UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 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 period ended                                               June 30, 1997
                                                                   -------------
 
                                       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

                                                                  0-2545
                                                          ----------------------

                           ALLIED RESEARCH CORPORATION

               --------------------------------------------------
             (Exact name of Registrant as specified in its charter)

         Delaware                                            04-2281015
------------------------------                       ---------------------------
(State or other jurisdiction of                       (I.R.S. Employer Number)
incorporation or organization)

8000 Towers Crescent Drive, Suite 750
Vienna, Virginia                                                22182
----------------------------------------             ---------------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code:       (703) 847-5268

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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of June 30, 1997: 4,545,501.


<PAGE>


                           ALLIED RESEARCH CORPORATION

                                      INDEX

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                           PAGE
PART I.           FINANCIAL INFORMATION - UNAUDITED                                                       NUMBER
<S> <C>                     
         Item 1.  Financial Statements


                  Condensed Consolidated Balance Sheets

                           December 31, 1996 and June 30, 1997.............................................2, 3


                  Condensed Consolidated Statements of Earnings

                           Three months and six months ended June 30, 1997 and 1996...........................4


                  Condensed Consolidated Statements of Cash Flows

                           Six months ended June 30, 1997 and 1996.........................................5, 6


                  Notes to Condensed Consolidated Financial Statements........................................7

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations..................................................................12


PART II. OTHER INFORMATION...................................................................................14
</TABLE>


<PAGE>


                           ALLIED RESEARCH CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                             (THOUSANDS OF DOLLARS)

                                     ASSETS

                                   (UNAUDITED)

--------------------------------------------------------------------------------




<TABLE>
<CAPTION>
                                                         June 30, 1997      December 31, 1996
                                                         -------------      -----------------
<S> <C>
CURRENT ASSETS
   Cash and equivalents, including restricted cash ........ $22,291              $32,860            
   Accounts receivable ....................................  20,220               11,889            
   Costs and accrued earnings on uncompleted contracts ....   3,876               14,694            
   Inventories ............................................   4,790                7,171            
   Prepaid expenses and deposits ..........................   2,592                3,880            
                                                            -------              -------            
                                                                                                    
           Total current assets ...........................  53,769               70,494            
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
PROPERTY, PLANT AND EQUIPMENT - AT COST                                                             
                                                                                                    
   Buildings and improvements .............................  11,910               13,316            
   Machinery and equipment ................................  29,638               33,030            
                                                            -------              -------            
                                                             41,548               46,346            
   Less accumulated depreciation ..........................  30,254               33,106            
                                                            -------              -------  
                                                             11,294               13,240  
   Land ...................................................   1,274                1,412            
                                                            -------              ------- 
                                                             12,568               14,652  
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
OTHER ASSETS
   Intangibles, net of amortization .......................   5,420                6,124            
   Restricted cash ........................................   1,800                   --              
   Other ..................................................     830                  678            
                                                            -------              -------
                                                              8,050                6,802  
                                                            -------              -------
                                                                                                    
                                                            $74,387              $91,948  
                                                            =======              =======
</TABLE>
 
The accompanying notes are an integral part of these statements.


                                       2
                                                                                
<PAGE>


                           ALLIED RESEARCH CORPORATION

                CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED

                             (THOUSANDS OF DOLLARS)

                                   LIABILITIES

                                   (UNAUDITED)

--------------------------------------------------------------------------------





<TABLE>
<CAPTION>
                                                             June 30, 1997        December 31, 1996
                                                             -------------        -----------------
<S> <C>
CURRENT LIABILITIES
   Notes payable .............................................  $   480                $  3,318
   Current maturities of long-term debt ......................    4,705                  14,099
   Accounts and trade notes payable ..........................   10,356                  18,571
   Accrued liabilities .......................................    4,065                   4,702
   Customer deposits .........................................   10,888                  10,935
   Income taxes ..............................................    1,286                     805
                                                                -------                --------

           Total current liabilities .........................   31,780                  52,430



LONG-TERM DEBT, less current maturities ......................    8,405                   7,443



DEFERRED INCOME TAXES ........................................      599                     628




STOCKHOLDERS' EQUITY
   Preferred stock, no par value; authorized, 10,000
      shares; none issued ....................................                               --
   Common stock, par value, $.10 per share; authorized
      10,000,000 shares; issued and outstanding, 4,545,501
      in 1997 and 4,443,092 in 1996 ..........................      455                     444
   Capital in excess of par value ............................   11,632                  10,846
   Retained earnings .........................................   21,773                  17,482
   Accumulated foreign currency translation adjustment .......     (257)                  2,675
                                                                -------                --------
                                                                 33,603                  31,447
                                                                -------                 -------

                                                                $74,387                 $91,948
                                                                =======                 =======
</TABLE>

The accompanying notes are an integral part of these statements.


                                       3

<PAGE>


                           ALLIED RESEARCH CORPORATION

                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------






<TABLE>
<CAPTION>
                                                Three months ended June 30,        Six months ended June 30,
                                                ---------------------------       ---------------------------
                                                   1997             1996             1997             1996
                                                ----------       ----------       ----------       ----------
<S> <C>
REVENUE .....................................   $   24,630       $   23,004       $   54,395       $   46,531

COST AND EXPENSES
   Cost of sales ............................       18,012           17,329           42,287           35,724
   Selling and administrative ...............        3,107            3,659            6,429            7,123
   Research and development .................          316              363              683              774
                                                ----------       ----------       ----------       ----------
                                                    21,435           21,351           49,399           43,621

        Operating income ....................        3,195            1,653            4,996            2,910

OTHER INCOME (DEDUCTIONS)
   Interest expense .........................         (612)            (862)          (1,120)          (1,540)
   Interest income ..........................          191              334              444              731
   Other - net ..............................         (132)            (115)             507             (231)
                                                ----------       ----------       ----------       ----------
                                                      (553)            (643)            (169)          (1,040)

        Earnings before income taxes ........        2,642            1,010            4,827            1,870

INCOME TAXES ................................          335              359              536              583
                                                ----------       ----------       ----------       ----------

        NET EARNINGS ........................   $    2,307       $      651       $    4,291       $    1,287
                                                ==========       ==========       ==========       ==========

NET INCOME  PER COMMON SHARE ................   $      .51       $      .15              .95              .29
                                                ==========       ==========       ==========       ==========


WEIGHTED AVERAGE NUMBER OF SHARES ...........    4,532,371        4,430,257        4,502,521        4,426,445
</TABLE>

The accompanying notes are an integral part of these statements.


                                       4

<PAGE>


                           ALLIED RESEARCH CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                          Six months ended June 30
                                                                          ------------------------
Increase (decrease) in cash and equivalents ..............................    1997       1996
                                                                            -------    -------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net earnings ..........................................................  $ 4,292    $ 1,287
   Adjustments to reconcile net earnings to net cash provided by
      (used in) operating activities
        Depreciation and amortization ....................................      992        598
        Changes in assets and liabilities
           Accounts receivable ...........................................   (9,068)     6,119
           Costs and accrued earnings on uncompleted contracts ...........    9,397     (8,324)
           Inventories ...................................................    1,491       (194)
           Prepaid expenses and other assets .............................      803        498
           Accounts payable, accrued liabilities and customer deposits ...   (5,674)    (5,871)
           Income taxes ..................................................      574       (238)
                                                                            -------    -------

                Net cash provided by (used in) operating activities ......    2,807     (6,125)

CASH FLOWS (USED IN) INVESTING ACTIVITIES
   Capital expenditures ..................................................     (346)      (263)
                                                                            -------    -------

                Net cash (used in) investing activities ..................     (346)      (263)
</TABLE>

The accompanying notes are an integral part of these statements.


                                       5

<PAGE>


                           ALLIED RESEARCH CORPORATION

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                       Six months ended June 30
                                                                       ------------------------
                                                                           1997        1996
                                                                        ----------  ----------
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
   Principal payments of long-term debt ...............................   (7,897)     (2,057)
   Increase in long-term debt .........................................    1,800        --
   Net (decrease) increase in short-term borrowings ...................   (2,694)      1,190
   Stock grant/stock plan .............................................      581          44
   Options exercised ..................................................      214        --
   Deposits - restricted cash .........................................   (1,800)      1,463
                                                                        --------    --------

                Net cash (used in) provided by financing activities ...   (9,796)        640

EFFECTS OF EXCHANGE RATE CHANGES ON CASH ..............................   (3,233)         81
                                                                        --------    --------

                NET (DECREASE) IN CASH AND CASH EQUIVALENTS ...........  (10,568)     (5,667)

CASH AND EQUIVALENTS AT BEGINNING OF YEAR .............................   32,859      15,744
                                                                        --------    --------

CASH AND EQUIVALENTS AT END OF PERIOD ................................. $ 22,291    $ 10,077
                                                                        ========    ========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-------------------------------------------------
   Cash paid during the period for
      Interest ........................................................ $    685    $    664
      Taxes ...........................................................      405         329
</TABLE>

The accompanying notes are an integral part of these statements.


                                        6

<PAGE>


                           ALLIED RESEARCH CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 1997

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------

NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

    The condensed consolidated balance sheets as of June 30, 1997 and December
    31, 1996, the condensed consolidated statements of earnings and the
    condensed consolidated statements of cash flows for the six months ended
    June 30, 1997 and 1996, have been prepared by the Company without audit. In
    the opinion of management, all adjustments (which include only normal
    recurring adjustments) necessary to present fairly the financial position,
    results of operations and changes in cash flow at June 30, 1997 and 1996
    have been made.

    Certain information and footnote disclosures normally included in financial
    statements prepared in accordance with generally accepted accounting
    principles have been condensed or omitted. It is suggested that these
    condensed consolidated financial statements be read in conjunction with the
    financial statements and notes thereto included in the Company's December
    31, 1996 Form 10-K filed with the Securities and Exchange Commission,
    Washington, D.C. 20549. The results of operations for the period ended June
    30, 1997 and 1996 are not necessarily indicative of the operating results
    for the full year.

NOTE 2 - PRINCIPLES OF CONSOLIDATION

    The condensed consolidated financial statements include the accounts of
    Allied Research Corporation (a Delaware Corporation) and the Company's
    wholly-owned subsidiaries, Mecar, S.A. (a Belgian Company), Allied Research
    Corporation Limited (a United Kingdom Company) and Barnes & Reinecke, Inc.
    (a Delaware Corporation).

    Mecar, S.A.'s wholly-owned Belgian subsidiaries include, Sedachim, S.I.,
    Tele Technique Generale, and VSK Electronics N.V. and its wholly-owned
    subsidiaries, Classics, B.V.B.A. Detectia, N.V., I.D.C.S., N.V. and Belgian
    Automation Units, N.V., (collectively "The VSK Group").

    Significant intercompany transactions have been eliminated in consolidation.

NOTE 3 - RESTRICTED CASH

    Mecar is generally required under the terms of its contracts with foreign
    governments to provide performance bonds, advance payment guarantees and
    letters of credit. The credit facility agreements used to provide these
    financial guarantees generally place restrictions on cash deposits and other
    liens on Mecar's assets until the customer accepts delivery. Cash deposits
    totaling approximately $18,219 at June 30, 1997 and $20,166 at December 31,
    1996 are restricted or pledged as collateral for various bank agreements as
    shown below.


                                       7

<PAGE>


                           ALLIED RESEARCH CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                                  JUNE 30, 1997

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------

NOTE 3 - RESTRICTED CASH - CONTINUED

    Barnes and Reinecke has an agreement with its bank to provide financing in
    exchange for a cash collateral deposit of $1,800 which is classified as
    long-term.

                                                             1997        1996
                                                             ----        ----

    Cash
      Credit facility and related term loan agreements     $17,937     $18,382
      Other bank guarantees and letters of credit              282       1,734
                                                           -------     -------
                                                            18,219      20,116

    Deposit - restricted cash - long term
      Cash deposit pledge                                    1,800          --
                                                           -------     -------
                                                           $20,019     $20,116
                                                           =======     =======

NOTE 4 - INVENTORIES

    Inventories are composed of raw materials and supplies.

NOTE 5 - NOTES PAYABLE

    Barnes and Reinecke has a $1,250 revolving line-of-credit agreement which
    had no outstanding balance at June 30, 1997. The outstanding borrowings
    under the similar line were $250 at December 31, 1996. These lines-of-credit
    expired June, 1997. In addition, there are two notes payable of $500 each to
    the bank which had a total balance of $138 at June 30, 1997 and $661 at
    December 31, 1996. Borrowings are secured by assets, as defined in the
    agreement, and are guaranteed by Allied. The agreement contains covenants
    requiring the maintenance of certain financial ratios and other matters. A
    new agreement was signed June, 1997 and calls for a line-of-credit of
    $3,500, a term loan of $500 and the capacity for $5,950 in letters of
    credit, the agreement is collateralized by prepaid deposits from the
    customer.

    Mecar has a $878 line-of-credit agreement with a foreign bank which has a
    balance of $342 at June 30, 1997 and no balance at December 31, 1996. The
    line is secured by a cash deposit pledge equal to the full amount of the
    line.

                                       8

<PAGE>

                           ALLIED RESEARCH CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                                  JUNE 30, 1997

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------

NOTE 6 - CREDIT FACILITY

    The Company is obligated under a credit agreement (the Old Agreement) with a
    banking pool comprised of four foreign banks that provided credit facilities
    primarily for letters of credit, bank guarantees, performance bonds and
    similar instruments required for specific sales contracts. The Old Agreement
    provides for certain bank charges and fees as the line is used, plus a fee
    of approximately 2% of guarantees issued. As of June 30, 1997, the credit
    facility had been fully utilized and guarantees of $8,181 remain
    outstanding.

    The Company has a credit agreement (the New Agreement) with a banking pool
    comprised of five foreign banks that provide similar credit facilities for
    new contracts. The bank fee structure under the New Agreement and the Old
    Agreement is similar. As of June 30, 1997, there were $12,620 guarantees
    outstanding under this agreement.

    At June 30, 1997, guarantees under the Old Agreement were secured by
    deposits of $4,112, plus term deposits of $4,069. The term deposits
    correspond to the term loan agreement with two of the institutions in its
    foreign banking pool. The proceeds were placed in deposit accounts as
    collateral for credit facility advances made by the pool under the Old
    Agreement. Guarantees under the New Agreement total $12,620 and are
    collateralized by deposits of $9,756. Amounts outstanding are also
    collateralized by pledges of approximately $27,600 on Mecar's assets,
    letters of credit and certain funds received under the contracts financed.
    Both Agreements provide for restrictions on payments or transfers to Allied
    and ARCL for management fees, intercompany loans, loan payments, the
    maintenance of certain net worth levels and the payment of bank fees and
    charges.

    The Company is also liable for guarantees and other instruments issued on
    its behalf by other banks which approximate $899 at June 30, 1997, which are
    collateralized by $548 of time deposits.

    Mecar is obligated on a $5,000 twenty year mortgage on its manufacturing and
    administration facilities. As amended, the balance of the loan is payable in
    annual principal installments of approximately $600 and matures in 2004. The
    Company is also obligated on several mortgages on The VSK Group's buildings
    which has a balance of approximately $1,200 at June 30, 1997. The mortgages
    are payable in annual installments of approximately $250 plus interest.

NOTE 7 - LONG-TERM FINANCING

    Scheduled annual maturities of long-term obligations as of June 30, 1997 are
approximately as follows:

                            Year              Amount
                            ----              ------
                            1998              $4,705
                            1999               3,500
                            2000               1,200
                            2001               1,200
                            2002                 800
                         Thereafter            1,705


                                       9

<PAGE>
                           ALLIED RESEARCH CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                                  JUNE 30, 1997

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------

NOTE 8 - INCOME TAXES

    The Company adopted the provisions of Statement of Financial Accounting
    Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").

    The provision for income taxes differs from the anticipated combined federal
    and state statutory rates due to operating loss carryovers and earnings from
    foreign subsidiaries.

    The Company's Belgian subsidiaries have unused net operating losses of
    approximately $8,000 at June 30, 1997, which under Belgian law cannot be
    carried back but may be carried forward indefinitely, and are subject to
    certain annual limitations.

    As of June 30, 1997, the Company had unused foreign tax credit carryforwards
    of approximately $700 which expire through 2009.

    Deferred tax liabilities have not been recognized for bases differences
    related to investments in the Company's Belgian and United Kingdom
    subsidiaries. These differences, which consist primarily of unremitted
    earnings intended to be indefinitely reinvested, aggregated approximately
    $23,000 at June 30, 1997. Determination of the amount of unrecognized
    deferred tax liabilities is not practicable.

NOTE 9 - EARNINGS (LOSS) PER SHARE

    Stock options outstanding have not been included in the per share
    computation because there would not be a material effect on earnings per
    share.

                                       10

<PAGE>

                           ALLIED RESEARCH CORPORATION

                      MANAGEMENT DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULT OF OPERATIONS

                                  JUNE 30, 1997

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------

    The Company conducts its business through its wholly-owned subsidiaries:
    Mecar, S.A., ("Mecar"), a Belgian corporation, and its subsidiaries,
    Sedachim, S.I., as well as Tele Technique Generale, VSK Electronics, N.V.,
    Classics, B.V.B.A., Detectia, N.V., I.D.C.S., N.V., and Belgian Automation
    Units, N.V. (collectively "The VSK Group"); Barnes & Reinecke, Inc.,
    ("Barnes") a Delaware corporation, headquartered in Illinois; and Allied
    Research Corporation Limited, ("Limited") a U.K Company. This discussion
    refers to the financial condition and results of operations of the Company
    on a consolidated basis.

    SALES
    -----

    Revenue for the first six months of 1997 was $54,395, a 17% increase from
    the comparable period in 1996, principally due to Mecar's increase in
    revenue. Mecar revenue was $41,100, or up 32% compared to $31,210 for the
    period ended June 30, 1996. Barnes' revenue was $4,796, down 25% compared to
    the same period in 1996. This decrease at Barnes is due to the completion of
    a significant contract during the prior period. The VSK Group's revenue for
    the first half of 1997 was $8,498 compared to $8,922 in 1996. This decrease
    is due to the strengthening dollar, as sales increased by 8% over the same
    period last year in VSK's functional currency. Limited did not have
    significant revenue this period or in last year's comparable period.

    Revenue for the quarter ended June 30, 1997 was $24,630, a 7% increase over
    the quarter ended June 30, 1996. Mecar recognized revenue of $17,842 for the
    quarter ended June 30, 1997, a 16% increase over the quarter ended June 30,
    1996; Barnes' revenue of $2,520 for the quarter ended June 30, 1997
    constituted a 18% decrease over the quarter ended June 30, 1996; the revenue
    of The VSK Group of $4,267 for the quarter ended June 30, 1997 decreased in
    U.S. dollars by 5% , however, they increased in VSK's functional currency by
    5% over the quarter ended June 30, 1996.

    The increase in revenue during the first six (6) months of 1997 resulted
    principally from a higher backlog of orders at the end of calendar year 1996
    than at the end of calendar year 1995 at Mecar and a substantial additional
    order received by Mecar in the first quarter of 1997. Although Barnes'
    revenues decreased, it continues to execute on the order it received during
    calendar year 1996 for the benefit of a foreign-based customer and is
    operating profitability.

    BACKLOG
    -------

    As of June 30, 1997, the Company's backlog was $121,495 compared with
    $79,600 at December 31, 1996 and $145,000 at March 31, 1997.

    Mecar's backlog at June 30, 1997 was $95,147 compared with $115,000 at March
    31, 1997.

    Barnes' backlog as of June 30, 1997 was $12,314 compared with $16,000 at
    March 31, 1997.

    The backlog of The VSK Group as of June 30, 1997 and March 31, 1997 was
    $14,214.

                                       11

<PAGE>
                           ALLIED RESEARCH CORPORATION

                      MANAGEMENT DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULT OF OPERATIONS - CONTINUED

                                  JUNE 30, 1997

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------

    OPERATING COSTS AND EXPENSES
    ----------------------------

    Cost of sales for the first six months of 1997 was approximately $42,287 or
    78% of sales as compared to $35,724 or 76% for the first six months of 1996.
    Cost of sales for the quarter ended June 30, 1997 was $18,012 or 73% of
    sales compared to $17,339 or 75% of sales for the same period the previous
    year. The percentage increase is primarily due to the product mix.

    Selling and administrative expenses were approximately $6,427 of revenues or
    12% as a percentage of sales for the six months ended June 30, 1997 as
    compared to $7,123 or 15% for the six months ended June 30, 1996. Selling
    and administrative expenses for the quarter ended June 30, 1997 were $3,107
    or 13% of sales compared to 16% of sales for the same period in the previous
    year. The decrease reflects scheduled reductions in certain expenditures and
    increased amounts of revenue.

    RESEARCH AND DEVELOPMENT
    ------------------------

    Research and development expenses were 1% of sales for each of the six month
    period and three month period ended June 30, 1997 as compared with 2% for
    the corresponding periods in 1996.

    OPERATING RESULTS
    -----------------

    Operating income reached $4,996 for the first six months of 1997 (or 9% of
    revenue). This compares with an operating income of $2,910 for the six
    months ended June 30, 1996. During the second quarter of 1997, the Company
    had operating income of $3,195 (or 13% of revenue) compared with an
    operating income of $1,653 for the quarter ended June 30, 1996. The improved
    results are primarily attributable to increased amounts of revenue at Mecar.

    INTEREST EXPENSE
    ----------------

    Interest expense for the six months ending June 30, 1997 was $1,120,
    compared to $1,540 for the six month period ended June 30, 1996, a 27%
    decrease over the prior period. Interest expense decreased by approximately
    29% for the three month period ended June 30, 1997 over the same period in
    1996. Both decrease are due to reduced levels of borrowing.

    INTEREST INCOME
    ---------------

    Interest income decreased for the six months and three month period ended
    June 30, 1997 as a result of lower levels of cash.

    OTHER - NET
    -----------

    For the three and six months ended June 30, 1997 and 1996, Other - Net
    represents primarily net currency gains and losses, resulting from foreign
    currency transactions.

                                       12

<PAGE>
                           ALLIED RESEARCH CORPORATION

                      MANAGEMENT DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULT OF OPERATIONS - CONTINUED

                                  JUNE 30, 1997

                             (THOUSANDS OF DOLLARS)

                                   (UNAUDITED)

--------------------------------------------------------------------------------

    NET EARNINGS
    ------------

    The Company had a $4,291 net profit for the first six months of 1997
    compared with a net profit of $1,287 for the same period of 1996.

    The Company earned $2,307 for the three month period ending June 30, 1997
    compared with $651 for the comparable period in 1996.

    The increased earnings are attributable to operations at Mecar. The VSK
    Group continues to provide a steady and stable return to the Company.

    LIQUIDITY AND CAPITAL RESOURCES
    -------------------------------

    During the first six months of 1997 and throughout 1996, Allied funded its
    operations principally with internally generated cash and back-up credit
    facilities required for foreign government contracts. At June 30, 1997, the
    Company had unrestricted cash (i.e., cash not required by the terms of the
    bank agreement to collateralize contracts) of approximately $4,072, as
    compared with approximately $4,654 as of March 31, 1997.

    In 1997, Mecar extended its bank pool agreement to finance orders received
    from its principal customers. The financing continues to consist of
    performance bonds, advance payment guarantees and import letters of credit
    and a $1,000 cash line-of-credit. The financing has been provided on
    substantially the same terms and conditions as historically provided by the
    bank pool and as summarized in prior Company filings. The financing
    documents continue to restrict the amount of payments Mecar may make to any
    affiliated company, including the Company, absent bank pool approval.

    During the second quarter of 1997, Barnes obtained a new bank facility. The
    facility provides a line-of-credit of up to $3,500, a term loan of $500 and
    the capacity to issue up to $5,950 in letters of credit. The letters of
    credit are required by Barnes' $9,000 contract executed in December, 1996.
    As of June 30, 1997, Barnes was obligated on a $1,800 long-term advance from
    a customer and an outstanding balance on a term note of $495.

    Accounts receivable at June 30, 1997 increased over December 31, 1996 by
    $8,331 and cost and accrued earnings on uncompleted contracts decreased by
    $10,818 from 1996 as a result of shipments. Inventories decreased by $2,381
    over 1996 and prepaid expenses decreased by $1,288. Current liabilities
    decreased by $20,650 from December 31, 1996 levels as a result of payments
    of current maturities of long-term debt, accrued liabilities and accounts
    payable.

    Long-term debt (including current maturities thereof) as of June 30, 1997,
    decreased by approximately $8,432 from December 31, 1996 as a result of
    scheduled repayments of the term loan supporting Mecar's credit facility and
    reductions in VSK's debt.

    In summary, working capital was approximately $18,064 at June 30, 1997,
    which is an increase of $3,925 from December 31, 1996.

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                           ALLIED RESEARCH CORPORATION

                                  JUNE 30, 1997

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PART II.        OTHER INFORMATION

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                           ALLIED RESEARCH CORPORATION

                                  JUNE 30, 1997

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

              (a) The Company's annual meeting of shareholders was held on June
4, 1997.

              (b) The matters voted upon at the meeting referred to in the
foregoing Item 4(a) were (i) the ratification of the selection of Grant Thornton
LLP as the Company's independent auditors for 1997 (ii) the election of five (5)
directors to serve for the ensuing year and until their successors are elected
and qualified and (iii) the approval of the Company's 1997Incentive Stock Plan
(the "Plan"). As to the ratification of the selection of Grant Thornton as the
Company's independent auditors for 1997, 3,273,164 shares was voted for, 3,543
shares were voted against, 170,165 shares abstained from voting and there were
no shares counted as broker non-votes. With respect to the election of directors
to serve for the ensuing year, shares were voted for (or votes were withheld)
for the five (5) nominees, all of whom were elected, as follows: J. R. Sculley -
3,113,379 (333,493); Clifford C. Christ - 2,870,209 (576,663); Earl P. Smith -
2,870,497 (576,375); Robert W. Hebel - 2,863,666 (583,206); and Harry H. Warner
- 3,067,126 (379,746). With respect to the approval of the Plan, 2,527,991
shares were voted for, 689,844 shares were voted against, 172,215 shares
abstained from voting and there were 47,822 shares counted as broker non-votes.

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                           ALLIED RESEARCH CORPORATION




SIGNATURE

  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.

                                       ALLIED RESEARCH CORPORATION

                                       /s/ J. R. Sculley
Date: July 25, 1997                    ---------------------------
                                       J. R. Sculley
                                       Chairman of the Board,
                                       Chief Executive Officer and
                                       Chief Financial Officer


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