===========================================================================
                    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 December 31, 1996     Commission File No. 2-88617

                              QUESTECH, INC.
          (Exact name of Registrant as specified in its charter)

          Virginia                                  54-0844913
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

      7600-A Leesburg Pike
      Falls Church, Virginia                         22043
(Address of principal executive offices)           (Zip Code)

Registrant's telephone number, including area code -- (703) 760-1000

Securities registered pursuant to Section 12(g) of the Act:

                                                  Name of Each Exchange on
    Title of Each Class                                Which Registered   

Common Stock ($.05 par value)                               NASDAQ

     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 (229.405 of this chapter) 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.   [   ]

     Aggregate market value of Common Stock held by non-affiliates of the
registrant at March 7, 1997 -- $6.7 million.

    Number of shares of Common Stock outstanding on March 7, 1997 -- 
1,610,957 shares.

                                  PART I


Item 1.  BUSINESS

     QuesTech, Inc. (the Company), provides a broad spectrum of
professional services to customers within several high technology
communities.  Corporate products include scientific, engineering, research,
and management services in electronics, information warfare, information
technology, computer software, systems integration, and industrial
analysis.

     A major portion of the Company's 1996 revenues were derived from
competitively awarded contracts with U. S. Government clients, primarily
within the Department of Defense.

Systems Engineering and Scientific Research

     The Company performs a broad range of high technology services for
agencies of the Department of Defense ("DOD") and the national security
community.  These services are provided through a number of operating
units, each focused on a distinct market and specific customer base.

QuesTech Research Division ("QTRD") 

     QuesTech Research Division (QTRD) provides diversified, high
technology  engineering and management services to various industries and
DOD agencies.  QTRD performs engineering services from concept formulation
and systems design, through engineering, technical and program management
support, to research and development.  QTRD solves complex problems for its
customers, primarily in the fields of intelligence, electronic warfare,
command, control, and industrial modernization.

     QTRD services also include engineering and management support to
Government and industry in intelligence analysis, tactical and processing
systems, software development, systems integration, industrial base
analysis, technology assessments, manufacturing technology, and electronic
warfare.

QuesTech Service Company ("QTSC")

     This wholly-owned subsidiary of the Company provides engineering field
services, including equipment installation, test monitoring, and operations
and maintenance.  QTSC also provides cost-effective program support
services, including system analyses, integrated logistics support,
equipment procurement, failure analysis, maintenance provisioning, training
and inspections to customers in the Department of Defense and intelligence
communities.  QTSC deploys personnel to locations from coast to coast and
around the world to perform on programs involving electronic warfare,
computer control and communication, signal intelligence and communications
systems.

QuesTech Packaging, Inc. ("QTPI", formerly QuesTech Ventures, Inc.)

     QuesTech Packaging, Inc. is a wholly-owned subsidiary which
manufactures plastic containers utilizing scrapless, melt-phase
thermoforming technology.  Its main product line consists of drop-in,
thermoformed infant bottle liners, which are another alternative to bag-type
liners produced by its competitors.

U. S. Government Contracts

     The Company's business is primarily derived from competitively awarded
U. S. Government contracts.

     United States Government contracts and related customer orders are
generally subject to termination at the convenience of the United States
Government whenever it believes that such termination would be in its best
interests.  Under contracts terminated for the convenience of the United
States Government, the Company may be entitled to receive payment for work
completed and allowable termination costs.  Whether the occurrence of any
such termination would have an adverse effect on the Company would depend
upon the particular contract and the nature of the termination.

     The Company's business is conducted pursuant to three types of
contracts:  cost reimbursable, time and materials, and fixed price. 
Certain of the Company's incurred costs are reimbursable under 
cost-reimbursable type contracts.  These costs are subject to incurred cost
audits in which the government may disallow some of the costs claimed for
contract costing purposes.  Management is not aware of any adjustments that
will result in a material charge to current or future operations, as a
result of these audits.

     U. S. Government contracting activity involves procurement by formal
advertising or by sole source procedures.  The Government is authorized to
forego formal advertising for the procurement of professional, experi-
mental, developmental or research services when the availability of
supplies or services from only one source or other circumstances render it
impractical to secure competitive bids.

Backlog

     The term "backlog" includes the aggregate contract revenues remaining
to be earned at the stated time.  The following table reflects the
Company's backlog as of December 31, 1996 and December 31, 1995:
<TABLE>
                Funded Backlog                Unfunded Backlog
                 December 31,                    December 31,  
              1996         1995               1996         1995

          <C>          <C>              <C>            <C>
          $38,608,600  $23,592,600      $367,148,200   $427,917,500
</TABLE>
     The term "funded" refers to the portion of aggregate contract revenues
remaining to be earned that is covered by funding appropriations and
allotments to the contract by the procuring agency; the term "unfunded"
refers to the excess of the value of the contract award over the funded
value.  Management cannot provide any assurance that the customer will
authorize funding amounts in addition to funding commitments existing as of
the end of 1996.  However, the Company historically has received the
funding for substantially all of its unfunded backlog.

Personnel

     The Company and its subsidiaries, as of December 31, 1996, had
approximately 600 employees on a regular full-time and part-time basis.

     The nature of the services provided by the Company requires the
employment of large numbers of professional and technical personnel,
including engineers, analysts, scientists, computer software specialists,
computer programmers and skilled technicians.  The Company's future success
will depend to a substantial extent on its ability to continue to attract
and retain qualified personnel.

Competition

     The Company has many competitors, including large, diversified firms
having greater financial resources and larger technical staffs.  Other
competitors, although smaller, are highly qualified in specialized areas
and may offer price advantages or may receive greater benefits under the
Small Business Set-Aside Program, which includes small and disadvantaged
businesses.  Furthermore, the U. S. Government's own in-house capabilities
and federally sponsored, not-for profit contract research centers compete
with the Company.  The Government contracting industry is faced with
changes such as global and political influences on the DOD budget, changes
in labor conditions, and the emergence of new competing companies, any of
which could have a material effect on the Company's efforts and profits.

Patents

     U. S. Patent No. 4,539,625, entitled LIGHTING SYSTEM COMBINING
DAYLIGHT CONCENTRATORS AND AN ARTIFICIAL SOURCE, issued September 3, 1985. 
Corresponding foreign patent:  Canadian Patent No. 1,236,808 issued May 17,
1988.

     U. S. Patent No. 4,767,902, entitled METHOD & APPARATUS FOR THE
MICROWAVE JOINING OF CERAMIC ITEMS, issued August 30, 1988.  Corresponding
foreign patents:  None.  However, applications have been filed in seven
foreign countries:  Canada, Japan, France, Great Britain, Italy, Sweden and
Germany.

     U. S. Patent No. 4,964,591, entitled PROJECTILE HAVING NONELECTRONIC
INFRARED HEAT TRACKING DEVICE, issued October 23, 1990.  European Patent
No. 392,306 granted on December 28, 1994.

     U. S. Patent No. 4,757,172, entitled METHOD & APPARATUS FOR THE
MICROWAVE JOINING OF NON-OXIDE CERAMIC ITEMS, issued July 12, 1988. 
European Patent No. 308,593 granted February 26, 1992.

     U. S. Patent No. 4,836,734, entitled MELT-PHASE THERMAL PRESSURE
APPARATUS FOR FORMING OF PLASTIC BLANKS INTO RETORTABLE CONTAINERS, issued
June 6, 1989.  European Patent No. 330,721 granted on January 22, 1992.

     U. S. Patent No. 4,997,691, entitled RETORTABLE CONTAINER I, issued
March 5, 1991.  European Patent No. 363,918 granted on May 24, 1995.

     U. S. Patent No. 5,091,231, entitled RETORTABLE CONTAINER II, issued
February 25, 1992.  Corresponding foreign patents:  None.  However,
applications have been filed in fifteen foreign countries:  Australia,
Canada, Austria, Belgium, France, Germany, Greece, Italy, Luxembourg,
Netherlands, Spain, Sweden, Switzerland, Liechtenstein, and the United
Kingdom.

Service Mark:

     U. S. Service Mark Reg. No. 1,531,368, QuesTech, Inc., issued March
21, 1989.

     U. S. Service Mark Reg. No. 1,931,615 issued on October 31, 1995.

Trademark

     QuesTech, Inc. was issued U.S. Service Mark Registration No. 1,531,368 on
March 21, 1989, No. 1,931,615 on October  31, 1995; and U.S. Trademark
Registration No. 1,933,165 on November 7, 1995.

Item 2.  PROPERTIES

     As of the date of this report, the Company maintains leases throughout
the United States, which includes the Falls Church, Virginia headquarters'
lease for 25,939 square feet.  In addition, there are material leases in
five other locations totaling approximately 67,400 square feet.  Management
believes that its existing leases are suitable and adequate.


Item 3.  LEGAL PROCEEDINGS

     The following information is furnished regarding litigation involving
the Company:

     On January 2, 1996, the Company was named as a defendant in a lawsuit
captioned 7600 Limited Partnership and Guy Beatty v. QuesTech, Inc.  The
plaintiffs (the Company's former landlord and its general partner) sought
attorneys' fees incurred in two earlier landlord/tenant cases (a contract
claim) plus damages for the tort of malicious prosecution, plus punitive
damages.

     In February 1997, the Company agreed to a settlement which has been
accounted for in the financial statements.  The settlement, which is subject
to final documentation, disposes of all issues raised in the litigation
and had no material impact on the Company's financial statements.

     The Company has no other litigation pending which involves potential
liability in excess of $10,000.

     Other Claims

     Since September 1996, the Company has been involved in a dispute with
Munchkin, Inc., the sole customer at that time of its QTPI subsidiary. The
dispute involved an alleged breach of contract and warranty issues, as well
as claims for payment by QTPI.

     In addition, in February, the Company filed a declaratory judgment
action seeking to clarify the nature of the exclusivity granted to Munchkin
under its contract. 

     The Company is currently in negotiations which if successful would resolve
all outstanding disputes with Munchkin, Inc. 

     The Company has no other claims pending which involves potential
liability in excess of $10,000.


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

     The following matters shall be submitted to a vote of security holders
at the Company's Annual Meeting on May 23, 1997:

     Election of six directors to the Company's Board of Directors;

     Ratification of the appointment of the Company's independent auditor;
and

     Amendment of the Company's Incentive Stock Option Plan (ISOP).

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

     The Company's authorized capital stock consists of 3,000,000 shares at
a par value of $0.05 per share.  At December 31, 1996, there were 1,649,904
shares issued, of which 1,610,857 were outstanding and 39,047 shares were
in Treasury.  Of the shares outstanding, 176,131 shares are held by the
Company's Stock Employee Compensation Trust.  The Company's common stock is
traded on NASDAQ.  Set forth below are the high and low selling price 1 for
the common stock for each full quarter of 1996 and 1995, during which the
common stock has been publicly traded as reported by NASDAQ.
<TABLE>
                 Period                        High         Low

         <S>                                   <C>          <C>
         1st fiscal quarter - 1996             9.00         7.50
         2nd fiscal quarter - 1996             9.25         7.00
         3rd fiscal quarter - 1996             8.25         6.25
         4th fiscal quarter - 1996             8.00         7.25

         1st fiscal quarter - 1995             4.75         3.75
         2nd fiscal quarter - 1995             9.75         4.63
         3rd fiscal quarter - 1995             8.63         7.00
         4th fiscal quarter - 1995             9.75         5.75
</TABLE>
     As of December 31, 1996 there were 275 accounts of record,
representing approximately 800 beneficial stockholders, including
individuals and persons whose stock is held in street name by stockbrokers.

     The Company has not paid dividends on its Common Stock since its
inception.  The payment of dividends in the future, if any, will be
determined by the Board of Directors.







1/   The high and low over-the-counter market quotation reflects inter-dealer 
     prices, without retail mark-up, mark-down, or commission, and
     may not necessarily reflect actual transactions.

                                  PART II

Item 6.  SELECTED FINANCIAL DATA

     The following table sets forth selected consolidated financial data
with respect to the Company and is qualified by reference to the
Consolidated Financial Statements and Notes thereto included in Part IV.
<TABLE>
            
                                          Years Ended December 31,        
                          
Operations Statements Data:      1996     1995     1994     1993     1992
(In thousands, except
 earnings/loss per share):
<S>                            <C>      <C>      <C>      <C>      <C>
Revenues ....................  $72,370  $57,951  $54,696  $52,649  $48,653
Income from operations before
  other income<expense> and
  income taxes ..............    1,583    2,028    1,877    1,431    1,315

Charges arising from settle-
  ments of litigation .......      --       722      843    1,754      224

Interest expense ............      578      396      386      307      243

Earnings<loss> before income
  taxes .....................    1,005      910      647     <630>     848

Extraordinary gain ..........      --       --       --       --       372

Net earnings<loss> ..........      818      520      318     <286>     438

Earnings<loss> per common
  share and common equivalent
  share:
Primary earnings<loss>
  per share .................  $   .54  $   .35  $   .23  $  <.18> $   .28
Fully diluted earnings/<loss>
  per share .................  $   .54  $   .34  $   .23  $  <.18> $   .28

Weighted average number of
  shares outstanding
  during 1996, 1995 and 1994:
   Primary ..................    1,518    1,485    1,397    1,567    1,568
   Fully diluted ............    1,525    1,540    1,411    1,567    1,568
</TABLE>
<TABLE>

                                         Years Ended December 31,        
                                 1996     1995     1994     1993     1992
Balance Sheet Data:

<S>                            <C>      <C>      <C>      <C>      <C>
Total Assets ................  $20,618  $16,424  $15,759  $17,610  $14,896
Long-term debt ..............    1,722      156      213      274       78
Indebtedness to related
  parties ...................    1,417    1,322    1,189    1,281    1,111
Accrued postretirement
  benefit cost ..............    1,267    1,161      977    1,091      -- 
Other long-term obligations .    1,011    1,137      831      884      --
Deferred gain and rent
  credits ...................      --       --       --       751      954
Stockholders' equity ........  $ 6,032  $ 5,048  $ 4,653  $ 4,335  $ 5,065
</TABLE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS:  1996 Compared With 1995

Revenues

     During 1996, the Company's revenues were $72.4 million, up 25% over
1995.  Both the government contracting and the commmercial packaging
segments reported business growth compared to last year.  The government
contracting segment, which provides 99% of the Company's revenues, consists
of two operating business units:  QuesTech Research Division and QuesTech
Service Company ("QTRD" and "QTSC" respectively).  A significant portion of
the revenues are derived from two major contracts with the Department of
the Army. The commercial packaging segment has only one operating business
unit,  QuesTech Packaging, Inc. ("QTPI").  During 1996, QTPI had only one
customer.

Government Contracts

     Revenues from a large Army contract and its follow-on effort which
commenced performance during 1996 have accounted for over 40% of the
Company's revenue during each of the last four years.  A significant
portion of the revenue increase was derived from materials and 
subcontract-intensive work orders.  Revenues from increased efforts on Navy 
contracts and a new 5-year $25 million Air Force contract also contributed 
to growth.

Commercial Packaging

     During the first half of 1996, QTPI produced thermoformed infant
bottle liners which were marketed under the "1-Step" Munchkin brand. 
Following a dispute on pricing terms and product specifications, QTPI
drastically cut back its production and halted customer shipments during
the third quarter.  No sales were posted during the fourth quarter.

Operating Expenses

     The Company's operating expenses during 1996 rose to $70.8 million, up 
27% over 1995.  Salaries, wages and employee benefits increased primarily
as a result of increased direct labor staffing on government contracts.  A
major portion of the increase in operating expenses arose from 
materials-intensive delivery orders and subcontracting activities.  
Additionally, manufacturing costs increased  during the production stages.

Income from Operations

     Income from operations for 1996 was approximately $1.6 million, which
declined by 22% compared to 1995.  Operating income was negatively impacted
by reduced margins arising from the costs of certain contractual 
requirements.  Continuing losses at QTPI, which included unabsorbed
production overhead in the absence of sales, and reserves for inventory and 
receivable write-downs, contributed to the decrease in operating income.

Interest Expense

     Interest expense increased 46% over 1995.  Interest costs associated
with construction in progress at the manufacturing plant were charged to
operations, instead of capitalized.

Taxes

     The Company's 1996 effective tax rate declined to 18.5% from 42.8%
during 1995.  The decrease in tax rate resulted from a tax benefit arising
from non-recurring adjustments to deferred taxes associated with
depreciation and other favorable tax deductions.




Net Earnings

     For 1996, primary and fully diluted earnings per share were $.54 on
earnings of $818,300; these amounts reflected a 54% increase over per share
earnings of $.35 during 1995.

Financial Condition

     The following table compares selected financial data that measure the
Company's liquidity and capital resources at December 31, 1996, 1995 and
1994 (in thousands of dollars, except for ratios):
<TABLE>
                                 1996         1995         1994

<S>                            <C>          <C>          <C>
Working capital                $ 1,932      $ 1,995      $ 2,903
Current assets                  11,101        9,595       10,799
Current liabilities              9,169        7,600        7,896
Availability under
  line of credit                 4,773        3,606        3,746
Working capital ratio (1)         1.21         1.26         1.37
</TABLE>

(1)  Current assets over current liabilities.

     The Company's financial condition improved through continued
profitability on consolidated operations.  Working capital remained at $1.9
million, which was approximately the same as last year, despite highly
leveraged activities.  Operating cash flows provided by the government
contract segment were consumed by the commercial packaging segment's
operating cash requirements.  Inventories, which were twice last year's
levels despite a write-down, increased pending shipment of finished goods
that are subject to a contract dispute.  The increase in accounts
receivable resulted mainly from revenue growth.  Capital expenditures,
primarily related to manufacturing build-out, were financed initially by
the line of credit facility, and subsequently refinanced with $2.1 million
of proceeds from a long-term capital lease.  During the next two years, the
Company will incur costs associated with the relocation of its contract
efforts from Vint Hill to Fort Monmouth.  Some of these amounts may be
mitigated through certain state grants.  

     The Company intends to implement a wide-area network covering twelve
sites.  The cost of setting up three pilot sites is expected to exceed
$300,000.  Of this amount, approximately $60,000 was expended in 1996.



Outlook

     Forward looking statements contained in this report are made pursuant
to the safe harbor provisions of the Private Securities Litigation Report
Act of 1995.  Certain factors could cause actual results to differ
materially from the statements.  These factors include but are not limited
to:  continuity of contract funding and customer relationships; retention
of key personnel, particularly those involved in technical efforts;
interest rates; changes in technology; and potential impact of industry
consolidation.

     The current business environment for the defense contracting industry
continues to be characterized by a general atmosphere of uncertainty.  This
uncertainty is the result of several factors including: 1) defense budget
cuts; 2) base closures and consolidations; and 3) increased competitive
pressures.  These factors will continue to shape the defense contracting
industry over the next several years.  However, given the emergence of
regional threats and ease with which leading edge technologies can be
acquired by potential adversaries, there is the possibility these trends
may be curtailed or reversed.  In addition, several segments within the
industry, such as the area of application programming and Information 
Warfare, will provide growth opportunities for contractors.

     Management anticipates that there will be little impact on the
Company's existing contracts during 1997 due to base closures.  Vint Hill
Farms Station, the site of QTRD's major Army support contract, is one of
the bases scheduled to be closed by the DOD in late 1997.  However, the
mission being supported at Vint Hill -- high technology engineering
services -- has been relocated to Fort Monmouth.  The Company will continue
to provide support to this mission under its current contract.  It is
anticipated that Army work will continue to remain a significant percentage
of the Company's overall business over the next several years.

     As a result of the decreased defense appropriations, competition among
contractors has increased considerably.  Large contractors who typically
targeted only large programs, now pursue programs of any size.  Therefore,
bigger contractors have become the Company's direct competitors.  Further,
competitive pressures have caused many firms to merge with other companies. 
The competitors who remain often gain increased expertise and experience
through the mergers, resulting in formidable competition for the Company. 
Management believes the Company is positioned well to withstand the rigors
of the current environment through a superior technical track record and
competitive pricing.

     The Company has invested over $3 million in manufacturing equipment,
plant build-out and refitting costs at its Newport News facility. 
Marketing efforts have elicited interest from prospective customers, one of
which has provided funding for a prototype mold to produce samples for
testing.  Based on internal cash flow forecasts, management has determined
that no impairment has occurred for its plant equipment and manufacturing
technology.  Results of operations, financial condition, and liquidity for
1997 may be negatively affected by factors such as:  the timing of the
execution of any new agreements, and the lead time for machine retooling
and testing in accordance with new customer specifications.  The Company is
unable to provide assurance that actual sales to other customers will be in
line with forecasts.


RESULTS OF OPERATIONS:  1995 Compared With 1994

Revenues

     During 1995, the Company's revenues were $57.9 million, up 6% over
1994.  The Company's business base is made up of the government contract
segment and the commmercial packaging segment.  The government contract
segment consists of QuesTech Research Division ("QTRD") and QuesTech
Service Company ("QTSC"); the packaging segment consists of QuesTech
Packaging, Inc. ("QTPI").  The growth during 1995 was the result of a 10%
increase in revenues at QTRD, which sustained the same growth rate during
each of the last two years, despite continued business contraction at QTSC. 
QTPI posted sales during late December, 1995, as a result of an initial
shipment to its customer under a supply contract.

Operating Expenses

     The Company's operating expenses during 1995 rose to $56 million, up
5.88% over 1994.  Salaries, wages and employee benefits remained constant
as a percentage of sales, primarily as a result of heightened direct labor
activity on government contracts.  The increase in other operating expenses
also included the cost of subcontract teaming efforts, travel related to
performance on government contracts, and start-up production and
engineering costs at QTPI.  Excluding corporate expense allocations, the
cost of maintaining QTPI's operations in 1995 was approximately $1.2
million, up from approximately $546,000 during 1994.  Most of the cost
increase was related to technical management and engineering support (not
associated with equipment fabrication), prior to the manufacturing
equipment being placed in service.

Income from Operations

     Income from operations for 1995 was approximately $2.0 million, up 8%
over 1994, as a result of favorable margins and increased billable hours on
government contracts.  Favorable margins from the government contracts
business segment allowed the Company to support the start-up operations of
QTPI, and achieve modest growth in operating income.

Interest Expense

     Interest expense in 1995 increased 2% over 1994, primarily because of
increased borrowings under the line of credit.  The line of credit interest
expense was partially mitigated by reduced interest cost associated with
curtailments of other long-term borrowings.

Charges Arising from Settlements of Litigation

     During 1995, other expense was $722,100, down from $843,100 during
1994, resulting from cost savings made possible by the conclusion of
significant litigation activities, including a re-structuring of its case
planning and strategy.  Based on its assessment of the expected outcome of
outstanding litigation, management believed that it had provided adequate
allowances in the financial statements.

Taxes

     During 1995, the Company's effective tax rate was 42.8% of pre-tax
income, compared to 50.9% during 1994.  For tax purposes, the Company
benefited from an increase in certain non-taxable income.

Net Earnings

     For 1995, primary and fully diluted earnings per share were $.35 and
$.34 on earnings of $520,100; these amounts reflected a 52% and 48%
increase over per share earnings of $.23 (primary and fully diluted,
respectively) during 1994.  The increase in per share amounts was less than
the 64% net earnings growth due to the dilutive impact of common stock
equivalents.

IMPACT OF INFLATION

     The impact of inflation on the Company's costs is minimal due to the
fact that increased costs are normally included in its pricing structure or
otherwise recovered through reimbursement of contract costs incurred.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Included under Item 14.


Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND    
      FINANCIAL DISCLOSURE

     Not applicable.

                                 PART III


Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Directors

     Vincent L. Salvatori - Chairman of the Board and Chief Executive
Officer, QuesTech, Inc.

     Dr. Robert B. Costello - Chairman, Costello Group

     Edward G. Broenniman - President and Chief Executive Officer, Piedmont
Group, Chief Operating Officer and Chief Financial Officer, Hemex, Inc.

     Gerald F. Mayefskie - President and Chief Operating Officer, QuesTech,
Inc.

     Sebastian P. Musco - Chairman of the Board and Chief Executive
Officer, Gemini Industries, Inc.

     Lt. General Vincent M. Russo (Ret.) - Independent Consultant in
Logistics

     Executive Officers

     Vincent L. Salvatori - Chairman of the Board and Chief Executive
Officer

     Gerald F. Mayefskie - President and Chief Operating Officer

     Joseph P. O'Connell - Vice President and Chief Financial Officer

     Christina M. Burkholder - Vice President and General Counsel


Item 11. EXECUTIVE COMPENSATION

     Reference is made to the material under the caption, "Remuneration of
Directors and Officers" in the Registrant's definitive Proxy Statement.





Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Reference is made to the material under the captions, "Stock
Ownership" and "Additional Inside Interests of Beneficial Security
Ownership" in the Registrant's definitive proxy statement.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.

                                  PART IV


Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
         ON FORM 8-K

      (a)  Documents filed as part of this report:

              1.  Financial Statements.
                Attached.

              2.  Financial Statement Schedules.
                  Attached.

              3.  Exhibits

                (3)     Articles of Incorporation and Bylaws, filed on December
                        27, 1983 with the Company's Registration Statement on 
                        Form S-1 are incorporated herein by reference.

                (4)     None

                (9)     None

               (10)     Material Contracts

                   (a)  Stock Option Plans.
                        (i)  1996 Stock Option Plan
                        (ii) Stock Option Plan for Non-Employee Directors

                   (b)  Agreement dated between Vincent L. Salvatori and
                   QuesTech.  Incorporated herein by reference.

                   (c)  Agreement dated between Gerald F. Mayefskie and
                   QuesTech.  Incorporated herein by reference.

                   

                   (d)  Confidential Settlement Agreement dated February
                   2, 1994 between William E. Bigler, Jr. and Jerome M.
                   Raffel and QuesTech, Inc. (redacted in part). 
                   Incorporated herein by reference.
                   
                   (e)  Confidential Settlement Agreement with Oscar E.
                   Hayes, dated August, 1995.  Incorporated herein by
                   reference.
                   
              11.  Earnings per share:  Reference is made to Registrant's
                   financial statements.

              12.  Statement re computation of ratios:  Reference is made to
                   Registrant's financial statements.

              13.  Reference is made to Registrant's definitive 1997 proxy
                   statement to be filed in connection with the Annual
                   Stockholders' Meeting.

              21.   Subsidiaries of the registrant
<TABLE>
                 Name of Subsidiary             State of Incorporation

                 <C>                            <C>
                 QuesTech Service Company       Virginia
                 QuesTech Packaging Inc.        Virginia
                 QuesTech Model Company         Virginia
                            (inactive)
                 QuesTech Information           Virginia 
                   Sciences Corporation
                            (newly formed) 
</TABLE>

              27.  Financial Data Schedule
 
         (b)  Reports on Form 8-K.

                            No reports on Form 8-K were required to be filed 
                            during 1996.


                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                     QUESTECH, INC.



Date:  ________________________  By: ____________________________________
                                     Vincent L. Salvatori
                                     Chief Executive Officer and
                                     Chairman of the Board

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

       Signatures                  Title                    Date


                           CEO and Chairman of
________________________   the Board (Principal      ______________________
Vincent L. Salvatori       Executive Officer) 

                           President,
________________________   Chief Operating Officer   ______________________
Gerald F. Mayefskie        and Director

                           Chief Financial Officer
________________________   (Principal Financial and  ______________________
Joseph P. O'Connell, Jr.    Accounting Officer)

  
________________________   Director                  ______________________
Robert B. Costello


                           Director                                        
Vincent M. Russo                    






Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act

The registrant shall furnish to the Commission, its annual report to
security holders covering the registrant's last fiscal year, and the proxy
statement, form of proxy, or other proxy soliciting material sent to more
than ten of the registrant's security holders with respect to its 1996
Annual Stockholders' Meeting.















































                        ANNUAL REPORT ON FORM 10-K

                    ITEM 14(a)(1), (2), (3), (10), (11)

      LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

                             CERTAIN EXHIBITS

                       FINANCIAL STATEMENT SCHEDULES

                       YEAR ENDED DECEMBER 31, 1996



                              QUESTECH, INC.
                          FALLS CHURCH, VIRGINIA







































 QUESTECH, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
    AND REPORT OF INDEPENDENT
  CERTIFIED PUBLIC ACCOUNTANTS
December 31, 1996, 1995 and 1994







                              C O N T E N T S


                                                                           
                                                                        
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                    3

CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1996
       AND 1995                                                       4

     CONSOLIDATED STATEMENTS OF EARNINGS - YEARS ENDED
       DECEMBER 31, 1996, 1995 AND 1994                               6

     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -
       YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994                   7

     CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS
       ENDED DECEMBER 31, 1996, 1995 AND 1994                         9

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                     11-42


SUPPLEMENTAL INFORMATION

     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS                 44


















Report of Independent Certified Public Accountants
Stockholders
QuesTech, Inc. and Subsidiaries


We have audited the accompanying consolidated balance sheets of QuesTech,
Inc. (a Virginia corporation) and Subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of earnings, stockholder's
equity and cash flows for each of the three years in the period ended
December 31, 1996.  These financial statements are the responsibility of
the Corporation'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
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of QuesTech, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.

We have also audited Schedule II as of December 31, 1996 and for each of
the three years in the period then ended.  In our opinion, this schedule 
presents fairly the information required to be set forth therein.


Grant Thornton LLP



Vienna, Virginia
February 6, 1997



<TABLE>

                      QuesTech, Inc. and Subsidiaries

                        CONSOLIDATED BALANCE SHEETS
                               December 31,

                                  ASSETS

                                                     1996           1995
CURRENT ASSETS

  <S>                                            <C>           <C>
  Cash and cash equivalents .................    $   54,300    $   178,300

  Accounts receivable
    Trade ...................................     9,030,900      8,341,900
    Income taxes and other...................       594,500         16,500

  Inventories ...............................       170,400         81,500
  Prepaid expenses and other ................       350,200        225,500
  Deferred income taxes .....................       900,300        751,300
   
       Total current assets .................    11,100,600      9,595,000

EQUIPMENT AND LEASEHOLD IMPROVEMENTS - at
  cost less accumulated depreciation and
  amortization ..............................     4,952,600      2,256,500

GOODWILL, less accumulated amortization of
  $1,571,600 and $1,417,000, respectively
  ...........................................     1,365,000      1,519,600
                                                                            
DEFERRED INCOME TAXES, net of valuation                                     
  allowance of $262,000 and $148,000
  respectively ..............................     1,315,600      1,218,100

OTHER ASSETS ................................     1,884,300      1,834,500

TOTAL ASSETS ................................   $20,618,100    $16,423,700
</TABLE>
 



The accompanying notes are an integral part of these statements.
<TABLE>
                      QuesTech, Inc. and Subsidiaries

                        CONSOLIDATED BALANCE SHEETS
                               December 31,

                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                     1996         1995
CURRENT LIABILITIES

  <S>                                           <C>           <C>
  Line of credit  ............................  $ 1,227,400   $   394,100
  Current maturities of long-term
    obligations ..............................      374,000        57,100
  Accounts payable ...........................    1,940,300     2,268,800
  Accrued liabilities and deferred 
    credits ..................................    5,627,300     4,834,300
  Income taxes
    Currently payable ........................          --         45,200

        Total current liabilities ............    9,169,000     7,599,500

LONG-TERM OBLIGATIONS, net of current
  maturities .................................    1,721,800       156,200
INDEBTEDNESS TO RELATED PARTIES ..............    1,417,100     1,321,900
ACCRUED POSTRETIREMENT BENEFIT COST ..........    1,267,300     1,161,000
OTHER LONG TERM OBLIGATIONS ..................    1,010,500     1,137,300

        Total liabilities ....................   14,585,700    11,375,900

COMMITMENTS AND CONTINGENCIES ................          --            --
STOCKHOLDERS' EQUITY
  Common stock - authorized 3,000,000 shares
    of $.05 par value, issued 1,649,904 and
    1,578,000 shares, outstanding 1,610,857
    and 1,536,461 at December 31, 1996 and
    1995, respectively .......................       82,500        78,900
  Additional paid in capital .................    2,835,600     2,720,100
  Retained earnings ..........................    3,652,000     2,833,700
  Less:  Treasury Stock at cost ..............     <193,100>     <227,300>
  Due from SECT ..............................     <344,600>     <357,600>

        Total stockholders' equity ...........    6,032,400     5,047,800
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...  $20,618,100   $16,423,700

</TABLE>

The accompanying notes are an integral part of these statements.

<TABLE>
                      QuesTech, Inc. and Subsidiaries

                    CONSOLIDATED STATEMENTS OF EARNINGS

                          Year ended December 31,

                                         1996          1995         1994

<S>                                 <C>           <C>          <C>
Revenues .........................  $72,370,100   $57,951,200  $54,696,400
Operating expenses
  Salaries, wages and
    employee benefits ............   34,594,600    28,269,100   26,719,900
  Other operating expenses .......   36,192,700    27,653,800   26,099,600
Total Operating Expenses .........   70,787,300    55,922,900   52,819,500

    Income from operations .......    1,582,800     2,028,300    1,876,900

Other expense
  Interest expense ...............     <578,300>     <395,800>    <386,400>
  Charges arising from settlements
    of litigation ................          --       <722,100>    <843,100>
    Earnings before income taxes .    1,004,500       910,400      647,400

Provision for income taxes .......     <186,200>     <390,300>    <329,600>
       NET EARNINGS ..............  $   818,300   $   520,100  $   317,800

Weighted average number of common
  shares outstanding:
    Primary ......................    1,518,374     1,484,680    1,396,594
    Fully diluted ................    1,524,757     1,540,208    1,410,902

Earnings per share:
  Primary ........................  $       .54   $       .35  $       .23
  Fully diluted ..................  $       .54   $       .34  $       .23

</TABLE>




The accompanying notes are an integral part of these statements.


                       QuesTech, Inc. and Subsidiaries

<TABLE>
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                          Year ended December 31,


                                            1996        1995        1994
Common Stock:
  <S>                                   <C>         <C>         <C>
  Beginning balance ................... $   78,900  $   78,900  $   78,900
  Exercise of options .................      3,600         --          -- 
  Ending balance ......................     82,500      78,900      78,900

  Additional paid in capital:
    Beginning balance .................  2,720,100   2,722,700   2,722,700
    Exercise of options ...............     85,500      <2,600>        -- 
    Tax benefit associated with
      exercise of options .............     30,000         --          -- 
    Ending balance ....................  2,835,600   2,720,100   2,722,700

Retained Earnings:
  Beginning balance ...................  2,833,700   2,313,600   1,995,800
  Net Earnings ........................    818,300     520,100     317,800
  Ending balance ......................  3,652,000   2,833,700   2,313,600

Treasury Shares:
  Beginning balance ...................   <227,300>    <30,000>    <30,000>
  Purchase of shares                           --     <197,300>         --
  Exercise of options .................     34,200         --           -- 
  Ending balance ......................   <193,100>   <227,300>    <30,000>

Due from SECT:
  Beginning balance ...................   <357,600>   <432,500>   <432,500>
  Exercise of options .................     13,000      74,900         -- 
  Ending balance ......................   <344,600>   <357,600>   <432,500>

Total Stockholders' Equity ............ $6,032,400  $5,047,800  $4,652,700

</TABLE>




<TABLE>

                      QuesTech, Inc. and Subsidiaries

              CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                          Year ended December 31,


                                            1996        1995        1994

<S>                                      <C>         <C>         <C>
Shares of Common stock authorized ....   3,000,000   3,000,000   3,000,000

Shares of Common stock issued:
  Beginning balance ...................  1,578,000   1,578,000   1,578,000
  Exercise of options .................     71,904         --          -- 
  Ending balance ......................  1,649,904   1,578,000   1,578,000

Shares of Treasury stock:
  Beginning balance ...................     41,539      10,000      10,000
  Acquisition <Reissue> of Treasury
    stock .............................     <2,492>     31,539         -- 
  Ending balance ......................     39,047      41,539      10,000

Shares held by the SECT:
  Beginning balance ...................    183,392     221,792     221,792
  Release of Shares ...................     <7,261>    <38,400>        --  
  Ending balance ......................    176,131     183,392     221,792

</TABLE>

The accompanying notes are an integral part of these statements.














<TABLE>

                      QuesTech, Inc. and Subsidiaries

                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                          Year ended December 31,

                                        1996          1995         1994
Increase (Decrease) in Cash and
  Cash Equivalents

Cash flows from operating activities:
  <S>                                <C>          <C>          <C>
  Net earnings ..................... $ 818,300    $  520,100   $  317,800
 
Adjustments to reconcile net
  earnings to net cash from
  operating activities:
    Depreciation and Amortization ..   940,900       677,300      695,800
    Reserve for unrecovered contract
      costs and doubtful accounts ..   337,500       185,000          --
    Provision for lease settlement .       --            --      <626,400>
    Increase in fund values of
      nonqualifying plan assets ....  <234,900>     <197,200>    <152,100>
    Changes in assets and liabilities:
      Accounts receivable ..........<1,267,000>      689,500    1,467,900
      Inventories ..................   <88,900>      <81,500>      46,400
      Prepaid expenses and other
        assets .....................    56,000       194,500     <274,300>
      Accounts payable and accrued
        expenses....................   464,500      <175,400>     <21,000>
      Income taxes payable .........   <45,200>      <74,700>    <325,800>
      Deferred taxes payable .......  <246,500>     <195,700>     136,100
    Indebtedness to related parties
      and other long-term
      obligations ..................   114,300       559,100      108,100
    Accrued postretirement benefits    106,300       184,200     <113,900>
             Net cash provided by
               operating activities    955,300     2,285,200    1,258,600

</TABLE>




<TABLE>

                      QuesTech, Inc. and Subsidiaries

                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                          Year ended December 31,

                                        1996          1995         1994

Cash flows from investing activities:
   
<S>                                  <C>          <C>          <C>
   Capital expenditures ............ $<3,815,500> $<2,019,900> $  <355,100>
   Proceeds from return on investment
     in whole life policies ........         --           --       250,300
             Net cash used in
               investing activities   <3,815,500>  <2,019,900>    <104,800>

Cash flows from financing activities:
   Increase/<Decrease> in line of
     credit ........................     833,300      139,900     <281,000>
   Cash advance to SECT for stock
    acquisition ....................         --           --      <432,500>
   Cash proceeds from exercise of
    stock options ..................     166,300       51,700          --
   Proceeds from lease financing ...   2,041,900          --           --
   Repayment of long-term debt .....    <131,800>     <51,100>     <97,400>
   Repayment of indebtedness to
     related parties ...............     <58,600>    <242,300>    <192,000>
   Repayment of other long-term debt    <114,900>     <70,400>     <61,500>
   Purchase of Treasury Stock ......         --      <176,700>         -- 
             Net cash used in
               financing activities    2,736,200     <348,900>  <1,064,400>

Net increase<decrease> in cash .....    <124,000>     <83,600>      89,400
Cash, beginning of period ..........     178,300      261,900      172,500

Cash, end of period ................ $    54,300  $   178,300  $   261,900

Cash payments for:
  Interest .........................     355,900      147,300      140,600
  Income taxes .....................     916,400      671,200      519,100

</TABLE>



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

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES

 1.  Nature of Operations

The Company performs a broad range of high technology services for industry
and agencies of the United States Department of Defense ("DOD") and the
national security community.  These services are provided through two
business units, QuesTech Research Division ("QTRD") and QuesTech Service
Company ("QTSC").  Revenues from government contracts account for 99% of
the Company's revenues.  A third subsidiary, QuesTech Packaging, Inc.
("QTPI", formerly QuesTech Ventures, Inc.), is in the business of
manufacturing plastic containers.

 2.  Use of Estimates in the Preparation of 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 and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.

 3.  Principles of Consolidation

The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries.  All material intercompany transactions
have been eliminated in consolidation.

 4.  Income Recognition

The Company provides services, primarily for the United States Government,
under three types of contracts:  cost-reimbursement, fixed price and 
time-and-materials.  Substantially all of the Company's revenue is derived 
from these contracts.  Approximately 40% of the Company's consolidated 
revenues

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

during each of the last three years was generated by a major contract with
the Department of the Army.  Income is recognized for cost-reimbursement
and fixed-price type contracts using the percentage-of-completion method
based on costs incurred; for time-and-materials contracts, income is based
on contractually defined billing rates applied to services performed and
materials delivered.  Anticipated losses on contracts are recognized as
soon as they become known.

Certain of the Company's contracts include provisions permitting the
government to withhold a defined amount or percentage of a contract price
until certain conditions have been satisfactorily met.  These conditions
primarily relate to uncompleted indirect cost rate negotiations and
substantial completion of contract performance.  The inclusion of these
amounts in income is consistent with the revenue recognition policy stated
above.  The inclusion of the retainages and costs subject to audit in
income is consistent with common industry practice.

A portion of the Company's revenues related to performance on certain 
cost-reimbursement type contracts is subject to audit by the United States
Defense Contract Audit Agency (DCAA).  Such contract audits have been
completed through December 31, 1991.  Contract costs for the government
contract segment for 1992 through 1995 are expected to be audited during
1997.  Contract revenue has been recorded in amounts that are expected to
be realized upon final settlement.

 5.  Operating Expenses

Operating expenses presented in the accompanying statements of operations
reflect the allocation of overhead and general and administrative expenses. 

 6.  Statement of Cash Flows

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.


                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

 7.  Inventories

    Inventories consist principally of raw materials and certain finished
goods and are stated at the lower of cost or market.  Cost is determined
principally under the average cost method.

 8.  Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:

    Cash and cash equivalents, accounts receivable, accounts payable, line
    of credit, and other accrued liabilities - The carrying amounts
    approximate fair value because of the short maturity of these
    instruments.  The Company's receivables arise primarily in connection
    with its performance on government contracts and therefore have
    negligible credit risk.

    Investment in a partnership - The fair value is based on the maximum
    amount of proceeds expected to be realized by the Company, upon
    liquidation of the partnership.

    Cash Values of Insurance Policies - The fair value is based on the cash
    values accumulated in these policies, net of borrowings.  Surrender
    charges are not reflected in the fair value amount unless cash
    withdrawals or loans are made against these policies.  On August 
    12, 1994, Confederation Life Insurance Company (CLIC), one of the
    insurance carriers for these policies, became subject to an Order of
    Rehabilitation and was placed under the regulatory supervision of the
    Michigan Commissioner of Insurance.  As a result, Confederation Life
    policies will be subject to certain restrictions, one of which is a
    limitation on access to cash values during the lifetime of the insured. 
    Surrenders, loans and other withdrawals are limited to the lesser of the
    net cash flow paid into a policy since August 12, 1994, or the net cash
    value of the policy.  At December 31, 1996, the 

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

    carrying amount of the cash values of these policies was approximately
    $477,400.

    Letter of credit - The fair value is based on the estimated cost to
    terminate or otherwise settle these obligations with the counter-parties.

Following is a summary of the estimated fair value at December 31, 1996, of
the Company's financial instruments other than those on which the carrying
amount approximates fair value.

<TABLE>
                                            Carrying        Fair
                                             Amount         Value

<S>                                        <C>            <C>
Investment in a partnership,
  for which it is not practicable
  to estimate fair value                   $   87,500     $      --

Cash values of Insurance policies           1,453,200      1,453,200

Letter of credit                                  --         250,000

</TABLE>

 9.  Property, Plant and Equipment and Related Depreciation

Property, plant and equipment are recorded at cost.  Cost includes
expenditures for major improvements and replacements and the net amount of
interest cost associated with significant capital additions.  Construction 
in progress costs and specialized manufacturing equipment in service are
stated at the lower of cost or fair value, based on expected future cash
flows from the capital investment.  During 1996 and 1995, interest cost
associated with construction in progress was expensed due to immaterial
amounts.  The cost of properties held under capital leases is equal to the
lower of the net present value of the minimum lease payments or the fair 
value of the leased property at the inception of the lease.



                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives
(generally five to ten years), using both the straight-line and 
declining-balance methods.  Amortization of computer software costs developed 
for internal use is over five years, based on a double-declining balance
method.  Leasehold improvements are amortized over the lives of the
respective leases or the service lives of the improvements, whichever is
the shorter period.  Amortization of capitalized leased assets is included
with depreciation expense.

During 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of," effective for financial statements with fiscal
years beginning after December 15, 1995.  In accordance with the Statement,
long-lived assets and certain intangibles, including goodwill, are required
to be reviewed for impairment whenever events or changes in circumstances
indicate that the related carrying amount may not be recoverable.  An
impairment loss is recognized when the estimated undiscounted future cash
flows generated by assets held for use are less than the underlying
carrying amount.  The Company has determined that no impairment loss need
be recognized for applicable assets of continuing operations.

10.  Goodwill

The excess of the acquisition costs over the fair value of the net assets
of the businesses acquired is being amortized on a straight-line basis over
periods ranging from 19 to 20 years.

The Company regularly performs a reassessment of the continuing value of
the acquired goodwill associated with the acquisitions of American Defense
Systems, Inc. (ADSI) and DHR, Inc. which at December 31, 1996 aggregated
$1.4 million.  To the extent that the future cash flows based on the
contracts' expected operating profits will exceed the carrying cost of the
asset, an impairment loss is not recognized.  Contract termination or 
non-renewal of the contract are events or changes in circumstances that 


                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

indicate that the carrying amount of the goodwill asset may not be
recoverable, thereby requiring the recognition of an impairment loss at
that time.

11.  Accounting for Postretirement Benefits

Effective in 1993, the Company adopted "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106) and elected to
recognize the transition obligation on a delayed recognition basis.  The
transition obligation represents the unfunded portion of the accrued
postretirement benefit obligation (the "APBO") as of the transition date
less any accrued postretirement benefit cost.  The accrued postretirement
benefit cost as of the balance sheet date reflects the net periodic cost
attributed to the current year, net of benefit payments, plus the accrued
amount as of the beginning of the year.  The cost measurement principles 
and required disclosures of SFAS 106 are applied separately to each
identifiable postretirement benefit plan.  The accrued postretirement
benefit cost obligation is reported as an aggregate amount in the financial
statements.

12.  Accounting for Post-Employment Benefits

The Company periodically re-evaluates its projected obligations under 
post-employment agreements when the subject officers receive compensation
increases during their years of active employment.  The projected cost of
additional compensation payable during the post-employment years is
discounted at present value and charged to operations.  Periodic increases
in the balances due each of the officers also reflect the accrued interest
on the discounted cost of the liability.








                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

13.  Accounting for Stock-based Compensation

The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation," effective for fiscal years that begin after December 15,
1995.  The new standard encourages but does not require all entities to
adopt a fair value based method of accounting for all employee stock option
plans.  Under this method, compensation cost is measured at the grant date
based on the value of the stock option award and is recognized over the
service period, which is usually the vesting period.  The Company has
chosen to use the intrinsic value based method, as prescribed by Opinion
25, that measures compensation cost only to the extent that the option
price is lower than the quoted market price of the stock at the date of the
award.  Pro forma disclosures of net income, and earnings per share have
been made, as if the fair value based method of accounting defined in SFAS
123 had been applied.  Refer to Note I.

14.  Reclassifications

Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the presentation in the 1996 financial
statements.

15.  Earnings per share

The computation of earnings per common share is based on the weighted
average number of common shares outstanding.  When dilutive, stock options
are included as share equivalents using the treasury stock method.  At
December 31, 1996 and 1995, the Company's Stock Employee Compensation Trust
(SECT), which had acquired 221,792 shares of the Company's stock from its
previous founders, held 176,131 and 183,392 shares, respectively. Although
outstanding, the SECT shares are excluded from the base of the earnings per
share calculation.



<TABLE>
                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE B - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS


                                               December 31     
                                            1996         1995
Accounts receivable
  Current
    U.S. Government
      <S>                                <C>          <C>
      Billed                             $ 9,403,800  $ 8,708,300
      Unbilled (including retentions
        and indirect cost rate
        variances of $1,197,000 and
        $82,400 in 1996 and
        $1,288,800 and $451,100
        in 1995, respectively)             1,739,900    1,686,700
                                          11,143,700   10,395,000

    Less reserve for unrecoverable
      contract costs and doubtful
      accounts                            <2,112,800>  <2,053,100>

                                         $ 9,030,900  $ 8,341,900
</TABLE>

Of the December 31, 1996 billed and unbilled amounts, approximately $9.7   
million is expected to be collected in 1997 and the remainder in subsequent
years.














                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE B - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS -
         Continued

<TABLE>
                                               December 31      
                                            1996         1995
Equipment and leasehold improvements
  <S>                                   <C>          <C>
  Furniture and fixtures                $ 2,811,300  $ 2,741,500
  Machinery and equipment                 3,486,300    2,926,700
  Computer software                       2,053,300    1,709,100
  Equipment held under capital lease        312,600      312,600
  Construction in progress                2,351,400      479,800
  Leasehold improvements                    905,300      618,300

                                         11,920,200    8,788,000
  Less accumulated depreciation and
    amortization                         <6,967,600>  <6,531,500>
                                        $ 4,952,600  $ 2,256,500
</TABLE>

Included in machinery and equipment, and construction in progress above is
equipment with a carrying value of approximately $3.5 million which is to
be used in the Company's plastics manufacturing business.  These carrying
values are based upon the Company's plans and intentions to expand its
business in this area by attracting new customers for various applications
of its patented container forming technology.  In addition, during 1996,
the Company received financing for certain of this equipment in the amount
of $2,000,000 as described in Note D.

If future  economic conditions result in changes in management's plans or 
intentions, the carrying values of the affected assets will be reviewed and 
adjustments, if necessary, will be made. 

As of December 31, 1996, the aggregate net book value of leased office 
equipment and certain leased assets included in construction in progress was
$2.3 million.  










                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE B - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS -
         Continued
<TABLE>
                                               December 31      
                                            1996         1995
Other assets
  <S>                                   <C>          <C>
  Cash value of life insurance
    policies                            $ 1,453,200  $ 1,218,300
  Patents less accumulated
    amortization of $82,700 and
    $50,800, respectively                   224,200      252,200
  Investment in a limited partnership        87,600      175,100
  Deposits                                   67,700       61,700
  Deferred costs                             51,600      127,200

                                        $ 1,884,300  $ 1,834,500
</TABLE>

Other assets include cash values of corporate-owned participating life
insurance policies which the Company purchased as a means of investing
salary deferrals of the employees covered under the Officers and Managers'
Deferred Compensation Plan.

The Company expects to hold the related life insurance policies through
terms varying between 10 to 20 years.  Earlier surrender of these policies
could cost the Company approximately $442,200 pre-tax, as a result of
surrender charges.  See also Note A8.

Accounts Payable

During 1996 and 1995, included in accounts payable are $1,879,900 and
$1,470,200, resulting principally from the Company's use of zero balance
bank accounts where funds are transferred to these accounts from the
Company's line of credit when disbursements are presented for payment.






                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE B - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS -
         Continued

<TABLE>
                                                 December 31      
Accrued liabilities and                        1996         1995
  deferred credits

  <S>                                     <C>          <C>
  Accrued compensation and withholdings   $ 1,924,900  $ 1,393,800
  Accrued vacation                          1,334,400    1,105,800
  Amounts owed to certain subcontractors
    and suppliers                           1,324,300      945,600
  Accrued legal expenses and commitments      505,600      547,300
  Deferred compensation                           --       235,900
  Accrued other taxes                          67,400      208,100
  Amounts due to related parties              373,500      164,000
  Other                                        97,200      233,800

Total accrued liabilities and
  deferred credits                        $ 5,627,300  $ 4,834,300

</TABLE>

NOTE C -  LINE OF CREDIT

At December 31, 1996, the Company's remaining available line of credit
(LOC) through Signet Bank of Virginia was $4.8 million.  The underlying
credit agreement permits borrowings up to $6.0 million.  The Company was in
compliance with various financial covenants, which require the maintenance
of a maximum debt-to-net worth ratio of 5.0 and a minimum tangible net
worth of $3.0 million.  The Company's borrowing rate at December 31, 1996
was 8.5% which was one percentage point above the bank's prime rate.  All
borrowings are secured by a first lien security interest in all receivable
accounts, contract rights, chattel paper, instruments, general intangibles,
equipment, inventory, and documents now owned and hereafter acquired by the
Company.

As part of the borrowing arrangements, the Company is required to pay a
commitment fee of 3/8 of one percent of the average daily amount of the
unused portion of the credit facility.

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE C -  LINE OF CREDIT - Continued

The agreement provides for the issuance of letters of credit by the bank on
the Company's behalf. 

The current agreement expires on May 31, 1997.  Management expects the
commitment to be extended by an amendment at that time.


NOTE D - LONG-TERM OBLIGATIONS

Long-term obligations consist of the following at December 31:

<TABLE>
                                                  1996        1995
Notes payable
<S>                                          <C>         <C>
Non-interest bearing note payable, due
  based on the Company's proportionate
  share of cash available for distribution
  as defined in a related partnership
  agreement, due upon demand                 $   10,600  $   10,600

Capitalized lease obligations
Amounts due under capitalized lease
  obligations, payable in monthly
  installments through 2001,
  collateralized by certain equipment         2,095,000     202,700

                                              2,105,600     213,300
  Less current maturities                      <373,200>    <57,100>

Total long-term obligations                  $1,732,400  $  156,200

</TABLE>






                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE D - LONG-TERM OBLIGATIONS - Continued

The following is a schedule of future minimum lease payments under
capitalized lease obligations together with the present value of the net
minimum lease payments:
<TABLE>
     Year ending December 31,
             
          <S>                                      <C>
               1997                                $  562,800
               1998                                   562,300
               1999                                   505,400
               2000                                   498,400
               2001                                   415,300

          Total minimum lease payments             $2,544,200

          Less amount representing interest
            and taxes                                <449,200>

          Present value of minimum lease payments  $2,095,000

          Current portion                          $  373,200
          Noncurrent portion                        1,721,800

          Capitalized lease obligations            $2,095,000
</TABLE>
During 1996, the Company refinanced certain construction in progress in its
Newport News manufacturing plant under a sale/leaseback arrangement.  The
machines were sold for a sum amount in excess of $2 million.  The
transaction was accounted for as lease financing, wherein the property
remains on the books subject to depreciation.  A financing obligation
representing the proceeds was recorded and is reduced based on payments
under the lease.






                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE E - INCOME TAXES

A reconciliation of the effective tax rate and the Federal statutory income
tax rate applied to income from continuing operations follows:

<TABLE>
                                       1996      1995      1994

  <S>                                  <C>       <C>       <C>
  Statutory Federal income tax rate    34.0%     34.0%     34.0%

  State income taxes, net of Federal
    income tax benefit                  1.0       4.0       4.0
  Amortization of goodwill              5.2       5.8       8.0
  Other                                <3.3>     <0.9>      4.9
  Depreciation                        <13.0>       --        --
  Investment in a foreign subsidiary   <5.4>       --        --

         Effective income tax rate     18.5%     42.9%     50.9%

Income tax expense (benefit) consists of the following for the year ended
December 31,
</TABLE>
<TABLE>
                             1996        1995         1994

<S>                      <C>         <C>         <C> 
Current                  $  432,700  $  586,000  $   193,500
Deferred                   <246,500>   <195,700>     136,100

  Income tax expense     $  186,200  $  390,300  $   329,600

</TABLE>









                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE E - INCOME TAXES - Continued

The tax effect of significant temporary differences that gave rise to
deferred income taxes as of December 31, 1996:
<TABLE>
                                   Deferred Tax    Deferred Tax
                                       Asset         Liability 

<S>                                 <C>             <C>
Depreciation                        $   90,900 
Retentions                                          $  454,900
Reserves against accounts
  receivables                          667,300
Deferred post-employment benefit       433,000
Deferred postretirement benefits     1,184,600  
Legal settlements                      125,300
Accrued vacation                       396,300
Miscellaneous                          166,800         131,400
  Subtotal                           3,064,200         586,300
Valuation allowance                   <262,000>            -- 
  Deferred Tax                      $2,802,200      $  586,200
</TABLE>

Based on an analysis of future operating income for the purpose of
realizing deferred tax assets, management believes that its net deferred
tax asset will be recoverable in future returns and that its valuation
allowance requires no further adjustment.

To date, none of the Company's federal income tax returns for years open
under the statute of limitations have been examined by the Internal Revenue
Service.

NOTE F - EMPLOYEE BENEFIT PLANS

1.  Profit-Sharing and Pension Plan

The Company has a profit-sharing plan pursuant to Section 401 of the
Internal Revenue Code, whereby participants may contribute up to 20% of
their compensation, but not in excess of a ceiling amount determined by the
Secretary of the Treasury during each year.  Under the plan, the Company 

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued

may make two types of contributions subject to the discretion of the Board
of Directors:  (1)  Employer matching contributions and (2)  Profit-Sharing
contributions.  In order to share in either contribution, an employee must
complete 1,000 hours of service during the Plan Year when the contribution
is made.  Generally, contributions vest in the employees' accounts based on
their length of service.

During 1996, the employer contribution to the 401K plan was $103,700
compared to $72,200 for 1995.  No employer contribution was made by the
Company during 1994.

2.  Discretionary Bonus Plan

Under the Officers and Managers Discretionary Bonus Plan for QuesTech and
subordinate units ("the Bonus Plan"), officers and managers of the Company
and its subsidiaries are selected by management for participation in the
Bonus Plan.  Bonuses are apportioned as a percentage of the recipient's
salary and are based upon the Company's overall performance and upon the
performance of the business unit to which the recipient is assigned,
subject to review and approval by the Chief Executive Officer and/or Chief
Operating Officer and the Board of Directors.

Amounts charged to expense under this plan were $452,200, $393,500 and
$292,500 at December 31, 1996, 1995 and 1994, respectively.

3.  Postretirement Benefits

The company has identified three separate postretirement benefit plans
which fall within the purview of SFAS 106:  the Group Health Plan, the
Executive Life Insurance Plan, and the Deferred Compensation Plan.






                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued

a.  Group Health Plan

The Group Health Plan extends medical and dental benefit coverage to
employees, who upon retirement at the age of 65, have completed 20 years of
full-time employment with the Company, or retire with an individual
employment agreement which specifically grants coverage approved by the
insurance carrier of the subject group health policy.  The Plan is
contributory and contains cost-saving features, such as deductibles and
coinsurance.  The accumulated postretirement benefit obligation (APBO)
represents the present value of insurance claims expected to be presented
by eligible employees during their retirement years, based on the net
premiums paid by the Company on behalf of active employees.

For measurement purposes, the annual health care cost trend for 1996
benefits was 9%, grading down to 5% over five years.  The 1% increase in
health care cost trend was 10% in 1996, grading down to 6% over five years. 
During 1995, a 10% medical inflation rate was assumed, grading down to 5%
over six years.  The measurement of the APBO for 1996 and 1995 was based on
an assumed discount rate of 7.5%.

b.  Executive Life Insurance

The Company maintains life insurance policies, covering certain of its
officers, both former and active, through their lifetime, in accordance
with their respective employment agreements.  The cost of the insurees'
premiums is treated as compensation expense.  

c.  Officers and Managers Deferred Compensation Plan (DEF COM)

DEF COM allows eligible employee participants to defer current compensation
and provides supplemental postretirement benefits along with certain
specified death benefits to the participants' beneficiaries. Postretirement
benefits under DEF COM are payable upon the participant's termination of
employment (including retirement), and are paid in equal installments over
a period equal to the length of time the employee deferred compensation,
but no longer than ten years.  Termination or retirement benefits are based

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued

upon the employee's actual deferrals plus interest credited annually, as
set by the Administrator.  Supplemental death benefits are payable in some
cases over a period of ten years provided death occurs while the employee
participant is actively employed with the Company.

The Company invests the amounts deferred by employees in life insurance
policies.  Since DEF COM is a defined contribution plan, the accumulated
postretirement benefit obligation as of the transition date has been based
on the actual balances in each participant's account, which consists of
contributions and accrued interest.

The following tables present the funded status of the Company's benefit
plans and the 1996 periodic expense:

<TABLE>
                               Group    Executive     Deferred
                               Health      Life         Comp.
                                Plan    Insurance       Plan        1996
Accumulated Postretirement
  Benefit Obligation:
<S>                        <C>         <C>         <C>         <C>
   Retirees                $ <314,400> $<298,800>  $ <987,800> $<1,601,000>
   Fully eligible active
    plan participants         <13,200>       --          --        <13,200>
  Other Active Plan
    participants             <139,700>       --    <1,761,900>  <1,901,600>

    Total                    <467,300>  <298,800>  <2,749,700>  <3,515,800>

Fair Value of Plan Assets         --         --           --           -- 
APBO in excess of
   plan assets:              <467,300>  <298,800>  <2,749,700>  <3,515,800>
Unrecognized net gain/
  <loss>                     <177,400>     1,500      300,000      124,100
Unrecognized Transition
   Obligation                 470,400    211,800    1,197,800    1,880,000
</TABLE>

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued
<TABLE>
                               Group    Executive     Deferred
                               Health      Life         Comp.
                                Plan    Insurance       Plan        1996
  Accrued postretirement
    benefit cost in the
<S>                        <C>         <C>        <C>          <C>
    balance sheet          $ <174,300> $ <85,500> $<1,251,900> $<1,511,700>

Reconciliation of accrued
  postretirement
  benefit cost:

Accrued postretirement
  benefit cost,
<S>                       <C>          <C>        <C>          <C>
  at January 1, 1996      $  <126,300> $ <66,400> $<1,204,200> $<1,396,900>
Net periodic cost             <64,000>   <35,200>    <491,600>    <590,800>
Benefit payments               16,000     16,100      443,900      476,000

Accrued postretirement
  benefit cost
  at December 31, 1996     $ <174,300> $ <85,500> $<1,251,900> $<1,511,700>

Current portion               <16,000>   <16,400>    <212,000>    <244,400>
Long-term portion            <158,300>   <69,100>  <1,039,900>  <1,267,300>

                             <174,300>   <85,500>  <1,251,900>  <1,511,700>

</TABLE>










                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued

The following tables present the funded status of the Company's benefit
plans and the 1995 periodic expense:
<TABLE>
                               Group    Executive     Deferred
                               Health      Life         Comp.
                                Plan    Insurance       Plan        1995
Accumulated Postretirement
  Benefit Obligation:
   Retirees and Terminated
<S>                        <C>         <C>        <C>          <C>
     participants          $ <322,600> $<290,300> $<1,200,200> $<1,813,100>
  Fully eligible active
     plan participants        <26,300>       --           --       <26,300>
  Other Active Plan
    participants             <130,900>       --    <1,568,200>  <1,699,100>

    Total                    <479,800>  <290,300>  <2,768,400>  <3,538,500>

Fair Value of Plan Assets         --         --           --           -- 
APBO in excess of
   plan assets:              <479,800>  <290,300>  <2,768,400>  <3,538,500>
Unrecognized net gain/
  <loss>                     <146,300>    <1,200>     291,100      143,600
Unrecognized Transition
   Obligation                 499,800    225,100    1,273,100    1,998,000

  Accrued postretirement
    benefit cost in the
    balance sheet          $ <126,300> $ <66,400> $<1,204,200> $<1,396,900>

</TABLE>







                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued
<TABLE>
                               Group    Executive     Deferred
                               Health      Life         Comp.
                                Plan    Insurance       Plan        1995
Reconciliation of accrued
  postretirement
  benefit cost:

Accrued postretirement
  benefit cost,
<S>                        <C>         <C>        <C>          <C>
  at January 1, 1995       $  <92,200> $ <48,200> $<1,064,100> $<1,204,500>
Net periodic cost             <66,500>   <34,500>    <420,600>    <521,600>
Benefit payments               32,400     16,300      280,500      329,200

Accrued postretirement
  benefit cost
  at December 31, 1995     $ <126,300> $ <66,400> $<1,204,200> $<1,396,900>

The following tables represent the net periodic postretirement benefit cost
components for 1996, 1995 and 1994:
</TABLE>
<TABLE>
                                Group    Executive    Deferred
                                Health      Life        Comp.
                                 Plan    Insurance      Plan        1996

    <S>                    <C>         <C>        <C>          <C> 
    Service cost           $   10,400  $   4,300  $   287,800  $   302,500
    Interest cost              31,800     17,700      127,100      176,600
    Amortization -
      transition obliga.       29,400     13,200       75,300      117,900
    Amortization - gain
      or loss                  <7,600>       --         1,400       <6,200>

    Net periodic post-
      retirement
      benefit cost         $   64,000  $  35,200  $   491,600  $   590,800
</TABLE>

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued
<TABLE>
                               Group    Executive     Deferred
                               Health      Life         Comp.
                                Plan    Insurance       Plan        1996

Impact of One Percent
  Increase in Medical
  Trend Rate:
    Aggregate impact on
      1996 service cost
<S>                                                            <C>
      and interest cost                                        $     2,100
</TABLE>
<TABLE>
 
                               Group    Executive     Deferred
                               Health      Life         Comp.
                                Plan    Insurance       Plan        1995

    <S>                     <C>         <C>       <C>          <C> 
    Service cost            $   9,200   $  4,000  $   236,800  $   250,000
    Interest cost              33,900     17,200      106,400      157,500
    Amortization -
      transition obliga.       29,400     13,200       75,300      117,900
    Amortization - gain
      or loss                  <6,000>       --         2,100       <3,900>
    Net periodic post-
      retirement
      benefit cost          $  66,500  $  34,400  $   420,600  $   521,500

Impact of One Percent
  Increase in Medical
  Trend Rate:
    Aggregate impact on
      1995 service cost
      and interest cost                                        $    46,400

</TABLE>



                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE F - EMPLOYEE BENEFIT PLANS - Continued
<TABLE>
                               Group    Executive     Deferred
                               Health      Life         Comp.
                                Plan    Insurance       Plan        1994

    <S>                     <C>         <C>       <C>          <C> 
    Service cost            $   9,000   $  3,700  $   188,700  $   201,400
    Interest cost              41,900     22,500       91,700      156,100
    Amortization -
      transition obliga.       29,400     18,300       75,300      123,000
    Amortization - gain
      or loss                    <500>       --           --          <500>
    Net periodic post-
      retirement
      benefit cost          $  79,800  $  44,500  $   355,700  $   480,000

Impact of One Percent
  Increase in Medical
  Trend Rate:
    Aggregate impact on
      1994 service cost
      and interest cost                                        $     4,500
</TABLE>

4.  Stock Employee Compensation Trust

On February 1, 1994, the Company established a Stock Employee Compensation
Trust ("SECT") and financed the SECT's repurchase of 221,792 shares of
common stock owned by two of the Company's former founders.  The Company's
loan to the SECT will be paid down from time to time as the employees
exercise and pay for their options under the Company's Incentive Stock
Option Plan.  At December 31, 1996 and 1995, there were 176,131 and 183,392
unallocated and uncommitted shares respectively held by the SECT.






                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE G - OTHER LONG-TERM OBLIGATIONS

Amounts due to certain founders (no longer affiliated with the Company),
under a Confidential Settlement Agreement, are included in Other Long-Term
Obligations.  Payments under the agreements will continue until 2004. 
During 1995, the Company entered into a similar agreement with another
former founder.  Amounts under the latter agreement payable through 2006
are included in Other Long-Term Obligations as well.  The cost of the
latter agreement was included in Other Expense in the 1995 financial
statements.


NOTE H - COMMITMENTS AND CONTINGENCIES

1.  Future Minimum Rental Commitments

The following is a schedule by years of the approximate future minimum
rental payments required under operating leases that have initial or
remaining noncancelable lease terms of one year or more as of December 31,
1996:

    Year ending December 31,

                    1997                             1,667,600
                    1998                             1,374,200
                    1999                               625,600
                    2000                               631,200
                    2001 and thereafter                433,800

         Future minimum rental payments             $4,732,400

Net rent expense under operating leases amounted to approximately
$1,744,000, $1,739,900, and $2,042,600 for the years ended December 31,
1996, 1995 and 1994, respectively, after being reduced by rental income
which was not material during the last three years.

2.  Litigation

The following information is furnished regarding litigation involving the
Company:

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE H -  COMMITMENTS AND CONTINGENCIES - Continued

On January 2, 1996, the Company was named as a defendant in a lawsuit
captioned 7600 Limited Partnership and Guy Beatty v. QuesTech, Inc.  The
plaintiffs (the Company's former landlord and its general partner) sought
attorneys' fees incurred in two earlier landlord/tenant cases (a contract
claim) plus damages for the tort of malicious prosecution, plus punitive
damages.

In February 1997, the Company agreed to a settlement which has been
accounted for in the financial statements.  The settlement, which is subject
to final documentation, disposes of all issues raised in the litigation, and
had no material impact on the Company's financial statements.

The Company has no other litigation pending which involves potential
liability in excess of $10,000.

Other Claims

Since September 1996, the Company has been involved in a dispute with
Munchkin, Inc., the sole customer at that time of its QTPI subsidiary. The
dispute involved an alleged breach of contract and warranty issues, as well
as claims for payment by QTPI.

In addition, in February, the Company filed a declaratory judgment action
seeking to clarify the nature of the exclusivity granted to Munchkin under
its contract.

The Company is currently in negotiations which, if successful, would
resolve all outstanding disputes with Munchkin. 

The Company has no other claims pending which involves potential liability
in excess of $10,000.





                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE H -  COMMITMENTS AND CONTINGENCIES - Continued

3.  Employment Agreements

The Company has employment agreements with two executive officers which
stipulate salary continuation for a period of five years and two years, as
a result of voluntary or involuntary termination, regardless of the change
in control of the Company.  The cost of accrued interest and the present
value of compensation changes for these agreements aggregated ($106,700 and 
$191,600) during 1996 and 1995, respectively.  None of these costs will be
paid until the subject officers terminate their employment with the
Company.


NOTE I -  STOCK OPTIONS

The Company accounts for its incentive stock options under APB No.
25.  The 1996 Plan allows the Company to grant options to officers and key
employees for up to 200,000 shares of common stock. These options, which
have five year terms, vest at a rate of 20% per year from the date of
grant.  The exercise price of each option equals the market price of the
Company's stock on the date of grant.  At December 31, 1996, the Company had
options outstanding for 220,200 shares of common stock.  Options to purchase
40,000 shares were issued out of the 1996 Plan.  The remainder of the 
outstanding options were issued under the 1994 Plan.  Options to purchase 
160,000 shares are available for future grants under the 1996 Plan.  There are
no options available for future grants under the 1994 Plan.   

Accordingly, no compensation cost has been recognized for the plan.  Had
compensation cost for the plan been determined based on the fair value of
the options at the grant dates consistent with the method of SFAS 123, the
Company's net income and earnings per share would have been:











                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE I -  STOCK OPTIONS - Continued
<TABLE>
                                            1996        1995

<S>                                        <C>        <C>
Net Income             As reported         818,300    520,100
                       Pro forma           705,600    419,000

Primary earnings
 per share             As reported             0.54       0.35
                       Pro forma               0.48       0.28

Fully diluted
 earnings per share    As reported             0.54       0.34
                       Pro forma               0.48       0.28
</TABLE>
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes options-pricing model with the following 
weighted-average assumptions used for grants in 1996 and 1995: expected 
volatility of 71%; risk free interest rate of 6%; and expected lives of four 
years.The pro forma effect on net income for 1996 or 1995 is not 
representative of the pro forma effect on net income in future years because 
it does not take into consideration pro forma compensation expense related to
grants made prior to 1995.



                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE I -  STOCK OPTIONS - Continued

A summary of the status of the Company's Incentive Stock Option Plans as of
December 31, 1996 and 1995, and changes during the years ending on those
dates is presented below.
<TABLE>
                                       1996                1995
                                     Weighted            Weighted
                                     Average             Average
                                     Exercise            Exercise
                           Shares      Price    Shares     Price
Outstanding at
<S>                       <C>          <C>      <C>         <C>
 beginning of year        277,500      $3.88     96,500     1.82

Granted                    44,000       6.90    219,000     4.41

Exercised                 <71,100>      2.21    <31,400>    1.75

Forfeited                 <30,200>      6.73     <6,600>    2.88

Outstanding at year-end   220,200       4.63    277,000     4.41

Options exercisable
 at year end               25,000       4.10     58,500     1.82

Weighted-average fair
 value of options
 granted during the year                4.13                2.57
</TABLE>
The following information applies to options outstanding at December 31,
1996:

    Number outstanding                             224,200
    Range of exercise prices                     $4 to $7.25
    Weighted-average exercise price                 $4.62
    Weighted-average remaining contractual life      3.55



                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE I -  STOCK OPTIONS - Continued

The Company has also provided for the grant of non-qualified stock options
to the Company's non-employee directors.  These options were granted to
purchase 15,000, 3,000 and 20,000 shares during 1996, 1990 and 1991, at the
stock's then fair market value, which were $7.25, $1.875 and $1.75
respectively.  Of these options, 15,000 shares were outstanding 
at December 31, 1996, and 23,000 shares at December 31, 1995.


NOTE J - FINANCIAL INFORMATION FOR BUSINESS SEGMENTS

The Company derived all of its revenues under contracts with agencies of
the United States Government, either as a prime contractor or as a
subcontractor.

Currently, the Company operates in two industry segments:  government
contracting and commercial (plastic container manufacturing).  Performance
under government contracts includes scientific, engineering, and program
management services, primarily in the defense and intelligence arenas. 
Sales provided by the commercial segment were in fulfillment of a multi-
year supply contract for thermoformed infant bottle liners.  Since the
third quarter, operations were disrupted by a dispute on pricing and
technical specifications.

Operating Profit/Loss is income from operations before general corporate
expense.  General corporate expense consists primarily of headquarters
administrative costs and provisions for reserves and other allowances.

Identifiable assets by industry segment are those assets that are used in
the Company's operations in each industry segment.  Corporate assets are
principally cash and cash equivalents, the deferred income tax asset,
certain fixed assets and leasehold improvements in the corporate office,
patents, and cash values of corporate-owned life insurance policies.  In
the commercial packaging segment, some manufacturing equipment was placed
in service during 1996 and 1995; however, a significant portion remained
under construction in progress as of year-end.


                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE J - FINANCIAL INFORMATION FOR BUSINESS SEGMENTS - Continued

A summary of the Company's operations by industry segment follows:
<TABLE>
                      Government
1996                  Contracts    Commercial   Corporate   Consolidated

<S>                  <C>          <C>          <C>           <C>
Operating revenues   $71,693,000  $   677,100  $       --    $72,370,100

Operating Profit     $ 6,290,500  $<1,813,900> $<2,893,800>  $ 1,582,800
Other income/expense         --           --           --           --
Interest                     --           --      <578,300>     <578,300>
Earnings before
 income taxes        $ 6,290,500  $<1,813,900> $<3,472,100>  $ 1,004,500
</TABLE>
<TABLE>
                      Government
1996                  Contracts    Commercial   Corporate   Consolidated

<S>                  <C>          <C>          <C>           <C>
Identifiable assets  $12,236,700  $ 3,586,700  $ 4,794,700   $20,618,100

Depreciation and
 amortization of
 property, plant
 and equipment       $   371,400  $   185,000  $   200,300   $   754,400

Amortization of
 goodwill and other
 intangibles         $   154,500  $       --   $    32,000   $   186,500

Capital Expenditures $   470,100  $ 2,615,100  $   730,300   $ 3,815,500

</TABLE>







                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE J - FINANCIAL INFORMATION FOR BUSINESS SEGMENTS - Continued
<TABLE>
                      Government
1995                  Contracts    Commercial   Corporate   Consolidated

<S>                  <C>          <C>          <C>           <C>
Operating revenues   $57,902,600  $    48,600  $       --    $ 57,951,200

Operating Profit     $ 6,309,100  $<1,176,100> $<3,104,700>  $  2,028,300
Other income/expense         --           --      <722,100>      <722,100>
Interest                     --           --      <395,800>      <395,800>
Earnings before
 income taxes        $ 6,309,100  $<1,176,100> $<4,222,600>  $    910,400

Identifiable assets  $11,389,500  $ 1,135,400  $ 3,898,800   $ 16,423,700

Depreciation and
 amortization of
 property, plant
 and equipment       $   250,700  $    57,500  $   199,100   $    507,300

Amortization of
 goodwill and other
 intangibles         $   154,500  $       --   $    15,500   $    170,000

Capital Expenditures $   339,200  $ 1,212,800  $   467,900   $  2,019,900
</TABLE>
<TABLE>
                      Government
1994                  Contracts    Commercial   Corporate   Consolidated

<S>                  <C>          <C>          <C>           <C>
Operating revenues   $54,676,400  $    20,000  $       --    $ 54,696,400

Operating Profit     $ 4,562,800  $  <546,100> $<2,139,800>  $  1,876,900
Other income/expense         --           --      <843,100>      <843,100>
Interest                     --           --      <386,400>      <386,400>
Earnings before
 income taxes        $ 4,562,800  $  <546,100> $<3,369,300>  $    647,400

Identifiable assets  $12,449,700  $   168,100  $ 3,141,500   $ 15,759,300
</TABLE>

                      QuesTech, Inc. and Subsidiaries

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     December 31, 1996, 1995 and 1994


NOTE J - FINANCIAL INFORMATION FOR BUSINESS SEGMENTS - Continued
<TABLE>
Depreciation and
 amortization of
 property, plant
<S>                  <C>          <C>          <C>           <C>  
 and equipment       $   300,100  $    50,700  $   179,600   $    530,400

Amortization of
 goodwill and other
 intangibles         $   154,600  $       --   $    10,800   $    165,400

Capital Expenditures $   235,400  $    77,800  $    41,900   $    355,100
</TABLE>






























                         SUPPLEMENTAL INFORMATION




























                      QuesTech, Inc. and Subsidiaries

              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
               Years ended December 31, 1996, 1995 and 1994
<TABLE>
                               1996          1995          1994
Reserve for unrecovered
  contract costs and
  doubtful accounts
             
  Balance at Beginning of
<S>                       <C>            <C>            <C>
    Period                $2,053,100     $1,853,300     $2,199,400
  Additions:
    Charged to Costs and
      Expenses                59,700        185,000            --    
    Charged to Other
      Accounts                               17,600         22,900
  Deductions:                    --          <2,800>      <369,000>
      Balance at End of
        Period            $2,112,800     $2,053,100     $1,853,300 

        Current           $2,112,800 (1)  $2,053,100 (1)    $1,853,300 (1)
        Non-current       $      --      $      --      $      -- 

Valuation allowance for
  deferred tax asset       
  Balance at Beginning of
    Period                $  148,000     $  148,000     $  148,000
  
  Additions:
    Charged to Income
      Tax Expense            114,000            --             -- 
    Charged to Other
      Accounts                   --             --             --
  Deductions:
      Balance at End of
        Period            $  262,000     $  148,000     $  148,000
        Current           $      --      $      --        $      -- 
        Non-current       $  262,000     $  148,000     $  148,000 (2)  
</TABLE>
(1)  Included in accounts receivable - trade.
(2)  Included in deferred tax asset - long-term.