<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 1998
                                              ------------------

                                       or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ____________________ to ___________________
 
                        Commission File Number: 001-8988
                                                --------
                             ECC International Corp.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                         <C>
             Delaware                                  23-1714658   
---------------------------------           ------------------------------------
 (State or other jurisdiction 
of incorporation or organization)           (I.R.S. Employer Identification No.)


2001 West Oak Ridge Road, Orlando, FL                     32809-3803 
-------------------------------------        ---------------------------------- 
(Address of principal executive offices)                 (Zip Code)    
</TABLE>

                                 (407) 859-7410
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


                                 Not Applicable
--------------------------------------------------------------------------------
        (Former name, former address and former fiscal year, if changed
                               since last report)


     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 twelve 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. 
                                              [X] Yes  [ ] No

     As of September 30, 1998, there were 8,329,409 shares of the Registrant's
Common Stock, $.10 par value per share, issued and outstanding.


<PAGE>   2

                    ECC INTERNATIONAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                      (In Thousands Except Per Share Data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                       Three Months    Three Months    
                                          Ended           Ended      
                                         9/30/98         9/30/97 
                                       ------------    ------------
<S>                                      <C>            <C>
Net Sales                                 $ 10,411       $ 12,156
Cost of Sales                                7,987          9,658
                                          --------       --------
Gross Profit                                 2,424          2,498
                                          --------       --------
Expenses:
  Selling, General & Administrative          3,061          2,912
   Systems Development                         520            683
   Non-Recurring Expenses                    1,166           --  
                                          --------       -------- 
     Total Expenses                          4,747          3,595
                                          --------       --------
Operating Loss                              (2,323)        (1,097)
                                          --------       --------
Other Income (Expense):
  Interest Income                               75             83
  Interest Expense                            (244)          (390)
  Other - Net                                  104            (67)
                                          --------       --------
     Total Other Expense                       (65)          (374)
                                          --------       --------
Loss Before Income Taxes                    (2,388)        (1,471)
(Benefit)/Provision for Income Taxes          (604)           360
                                          --------       --------
Net Loss                                  $ (1,784)      $ (1,111)
                                          ========       ========
Loss Per Common

Share - Basic and
  Assuming Dilution:
Net Loss Per Common Share                 $  (0.21)      $  (0.14)
                                          ========       ========
</TABLE>
 

        See accompanying notes to the consolidated financial statements.

<PAGE>   3

                    ECC INTERNATIONAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                 THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                 (In Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                 Three Months       Three Months
                                                     Ended             Ended  
                                                    9/30/98           9/30/97 
                                                    -------           ------- 
<S>                                                 <C>               <C>
Net Loss                                            $(1,784)          $(1,111)
Other Comprehensive Income (Expense):               
  Foreign Currency Translation  Adjustments            (125)               78    
                                                    -------           -------     
      Total Comprehensive Income                    $(1,909)          $(1,033)   
                                                    =======           ========
</TABLE>


        See accompanying notes to the consolidated financial statements



<PAGE>   4



                    ECC INTERNATIONAL CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                       (Unaudited)    (Audited)   
                                                        9/30/98        6/30/98 
                                                        ----------    ---------
<S>                                                       <C>          <C>
ASSETS

Current Assets:
  Cash                                                    $ 3,742      $ 4,830 
  Accounts Receivable, Net                                  6,690        8,097
  Costs and Estimated Earnings in Excess     
   of Billings on Uncompleted Contracts                    16,469       16,391
  Inventories
    Raw Material                                            4,249        4,149
    Work in Process                                         1,160        1,053
  Prepaid Expenses and Other                                7,438        6,868
                                                          -------      -------  
    Total Current Assets                                   39,748       41,388
Property, Plant and Equipment - Net                        20,729       20,994
Other Assets                                                1,563        1,976
                                                          -------      ------- 
    Total Assets                                          $62,040      $64,358
                                                          =======      =======
</TABLE>


                                                                    Continued...

<PAGE>   5


                   ECC INTERNATIONAL CORP. AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS (Continued)
                (In Thousands Except Share and Per Share Data)

<TABLE>
<CAPTION>
                                                     (Unaudited)     (Audited) 
                                                      9/30/98         6/30/98 
                                                      ---------       -------
<S>                                                   <C>              <C>
LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:
  Current Portion of Long-Term Debt                   $11,192          $11,132
  Accounts Payable                                      5,397            6,263
  Advances on Long-Term Contracts                       4,207            4,683
  Accrued Expenses                                      8,775            7,925
                                                      -------          -------
    Total Current Liabilities                          29,571           30,003
                                                      -------          -------
Deferred Income Taxes                                     918              918
                                                      -------          -------
Commitments and Contingencies
Stockholders' Equity:
  Common stock, $.10 par; authorized 
   20,000,000 shares at 9/30/98 and 
   6/30/98; issued and outstanding,
   8,329,409 shares at 9/30/98 and 
   8,318,058 at 6/30/98                                   833              832
  Preferred stock, $.10 par; authorized 
   1,000,000 shares at 9/30/98 and at
   6/30/98; none issued and outstanding 
   at 9/30/98 and 6/30/98                                  --               --
  Note Receivable from Stockholder                       (146)            (146)
  Capital in Excess of Par                             24,826           24,804 
  Retained Earnings                                     6,149            7,933
  Cumulative Translation Adjustment                      (111)              14
                                                      -------          -------
Total Stockholders' Equity                             31,551           33,437
                                                      -------          -------
Total Liabilities & Stockholders' Equity              $62,040          $64,358
                                                      =======          =======
</TABLE>

        See accompanying notes to the consolidated financial statements.


<PAGE>   6


                    ECC INTERNATIONAL CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE THREE MONTHS ENDED
                          SEPTEMBER 30, 1998 AND 1997
                                 (In Thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                  Three Months    Three Months 
                                                     Ended            Ended
                                                    9/30/98          9/30/97 
                                                  ------------    ------------
<S>                                                <C>                <C>

Cash Flows From Operating Activities:
Net Loss                                           $(1,784)        $(1,111)
Items Not Requiring Cash:
  Depreciation                                       1,014           1,128
Changes in Certain Assets and Liabilities:                                            
  Accounts Receivable                                1,407            (764)
  Costs and Estimated Earnings in Excess                                               
   of Billings on Uncompleted Contracts                (78)          3,819 
  Inventories                                         (207)           (315)
  Prepaid Expenses and Other                          (570)           (272)
  Accounts Payable                                    (866)            324
  Advances on Long-Term Contracts                     (476)            168 
  Accrued Expenses                                     873             528
                                                   -------         -------
Net Cash (Used In)/Provided By 
 Operating Activities                                 (687)          3,505
                                                   -------         -------
Cash Flows From Investing Activities:
  Additions to Property, Plant and Equipment          (749)           (778)
  Other                                                348              87 
                                                   -------         -------
Net Cash Used In Investing Activities                 (401)           (691)
                                                   -------         -------
Cash Flows From Financing Activities:
  Proceeds From Issuance of Common Stock, Options    
  Exercised and Warrants, Including Related 
   Tax Benefit                                          --               2   
Repayments under Term Loan                              --          (2,250)    
Borrowings under Revolving Credit Facility, Net         --            (142)  
                                                   -------         -------
Net Cash Used In Financing Activities                   --          (2,390) 
                                                   -------         -------
Net (Decrease)/Increase in Cash                     (1,088)            424
Cash at Beginning of the Period                      4,830           3,888
                                                   -------         -------
Cash at End of the Period                          $ 3,742         $ 4,312
                                                   =======         =======
</TABLE>


                                                                    Continued...


        See accompanying notes to the consolidated financial statements.

<PAGE>   7
                    ECC INTERNATIONAL CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE THREE MONTHS ENDED
                    SEPTEMBER 30, 1998 AND 1997 (Continued)
                                 In Thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                    Three Months   Three Months  
                                                       Ended          Ended
                                                      9/30/98         9/30/97 
                                                    ------------    -----------
<S>                                                     <C>           <C>

Supplemental Disclosure of Cash Flow Information: 
Cash Paid During the Year For:
  Interest                                              $248           $393

Supplemental Schedule of Non Cash 
 Financing Activities:

Issuance of Director Equity Compensatio                 $ 23           $ --

Issuance of Employee Stock Incentives                   $ --           $421

</TABLE>

       See accompanying notes to the consolidated financial statements.



<PAGE>   8
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.  The accompanying statements are unaudited and have been prepared by ECC
    pursuant to the rules and regulations of the Securities and Exchange
    Commission. The June 30, 1998 consolidated balance sheet was derived from
    audited financial statements but does not include all disclosures required
    by generally accepted accounting principles. In the opinion of management
    the accompanying unaudited consolidated financial statements contain all
    adjustments, consisting of only normal recurring adjustments, necessary to
    present fairly the consolidated financial position, results of operations
    and cash flows for the interim period presented. These unaudited
    consolidated financial statements should be read in conjunction with the
    consolidated financial statements and footnotes thereto in the Company's
    Annual Report on Form 10-K for the fiscal year ended June 30, 1998.

2.  For the three months ended September 30, 1997 certain items were restated on
    the Company's consolidated statements of operations and consolidated
    statements of cash flows to conform to the presentation in the Company's
    Annual Report on Form 10-K for the fiscal year ended June 30, 1998.

    In the fourth quarter of fiscal year 1998, the Company changed its method of
    accounting for precontract costs from deferring costs incurred for specific
    anticipated contracts and including those costs in contract sales and costs
    when the contract award was assured to expensing the costs as incurred in
    accordance with Statement of Position 98-5 "Reporting on the Cost of
    Start-Up Activities." The retro-active effect of the change on the three 
    month period ended September 30, 1997 was to increase net loss by $118,000 
    ($0.02 per share).


3.  Basic loss per common share is computed by dividing net loss available to
    common shareholders by the weighted-average number of common shares
    outstanding during the period. Diluted loss per share is computed by
    dividing net loss available to common shareholders by the weighted-average
    number of common shares outstanding during the period adjusted for the
    number of shares that would have been outstanding if the dilutive potential
    common shares had been issued. The diluted loss per share does not assume
    the exercise of options that would have an antidilutive effect on loss per
    share.

    The weighted-average number of common shares outstanding for the basic and
    diluted per share calculations are identical since the assumed exercise of
    all outstanding options would be antidilutive.


    The weighted-average number of common shares outstanding for each period
    presented is as follows:

<TABLE>
<CAPTION>
                                        9/30/98     9/30/97
                                        -------     -------
<S>                                    <C>          <C>
    Three-months ended                 8,329,589   8,119,883 
</TABLE>




4.  The Company's financial statements have been presented on the basis that it
    is a going concern, which contemplates the realization of assets and
    satisfaction of liabilities in the normal course of business. The Company
    has suffered substantial losses in recent fiscal years and for the three
    months ended September 30, 1998. In addition, the Company is experiencing
    difficulty generating sufficient cash flow to meet its obligations and
    sustain operations and has not yet obtained a new credit facility to replace
    its current loan facility, of which the balance of $10.4 million (after
    payments discussed below) is due January 11, 1999. These factors raise 
    substantial doubt about the Company's ability to continue as a going 
    concern.

    The financial statements do not include any adjustments relating to the
    recoverability and classification of liabilities that might be necessary
    should the Company be unable to continue as a going concern. The Company did
    not comply with the minimum fixed charge coverage ratio covenant at
    September 30, 1998 and June 30, 1998, and was unable to obtain waivers from
    its bank lender for these violations under its revolving credit agreement.
    On October 1, 1998, the Company entered into a forbearance agreement with
    the bank, which extended the expiration date of the revolving credit
    agreement from October 1, 1998 to January 11, 1999, and reduced the
    availability of credit from $13.0 million to $11.4 million. The forbearance
    agreement also provides for the maintenance of minimum cash balances, fixed
    charge coverage ratio and current ratio as well as maximum debt to equity
    ratio through the expiration date. The forbearance agreement terminates on
    November 30, 1998, if the Company does not obtain a letter of commitment
    from a financial institution providing for repayment in full of the
    obligations under the revolving credit agreement.

    The Company is currently in the process of seeking alternative sources of
    financing and anticipates obtaining the financing by November 30, 1998.
    There can be no assurance, however, that the Company will obtain such
    financing.

    Pursuant to the terms of the forbearance agreement, the Company made a
    $300,000 payment on the loan facility in October 1998. Additionally, during
    November 1998, the Company used proceeds from the sale of certain real 
    estate assets to reduce the loan facility by an additional $500,000.

5.  The Company adopted Statement of Financial Accounting Standards No. 130,
    "Reporting Comprehensive Income" (SFAS No. 130), in the quarter ended
    September 30, 1998. SFAS No. 130 establishes standards for reporting
    comprehensive income and its components, classified by their nature, in a
    full set of annual financial statements. The components of other
    comprehensive income for the Company have generally only included foreign
    currency translation adjustments.


6.  Non-Recurring Expenses

    During the three-month period ended September 30, 1998, the Board of
    Directors announced the approval of a plan to wind down and discontinue the
    operations of the UK subsidiary by March 1999. In addition, the Company
    announced the relocation of its corporate headquarters staff and
    Instructional Systems Development Group from Wayne, Pennsylvania to the
    Company's principal Systems Design and Production Center in Orlando,
    Florida. The relocation was completed on September 30, 1998. As a result of
    the efforts to wind down the UK operation and the relocation of the
    corporate headquarters, the Company recorded non-recurring charges of
    approximately $1.2 million during the three-month period ended September
    30, 1998. These charges primarily relate to employee termination benefits.
    Management expects to record additional charges, principally relating to
    employee termination benefits, during the remainder of fiscal year 1999 of
    $1.3 million. Management continues to evaluate options with respect to the
    leased facilities in the U.K. including subletting the facilities or
    terminating the leases. Any resulting charge will be determined after the 
    evaluation is complete.
        
<PAGE>   9


                    ECC INTERNATIONAL CORP. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    OVERVIEW 

    This Quarterly Report on Form 10-Q contains forward-looking statements
    within the meaning of Section 21E of the Securities Exchange Act of 1934, as
    amended, and Section 27A of the Securities Act if 1933, as amended. For this
    purpose, any statements contained herein that are not statements of
    historical fact may be deemed to be forward-looking statements. Without
    limiting the foregoing, the words "believes," "anticipates," "plans,"
    "expects," and similar expressions are intended to identify forward-looking
    statements. There are a number of factors that could cause the Company's
    actual results to differ materially from those indicated by such
    forward-looking statements. These factors include, without limitation, those
    set forth below under the caption "Certain Factors That May Affect Future
    Operating Results.



a)  MATERIAL CHANGES IN FINANCIAL CONDITION

    During the three-month period ended September 30, 1998, the Company's
    principal sources of cash were billings and receipts on accounts receivable
    and costs and estimated earnings in excess of billings on uncompleted
    contracts. The principal uses of these funds were to make vendor payments
    and fund improvements to the Orlando facility.

    Accounts Receivable decreased due to the receipt of payments on the
    Company's domestic training contracts including the CCTT LRIP, Javelin
    multi-year and Saudi Vigs programs.

    Work in process inventory increased primarily due to unabsorbed overhead.
    Overhead is absorbed on an annualized projected rate. Management expects
    that volume during the remaining fiscal 1999 quarters will support the
    currently budgeted overhead rate.

    Prepaid Expenses and Other increased primarily due to the federal tax
    benefit recorded for the federal net operating loss realized during the
    three-month period ended September 30, 1998.

    Other Assets decreased primarily as a result of the receipt of cash
    surrender value on certain executive insurance policies.

    Advances on long-term contracts decreased primarily as a result of the
    liquidation of advance payments for work performed on contracts in the UK
    division.

    Accrued expenses increased primarily as a result of accruals recorded for
    non-recurring expenses associated with the relocation of the corporate
    headquarters and wind down of the UK division. (See Note 6 to the Unaudited
    Consolidated Financial Statements).


    The Company's financial statements have been presented on the basis that it
    is a going concern, which contemplates the realization of assets and
    satisfaction of liabilities in the normal course of business. The Company
    has suffered substantial losses in recent fiscal years and for the three
    months ended September 30, 1998. In addition, the Company is experiencing
    difficulty generating sufficient cash flow to meet its obligations and
    sustain operations and has not yet obtained a new credit facility to replace
    its current loan facility, of which the balance of $10.4 million (after 
    payments discussed below) is due January 11, 1999. These factors raise
    substantial doubt about the Company's ability to continue as a going
    concern.

    The financial statements do not include any adjustments relating to the
    recoverability and classification of liabilities that might be necessary
    should the Company be unable to continue as a going concern. The Company did
    not comply with the minimum fixed charge coverage ratio covenant at
    September 30, 1998 and June 30, 1998, and was unable to obtain waivers from
    its bank lender for these violations under its revolving credit agreement.
    On October 1, 1998, the Company entered into a forbearance agreement with
    the bank, which extended the expiration date of the revolving credit
    agreement from October 1, 1998 to January 11, 1999, and reduced the
    availability of credit from $13.0 million to $11.4 million. The forbearance
    agreement also provides for the maintenance of minimum cash balances, fixed
    charge coverage ratio and current ratio as well as maximum debt to equity
    ratio through the expiration date. The forbearance agreement terminates on
    November 30, 1998, if the Company does not obtain a letter of commitment
    from a financial institution providing for repayment in full of the
    obligations under the revolving credit agreement.


    The Company is currently in the process of seeking alternative sources of
    financing and anticipates obtaining the financing by November 30, 1998.
    There can be no assurance, however, that the Company will obtain such
    financing.

    Pursuant to the terms of the forbearance agreement, the Company made a
    $300,000 payment on the Loan Facility in October 1998.

    Additionally, during November 1998, the Company used proceeds from the sale
    of certain real estate assets to reduce the Loan Facility by an additional
    $500,000. During the remainder of fiscal year 1999, the Company anticipates
    spending approximately $1.0 million for new machinery and equipment and to
    continue to refurbish the Orlando facility.

    Other than as stated above, the Company currently has no other material
    commitments for capital expenditures.

b.) Material Changes in Results of Operations.

    Net sales decreased for the three-month period ended September 30, 1998 as
    compared to the same period ended September 30,1997. The decrease in net
    sales is primarily the result of the completion of several training division
    contracts. This decrease in net sales was partially offset by sales
    generated from recently awarded contracts including: Javelin multi-year;
    CCTT LRIP; a Saudi Vigs contract; as well as several additions to other
    ongoing contracts.

    Net sales in the UK subsidiary also decreased for the three-month period
    ended September 30,1998 as compared to the same period ended September 30,
    1997. This decrease was a result of reduced activity on its two major
    contracts as they are expected to be completed during the first half of
    fiscal year 1999. There have been no substantial new business awards in the
    UK operation since the third quarter of fiscal year 1998. The Company
    expects to complete the wind down of the UK operation by March 1999.

    Overall gross margin as a percentage of net sales increased for the
    three-month period ended September 30, 1998 versus the same period ended
    September 30, 1997. Domestic training contract gross margin levels improved
    as a result of the completion of many large "cost plus" type contracts which
    have historically had lower gross margins than the "fixed price" type. In
    addition, the Company's cost reduction initiatives during fiscal year 1998
    and the first quarter of fiscal year 1999 have reduced overhead costs, thus
    improving gross margins. In addition, gross margins in the UK operation have
    improved over the corresponding period in the prior fiscal year as a result
    of the accrual for loss contracts recorded at June 30, 1998.

    Selling, general and administrative expense increased primarily as a result 
    of increases in the domestic operations costs partially offset by cost
    cutting initiatives in the UK operation. The increase in domestic selling,
    general and administrative costs is primarily the result of increased
    utilization of consulting services related to marketing, outplacement and
    executive search services as well as bid and proposal expenditures as the
    Company seeks new business awards.

    Systems development expense decreased during the three-month period ended
    September 30, 1998 as compared to the same period ended September 30, 1997.
    The decrease primarily is a result of cost cutting initiatives. These 
    initiatives are expected to continue through out fiscal year 1999.

    During the three-month period ended September 30, 1998, the Board of
    Directors announced the approval of a plan to wind down and discontinue the
    operations of the UK subsidiary by March 1999. In addition, the Company
    announced the relocation of its corporate headquarters staff and
    Instructional Systems Development Group from Wayne, Pennsylvania to the
    Company's principal Systems Design and Production Center in Orlando,
    Florida. The relocation was completed on September 30, 1998. As a result of
    the efforts to wind down the UK operation and the relocation of the
    corporate headquarters, the Company recorded non-recurring charges of
    approximately $1.2 million during the three-month period ended September 30,
    1998. These charges primarily relate to employee termination benefits.
    Management expects to record additional charges, principally relating to
    employee termination benefits, during the remainder of fiscal year 1999 of
    $1.3 million. Management continues to evaluate options with respect to the
    leased facilities in the U.K. including subletting the facilities or
    terminating the leases. Any resulting charge will be determined after the
    evaluation is complete.

    Interest expense decreased for the three-month period ended September 30,
    1998 versus the corresponding period in the previous fiscal year. The
    decrease was primarily the result of a reduction in the Company's revolving
    credit facility. 

    Other, net increased primarily as a result of gains on foreign exchange
    transactions in the UK subsidiary.


<PAGE>   10

c)  CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS.


    The following important factors, among others, could cause actual results to
    differ materially from those indicated by forward-looking statements made in
    this Quarterly Report on Form 10-Q and presented elsewhere by management
    from time to time. All forward-looking statements included in this document
    are based on information available to the Company on the date hereof, and
    the Company assumes no obligation to update any such forward-looking
    statements.

    A number of uncertainties exist that could affect the Company's future
    operating results, including, without limitation, general economic
    conditions, changes in government spending, cancellation of weapons
    programs, delays in contract awards, delays in the acceptance process of
    contract deliverables, the Company's continued ability to develop and
    introduce products, the introduction of new products by competitors, pricing
    practices of competitors, the cost and availability of parts and the
    Company's ability to control costs.

    The Company has entered into a forbearance agreement with its bank lenders
    which extended the expiration of its revolving credit agreement from October
    1, 1998 to January 11, 1999 and provides for the maintenance of minimum cash
    balances as well as other restrictive covenants through the expiration date.
    The forbearance agreement terminates on November 30, 1998, if the Company
    does not obtain a letter of commitment from a financial institution
    providing for repayment in full of the obligations under the revolving
    credit agreement. There can be no assurance that the Company will be
    successful in generating the necessary cash flow or obtaining such
    financing.

    To date, a substantial portion of the Company's revenues have been
    attributable to long-term contracts with various government agencies. As a
    result, any factor adversely affecting procurement of long-term government
    contracts could have a material adverse effect on the Company's financial
    condition and results of operations.

    Because of these and other factors, past financial performance should not be
    considered an indication of future performance. The Company's future
    quarterly operating results may vary significantly. Investors should not use
    historical trends to anticipate future results and should be aware that the
    trading price of the Company's Common Stock may be subject to wide
    fluctuations in response to quarterly variations in operating results and
    other factors, including those discussed above.


    YEAR 2000 ISSUE

    The "Year 2000" problem relates to computer systems that have time and
    date-sensitive programs that were designed to read years beginning with
    "19", but may not properly recognize the year 2000. If a computer system or
    software application used by the Company or a third party dealing with the
    Company fails because of the inability of the system or application to
    properly read the year "2000" the results could conceivably have a material
    adverse effect on the Company if not adequately remedied by the Company, its
    suppliers and customers, on a timely basis.

    The Company has formally addressed the Year 2000 issue since November 1997
    when a Year 2000 Compliance Program was initiated. A complete evaluation was
    made on all internal systems, including voice mail, automated badge entry,
    e-mail, payroll, accounting, facilities and products. 

    For its information technology, the Company currently utilizes a network of
    Unix and Windows NT platforms, which provide company-wide access to all of
    the Company's business application programs. Employees access the network
    application software through individual PC's (about 400), all of which are
    compliant. Substantially all operating systems related to the Company's
    network have been updated to comply with Year 2000 requirements.
    Periodically, new application programs and updated versions of existing
    programs are added to the system. The Company has an ongoing program to
    confirm that all such added software programs are compliant. The Company
    will perform a final re-verification test of all systems in the second
    quarter of calendar year 1999 to allow time for any unexpected remediation
    that may need to occur. Although there can be no assurance that the Company
    will identify and correct every Year 2000 problem found in its computer
    applications, the Company believes that it has in place a comprehensive
    program to identify and correct any such problems.

    The Company has reviewed its building and utility systems (heat, light,
    phones, etc.) for the impact of Year 2000. Almost all of the systems in this
    area are Year 2000 ready. The Meridian Voice Mail system is not yet
    compliant, but the Company is in the process of purchasing an upgrade, which
    is compliant. While, the Company has no reason to believe that its utility
    suppliers will not meet their required Year 2000 compliance targets, there
    can be no assurance that these suppliers will in fact meet the Company's
    requirements. The failure of any such supplier to fully remediate its
    systems for Year 2000 compliance could cause a partial shutdown of the
    Company's plant, which could impact the Company's ability to meet its
    obligations to supply products to its customers.
  
<PAGE>   11
    The Company is satisfied that its customer base is aware of the Year 2000
    issue and is proactively working to ensure that there are no problems
    associated with the Year 2000. The Company is aware of this because all
    major customers have asked the Company for its Year 2000 status. In 
    addition, the Company is working with its prime contractors to identify Year
    2000 problems that may affect the integration of the Company's product with
    those of the prime contractor. The Company will work with its prime
    contractors to remediate any problems as they are identified.

    The Company has also commenced a program to determine the Year 2000
    compliance efforts of its equipment and material suppliers. The Company has
    sent requests to all of its significant suppliers regarding their Year 2000
    compliance, requesting that they warrant their ability to provide services
    and supplies in the Year 2000. Half of the suppliers have warranted their
    ability to provide supplies in the Year 2000, and the remainder have
    presented a plan to have their company compliant by the end of calendar year
    1999. This program will be ongoing and the Company's efforts with respect to
    specific problems identified will depend in part upon its assessment of the
    risks involved. Unfortunately, the Company cannot fully control the conduct
    of its suppliers, and there can be no guarantee that Year 2000 problems
    originating with a supplier will not occur. The Company has not yet
    developed contingency plans in the event of a Year 2000 failure caused by a
    supplier or third party, but would intend to do so if a specific problem is
    identified through the programs described above. In some cases, especially
    with respect to its utility vendors, alternative suppliers may not be
    available.

    The Company believes that the cost of Year 2000 compliance for its
    information and production systems has not and will not be material to its
    consolidated results of operations and financial position. 


    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Not Applicable.

<PAGE>   12


                           PART II. OTHER INFORMATION

                            ECC INTERNATIONAL CORP.


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a.  EXHIBITS

             Exhibit 27.1 - Financial Data Schedule for the three-month period 
             ended September 30, 1998.

         b.  REPORTS ON FORM 8-K 

             On August 28, 1998, the Company filed a Current Report on Form 8-K,
             dated August 27, 1998, to report under Item 5 (Other Events) that
             the Company had reduced its work force by 5% and that the Board of
             Directors had approved a plan to wind down and discontinue the
             operations of ECC Simulation Limited. No financial statements were
             required to be filed with such report.

<PAGE>   13


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                               ECC INTERNATIONAL CORP.

            
Date: November 16, 1998                        /s/ James C. Garrett   
      -----------------                        -------------------------------
                                               James C. Garrett
                                               President and
                                               Chief Executive Officer
                                               (Principal Financial and 
                                               Accounting Officer)