amounts representing outstanding
     checks, were deposited with high credit quality financial institutions.
     During the normal course of business, the Company extends credit to
     customers conducting business in the aviation industry worldwide.

     Inventories - Inventories are stated at the lower of cost or market. Cost
     is determined using the first-in, first-out method.

     Property, Plant and Equipment - Property, plant and equipment are stated at
     cost. Depreciation on plant and equipment is calculated on the
     straight-line method over the estimated useful lives of the assets. Upon
     disposition, the cost and related accumulated depreciation are removed from
     the accounts and any related gain or loss is reflected in earnings.

     Research and Development - Research and development costs are expensed as
     incurred. Research and development approximated $443,000, $460,000, and
     $504,000 during the years ended January 31, 1998, 1997 and 1996,
     respectively.

     Income Taxes - The Company accounts for income taxes in accordance with
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes." Under this method, deferred tax liabilities and assets are
     determined based on the difference between the financial statement carrying
     amounts and tax bases of assets and liabilities using enacted tax rates in
     effect in the years in which the differences are expected to reverse. A
     valuation allowance is provided against the future benefit of deferred tax
     assets if it is determined that it is more likely than not that the future
     tax benefits associated with the deferred tax asset will not be realized.



                                       21
<PAGE>
Notes to Consolidated Financial Statements, Continued

1.   Description of Business and Summary of Significant Accounting Policies, 
     continued:

     Revenue Recognition - The Company generally recognizes revenue from sales
     of its products on the accrual basis on the date such products are shipped.
     In certain circumstances, the U.S. Government accepts title to products
     while still on the Company's premises. The Company records these items as
     sales when the government accepts title in writing and assumes all other
     risks and rewards of ownership.

     The Company follows the percentage-of-completion method of accounting for
     income on one long-term engineering service contract. Under this method,
     contract revenue is computed as that percentage of estimated total revenue
     that costs incurred to date bear to total estimated costs, after giving
     effect to the most recent estimates of costs to complete. Revisions in
     costs and revenue estimates are reflected in the period in which the
     revisions are determined. Provisions for estimated losses on uncompleted
     contracts are made in the period in which such losses are determined
     without regard to the percentage-of-completion.

     Environmental Expenditures - The Company capitalizes environmental
     expenditures that increase the life or efficiency of property or that
     reduce or prevent environmental contamination. The Company accrues for
     environmental expenses resulting from existing conditions that relate to
     past operations when the costs are probable and reasonably estimable.

     Computation of Earnings Per Share - Basic earnings per share is computed
     using the weighted average of common stock outstanding. Diluted earnings
     per share is computed using the treasury stock method which is summarized
     as follows:
<TABLE>
<CAPTION>

                                                                      1998             1997            1996
                                                                  -----------     -------------   ------------
<S>                                                                 <C>               <C>            <C>      
        Weighted average common stock outstanding                   3,867,057         3,806,173      3,797,690

        Weighted average common stock equivalents                      26,522                 0              0
                                                                 ------------      ------------    -----------
        Shares used in diluted earnings per share calculation       3,893,579         3,806,173      3,797,690
                                                                 ============      ============    ===========
</TABLE>

     Use of Estimates in the Financial Statements - The preparation of financial
     statements in conformity with generally accepted accounting principles
     requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements. Estimates
     also affect the reported amounts of revenues and expenses during the
     reporting period. Actual results could differ from those estimates.

     Fair Value of Financial Instruments - Statement of Financial Accounting
     Standards (SFAS) No. 107 "Disclosures About Fair Value of Financial
     Instruments," requires disclosure of the fair value of certain financial
     instruments. Cash, accounts receivable, short-term borrowings, accounts
     payable and accrued liabilities are reflected in the financial statements
     at fair value because of the short-term maturity of these instruments. The
     fair values of the Company's long-term debt, notes payable and letters of
     credit are disclosed in Note 7.

                                       22
<PAGE>
Notes to Consolidated Financial Statements, Continued

1.   Description of Business and Summary of Significant Accounting Policies, 
     continued:

     New Accounting Pronouncements - In June 1997, the Financial Accounting
     Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive
     Income" which is effective for periods ending after December 15, 1998. This
     statement establishes standards for computing and presenting comprehensive
     income which includes translation adjustments. In June 1997, FASB issued
     SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
     Information," which is also effective for periods ending after December 15,
     1998. This statement establishes additional disclosure requirements for
     business segments. In February 1998, the FASB issued SFAS No. 132,
     "Employers' Disclosure about Pensions and Other Postretirement Benefits"
     which is effective for periods ending after December 15, 1998. This
     Statement revises employers' disclosures about pension and other
     postretirement benefit plans.

     Management is currently assessing the future period impact of SFAS Nos.
     130, 131 and 132 on the Company's presentation of results of operations,
     changes in shareholders' equity, segment and pension benefit disclosures.

     Reclassifications - Certain prior year amounts have been reclassified to
     conform with 1998 presentation.



2.   Receivables:

     Receivables at January 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>

                                                                                     1998                    1997
                                                                                -------------          --------------
<S>                                                                             <C>                    <C> 
        Trade, less allowance for doubtful accounts of $68,000 in 1998
          and $97,000 in 1997                                                   $   3,315,000          $    3,279,000

        Officers and employees                                                          3,000                   6,000

        Current notes receivable and other                                             30,000                 113,000
                                                                                -------------          --------------
                                                                                $   3,348,000          $    3,398,000
                                                                                =============          ==============
</TABLE>

3.   Inventories:
<TABLE>
<CAPTION>

     Inventories at January 31, 1998 and 1997 consisted of the following:

                                                                                      1998                    1997
                                                                                ------------          --------------
<S>                                                                             <C>                    <C>          
       Raw materials and work in process                                        $  7,265,000           $   6,843,000
       Finished goods                                                                792,000                 443,000
                                                                                ------------          --------------
                                                                                $  8,057,000           $   7,286,000
                                                                                ============          ==============
</TABLE>


                                       23

<PAGE>
Notes to Consolidated Financial Statements, Continued


4.   Property, Plant and Equipment:

     Property, plant and equipment at January 31, 1998 and 1997 consisted of the
       following:
<TABLE>
<CAPTION>

                                                                                Estimated 
                                                                               Useful Life
                                                                                 (years)           1998         1997
                                                                               -----------     -----------  -----------
<S>                                                                            <C>  <C>         <C>          <C>      
       Land and improvements                                                   15 - 20          $ 462,000    $ 462,000
       Buildings and improvements                                              25 - 30          3,215,000    3,162,000
       Machinery and equipment                                                  7 - 10          3,911,000    3,565,000
       Patterns, dies, and tools                                                3 - 5             172,000      161,000
       Furniture and fixtures                                                   7 - 10            433,000      418,000
                                                                                              -----------  -----------
                                                                                                8,193,000    7,768,000
       Less accumulated depreciation and amortization                                           3,824,000    3,277,000
                                                                                              -----------  -----------
                                                                                              $ 4,369,000  $ 4,491,000
                                                                                              ===========  ===========
</TABLE>
                                                                 
5.   Costs and Estimated Earnings on Uncompleted Contract:

     The Company has one long-term contract to provide engineering services,
     which is recorded on the percentage of completion method. Costs and
     estimated earnings in excess of billings on this contract at January 31,
     1998 and 1997 are comprised of the following:
<TABLE>
<CAPTION>

                                                                                            1998              1997
                                                                                        ------------     -------------
<S>                                                                                    <C>                <C>             
       Costs incurred to date                                                          $  2,009,000       $ 1,935,000     
       Estimated earnings                                                                   331,000           391,000  
                                                                                       ------------     -------------    
                                                                                          2,340,000         2,326,000     
       Less billings to date                                                              2,292,000         2,268,000     
                                                                                       ------------     -------------    
                                                                                       $     48,000       $    58,000     
                                                                                       ============     =============               
</TABLE>

                                      24
<PAGE>
Notes to Consolidated Financial Statements, Continued

6.   Income Taxes:

     Income tax (expense) benefit for the years ended January 31, 1998, 1997 and
     1996 consisted of:
<TABLE>
<CAPTION>
                                                                              1998          1997         1996
                                                                         --------------   -----------  ----------
<S>     <C>                                                              <C>             <C>            <C>   
        Continuing operations:
          Current:
            Federal                                                         $  (957,000)   $   87,000    $  38,000
            State                                                               (62,000)            0            0
                                                                          -------------    ----------   ----------
                                                                             (1,019,000)       87,000       38,000
                                                                          -------------    ----------   ----------
           Deferred:
            Federal                                                             279,000      (603,000)     451,000
            State                                                                 6,000       (90,000)      28,000
                                                                          -------------    ----------   ----------
                                                                                285,000      (693,000)     479,000
                                                                          -------------    ----------   ----------

                                                                            $  (734,000)   $ (606,000)   $ 517,000
                                                                          =============    ==========   ==========
        Discontinued operations
          Current:
            Federal                                                         $         0    $   94,000    $ 353,000
            State                                                                     0             0            0
                                                                          -------------    ----------   ----------
                                                                            $         0    $   94,000    $ 353,000
                                                                          =============    ==========   ==========
        Total
          Current:
            Federal                                                         $  (957,000)   $  181,000    $ 391,000
            State                                                               (62,000)            0            0
                                                                          -------------    ----------   ----------
                                                                             (1,019,000)      181,000      391,000
                                                                          -------------    ----------   ----------
          Deferred:
            Federal                                                             279,000      (603,000)     451,000
            State                                                                 6,000       (90,000)      28,000
                                                                          -------------    ----------   ----------
                                                                                285,000      (693,000)     479,000
                                                                          -------------    ----------   ----------
                                                                            $  (734,000)   $ (512,000)  $  870,000
                                                                          =============    ==========   ==========
</TABLE>
     The following is a reconciliation of the statutory federal income tax rate
     to the actual effective income tax rate for the years ended January 31,
     1998, 1997 and 1996:
<TABLE>
<CAPTION>
                                                                                1998         1997       1996
                                                                               ------       -------   --------
<S>                                                                            <C>          <C>          <C>   
        Federal tax rate                                                       (34.00)%     (34.00)%     34.00%
        Increase in taxes resulting from:
          State income taxes, net of federal tax benefit                        (3.85)       (3.30)       1.10
          Decrease in valuation allowance                                        3.20         4.74        0.00
          Other                                                                 (3.25)       (3.10)      (3.50)
                                                                             --------     --------    --------
        Effective tax rate                                                     (37.90)%     (35.66)%     31.60%
                                                                             ========     ========    ========
</TABLE>

                                       25


<PAGE>
Notes to Consolidated Financial Statements, Continued

6.   Income Taxes, continued:

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and deferred tax liabilities at January
     31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>

                                                                                    1998                 1997
                                                                                ------------          -----------
<S>     <C>                                                                     <C>                  <C>  
        Current deferred tax assets:
          Accounts receivable                                                    $ (102,000)            $  36,000
          Inventories, principally due to additional costs inventoried
            for tax purposes pursuant to the Tax Reform Act of 1986                 246,000               125,000
          Compensated absences, principally due to accrual for
            financial reporting purposes                                            100,000                96,000
          Accrued warranty liability                                                      0                30,000
          Other                                                                      70,000               110,000
                                                                                -----------            ----------
                Total current deferred tax assets                                   314,000               397,000
                                                                                -----------            ----------

          Non-current deferred tax assets:
            State net operating loss                                                      0                61,000
            Valuation allowance                                                           0               (61,000)
                                                                                -----------            ----------
                Total non-current deferred tax assets                                     0                     0
                                                                                -----------            ----------

                Total deferred tax assets                                           314,000               397,000
                                                                                -----------            ----------

          Deferred tax liabilities:
            Property, plant and equipment, principally due to
                differences in depreciation and capitalized interest                214,000               582,000
                                                                                -----------            ----------
                Total gross deferred tax liabilities                                214,000               582,000
                                                                                -----------            ----------
                  Net deferred tax asset (liability)                            $   100,000            $ (185,000)
                                                                                ===========            ==========

</TABLE>

     The Company established a valuation allowance of approximately $61,000 as
     of January 31, 1997 which primarily related to state net operating loss
     carryforwards. During 1998, the Company utilized all available state
     operating loss carryforwards thereby causing the valuation allowance to be
     decreased by $61,000. The Company does not have any federal or state
     operating loss carryforwards available at January 31, 1998. Management has
     assessed that it is more likely than not that the net deferred tax assets
     will be realized through future taxable earnings and the reversal of
     certain timing differences.

     During November 1996, the Company was notified of an examination by the
     Internal Revenue Service for the years ended January 31, 1995 and 1994. The
     examination was completed during April 1997 with no material impact to the
     Company's financial statements.


                                       26
<PAGE>
Notes to Consolidated Financial Statements, Continued

7.   Credit Facilities, Long-Term Debt and Notes Payable:

     Long-term debt and notes payable at January 31, 1998 and 1997 consisted of
     the following:
<TABLE>
<CAPTION>

                                                                                     1998                      1997
                                                                                -------------            --------------
<S>                                                                             <C>                         <C>        
        Note payable                                                            $   1,628,000               $         0
        Industrial development revenue bonds                                        1,113,000                 1,188,000
        Revolving credit facility                                                           0                 1,250,000
        Acquisition loan                                                                    0                   400,000
        Mortgage note payable                                                         831,000                   904,000
        Equipment loans                                                                     0                     7,000
        Note payable, related party                                                   225,000                   500,000
                                                                                -------------             -------------
                                                                                    3,797,000                 4,249,000
        Less current maturities                                                       196,000                 1,805,000
                                                                                -------------             -------------
        Long-term debt and notes payable, less current maturities               $   3,601,000               $ 2,444,000
                                                                                =============             =============
</TABLE>


     The amount of long-term debt and notes payable maturing in each of the
     fiscal years 2000, 2001, 2002, and 2003 approximates $348,000, $573,000,
     $348,000, and $2,332,000, respectively.

     Note Payable - The note payable is payable in monthly installments
     beginning in October 1998 through September 30, 2003 including interest at
     the 90-day average of the 90-day treasury bill plus 2.75% (7.99% at January
     31, 1998). The note payable is collateralized by accounts receivable and
     inventory.

     Industrial Development Revenue Bonds - The industrial development revenue
     bonds are payable in quarterly principal and monthly interest installments
     through December 2012 and bear interest at 90% of prime. The bonds are
     collateralized by property, plant and equipment located in Clearwater,
     Florida. The pledged collateral has a carrying value of approximately
     $2,459,000 at January 31, 1998. The mortgage and underlying bonds may be
     redeemed by the holder, in whole, at the principal amount plus accrued
     interest on the 10th, 15th, or 20th anniversary date of the mortgage and
     underlying bonds. If the tax exempt status of the bond is revoked or
     impaired, certain portions could become immediately payable, or the
     interest rate will be increased. In addition, the total of $1,113,000 is
     subject to accelerated maturity.

     Revolving Credit Facility - The Company has available a $1,500,000 line of
     credit. Interest is payable monthly at the 90-day average of the 90-day
     treasury bill plus 2.75% (7.99% at January 31, 1998) and principal is
     payable on demand. The line of credit agreement, which expires in April
     1998, is collateralized by equipment and receivables, and is subject to the
     same covenants included in the Company's long-term debt agreements.
     Approximately $1,500,000 of additional credit was available under this
     facility at January 31, 1998. The weighted average interest rate under this
     facility for the years ended January 31, 1998 and 1997 was 8.41% and
     8.015%, respectively.


                                       27
<PAGE>
Notes to Consolidated Financial Statements, Continued

7.   Credit Facilities, Long-Term Debt and Notes Payable, continued:

     Acquisition Loan - The Company had an acquisition loan at January 31, 1997
     representing financing related to the purchase of Avionics Specialties,
     Inc. The loan bears interest at prime plus .25% and matured in January
     1998. This loan was refinanced in connection with the note payable.

     Mortgage Note Payable - The mortgage note is payable in monthly
     installments through May 2009, including interest at 7.5% through May 1999
     and prime plus 1 percent thereafter. The lender has a put option
     exercisable in May 2001. The note is collateralized by substantially all
     property, plant and equipment at the Avionics Specialties, Inc. location.
     The collateralized property has a carrying value of approximately
     $1,178,000 at January 31, 1998.

     Equipment Loans - The Company had one outstanding equipment loan at January
     31, 1997 totaling $7,000. The loan bears interest at prime plus .25% and is
     payable in monthly installments through maturity in August 2000. The loan
     was paid in full during February 1997.

     Note Payable, Related Party - The note payable, related party consists of a
     term loan owed to a shareholder of the Company. The loan, which is
     uncollateralized, is payable in full at maturity during May 2001 and bears
     interest at prime.

     The Company's long-term debt agreements and the line of credit agreement
     include certain restrictive covenants, including restrictions on dividends
     (dividends during any single calendar year cannot exceed 25 percent of net
     income for that year), limitations on business acquisitions and sales of
     assets, and the maintenance of certain financial ratios as well as minimum
     working capital and tangible net worth requirements, as defined.

     The carrying amount of long-term debt and notes payable at January 31, 1998
     approximates fair value. The prime rate of interest at January 31, 1998 was
     8.5%.

8.   Discontinued Operations - Sale of Ordnance Division:

     During June 1996, the Company sold substantially all assets of its ordnance
     division. The sale, which totaled $1,700,000, resulted in a $41,000 gain.

     Identifiable assets of approximately $2,076,000 at January 31, 1996
     consisted primarily of property and equipment.

     Information summarizing discontinued ordnance operations for the years
     ended January 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>

                                                                                    1997                    1996
                                                                                ------------           ------------
<S>                                                                             <C>                   <C>           
        Net sales                                                               $    945,000          $    1,606,000
                                                                                ============          ==============
        Loss from discontinued operations before income taxes                   $   (293,000)         $     (946,000)
        Income tax benefit                                                            94,000                 353,000
                                                                                ------------          --------------
        Net loss from discontinued operations                                   $   (199,000)         $     (593,000)
                                                                                ============          ==============
</TABLE>
                                       28
<PAGE>
Notes to Consolidated Financial Statements, Continued

9.   Major Customer Information:

     Sales to U. S. Government agencies, when combined, represented 10 percent
     or more of net sales and amounted to approximately $6,536,000, $5,079,000,
     and $5,193,000 for the years ended January 31, 1998, 1997 and 1996,
     respectively. Foreign sales for the years ended January 31, 1998, 1997 and
     1996 represented 10 percent or more of net sales and amounted to
     approximately $2,470,000, $6,208,000, and $4,751,000, respectively. All
     foreign sales contracts are payable in U.S. dollars therefore avoiding any
     foreign currency exchange risk. Receivables at January 31, 1998 included
     approximately $743,000 in receivables due from the U.S. government.

10.  Benefit Plans:

     Effective February 1, 1993, the Company adopted a tax-deferred savings plan
     which covers substantially all employees of the Company. Under the plan,
     participants may elect to contribute up to 10% of pre-tax earnings. The
     Company will fund a 100% matching contribution, up to 3% of the
     participant's yearly compensation. Such matching contributions will be made
     in cash or common stock of the Company. Additional contributions may be
     made at the Company's discretion. For the years ended January 31, 1998,
     1997 and 1996, the Company's contribution was approximately $157,000,
     $165,000, and $145,000, respectively. During the years ended January 31,
     1998, 1997 and 1996, the Company issued 14,960, 8,019, and 7,799 shares of
     treasury stock, respectively, in partial payment of the Plan. These stock
     contributions were properly accounted for as non-cash transactions.

     During 1998, the Company paid a stock bonus of 100 shares to each employee.
     The fair market value of the stock at the date the bonus was granted was
     charged to expense in the amount of approximately $94,000.

     In March 1993, the Board of Directors adopted, subject to shareholder
     approval, an Incentive Stock Option Plan, which provides for the granting
     of 300,000 shares of the Company's authorized but unissued common stock to
     key employees. Under the plan, options granted may be either incentive
     stock options as defined by the Internal Revenue code, or non-qualified
     stock options. Options may be granted at prices not less than fair market
     value at the date of option grant. The option price for incentive stock
     options granted to an optionee who possesses more than 10% total combined
     voting power of value of the Company may not be less than 110% of the fair
     market value at the date of option grant. The stock options will be
     exercisable over a period determined by the Board of Directors, but no
     longer than five years after the date they are granted.

                                       29
<PAGE>
Notes to Consolidated Financial Statements, Continued

10.  Benefit Plans, continued:

     A summary of the status of the Company's stock option plan is as follows:

                                                                   Exercise 
                                                     Shares          Price
                                                   ----------     ----------


        Balance, February 1, 1995                     107,500       $3.00
        Canceled                                      (22,000)      $3.00
                                                  -----------
        Balance, January 31, 1996                      85,500
        Canceled                                      (13,500)      $3.00
                                                  -----------

        Balance, January 31, 1997                      72,000
        Exercised                                     (60,500)      $3.00
        Canceled                                       (7,500)      $3.00
                                                  -----------
        Balance, January 31, 1998                       4,000
                                                  ===========


     All outstanding options at January 31, 1998 and 1997 are exercisable. At
     January 31, 1998, all options outstanding have a remaining contractual life
     of less than one year.

     Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
     Stock-Based Compensation," establishes financial accounting and reporting
     standards for stock-based employee compensation plans. The Company has
     adopted the disclosure only provisions of SFAS No. 123 but applies
     Accounting Principles Board (APB) Opinion No. 25 and related
     interpretations in accounting for its plan. SFAS No. 123 and APB No. 25
     have no financial accounting or reporting impact on the Company for the
     years ended January 31, 1998 and 1997 due to the Company not granting any
     stock options.

11.  Related Party Transactions:

     The Company purchased painting services of approximately $14,000 during the
     years ended January 31, 1996 from an entity owned by a shareholder and
     former Chief Executive Officer and Chairman of the Board of Directors of
     the Company. The Company has filed a lawsuit related to these services as
     described in Note 12.

     During the year ended January 31, 1997, the Company obtained short-term
     financing totaling $500,000 from a shareholder and officer. The loan, which
     was fully repaid during the year, was non-interest bearing and
     uncollateralized.

     During the year ended January 31, 1997, the Company obtained long-term
     financing from a shareholder totaling $750,000 at origination. Principal
     repayments totaling $275,000 and $250,000 were made during 1998 and 1997.
     The terms of the note are more fully described in Note 7.


                                       30
<PAGE>
Notes to Consolidated Financial Statements, Continued

12.  Commitments and Contingencies:

     In 1993, the Company was named as a co-defendant in a patent infringement
     suit filed by Sensonics Inc. claiming that the Company infringed Sensonics'
     expired patent for an electromagnetical tapping device that the Company
     used as a component part. During May 1996, the Company's Board of Directors
     approved a proposed settlement of the lawsuit for $2,000,000. Pursuant to
     this settlement, the Company recorded a $225,000, and $960,000 provision
     for the settlement of litigation during the years ended January 31, 1997
     and 1996, respectively. All amounts related to the settlement were paid by
     the Company during the year ended January 31, 1997.

     The Company was sued in September of 1996 by David S. Goldman, former
     President and Chief Executive Officer of Aerosonic Corporation, for an
     alleged breach of a consulting agreement between Mr. Goldman and the
     Company. The suit seeks damages in excess of $15,000. The Company has filed
     a motion to dismiss this action, which is currently under review. During
     fiscal year 1997, the Company sued Mr. Goldman and Mil-Spec Finishers,
     Inc., a former subcontractor to Aerosonic Corporation controlled by Mr.
     Goldman, seeking damages in excess of $15,000, for alleged fraud and
     misappropriation of funds, appropriation of corporate opportunity, breach
     of fiduciary duty and conversion.

     In accordance with a consent agreement signed by the Company in 1993, the
     Company's environmental consultant has developed an interim remedial action
     plan to contain and remediate certain contamination on and underlying the
     Company's property. This plan was submitted to the Florida Department of
     Environmental Protection (FDEP) in 1997 and is currently under review and
     discussion. During 1997, the Company recorded a provision of approximately
     $175,000 related to the estimated costs to be incurred under this plan. As
     of January 31, 1998 the Company has a remaining liability of approximately
     $128,000 recorded in Other accrued expenses to cover future environmental
     expenditures related to the remediation of this site. Management believes
     that any additional liability in excess of the amounts accrued at January
     31, 1998 will not have a material affect on the financial condition of the
     Company.

     The Company is also involved in certain claims and legal actions arising in
     the ordinary course of business. In the opinion of management, the ultimate
     disposition of the above matters will not have a material adverse effect on
     the Company's financial position, results of operations, or liquidity.

     At January 31, 1998, the Company was committed to future purchases
     primarily for materials of approximately $791,000. At January 31, 1998, the
     Company had an additional $79,000 letter of credit which guarantees trade
     activities. The contract amount of all of the Company's letters of credit
     is a reasonable estimate of their fair value, as the value for each is
     fixed over the life of the commitment.

                                       31


<PAGE>


SIGNATURES

Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


AEROSONIC CORPORATION
(Registrant)

By: /s/ J. Mervyn Nabors                                 Date:  April 30 ,1998
   -----------------------------                               
      J. Mervyn Nabors, President
      Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of l934, 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/ J. Mervyn Nabors
   -----------------------------
    J. Mervyn Nabors                                     Date: April 30 ,1998
    President, Chief Executive Officer
    and Chairman of the Board

    /s/ David A. Baldini
   -----------------------------
    David A. Baldini                                     Date:  April 30,1998
    Vice President and
    Vice Chairman of the Board

    /s/ Eric J. McCracken
   -----------------------------
    Eric J. McCracken                                    Date:  April 30 ,1998
    Executive Vice President,
    Chief Financial Officer and Director

   /s/ P. Mark Perkins
   -----------------------------
   P. Mark Perkins                                       Date:  April 30 ,1998
   Executive Vice President and Director

    /s/ Richard A. Frank
   -----------------------------  
   Richard A. Frank                                      Date:  April 30 ,1998
   Director

   /s/ Joseph P. Sherman
   ----------------------------- 
   Joseph P. Sherman, Jr.                                Date:  April 30 ,1998
   Director

                                       32