Control of drives based on AC induction motors is a quite complex task. Provided the vector control algorithm is used we need to know not only the rotor speed but also the position of the magnetic flux inside the motor during the control process. In most applications the flux sensors are omitted and the magnetic flux phasor position has to be calculated. But there are also applications in which even speed sensors should be omitted. In such a situation, we have to solve the task of state reconstruction only from voltage and currents measurements. In the current paper, we present a method based on deterministic evaluation of measurement using the state observer based on Lyapunov function. It is also shown, that the main problem of speed estimation accuracy is closely tied to the knowledge of actual rotor resistance value. A simple method of rotor resistance estimation based on rotor slot harmonics analysis is proposed. Algorithm has been proved in testing on a small 250W AC induction machine