UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities and Exchange
Act of 1934

For the Fiscal Year Ended March 31, 1998
Commission File Number  0-21908


MRS Technology, Inc.
(exact name of registrant as specified in its charter)

Massachusetts                                          04-2904966
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification No.)

10 Elizabeth Drive, Chelmsford, MA                01824-4112
(Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:  (978)250-0450

Securities registered pursuant to Section 12(b) of the Act:  None
Exchange on which securities are registered:  NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share

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 and Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period that 
the registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.  Yes X  No___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-K or any amendment to 
this Form 10-K. [X]

As of June 1, 1998, the aggregate market value of outstanding shares of the
voting stock held by non-affiliates was $1.4375.

As of June 1, 1998, 6,858,763 shares of the registrant's Common Stock, par
value $.01 per share, were issued and outstanding.


               DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement relating to the Annual Meeting of Shareholders
to be held on July 28, 1998 are incorporated by reference into Part III of
this Report.

PART I

Item 1. Business

General

MRS Technology, Inc. was founded in February 1986 to develop and manufacture 
photolithographic equipment for the production of flat panel displays (FPDs),
principally active matrix liquid crystal displays (AMLCDs).  The Company's 
innovative photolithographic system, the PanelPrinter, is a "stitching
step-and-repeat" imaging system which prints large-area integrated circuit
patterns, a critical step in the FPD production process.

Two years and $10,000,000 were spent developing the first PanelPrinter, which 
pioneered the high speed stitching of integrated circuit (IC) images using the
thin film transistor (TFT) process.  With technology superior to its 
competitors, especially for larger, higher-resolution FPDs, the Company
succeeded in winning a dominant share of the market for FPD research and
development laboratories and pilot production lines.  This success led to an
initial public offering (IPO) in July 1993, in which the Company raised
$15,600,000 of additional capital.  From fiscal 1993, just prior to the 
Company's IPO, through fiscal 1995, the Company generated three successive
years of profitable operations, attaining revenues of $22,400,000 and profits 
of $1,600,000 in fiscal 1995.  Since its inception, through IPO funding,
Defense Advanced Research Projects Agency (DARPA) contracts and from margins 
on over $50,000,000 of products sold, MRS continued to develop and advance 
the technology required for production of much larger FPDs on increasingly
larger substrates.

MRS succeeded in capturing a portion of the worldwide research and 
development market and substantially all of the U.S. FPD production market.
However, the U.S. production market has not developed as a volume producer of
FPDs.  Additionally, MRS was unsuccessful in penetrating the Japanese market, 
the largest producer of FPDs, which is dominated by Nikon and Canon, the
Company's principal competitors.

Japanese manufacturers received little or no competitive pressure for FPD 
manufacturing from the rest of the world.  Therefore advances in display sizes
and resolution came slowly, delaying the need for the Company's principal
competitive advantages.  As a result of these factors, in late fiscal 1997,
the Company reduced its expense base.  Additionally, in early fiscal 1998, the
Company narrowed its focus to the high volume FPD manufacturing market for 
its growth rather than the lower volume research and development market.  More
specifically, the Company primarily focused on the Asian market where the 
production plans for desktop FPDs were greatest and requirements for larger, 
higher resolution displays better matched the Company's strengths.  However, 
the Asian economic crisis in the Company's fiscal 1998 prevented the Company 
from achieving its expected growth.  Additionally, desktop FPDs remain an
expensive, optional luxury further delaying market demand.  All of these
factors left the Company with extensive technology designed for markets which
were either already dominated by competitors' products or which did not grow 
as expected, and are not expected to show significant growth in the near term.

In the fourth quarter of fiscal 1998, the Company identified a new potential 
market for its large-area photolithograpic technology.  The Company observed
that fabricators of advanced chip (IC) packaging applications are experiencing 
yield loss related to rapidly increasing complexity and operating speeds of
microprocessors and other logic chips.  Resulting demands on printed circuit 
board (PCB) manufacturing technology include reduced linewidths and tightened
registration, demands which are beyond the capability of traditional contact
printing techniques.  In March 1998, the Company announced that it would enter 
a new large-area lithography market of high density interconnect (HDI).

The HDI market is being driven by the factors described above.  The Company 
believes that certain of its existing product capabilities encompass the
functionality required to reduce the yield loss being experienced.  In April
1998, the Company received its first order for a Model 5200 PanelPrinter from 
an HDI fabricator.

HDI Overview

The Company plans to use its existing PanelPrinter inventory to help key 
customers through process development.  The first such sale was announced on
April 21, 1998.  Information and experience gained in these initial
installations will be applied to the development of a new product optimized 
for HDI market requirements, using much of the Company's existing technology. 
The initial focus will be on the chip packaging segment of the HDI market 
where linewidth reduction and layer-to-layer registration requirements have
been greatest.  Other segments of the much larger total HDI market will be 
targeted after a significant market share has been established in the chip
packaging segment.  Downstream development of these systems will be driven by
industry and customer requirements as these evolve.

The printed circuit industry is in the midst of significant technological
change aimed at producing a significant increase in density at no additional 
cost to the board purchaser.  The fabrication technology that is enabling this 
change is called microvia construction.  This technology, which is useful 
over a wide range of electronics interconnect applications, is being driven
primarily by:

Area array silicon platforms.  Ball grid array and chip scale substrates are 
needed for bare silicon applications providing access to high device
leadcounts in small package areas.  These high I/O count requirements outstrip
the traditional, single metal, peripheral leadframes that have formed the 
backbone of silicon packaging since the integrated circuit was invented.  They
result in film, rigid, and build up multilayer silicon platforms to provide 
electrical access and a standardized physical interface to leading edge
silicon.

Interconnection of area array platforms.  Ball grid arrays and chip scale
packages will coexist with traditional surface mount components for many
years.  Their increased use means more solder joints per square centimeter of
substrate.  This increases the density of the substrate in two ways: first,
connection access to the array grids with via structures and line widths that
can be accommodated within the array, and; second, interconnection between 
arrays and other components.  Both of these requirements increase demand for
microvias.

Small form factor systems.  Eighteen percent of the world's electronic systems
fall into the category of being complex enough and small enough to potentially
demand microvia substrates.  These systems are often dense double-sided
assemblies with solder joint densities that are typically double today's 
conventional multilayer-based assemblies.  These systems are not limited to
hand-held applications (e.g., cellphones), they are also seen in such areas 
as automotive electronics and embedded processor modules.  All of these small
form factor systems are driving toward the need for microvias, as
manufacturers must produce smaller, denser system packages, which in turn,
increase system performance and decrease system cost.

Microvia substrate fabrication, which involves the sequential build-up of
multiple levels of interconnect, is reaching a limit in interconnect density
due to poor layer to layer registration control and inadequate feature
definition below 3 mils (0.003 inches).  In order to meet the Semiconductor
Industry Association road maps for chip carriers, the industry must change the
way it performs the imaging process on microvia substrates.  Projection
lithography has been commonly accepted as the solution, however, no 
particular projection lithography method has yet emerged as the best choice. 
Up to this point, no tool has offered the combination of higher resolution,
better registration, and high throughput.  The Company believes that its
stepper technology is ideally suited to satisfy all three of these demands.

Several methods of fine feature formation are being explored by the industry 
including scanning projection lithography, laser drilling of via holes, laser
direct imaging, and laser ablation of metallization levels.  None of these
techniques, however, offer the level of process control afforded by large area 
step-and-repeat lithography.  There is no consensus in the market for which
method will ultimately dominate, but there is a clear precedent in the wafer 
processing industry.  The situation is closely analogous to that of twenty
years ago in the integrated circuit industry, when increasing chip-level 
device and interconnect densities moved beyond the ability of then current
manufacturing equipment, contact and proximity printers.  The first wafer
stepper was installed in an integrated circuit production line in 1979.  
Today, the wafer stepper is the dominant imaging tool for integrated circuits
with a total available, worldwide equipment market measured in billions of
U.S. Dollars.

The HDI market for lithography tools is split between circuit layer 
patterning and via hole patterning.  The split is primarily the result of the
dramatically different throughput constraints for these two segments due to
the nature of the photo materials used.  Laser drilling of vias is seen as a
significant competitive technology in via formation for low via-count
applications, but suffers a dramatic throughput disadvantage in the high
via-count chip carrier segment.  The chip carrier segment is projected to be
the fastest growing segment of the microvia market and is the one best suited
to the Company's step-and-repeat technology.

The Company has a good entry position for supplying tools into the chip 
carrier market through the existing 5200 PanelPrinter systems.  This machine
is not optimized for the market, but will satisfy the needs of early adopter
manufacturers anxious to supply high performance chip carrier substrates.
Medium and long term market growth for the Company will be based on an 
evolved 5200 platform that provides large substrate support (such as the
18-inch by 24-inch substrate now standard in the PCB industry), a wide field 
i-line projection lens, and a cost-reduced manufacturing infrastructure.

Manufacturing Technology

In the context of electronics manufacturing, photolithography provides 
accurate and precise imaging by replicating detailed patterns from master
artwork sources onto successive layers of conductive, semiconductive and 
insulating materials to form microstructures, such as transistors, diodes, 
resistors, connecting lines and holes, all intended to result in a product
which performs specific functions, most often involving the sensing, storing, 
transmitting, processing or displaying of information.  This multi-layer
production process is used to manufacture integrated circuits, FPDs, and more
recently, multi-layer printed circuit boards and chip carriers, products 
which contain large numbers of microstructures and the patterns which connect 
them.  The layers are built up one by one on a substrate base.  For the first 
layer, a material is applied to the substrate.  Next, a coating of 
light-sensitive photoresist chemical is applied.  A series of master patterns 
is then successively imaged onto the photoresist by a photolithography system, 
using a projection lens and an illuminator.  Each pattern exposed onto the 
photoresist is then developed and etched.  Developing removes the exposed 
photoresist pattern, while unexposed photoresist remains.  Through a chemical 
process, etching then removes the metal layer in the exposed area, leaving
the pattern replicated from the master artwork.  For the second layer, an 
insulating material, such as silicon nitride, is applied on top of the
previous layer.  Again, a coating of photoresist is added and the plate is
exposed, developed and etched.  These steps are typically repeated several
times, or as many times as there are layers in the process.  The size, shape
and electrical property of each material remnant, and the order in which they 
have been layered into the microstructure, determine the functionality of the
microstructure.

For each layer in the process, the substrate moves through a production line, 
with each item of equipment in the line performing one or more of the
fabrication steps.  A typical line includes deposition equipment to apply 
thin-film layers, photoresist equipment to apply coatings of photoresist, a
photolithographic system to image patterns in each layer of material and other
equipment to perform the development, etching and inspection steps.  In a
single production line, the substrate must pass through all production steps
as many times as there are layers.  For volume production, one production
line, including one photolithographic system, is dedicated to each layer.

Precise coordination of machine systems is necessary to achieve the accuracy 
required to position adjacent images and registration of the various image 
layers of a large area integrated circuit.  The technological challenges of 
image positioning and registration alignment are made even more complicated by
the distortion in substrate shape that can occur as a result of temperature
changes during the production process.  In addition, photolithographic 
systems must operate with sufficient speed to make volume production of
products possible.

Imaging equipment used in HDI fabrication is evaluated in terms of 
registration, resolution, and cost or value of ownership.  Alternate
technologies and competing equipment options each have benefits on one or more
category of performance.  The Company believes that its new HDI system will be
the first to excel in all three of the categories.

-  Registration A board's capacity can be increased by adding layers of
circuitry. Advanced PCBs typically require four to sixty layers, with the
majority between the four and ten layers.  Circuit traces from one layer must
be connected to at least one other layer.  Connection between layers is
accomplished by a variety of via technologies.  A via is typically a hole
placed in a "pad" area of a signal trace, cut through one or more insulating
layers, and plated or filled to provide electrical continuity to a lower
layer. The pad in the upper layer must be positioned accurately with respect
to the lower layer.  The relative alignment of pads on corresponding layers is
referred to as registration.

-  Resolution Smaller features allows more signals to be routed through a
given area on a board.  Shorter run lengths also have a benefit of better
impedance control, resulting in faster switching rates and lower power
requirements.  Lithography tools must be able to produce patterns in very
thick layers of photoresist and on substrates with large planar deviations
(warp, bow, taper, etc.).

-  Cost of Ownership Cost of ownership is made up of many contributing
factors.  The purchase price is typically allocated over three years.  In
addition to the cost of the system, fabricators consider the cost of factory
clean room space, utilities, maintenance costs, and tooling, such as the cost
of master artwork reticles or photomasks.  Additional factors are becoming
more significant as equipment costs rise and production specifications
increase, the most significant of which are utilization, or up-time, and
product yield, the percentage of good parts produced to total parts produced.

Competing equipment options for imaging equipment used in HDI fabrication
include contact printing, projection scanning, laser direct imaging, and step
and repeat lithography.

Contact printing is currently used for the majority of PCB fabrication.  With
an average selling price of $100,000 to $600,000 and little maintenance, it is
a cost effective method for low to medium resolution work. Many leaders
participating in small scale production of laminate multi-chip modules and
other chip carriers, as well as those producing dense miniature boards for 
portable applications, have reduced contact printing resolution to 3 to 4 mil
(75 to 100 microns), but suffer from extremely low yield at this resolution
level, mostly as a result of particle contamination.

The most significant problem with contact printing is inaccurate
layer-to-layer registration.  Standard processes between exposure steps cause
the boards to shrink or expand while master artwork is fixed in size, causing
registration errors in scaled boards.  An initiative has been put in place to
characterize dimensional instability in the boards so masks can be created
with prescaled artwork.  This may improve registration on average, but
board-to-board scale variation and within-board scale variation cannot be
corrected.

Contact printing does benefit from the lowest initial purchase price.
Simplicity allows for a very low maintenance cost and high utilization.
However, for high resolution, yield loss becomes a significant factor in the
overall cost of ownership.

Projection scanning systems have been developed to provide a large field
non-contact lithography process.  The initial purchase price of a scanning
system is approximately $1,200,000, or twice that of a contact printer.  The
optics are capable of producing better than 4 micron images without potential
contamination from contact.  However, in actual production the 4 micron
specification has not been achieved due to thick, low contrast resists
typically used, and the inability to automatically change focus during
exposure.  Limited depth of focus of the optics may cause problems with many
of the warped and tapered boards.  Thick photoresist layers and focusing
requirements over rolling  topography make matter much worse.  Scanning
requires large, expensive mater artwork masks to produce the images. This
process lends itself well to large format boards which require nonrepetitive
artwork.  However, it is less effective for small format boards such as chip
carriers and portable applications.  Such applications can use less expensive
and more precise small format masks with patterns stepped and repeated across
the substrate.

Registration on projection scanners is better than that of a typical contact
printer due to use of advanced alignment systems.  Complicated motions of both
mask and substrate make registration accuracy more difficult to achieve than
with step and repeat systems.  In addition, the fixed 1:1 relationship between
artwork and printed image does not allow a simple means to adjust for board
scaling.  Complexity of the system, and reputed poor reliability raise the
total cost.  With the potential failure to meet resolution goals, the yield
improvement may not justify the increase in other cost factors.

Laser Direct Imaging (LDI) is a relatively new technology which has some
advantages for PCB R & D and prototyping.  The initial purchase price of an
LDI tool is in the range of $850,000 to $1,400,000.  Its non-contact
lithography process eliminates the contamination problem associated with
contact printers.  The laser beam is directed to create an image directly from
a computer file without the need for an expensive mask.  LDI systems produce
finer resolution than contact printers, but at a cost of reduced throughput.

Registration on LDI tools is better than that on contact printers.  Control of
the writing beam is accurate.  The writing pattern may be adjusted to correct
for a predetermined substrate scale.  Compensation for board-to-board
variation and within-board variation may also be possible in the future, but
with a potentially significant loss in throughput due to computation time. 
The Cost of ownership on LDI tools may be too high for a high-volume
production environment, due to high cost and relatively low throughput.

Optics for step and repeat systems can be built to resolve sub-micron
features, but this capability will not be required in the HDI market for
several years.  The Company's new HDI system balances lens cost with
resolution and field size to achieve the initially required 12.5 micron
resolution with the best customer cost of ownership. The resulting lens has a
large depth of focus to compensate for warped and bowed substrates.  The HDI
system design provides the tightest registration control of all HDI imaging
technologies.  The alignment system can accurately measure substrate scaling. 
Corrections may be applied at each exposure site allowing compensation for
board to board variations and within board variations.

The average selling price of step-and-repeat systems is expected to be
approximately $1,600,000.  The cost of small masks used on step and repeat
systems is less than the larger masks for scanners.  Reliability is better
than that of LDI and scanners, but not as good as contact printers.  The total
cost of ownership is lowest because throughput approaches that of contact
printing, and higher yields are achievable at lower resolution levels.

The Company's Technology

Since its organization in 1986, the Company has devoted substantially all of
its resources to the design and manufacture of photolithographic systems that
meet technological challenges faced by manufacturers.  The Company has focused
on the following system features:

- Alignment - A combination of a vision system with proprietary algorithms and
proprietary motions software provides highly accurate layer-to-layer
registration.

- Scalability - Detecting and measuring microscopic distortion in substrate
shape compensates for distortion by adjusting the image projected on the
substrate.

- Ease of Use and Flexibility - Employing proprietary set-up, self-calibration
and user interface software simplifies the set-up, testing, imaging and
resetting processes, thereby improving productivity.

- Reliability/Ease of Maintenance - Designed to employ low-friction air
bearings and advanced diagnostic capabilities -- both on-site and from remote
locations -- the Company's system minimizes downtime and enhances throughput
capability.

Alignment.  Accurate measurement is critical to precise image positioning and
registration, the accurate superimposition of images on successive layers.  
The PanelPrinter uses laser interferometry to accurately measure and control
the position of the substrate, and a machine vision system to precisely
measure the location of alignment mark images on the substrate.  Job execution
software compares the location of the measured marks to reference marks stored
in the system computer.  The results are then translated by the software and
used to correct the position of the stage and camera hardware to bring the
substrate into accurate "alignment" with the system.

Scalability.  Substrates tend to distort when subjected to high temperatures
used during the production process.  Compensation for such distortion is done
with the scalability feature.  Measurement data taken during the alignment
process is used to determine the substrate shape changes.  Job execution
software compensates for these changes by "scaling" the stepping motions of
the stage, and by adjusting the magnification of the projected image.  These
corrections optimize the size, shape and position accuracy of the projected
image over the underlying, previously exposed image.

Ease of Use and Flexibility.  The complexity inherent in operating a
photolithographic system makes ease of use and flexibility particularly
desirable to customers.  The Company's software incorporates advanced computer
graphics and flexible, simple user interfaces to set up and carry out machine
instructions.  The software facilitates the production of a variety of product
types and sizes and improves productivity.

Measurements and correction software provides rapid set-up and
self-calibration  routines.  A number of tests, including statistical
analyses, can be run to verify system performance.  This software, among other
functions, calibrates the position of the lens and enables automatic
adjustment of image positioning.  This self-calibration routine eliminates the
need to expose and develop test substrates and reduces set-up time from the
hours generally required by mechanical means to under ten minutes.

One of the Company's software modules leads the user through a graphical,
step-by-step process of electing patterns and their appropriate printing
sequence.  Once a job execution program is entered into the system, it can be
initiated with a single command.  Other software modules provide operators
with access to extensive, on-line interactive manuals, which are customized
for specific machine configurations and periodically updated.

All of the technology referred to above were developed for the FPD market, but
will also be useful in addressing the needs of the HDI market.  Although the
Company believes its existing technology is sufficient to meet the needs of
HDI in the short term, additional technology will need to be developed for
completing the new product optimized for the HDI market.  Initially, this will
involve relaxing some of the precision and resolution previously developed to
achieve higher throughput and reduce costs.  Previously developed precision
and resolution can be worked back in on future systems, as industry technology
road maps suggest may be required, but additional technology will need to be
developed to maintain high throughput.  There can be no assurance that the
Company will have adequate resources todevelop such additional technology.

Customers and Marketing

Historically, photolithographic systems such as the Company's PanelPrinter
have been used for commercial and research purposes.  Potential commercial 
customers included manufacturers of electronic products that incorporate FPDs.
Potential commercial customers also include original equipment manufacturers
that seek to manufacture and sell FPDs as individual components.

The capital and technological investments required for manfacturers entering
the FPD market are substantial.  As a result, there has been a limited number
of potential customers for the Company's PanelPrinter.  Of the limited number 
of potential customers, the majority are located outside the United States to
date, principally in Japan and Korea.  The Company's ability to compete
effectively in the Japanese and Korean markets has been limited by its small
size, its geographic location and its selection of regional representatives.

The chip carrier segment of the HDI market is an emerging market, with the
initial fabricators representing the initial potential customers, most of whom
are in the process of evaluating new lithography methods for high performance
chip carrier production requirements.  The Company intends to serve these
customers with simple variants of the Company's existing stepper products
having only minor modifications from the standard FPD configurations.  These
tools are expected to be used in pilot production lines where new and/or
modified processes will be required.

Through strategic partnerships with these initial customers, especially those
who are volume manufacturers, the Company expects to leverage its early
relationships into a marketing program which is reference driven;
manufacturers recommending to other manufacturers.  The Company believes these
partnerships will establish the credibility necessary to penetrate the broader
HDI market.

Historically, cooperation with the U.S. government has been an important
factor in achieving technological leadership in the FPD manufacturing
equipment industry.  Since 1990, the Company has received funding from
agencies of the U.S. government for certain feasibility studies and production
of a next-generation FPD photolithographic system.  Under these funding
arrangements, the U.S. government generally has limited rights to use certain
critical technical data and computer software, however, the Company retains
ownership of the developed technology.  The Company does not intend to seek
funding from the U.S. government for developing technology for the HDI market.

In North America, the Company sells directly to customers through the efforts
of its marketing and sales staff and through relationships that its management
have with customers throughout the industry.  Overseas, in addition to its
efforts to sell directly, the Company uses distributors and foreign sales
representatives to sell its product.

Products

The Model 5200 PanelPrinter features an optical projection system, a
high-speed, laser-metered substrate stage, an automated reticle handler and a
sophisticated substrate alignment system, all integrated with the Company's
proprietary software.  For certain applications, the PanelPrinter currently is
capable of an hourly throughput rate of up to 80 large-area substrates.

The Company offers both single and dual camera optical systems with several
projection lens options.  In the Company's patented dual camera system, each
camera lens offers 2X reduction and an 80 millimeter image field, insuring
equally sharp detail at the edges of the image as in the center of the lens
field.  Two cameras increase throughput by simultaneously exposing two images
on the substrate.  The PanelPrinter includes as a standard feature a reticle
library, with storage for 38 reticles, reducing the time required in changing
reticle patterns for exposure.

Other Products

The Company's high-speed substrate handling system moves the substrate through
the PanelPrinter.  One available option is an automatic substrate loading and
unloading system.  The substrate handler is designed for maximum flexibility,
by accommodating many different substrate sizes and thicknesses.  Linear
induction motors, controlled by laser measurement systems, effect highly
accurate stage movement.  Substrate handler pre-alignment and movement
throughout the photolithography process is made more accurate through the use
of air bearings, as well as a vibration isolation and dampening system
supporting a solid granite base.  The substrate handling system also permits
easy interface to other  production line equipment.  A Class 10 environmental
enclosure chamber controls temperature and reduces particulate contamination,
thereby increasing production yields.

The Company has several software products that enhance productivity.  The
Company's job setup software -- PanelCADTM -- uses a graphical interface
rather than complicated programming language, to set up and edit jobs.
PanelCALTM -- the Company's automatic calibration software -- allows the user
to constantly monitor imaging performance without the need for test
substrates, off-line measurements or manual mechanical adjustments.  The
Company's PanelSCALETM software allows for automatic adjustment for
process-induced substrate distortions.  The PanelPrinter's automatic
measurement and topography software adjusts stage and camera  positioning to
maximize stitching and registration accuracy.

Future Product

A new lithography system for cost effective, high volume HDI fabrication will
be developed.  The initial specifications for this system have been
established.  Additional refinements to the specification will be provided by
likely users.  This development project will incorporate a newly designed
i-line lens (purchased) and illumination system (purchased), a new motions
system with at least 18 x 24 inches of travel (purchased), a new
machine-vision based alignment system (purchased), and a new substrate
handling system (purchased).  The remaining subsystems will be primarily MRS
designed and will, wherever practicable, use existing MRS designs (modified)
from the Model 5200, 6700, and 11000 PanelPrinter systems.

Operations

Historically, the Company has operated primarily as an assembly, test and
systems integration company.  Except for extensive motion systems, vision
systems and proprietary software, most other components of the PanelPrinter
are either manufactured by others as custom components or are standard
electronic components purchased from major manufacturers or distributors.  The
Company generally builds PanelPrinters to order and lead times can be up to
nine months.

The manufacturing process for the PanelPrinter has two stages.  The first
stage is assembly.  Because the Company purchases most of the system
components, the Company performs little processing of raw materials.  The
major components that make up the assembly of a PanelPrinter are the main 
projection lens, illuminator, environmental chamber, granite base, stage, air
bearings, laser systems, boards and plate handlers.  Following assembly,
testing an integration of the system, the second stage of the process begins. 
At this point, the system software is installed and trial panels are
manufactured to ensure that lens assembly and stage motions are coordinated.

The Company generally orders individual components from a single or a limited
group of suppliers in order to assure quality and obtain quantity discounts.
The Company believes that, with the possible exception of the main projection
lens, it could find alternate sources for all components and subassemblies of
the PanelPrinter without significant disruption in its production schedule.
The lead times for major components range from three to four months for the
stage and up to nine months for the lenses.  Without incurring significant
additional cost, the Company has been able to shorten the lead time for lenses
to three months by pre-ordering the glass used to make the lenses.  To date,
the Company has not experienced any material delays in production due to
component unavailability or delay.  Nonetheless, termination or disruption of
supplies from these sources could result in production delays, reductions in
PanelPrinter shipments or increased costs that would have an adverse effect on
the Company's operations.  While the Company is exploring ways to reduce its
dependence on these sole and limited-source suppliers, there can be no
assurance that the Company will be successful in doing so.

While many of the components of the PanelPrinter are available from a variety
of outside vendors, the main projection lens is available only from a limited
number of sources.  Management believes that a total of four or five companies
worldwide have the ability to manufacture lenses of the quality used in the
PanelPrinter.  Two of these manufacturers, Nikon and Canon, are direct
competitors of the Company.  To date, substantially all of the Company's
lenses have been provided by Tropel, a precision optics and metrology products
manufacturer.  Although an alternative source for PanelPrinter lenses would
likely require at least 12 months to produce a lens to the Company's 
specifications, the Company has established relationships with other lens
manufacturers.

The primary difference in operations based on the plan for entering the HDI
market will be to place an even greater reliance on purchased  subsystems over
Company-developed subsystems.  The objective will be to build lower-cost,
higher throughput systems which increase the value of ownership of such
systems to customers.

Competition

The market for FPD manufacturing equipment is intensely competitive and
subject to rapid technological change.  Historically, the Company competed
directly with two other major manufacturers of large-area projection
photolithographic systems, Nikon and Canon.

For both HDI and FPD markets, there are a number of bases on which
manufacturers of photolithographic systems compete.  The relative importance
of these varies depending on whether the system is being purchased for use in
a research environment or for use in a volume production environment.  In the
research environment, the most important competitive factors are technical
performance (including resolution and uniform critical dimension control),
reliability and technical features (including scaling, motions technology and
systems integration).  In the volume production environment, the critical
competitive factors are throughput, reliability, long-term relationship with
the manufacturer, technical performance and the manufacturer's reputation and
financial stability.

While precise statistics are not available, the Company believes that Nikon is
the FPD lithography market leader, with the largest installed base of
large-area photolithographic machines used in the manufacture of AMLCDs.  At
present, most AMLCD production takes place in Japan, and Nikon is the primary 
source for photolithographic systems in the Japanese market.  Nikon regularly
announces new features for its line of photolithography machines.  The
Company's other major competitor is Canon.  Both Nikon and Canon have much
greater financial resources, broader product lines and greater customer
service capability than the Company.  Additionally, they are located in a
major market area and have larger, more established customer bases.

Imaging equipment used in HDI fabrication includes contact printers,
projection scanners, laser direct imaging systems, and most recently, step and
repeat lithography systems.  There are a large number of manufacturers of
contact printers.  Performance of contact printing is not expected to match
the requirements for HDI.

There is one strong competitor for projection scanning, Tamarack, supplying a
mature scanning system to both flat panel and PCB markets (Tamarack also
produces contact printing equipment).  There are also two competitors, Anvik
and Ultratech, with systems in prototype phase.  The Tamarack system has
achieved a fair level of success in flat panel manufacturing, primarily in
production of color filter plates.  This application requires fairly  high
resolution (approximately 5.0 microns), but less than 5 micron registration
control.

Anvik has been working on various models under a number of government funded
projects.  Anvik systems have yet to be placed into actual production.
Ultratech has also applied their 1X optics to a prototype high resolution
scanning machine, but only at the smaller silicon wafer sizes.  Both Anvik and
Ultratech claim lower depth of focus than the Tamarack system.

Two competitors in laser direct imaging, ETEC and Jenoptik, produce laser
direct imaging equipment for PCB applications.  Jenoptik's Model DP-40 was
installed at one customer site, and never reached either throughput or
reliability goals.  The Jenoptik product line is now marketed by Israel-based
Orbotech.  Resolution performance falls below the requirements for HDI
applications with no indication that a high resolution model is on the way.  
ETEC acquired Polyscan to add to their world leadership portfolio of e-beam
and laser direct write systems for mask generation.  The original product was
based on lower resolution, like the Jenoptik DP-40.  New optics have allowed
migration to competitive resolution, at the cost of throughput.  Emphasis on
mask generation equipment may hamper efforts to develop registration
improvements.

The Company believes that it is the only company actively pursuing step and
repeat technology for HDI applications.  Barriers to entry include  material
handling, scale compensation, and imaging requirements through a large depth
of focus.  Companies that could have the ability to develop step and repeat
equipment for HDI applications are those with current wafer stepper or flat
panel display stepper experience, such as ASM Lithography, Canon, Nikon,
Silicon Valley Group, and Ultratech Stepper.  All of these companies have
historically focused substantially all of their development efforts on their
primary market, wafer steppers, however.

Research and Development

Since inception, the Company has strived to develop the highest performance
tools for the FPD market.  Because of this and the complexity of
photolithographic technology, very few outside vendors had the capability to
provide modules at the subsystem level that would meet the demanding
performance criteria expected.  As a result, many of the mechanical and
electrical components in the PanelPrinter were custom designed and fabricated
internally by the Company.  This has led to a relatively high cost structure
for the existing PanelPrinter products.

The performance level requirements of the HDI market, although high, are not
expected to require that the Company continue to design and manufacture many
of the mechanical and electrical components internally.  The Company's product
development strategy for HDI lithography systems is expected to incorporate
purchased, commercial components and subsystems wherever practicable. 
Internal development of proprietary components and subsystems will only be
done where necessary in cases which exploit our core competencies in precision
mechanics, optics, and software.

Photolithographic equipment design requires the cooperation and management of
four distinct engineering disciplines:  electrical, mechanical, optical and
software.  As of March 31, 1998, of the Company's 18 engineers, 3 are
administrative, 2 are electrical engineers, 7 opto-mechanical, and 6 software. 
The Company's primary research focus has been the design and development of
enhancements to its PanelPrinter.

In the fiscal years ended March 31, 1998, 1997 and 1996, the Company incurred
aggregate research and development costs of $3.4 million, $3.5 million and
$4.9 million, respectively. Those costs include $1.1 million, $0.5 million and
$2.6 million, respectively, allocable to product development or contract
research related contracts in these periods.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

Intellectual Property and Proprietary Technology

The Company believes that it would be difficult to reproduce the accumulated
know-how embodied in the PanelPrinter and that this is its primary source of
protection.  For instance, the Company believes that its software, which is
central to its motions, throughput, and image control technology, would be
difficult to duplicate without access to the source code.  However, there can
be no assurance that the Company's accumulated know-how could not be
reproduced, or that its intellectual property and proprietary rights are
adequately protected or can be adequately policed.  There may also be pending
or issued patents of which the Company is not aware which the Company might be
required to license or to challenge at possible considerable expense to the
Company.  There can be no assurance that any such license would be available
on acceptable terms, if at all, or that the Company would prevail in any such
challenge.

The Company also relies on a combination of patents and confidentiality
agreements.  The Company holds four patents in the United States relating to
optical alignment within the photolithographic and precision motion systems. 
The Company currently has a total of eight patent applications pending, five
in the United States and three overseas.

Employees

As of March 31, 1998, the Company had 55 employees, of whom 18 are employed
primarily in research and development, 10 are employed in manufacturing, 9 are
employed in customer support, 4 are employed in sales and marketing, and 14
are employed in general and administrative functions.  The Company has 
historically not encountered difficulties with its employees and turnover has
primarily been associated with workforce reductions taken by the Company.  The
Company is highly dependent on certain management and technical employees in
such critical areas as the development of hardware, software and motions and
imaging technology.  The loss of any such personnel could have a material
adverse effect on the operations of the Company, and there is no assurance
that the Company will be able to retain such personnel.

Backlog

Backlog at March 31, 1998 was $0.5 million as compared with $1.5 million at
March 31, 1997 and $2.2 million at March 31, 1996.  The Company includes in
backlog only those orders for product shipments and contract billings for
which a confirmed order has been received by the date on which the backlog is
computed.  Backlog for which delivery had been specified within twelve months
at March 31, 1998, March 31, 1997 and March 31, 1996 was $0.5 million, $1.5
million and $2.1 million.  Because of the possibility of customer changes in
delivery schedules, cancellation of orders and potential delays in product
shipments and contract performance, the Company's backlog as of any particular
date may not be representative of revenues for any succeeding period.

Item 2. Properties

The Company leases 34,579 square feet of space in its sole manufacturing and
research facility, located at 10 Elizabeth Drive in Chelmsford, Massachusetts.
The Chelmsford facility is also the Company's headquarters.  Management
believes that existing space and space otherwise available is adequate to
support Company operations through fiscal 1999.

Item 3. Legal Proceedings

On January 24, 1997, Micron Display Technology ("Micron Display") brought suit
in Idaho against the Company alleging in five counts of breach of contract,
breach of implied warranties, and breach of express warranties, in connection
with a Model 5200 PanelPrinter (the "PanelPrinter") which the Company alleged
Micron Display purchased from the Company in 1996.  On January 30, 1997, the
Company filed an action in Massachusetts against Micron Display alleging in
two counts breach of contract and violation of M.G.L. c. 93A, in connection
with Micron Display's nonpayment for the PanelPrinter.

The parties disputed which documents constituted the contract between them.
Further, Micron Display alleged, among other things, that the PanelPrinter
failed to meet certain performance specifications contained in what it
contended constituted the contract, and that, as a consequence, it was
entitled to the return of its $1.0 million deposit and the conversion of the
parties' relationship to a lease of the PanelPrinter, or a PanelPrinter of
like quality.  The Company maintained that other documents constituted the
contract, pursuant to which there was no right to convert the relationship to
a lease, and further denied that the PanelPrinter failed to meet
specifications set forth in the document cited by Micron Display.  The Company
sought approximately $1.4 million as the balance of the unpaid contract price,
and additional remedies under the Massachusetts Unfair Business Practices Act.

On July 23, 1997, the parties executed a Settlement Agreement resolving their
disputes and releasing all claims against each other.  Both lawsuits have now
been dismissed.  While the specific terms of the Settlement Agreement are
confidential, the settlement generally provided for a lump sum payment to be
made by Micron Display to the Company at the time the Settlement Agreement was
executed, and further monthly installment payments to be made thereafter.
These payments, together with Micron Display's initial deposit, constitute
payment in full for the PanelPrinter.  The Company in turn has agreed to
provide Micron Display with an extended warranty with respect to the
PanelPrinter, as well as technical assistance and certain modifications to the
PanelPrinter.  No significant amounts due to or from Micron remain outstanding
at March 31, 1998.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1998.

<TABLE>
<CAPTION>
Item 4a. Executive Officers of the Registrant
<S>                             <C>
Name                            Position with the Company
Carl P. Herrmann                President, CEO and Chairman of the Board
Patricia F. DiIanni             Vice President and Chief Financial Officer
John L. Steele, Jr.             Vice President, Secretary and General Counsel
</TABLE>

Executive officers of the Company are elected by the Board of Directors on an
annual basis and serve at the discretion of the Board of Directors or until
their successors are duly elected and qualified.  There are no family
relationships among any of the directors or executive officers of the Company.

Carl P. Herrmann, has been President, CEO and Chairman of the Board since
February 1998.  Mr. Herrmann has been serving on the Board of Directors since
May of 1997.  Prior to joining the Company's Board of Directors he had been an
independent management and international marketing consultant since December
1994.  From July 1991 to November 1994, he was at Solbourne Computer, Inc.
from April 1992 as President and Chief Executive Officer.  From May 1989 to
November 1990 he was the Hong Kong-based Director of Asia/Pacific Operations
for Amphenol Corp.  From October 1984 to April 1989 he was Managing Director
of GenRad Inc.'s regional operations based in Singapore.  From August 1983 to
September 1984 he was the Tokyo-based Vice President of TEL-GenRad, KK, a
joint venture developing and manufacturing PC board and semiconductor test
systems.  Mr. Herrmann received a BA from the University of Pennsylvania and
an MBA from the Wharton School.

Patricia F. DiIanni, Vice President and Chief Financial Officer.  Ms. DiIanni
has served as Chief Financial Officer since July 1996 and prior to that as
Controller of the Company from June 1993.  From November 1991 to May 1993, Ms.
DiIanni was employed by Symbolics, Inc., a manufacturer of computers and
software for artificial intelligence, most recently as Manager, Treasury and
Financial Planning and Analysis.  From 1961 to November 1991, Ms. DiIanni was
employed by GenRad, Inc., a manufacturer of automatic testing equipment, where
she held a variety of financial positions,including Manager, Worldwide
Planning and Analysis from 1990 to November 1991.

John L. Steele, Jr., Vice President, Secretary and General Counsel.  Mr.
Steele, a founder of the Company, has served as Vice President, Secretary and
General Counsel since March 1993.  Prior to March 1993, he had served as Vice
President, Administration since theCompany's organization in February 1986.
Prior to the Company's formation, Mr. Steele was the Secretary and General
Counsel of GenRad, Inc., a manufacturer of automatic testing equipment.  Mr.
Steele received an A.B. from Dartmouth College and a J.D. from Suffolk
University.

PART II

Item 5.  Market for Registrant's Common Stock and Related Shareholders Matters 

Stock Market Information

The Company's Common Stock began trading on the NASDAQ National Market System
on July 23, 1993.  The following table sets forth the high and low sales price
per share of Common Stock as reported on the NASDAQ National Market System for
the periods indicated.

<TABLE>
<CAPTION>
                                             High           Low
<S>                                          <C>            <C>
1998
First Quarter                                $1.3750        $0.7500
Second Quarter                               $1.7500        $1.0000
Third Quarter                                $2.0000        $0.6250
Fourth Quarter                               $1.7500        $0.6875

1997
First Quarter                                $6.0000        $3.5630
Second Quarter                               $3.8750        $2.3750
Third Quarter                                $3.2500        $1.8130
Fourth Quarter                               $3.0000        $1.2500
</TABLE>

Holders

As of June 1, 1998, there were 127 stockholders of record of the Company's
Common Stock, and the estimated number of beneficial owners of such stock on
such date was 2,500.

Dividends

The Company has never paid dividends on its Common Stock and has no present
plans to do so.


<TABLE>
<CAPTION>
Item 6.  Selected Consolidated Financial Information

The following table contains certain selected consolidated financial
information and is qualified by reference to and should be read in conjunction
with the Consolidated Financial Statements and related Notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.

                                              Year ended March 31,
                                  1998     1997     1996       1995    1994
<S>                               <C>      <C>      <C>        <C>     <C>
Statement of Operations Data:
Revenues
Product                           $ 5,265  $ 5,173  $ 7,699   $16,897  $ 7,607
Contract research                       0      579    2,858     5,501    7,586
Service and other                   1,883    1,389        0         0        0
Total revenues                      7,148    7,141   10,557    22,398   15,193

Cost of revenues
Product                             6,276    4,040    7,389    10,893    4,496
Contract research                       0      579    2,891     5,337    7,171
Service and other                   1,382    1,485        0         0        0
Total cost of revenues              7,658    6,104   10,280    16,230   11,667

Gross margin                         (510)   1,037      277     6,168    3,526

Operating expenses
Research and development            2,237    3,042    2,279     1,945      727
Selling, general and
 administrative                     2,414    2,944    3,715     2,862    1,379
Other charges                           0        0    4,469         0        0

Income (loss) from operations      (5,161)  (4,949) (10,186)    1,361    1,420

Other income (expense), net            18    1,819      245       347      228

Income before provision 
 for income taxes                  (5,143)  (3,130)  (9,941)    1,708    1,648

Provision for income taxes              0        0        0        72       62

Net income (loss)                 ($5,143) ($3,130) ($9,941)  $ 1,636  $ 1,586

Net income (loss) per share
Basic                              ($0.75)  ($0.47)  ($1.52)    $0.25    $0.29
Diluted                            ($0.75)  ($0.47)  ($1.52)    $0.24    $0.26

Weighted average common shares
outstanding

Basic                               6,814    6,717    6,550     6,480    5,533
Diluted                             6,814    6,717    6,550     6,952    6,146

                                  1998     1997     1996      1995     1994
<S>                               <C>      <C>      <C>       <C>      <C>
Balance Sheet Data:
Cash and cash equivalents         $ 1,095  $ 3,291  $ 4,218   $ 8,340  $12,147
Working capital                     5,605   10,130   10,097    18,174   18,776
Total assets                        7,884   13,428   16,301    26,993   24,104
Long-term debt                          0    1,000       11        15       17
Stockholders' equity                4,832    9,870   12,864    22,600   20,788
</TABLE>

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

This document and documents incorporated by reference include forward-looking
statements about the Company's businesses, revenues and  expenses, effective
tax rate and operating and capital requirements.  Forward-looking statements
made or incorporated by reference herein are not guarantees of future
performance.  In addition, forward-looking statements may be included in
various other Company documents to be issued in the future and in various oral
statements by the Company representatives to security analysts and investors
from time to time.  Any forward-looking statements are subject to risks that
could cause the actual results to vary materially.  Such risks are discussed
below ("Risk Factors Which May Effect Future Results") and in related portions
of this document, including documents incorporated by reference.

Overview

Since it's inception in 1986, the Company has devoted substantially all of its
resources toward the research, development and manufacture of advanced
lithography systems for the flat panel display and other large area electronic
devices markets.  Through fiscal 1998, the Company has principally sold its
products for research and development purposes.  The Company has also
generated sales of its products for purposes of volume production of flat
panel displays, however, these sales have been limited and have been
principally to U.S. manufacturers.  The Company's sales have been declining
since fiscal 1996.  This has been due to several factors including intense
competition in the Japanese market, the principal market for volume production
of flat panel displays, because that market is dominated by competitors such
as Nikon and Canon.  Additionally, due to a number of unforeseen market and
economic conditions, there has been little or no competitive pressure for
manufacturers to increase display sizes or resolution which are the Company's
competitive advantages.  Therefore, the market for volume production of FPDs
has not expanded beyond Japan or into technology where the Company expected it
would have the ability to effectively compete.  As a result of these
circumstances, in late fiscal 1997 and early fiscal 1998, the Company reduced
its workforce, implemented cost reduction programs and directed its efforts to
the Asian market where the vast majority of worldwide production of desktop
PCs, including those with FPDs, occurred.  The Asian economic crisis, which
began in the Company's fiscal 1998 caused a substantial decline in the growth
of the PC market and further reduced the Company's sales through fiscal 1998.

As a result of these circumstances, the Company has continued to experience
significant losses from operations and negative cash flows and has defaulted
on debt covenants during fiscal 1998.

Recent Developments

During the fourth quarter of fiscal 1998, the Company identified a potential
new market opportunity for the Company's large area photolithography
technology, the high density interconnect (HDI ) market.  HDI manufacturers
are faced with a demand to produce printed  wiring boards (PWB) with
increasing complexity and component density.  Growth in portable consumer
products (cell phones, PDAs, etc.) as well as a number of high speed data
applications is creating a requirement for new manufacturing technologies.
Leading the increased density demand is an area of integrated circuit
packaging referred to as chip carriers.  High numbers of input and output
signals must be routed through the PWB in a limited area, requiring tight
circuit dimensions and precise layer to layer interconnect registration.  The
Company's technology is uniquely suited to meet these requirements.  See also
"Business".  The Company believes that its existing products are uniquely well
suited for the needs of the HDI market and, therefore has refocused its
marketing efforts from the flat panel display industry to the HDI market.  As
a result of this refocus, the Company received its first HDI purchase order
for a Model 5200 PanelPrinter in April 1998.

Although the Company received its first HDI purchase in April 1998, the HDI
market is an emerging market which is currently represented by a limited
number of customers.  Most of these customers are in the process of evaluating
new lithography methods in anticipation of expected significant growth in high
performance chip carrier production.  The Company believes that its
lithography tool and related technology are best suited to meet the needs of
these customers.  However, there are a number of risks associated with the
Company's transition to the HDI market including, but not limited to the
Company's ability to obtain sufficient financing to continue to fund its
operations and its research and development efforts.  Though the technology
foundation is in place, a considerable effort is required to develop new
technologies which will meet the needs of the HDI market in the longer-term.
Further, the ability of the Company to develop strategic partnerships with HDI
manufacturers to gain acceptance of its products and technology, the risks
attendant to an emerging market including its actual potential size and
success, and the market's acceptance of the Company's product as the, or one
of the, methods for future fabrication are also potential risks.

As a result of the Company's transition to a new market for its technology,
the Company terminated its work under its contract with the United States
Display Consortium (USDC), an industry-led public/private partnership, in
March 1998.  The contract with the USDC was entered into in June 1998 for the
research, development and manufacture of an advanced large-area high
throughput step-and-repeat imaging tool.  Under the contract, MRS and the USDC
would share in the cost of the new imaging tool which was expected to be
delivered to a member of the USDC at the end of the contract.  As a result of
the contract prior to cancellation the Company earned product revenue and
incurred research and development costs which have been allocated to the
contract and included in cost of product revenues.

See "Liquidity" and Note A to Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
Results of Operations
Fiscal Years 1998 and 1997
Revenues ($ in 000's)
                                           Year ended March 31,
                                         1998                  1997
<S>                                  <C>       <C>         <C>       <C>
Product                              $5,265     74%        $5,173     72%
Contract research                         0      0%           579      8%
Service and other                     1,883     26%         1,389     20%
Total revenues                       $7,148    100%        $7,141    100%

</TABLE>

Product revenues remained relatively consistent in fiscal 1998 as compared to
fiscal 1997, however, the mix of product revenues varied.  Revenues for fiscal
1998 included the sale of two PanelPrinters at selling prices consistent with
the Company's historical average selling prices.  Revenues for fiscal 1997
also included the sale of two PanelPrinters, however, one of these systems was
sold at a substantially higher than average selling price as a result of its
more complex configuration.  The impact of the lower average selling prices in
fiscal 1998 as compared to fiscal 1997 were offset by revenues from the
Company's contract with the USDC.

Service and other revenues increased 36% year to year as the Company continued
its efforts to increase service contracts and sales of spares and consumables
to its installed base of customers in the flat panel display market.

<TABLE>
<CAPTION>
Gross Margin ($ in 000's)
                                           Year ended March 31,
                                   1998              1997              1996
                                        %Change           %Change
<S>                           <C>       <C>       <C>     <C>          <C>
Product                       ($1,011)  -189%     $1,133   265%        $310
As % of revenue                          -19%               22%
Contract research                          0%             -100%        ($33)
As % of revenue                            0                 0
Service and other             $   501   -622%       ($96)    0%        $  0
As % of revenue                           27%               -7%
Total gross margin            ($  510)    -7%     $1,037   275%        $277
</TABLE>

Product gross margin in fiscal 1998 declined as a result of inventory
provisions of $1.0 million recorded in the fourth quarter.  These inventory
provisions were recorded to reduce inventory to its net realizable value as a
result of the Company's change in market direction.  Product gross margin in
fiscal 1998 was further reduced by underabsorped manufacturing costs due to
lower than expected demand and product revenues under the USDC contract which
had no gross profit.

Service and other gross margin increased due to revenues increasing faster
than the related costs.  This was due to the Company having invested in its
service infrastructure in fiscal 1997, therefore, its infrastructure costs
remained relatively constant.

See also "Business Developments," "Factors Affecting  Future Results," and
Note A to Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
Research and Development ($ in 000's)
                                             Year ended March 31,
                                    1998            1997            1996
                                       %Change         %Change
<S>                           <C>       <C>      <C>      <C>       <C>
Research and development      $2,237    -26%     $3,042   33%       $2,279
As a % of revenue                        31%              43%
</TABLE>

Research and development expenses declined 26% in fiscal 1998 compared to
fiscal 1997 due to the Company's reduction in headcount in the fourth quarter
of fiscal 1997.  Historically the Company has funded a substantial portion of
its aggregate research and development costs through contracts with the
Defense Advanced Research Projects Agency ("DARPA"), an agency of the U.S.
government, in addition to the contract with the USDC in fiscal 1998.

Aggregate research and development costs declined in fiscal 1998 to $3.4
million from $3.5 million in fiscal 1997 also as a result of the headcount
reduction.  Research and development expenditures allocated to contracts were
$1.1 million in fiscal 1998 compared to $0.5 million in fiscal 1997.  The
fiscal 1998 contract-related costs resulted from the initial phase of the USDC
contract which required more effort than the fiscal 1997 efforts under the
DARPA contract which ended that year.  The Company does not expect to continue
to fund its aggregate research and development costs through similar
contracts.

See also "Business Developments," "Factors Affecting Future Results," and
Notes A and B to Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
Selling, General and Administrative ($ in 000's)
                                            Year ended March 31,
                                   1998               1997            1996
                                       %Change            %Change
<S>                         <C>       <C>      <C>       <C>         <C>
Selling, general and 
 administrative             $2,414    -18%     $2,944    -21%        $3,715
As % of revenue                        34%                41%
</TABLE>
Selling, general and administrative expenses declined 18% in fiscal 1998
compared to fiscal 1997 as a result of generally lower expenses across all
expense categories due to headcount reductions and efforts to control costs
which were taken in the fourth quarter of fiscal 1997.

Other Income/Expense

Interest expense grew year to year as a result of the line of credit that the
Company entered into during the fourth quarter of fiscal 1997 with a $1
million required minimum borrowing.

Other income dropped in fiscal 1998 compared to an unusual high fiscal year
1997 which had a gain on the sale of $1.7 million of certain assets.

Results of Operations
Fiscal Years 1997 and 1996

Revenues

Product revenues decreased 33% from $7.7 million in fiscal 1996 to $5.2
million in fiscal 1997.  This decrease is attributable to the sale of two new
PanelPrinters in fiscal 1996 versus the sale of one new PanelPrinter in fiscal
1997.  Fiscal 1996 also had significant product revenues from a substantial
amount of work to rebuild and re-validate PanelPrinters previously sold to one
customer as a result of fire damage in their facility compared to fiscal 1997
which included a lens upgrade and the sale of a PanelPrinter previously held
for lease which reflected lower selling prices.

Service and support revenues grew during fiscal 1997 to $1.4 million or 19% of
total revenues from approximately 8% of total revenues in fiscal 1996 and 2%
of total revenues in fiscal 1995.  As the number of machines in the field now
off warranty increased, the need for both service contracts and replacement,
spare and consumable parts has grown significantly making this business a
growing part of the Company's total revenues.

Contract research revenues decreased 80% from $2.9 million in fiscal 1996 to
$0.6 million in fiscal 1997 due to the Company reaching the end of its
contract with DARPA during the year.  The current year activity with DARPA was
recognized under the final phase of a $19.2 million contract which was
originally awarded in February of 1992.  This contract was converted during
fiscal 1996 to a fixed price contract with no additional fee to be billed.

Gross Margin

Product gross profit increased 267% from $0.3 million in fiscal 1996 to $1.1
million in fiscal 1997.  The increase is due to the inventory charges taken in
fiscal 1996 to reduce the value of inventory as a result of the decline in
revenue and backlog, offset by underabsorption in fiscal 1997 resulting from
lower production levels.  In addition, the fiscal 1996 costs reflected costs
of full systems and low margin revenues associated with re-validating damaged
customer owned PanelPrinters compared to higher margin upgrades and previously
leased equipment.

Contract research gross profit was relatively flat in fiscal 1997 compared to
fiscal 1996 due to the change to a fixed price no fee contract early in fiscal
1996.

Research and Development

Research and development expenses increased from $2.3 million in fiscal 1996
to $3.0 million in fiscal 1997 or 34%.  This increase is due to the decreased
work on the DARPA contract resulting in a lower absorption of labor and
overhead costs.  Costs before the absorption of DARPA costs dropped from $4.9
million in fiscal 1996 to $3.5 million in fiscal 1997 or 29% as a result of
lower costs across all expense categories resulting from employment actions
taken in January 1997.

Selling, General and Administrative

Selling, general and administrative expenses (net of allocation to cost of
contract research) decreased $0.8 million from $3.7 million in fiscal 1996 to
$2.9 million in fiscal 1997 or 22%.  This reduction in expense levels is the
result of generally lower expenses across all expense categories in both
Administration and Sales and Marketing being partially offset by higher patent
cost activity and consulting expenses.

Other Income/Expense

Other income for fiscal 1997 reflects a gain on the sale of the Company's
interests in Integrated Circuit Testing GmbH (ICT).  During fiscal 1997, a
portion of ICT business was spun-off to form Electron-Beam Technology GmbH
(EBETECH), a separate corporation owned by MRS, Siemens AG (Siemens) and a
group of other investors.  ICT was sold to Opal in October 1996, and EBETECH
was sold to Etec Systems, Inc. (ETEC) in March 1997.  MRS received $2.5
million from these sales resulting in a gain of $1.7 million.

Seasonality and Inflation

The Company's business is not seasonal in nature. The Company does not believe
that its operations have been materially affected by inflationary forces
during its three most recent fiscal years.

Liquidity and Capital Resources

The Company had cash and cash equivalents at March 31, 1998 of $1.1 million, a
decrease of $2.2 million from March 31, 1997.  This decrease was mainly the
result of negative cash flows from operations in fiscal 1998 which have
resulted from declining sales and, therefore, significant losses from
operations.

Historically, the Company has required significant working capital to support
its research and development efforts and to meet its ongoing production,
selling and general and administrative costs.  Additionally, the Company's
transition to a new market will require substantial investments to develop new
technologies specifically for this new market as well as substantial funding
for its ongoing operations until such time as orders from this new market are
sufficient to meet its working capital needs.  In addition, historically, the
Company has funded a substantial portion of its aggregate research and
development costs through contracts with an agency of the U.S. government and
other contracts.  However, the Company does not expect to continue to fund its
research and development efforts through similar contracts in the future.  The
Company's ability to develop new technologies is dependent upon its ability to
fund research and development through working capital and/or other financing
alternatives.

In the past, the Company has been able to meet its working capital
requirements through its existing cash balances and amounts available under
its line of credit.  However, as a result of its significant net loss in
fiscal 1998, the Company was not in compliance with a financially restrictive
debt covenant, minimum tangible net worth, as of March 31, 1998.  The Company
has received a waiver of the covenant default for the period March 31 through
June 30, 1998.  However, it is probable that the Company will not be in
compliance with this covenant for the remainder of fiscal 1999.

Management's plans in regard to these circumstances are discussed below.

In the fourth quarter of fiscal 1998, the Company hired a new chief executive
officer with extensive experience in the high technology industry.  Under the
direction of the new chief executive, the Company refocused its marketing
efforts toward a new market which the Company believes provides significant
opportunity in the future.  The Company is actively seeking strategic
relationships with customers in the new market in order to gain new orders for
its products, in the short-term, and market acceptance of its technology in
the longer-term.  Additionally, the Company is in the process of renegotiating
its line of credit agreement to less restrictive covenants and is seeking
potential additional financing through private equity offerings.

There is no assurance that the Company will be successful in obtaining
sufficient additional financing to fund its operations and research and
development efforts or renegotiate the terms of its line of credit on terms
acceptable to the Company.  Additionally, there is no assurance that the
Company will be successful in attracting new customers in the HDI market or
that its products and technologies will be accepted by the new market.  These
circumstances raise substantial doubt as to the Company's ability to continue
as a going concern.  See Note A to Notes to Consolidated Financial Statements.

Factors Affecting Future Results

In addition to the risks discussed in "Recent Developments" and "Liquidity and
Capital Resources" above, the ability of the Company to attain the financial
or other results that may be planned, forecasted or projected from time to
time is subject to a number of factors, including the ability to obtain new
orders, the timing of recording  the related revenue, the ability to develop 
and manufacture new products, the ability to respond to competitive technology
and pricing pressures, adequate availability of major components, and the
ability to maintain key employees.  In addition, the Company has historically
been dependent upon a limited number of markets and geographic areas to sell
its product, the PanelPrinter.  Therefore, the Company's financial position
and results of operations may be impacted by economic and market conditions in
the markets and regions into which it sells its products.  PanelPrinters and
optional equipment generally have ranged in price from $1.2 to $2.7 million.
Any delay in revenue recognition or cancellation of an order would adversely
affect the Company's results of operations, cash flows, or both.  Fluctuations
in product revenues, and consequently quarterly and annual net income or loss,
are largely related to revenue recognition on sales of PanelPrinter units.  In
addition, the process for turning prospects into firm purchase commitments and
subsequently selling the systems is often lengthy.

Year 2000 Computer Systems Compliance

Concerns have been widely expressed regarding the inability of certain
computer programs to process date information beyond year 1999.  These
concerns focus on the impact of the Year 2000 problem on business operations
and the potential costs associated with identifying and addressing the
problem.  The Company is in the process of evaluating and taking steps to deal
with the potential impact of this problem in areas under its control, in
particular its products, its administrative and business systems, and its
sources of supply.

Based on its review to date, the Company believes that its own products are
"Year 2000 compliant". The Company is in the process of upgrading its business
systems.  The upgrade will enable proper processing of transactions relating
to the Year 2000 and beyond.  The Company has also undertaken a program to
survey suppliers to determine the status and schedule for their Year 2000
compliance.  Where it is believed that a particular supplier's situation poses
unacceptable risks, the Company plans to identify an alternative source.

Costs incurred in the compliance effort will be expensed as incurred.  While
the Company's Year 2000 compliance evaluation is not yet complete, the Company
does not foresee a material impact on its business, operating results or
financial position from the Year 2000 problem.  The Company cannot, of course,
predict the nature or materiality of the impact on its operations or operating
results of noncompliance by parties outside its control.

Item 8.  Financial Statements and Supplementary Data

(a)  Financial Statements


<TABLE>
<CAPTION>

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements                             Page No.
<S>                                                             <C>
Report of Independent Accountants                               24

Consolidated Balance Sheets at March 31, 1998 and 1997          25

Consolidated Statements of Operations, Years ended
March 31, 1998, 1997 and 1996                                   26

Consolidated Statements of Stockholders' Equity, 
Years ended March 31, 1998, 1997 and 1996                       27

Consolidated Statements of Cash Flows, Years ended
March 31, 1998, 1997 and 1996                                   28

Notes to Consolidated Financial Statements                      29

Quarterly Financial Information (Unaudited)                     40
</TABLE>

                      REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of MRS Technology, Inc.:

We have audited the accompanying consolidated balance sheets of MRS
Technology, Inc. and subsidiaries as of March 31, 1998 and 1997 and the 
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three fiscal years in the period ended March 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of MRS Technology,
Inc. and subsidiaries as of March 31, 1998 and 1997 and the consolidated
results of its operations and its cash flows for each of the three fiscal
years in the period ended March 31, 1998, in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note A to the
financial statements, the Company has suffered recurring losses from
operations, negative cash flows, default on debt covenants and requires
additional financing.  These factors raise substantial doubt about the
Company's ability to continue as a going concern.  Management's plans in
regard to these matters are also described in Note A.  The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.










Boston, Massachusetts
May 5, 1998                                     COOPERS & LYBRAND.L.L.P.

<TABLE>
<CAPTION>
MRS Technology, Inc.
Consolidated Balance Sheets
                                                       March 31,
                                ASSETS            1998           1997
Current Assets
<S>                                               <C>            <C>
Cash and cash equivalents                         $ 1,094,636    $ 3,290,982
Accounts receivable, net of allowance for doubtful
accounts of $21,000 and $21,000, respectively         862,155      1,978,994
Inventories                                         5,643,432      7,313,982
Deposits                                               20,989        169,730
Other current assets                                   56,076        102,605
Total current assets                                7,677,288     12,856,293

Property and equipment, net                           176,969        533,244
Other assets                                           29,965         37,979
Total assets                                      $ 7,884,222    $13,427,516

<CAPTION>
                        LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
<S>                                               <C>            <C>
Accounts payable                                  $   723,516    $   370,644
Accrued expenses                                    1,187,700        813,224
Short-term debt                                     1,000,000              0
Current portion of obligations under 
 capital leases                                             0         11,096
Customer deposits                                           0      1,312,389
Other current liabilities                             140,714         49,746
Total current liabilities                           3,051,930      2,557,099

Long-term debt                                              0      1,000,000
Total liabilities                                   3,051,930      3,557,099

Commitments and contingencies (Notes A, E, H, and K)

Stockholders' equity
Common stock, $.01 par value; authorized, 
 20,000,000 shares;issued and outstanding 
 6,838,165 and 6,776,355 shares, respectively          68,381         67,763
Additional paid-in-capital                         36,487,455     36,383,258
Accumulated deficit                               (31,723,544)   (26,580,604)
Total stockholders' equity                          4,832,292      9,870,417

Total liabilities & stockholders' equity-         $ 7,884,222    $13,427,516


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


<TABLE>
<CAPTION>
MRS Technology, Inc.
Consolidated Statement of Operations
                                           Years ended March 31,
                                 1998            1997            1996
Revenues
<S>                              <C>             <C>             <C>
Product                          $ 5,265,075     $ 5,173,273     $ 7,699,267
Contract research                          0         578,483       2,857,927
Service and other                  1,883,035       1,388,941               0
Total revenues                     7,148,110       7,140,697      10,557,194

Cost of revenues
Product                            6,275,561       4,040,747       7,389,402
Contract research                          0         578,483       2,890,661
Service and other                  1,382,257       1,484,554               0
Total cost of revenues             7,657,818       6,103,784      10,280,063

Gross margin                        (509,708)      1,036,913         277,131

Operating expenses
Research and development           2,237,321       3,042,186       2,279,383
Selling, general and 
 administrative                    2,413,903       2,944,188       3,714,918
Other charges                              0               0       4,469,120

Loss from operations              (5,160,932)     (4,949,461)    (10,186,290)

Interest income                      109,345         112,566         335,803
Interest expense                     116,771             653           4,906
Other income (expense), net           25,418       1,706,753         (85,333)

Net loss                         ($5,142,940)    ($3,130,795)    ($9,940,726)

Net loss per share - 
Basic and Diluted                     ($0.75)         ($0.47)         ($1.52)

Weighted average common and common 
 equivalent shares outstanding - 
Basic and Diluted                  6,814,000       6,717,000       6,549,672

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

<TABLE>
<CAPTION>
MRS Technology, Inc.
Consolidated Statements of Changes in Stockholdrs' Equity

                  Years ended March 31, 1996, 1997 and 1998

                                

                                 Class A Common Stock          Additional
                                 Shares  $.01 Par Value     Paid-In-Capital
<S>                              <C>         <C>              <C>
Balance, March 31,1995           6,455,731   $64,557          $36,045,022

Issuance of common shares in
 connection with employee
 stock purchase plan                21,866       219               86,533

Issuance of common shares in
 connection with employee
 stock option plan                 129,814     1,298              116,003

Issuance of common shares in
connection with warrant exercise    66,909       669                 (669)

Net loss

Balance, March 31, 1996          6,674,320    66,743           36,246,889

Issuance of common shares in
 connection with employee 
 stock purchase plan                24,577       245               65,087

Issuance of common shares in
 connection with employee
 stock option plan                  77,458       775               71,282

Net Loss

Balance, March 31, 1997          6,776,355    67,763           36,383,258

Issuance of common shares in
connection with employee 
stock purchase plan                 17,014       170               14,263

Compensation associated with
stock option grant to a
consultant                                                         50,000

Issuance of common shares in
connection with employee
stock option plan                   44,796       448               39,934

Net loss

Balance, March 31, 1998          6,838,165   $68,381          $36,487,455

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

<TABLE>
<CAPTION>
MRS Technology, Inc.
Consolidated Statements of Changes in Stockholdrs' Equity

                  Years ended March 31, 1996, 1997 and 1998

                                                                  Total
                                             Accumulated      Stockholders
                                                Deficit           Equity
<S>                                          <C>              <C> 
Balance, March 31,1995                       ($13,509,083)    $22,600,496

Issuance of common shares in
 connection with employee
 stock purchase plan                                               86,752

Issuance of common shares in
 connection with employee
 stock option plan                                                117,301

Issuance of common shares in
connection with warrant exercise

Net loss                                       (9,940,726)     (9,940,726)

Balance, March 31, 1996                       (23,449,809)     12,863,823

Issuance of common shares in
 connection with employee 
 stock purchase plan                                               65,332

Issuance of common shares in
 connection with employee
 stock option plan                                                 72,057

Net loss                                       (3,130,795)     (3,130,795)

Balance, March 31, 1997                       (26,580,604)      9,870,417

Issuance of common shares in
connection with employee 
stock purchase plan                                                14,433

Compensation associated with
stock option grant to a
consultant                                                         50,000

Issuance of common shares in
connection with employee
stock option plan                                                  40,382

Net loss                                       (5,142,940)     (5,142,940)

Balance, March 31, 1998                      ($31,723,544)     $4,832,292

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

<TABLE>
<CAPTION>
MRS Technology, Inc.
Consolidated Statements of Cash Flows

                                             Years ended March 31,
                                       1998           1997           1996
<S>                                  <C>           <C>           <C>        
Cash flows from operating activities 
Net loss                             ($5,142,940)  ($3,130,795)  ($9,940,726)
Adjustments to reconcile net loss
 to net cash used in operating 
 activities:
Depreciation                             342,676       643,554       795,286
Amortization                               2,232         2,232        66,667
Gain on sale of investment in
 business alliance                             0    (1,717,032)            0
Other charges                             50,000             0     4,468,879
Inventory provisions                   1,400,000       200,000     2,493,232
Changes in assets and liabilities:
Accounts receivable                    1,116,839      (862,013)    4,454,018
Inventories                              311,654       579,032    (4,591,902)
Other assets                             203,284       663,327      (437,430)
Accounts payable                         352,872    (1,497,112)     (370,771)
Accrued expenses                         374,479      (643,753)       27,100
Other current liabilities                 90,968       (47,778)       97,524
Customer deposits                     (1,312,389)    1,312,389      (840,000)
Net cash used in operating activities (2,210,325)   (4,497,949)   (3,778,123)

Cash flows from investing activities
Purchases of property and equipment      (29,740)      (79,463)     (531,795)
Proceeds from sale of investment in 
 business alliance                             0     2,517,033             0
Net cash provided by (used in) 
 investing activities                    (29,740)    2,437,570      (531,795)

Cash flows from financing activities
Proceeds from stock purchases under
 employee stock purchase plan             14,433        65,332        86,752
Proceeds from employee stock 
 option exercises                         40,382        72,057       117,301
Net borrowings under line of credit            0     1,000,000             0
Principal payments under capital 
 lease obligations                       (11,096)       (3,908)      (16,421)
Net cash provided by financing 
 activities                               43,719     1,133,481       187,632

Net decrease in cash and cash 
 equivalents                          (2,196,346)     (926,898)   (4,122,286)
Cash and cash equivalents at 
 beginning of year                     3,290,982     4,217,880     8,340,166

Cash and cash equivalents at 
 end of year                          $1,094,636    $3,290,982    $4,217,880

Supplemental cash flow information
Interest paid                           $109,345          $653        $4,906
Income taxes paid                              0             0       $27,120

Supplemental disclosure of non-cash 
 investing and financing activities
Property and equipment transferred 
 to inventory                             41,104             0             0

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

A.  Nature of Business and Basis of Presentation

MRS Technology, Inc. was founded in February 1986 to develop and manufacture 
photolithographic equipment for the production of flat panel displays (FPDs),
principally active matrix liquid crystal displays (AMLCDs).  Through fiscal
1998, the Company's equipment was used primarily for the production of and
research on FPDs.  The Company's innovative photolithographic system, the
PanelPrinter, is a "stitching step-and-repeat" imaging system which prints 
large-area integrated circuit patterns, a critical step in the FPD production
process.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern which contemplates the continuity of
operations, realization of assets and satisfaction of liabilities in the
normal course of business.  The Company has suffered recurring losses from
operations, negative cash flows, default of debt covenants and requires
additional financing.  These factors raise substantial doubt about the
Company's ability to continue as a going concern.  These financial statements
do not include any adjustments that might result from the outcome of this 
uncertainty.

Risks and Uncertainties and Management's Plan

Since it's inception in 1986, the Company has devoted substantially all of its
resources toward the research, development and manufacture of advanced
lithography systems for the flat panel display and other large area electronic 
devices markets.  Through fiscal 1998, the Company has principally sold its
products for research and development purposes.  The Company has also
generated sales of its products for purposes of volume production of flat
panel displays, however, these sales have been limited and have been
principally to U.S. manufacturers.  The Company's sales have been declining
since fiscal 1996.  This has been due to several factors including intense
competition in the Japanese market, the principal market for volume production
of flat panel displays, because that market is dominated by competitors such
as Nikon and Canon.  Additionally, due to a number of unforeseen market and
economic conditions, there has been little or no competitive pressure for
manufacturers to increase display sizes or resolution which are the Company's
competitive advantages.  Therefore, the market for volume production of FPDs
has not expanded beyond Japan or into technology where the Company expected it
would have the ability to effectively compete.  As a result of  these
circumstances, in late fiscal 1997 and early fiscal 1998, the Company reduced
its workforce, implemented cost reduction programs and directed its efforts to
the Asian market where the vast majority of worldwide production of desktop
PCs, including those with FPDs, occurred.  The Asian economic crisis, which
began in the Company's fiscal 1998 caused a substantial decline in the growth
of the PC market and further reduced the Company's sales through fiscal 1998.

As a result of the Company's declining sales, the Company continued to
experience significant losses from operations and negative cash flows and have
defaulted on debt covenants during fiscal 1998.

During the fourth quarter of fiscal 1998, the Company identified a potential
new market opportunity for the Company's large area photolithography
technology, the high density interconnect (HDI) market.  HDI manufacturers are
faced with a demand to produce printed wiring boards (PWB) with increasing
complexity and component density.  Growth in portable consumer products (cell
phones, PDAs, etc.) as well as a number of high speed data applications is
creating a requirement for new manufacturing technologies.  Leading the
increased density demand is an area of integrated circuit packaging referred
to as chip carriers.  High numbers of input and output signals must be routed
through the PWB in a limited area, requiring tight circuit dimensions and
precise layer to layer interconnect registration.  The Company's technology is
uniquely suited to meet these requirements.  See also "Business" . The Company
believes that its existing products are uniquely well suited for the needs of
the HDI market and, therefore has refocused its marketing efforts from the
flat panel display industry to the HDI market.  As a result of this refocus,
the Company received its first HDI purchase order for a Model 5200
PanelPrinter in April 1998.

Although the Company received its first HDI purchase in April 1998, the HDI
market is an emerging market which is currently represented by a limited
number of customers.  Most of these customers are in the process of evaluating
new lithography methods in anticipation of expected significant growth in high
performance chip carrier production.  The Company believes that its
lithography tool and related technology are best suited to meet the needs of
these customers.  However, there are a number of risks associated with the
Company's transition to the HDI market including, but not limited to the
Company's ability to obtain sufficient financing to continue to fund its
operations and its research and development efforts.  Though the technology
foundation is in place, a considerable effort is required to develop new
technologies which will meet the needs of the HDI market in the longer-term.
Further, the ability of the Company to develop strategic partnerships with 
HDI manufacturers to gain acceptance of its products and technology, the risks
attendant to an emerging market including its actual potential size and
success, and the market's acceptance of the Company's product as the, or one
of the, methods for future fabrication are also potential risk.

Historically, the Company has required significant working capital to support
its research and development efforts and to meet its ongoing production,
selling and general and administrative costs.  Additionally, the Company's
transition to a new market will require substantial investments to develop new
technologies specifically for this new market as well as substantial funding
for its ongoing operations until such time as orders from this new market are
sufficient to meet its working capital needs.  In addition, historically, the 
Company has funded a substantial portion of its aggregate research and
development costs through contracts with the U.S. government and other
contracts.  However, the Company does not expect to continue to fund its
research and development efforts through similar contracts in the future.  
The Company's ability to develop new technologies is dependent upon its
ability to fund research and development through working capital and/or other
financing alternatives.

In the past, the Company has been able to meet its working  capital
requirements through its existing cash balances and amounts available under
its line of credit.  However, as a result of its significant net loss in
fiscal 1998, the Company was not in compliance with a financially restrictive
debt covenant, minimum tangible net worth, as of March 31, 1998.  The Company
has received a waiver of the covenant default for the period of March 31, 1998
through June 30, 1998.  However, it is probable that the Company will not be
in compliance with this covenant for the remainder of fiscal 1999.

Management's Plans in Regard to These Circumstances

In the fourth quarter of fiscal 1998, the Company hired a new chief executive
officer with extensive experience in the high technology industry.  Under the
direction of the new chief executive, the Company refocused its marketing
efforts toward a new market which the Company believes provides significant
opportunity in the future.  The Company is actively seeking strategic
relationships with customers in the new market in order to gain new orders for
its products, in the short-term, and market acceptance of its technology in
the longer-term.  Additionally, the Company is in the process of renegotiating
its line of credit agreement to less restrictive covenants and is seeking 
potential additional financing through private equity offerings.

There is no assurance that the Company will be successful in obtaining
sufficient financing to fund its operations and research and development
efforts or to renegotiate the terms of its line of credit on terms acceptable
to the Company.  Additionally, there is no assurance that the Company will be
successful in attracting new customers in the HDI market, or that its products
and technologies will be accepted by the new market.  These circumstances
raise substantial doubt as to the Company's ability to continue as a going
concern.

In addition to the risks and uncertainties discussed above, the ability of the
Company to attain the financial or other results that may be planned,
forecasted or projected from time to time is subject to a number of factors,
including the ability to obtain new orders, the timing of recording the
related revenue, the ability to develop and manufacture new products, the
ability to respond to competitive technology and pricing pressures, adequate
availability of major components, and the ability to maintain key employees.
In addition, the Company has historically been dependent upon a limited number
of markets and geographic areas to sell its product, the PanelPrinter.
Therefore, the Company's financial position and results of operations may be
impacted by economic and market conditions in the markets and regions into
which it sells its products.

PanelPrinters and optional equipment generally have ranged in price from $1.2
to $2.7 million.  Any delay in revenue recognition or cancellation of an order
would adversely affect the Company's results of operations, cash flows or
both.  Fluctuations in product revenues, and consequently quarterly and annual
net income or loss, are largely related to revenue recognition on sales of
PanelPrinter units.  In addition, the process for turning prospects into firm
purchasing commitments and subsequently selling the systems is often lengthy.

B.  Summary of Significant Accounting Policies

Use of Estimates

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.  The most significant
estimates relate to the effects of the Company's ability to continue as a
going concern.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of 
the Company and its wholly owned subsidiaries, MRS Securities Corporation and
MRS Asia, Inc.  Intercompany accounts and transactions have been eliminated in
consolidation.

Cash and Cash Equivalents

Cash equivalents are highly-liquid securities which include certificates of
deposit, money market funds, or other securities having a maturity of three
months or less at date of acquisition.  Cash equivalents are stated at cost
plus accrued interest which approximates market value.

Financial Instruments

Financial instruments which potentially expose the Company to concentrations
of credit risk include cash, cash equivalents and accounts receivable.  The
Company's cash and cash equivalents are invested in accounts at high quality
institutions.  The Company's accounts receivables are generally due from
large, well established companies.  Therefore, in management's opinion, no 
significant concentration of credit risk exists for the Company.

Revenue Recognition

The Company generally records product revenues upon completion of all
significant contractual obligations and product shipment.  In certain
situations, where the Company has met all significant obligations and the
customer requests that shipment be delayed for certain post-contract activity,
such as the integration of third party equipment with the PanelPrinter,
revenue is recognized upon customer acceptance at the Company's facility.
Advance payments are recorded as customer deposits.  In situations where the
Company enters into a contract to perform research and development or to 
develop and manufacture a product over a long-term period, the Company records
revenue under such contracts under the percentage-of-completion method of
accounting, whereby revenue and profit, if any, under the contract are
recognized throughout the contract.  Costs under contracts for the long-term
development and manufacture of a product include direct labor and materials.
Costs under research and development contracts with the U.S. government
include direct labor and other direct costs as well as allocated research and
development overhead and general and administrative costs.  Estimates of costs
to complete are reviewed periodically, and adjustments to profit resulting
from any revisions are recorded in the accounting period in which the
revisions are made.  Losses on contracts are recorded in full when they become
evident.  There were no U.S. government contracts in fiscal 1998.

The Company recognizes post-contract customer support revenue as the services
are performed on a time and material basis.

Warranty and Installation

The Company warrants its products for a period of 12 months from delivery to
an end user.  A provision for the estimated future cost of system installation
and warranty is included in cost of sales at the time the associated revenue
is recognized.

Research and Development

Research and development costs for internal products are charged to expense
when incurred until technological feasibility has been established for the 
product.  Thereafter, all software costs are capitalized until the product is
available for general release to customers.  The cost of purchased software is
capitalized for products determined to have reached technological 
feasibility; otherwise the cost is charge to expense.  Capitalized software
costs are amortized using the straight line method over the economic life of
the product or based upon the anticipated revenues of the product.  The 
financial statements do not contain any capitalized software development 
costs as either the requirements for capitalization have not been met or the 
impact of capitalization was insignificant.  Aggregate research and
development costs are as follows (000's):

<TABLE>
<CAPTION>

                                            Year ended March 31,
                                        1998        1997        1996

<S>                                     <C>         <C>         <C>
Research and development expenses       $2,237      $3,042      $2,279
Contract-related research and 
 development costs                           0         488       2,664
Product development related research 
 and development costs                   1,115           0           0
 Aggregate research and 
 development costs                      $3,352      $3,530      $4,943
</TABLE>

Inventories

Inventories are stated at the lower of cost or market, determined on a
first-in, first-out (FIFO) method.  This method requires the periodic
assessment of net realizable value.  The difference between cost and market is
charged to operations in the period the impairment is determined.

Foreign Currency

For foreign operations, the U.S. dollar has been determined to be the 
functional currency.  Monetary assets and liabilities are translated at rates
of exchange in effect at the end of the fiscal year, while non-monetary items
are translated at historical rates.  Income and expense items are translated
at average exchange rates prevailing during the year.

Additionally, the Company may hedge certain portions of its exposure to
foreign currency fluctuations through the purchase of forward exchange
contracts.  Gains and losses associated with currency rate changes on forward
contracts are recorded in results of operations unless the contract hedges a
firm commitment, in which case any gains and losses are deferred and included
as a component of the related transaction.  No forward exchange contracts were
outstanding at March 31, 1998 or 1997.  The effect of exchange gains and
losses, which may include transactions denominated in a foreign currency as
well as hedges, is included in the results of operations.  No significant
gains or losses were recorded in fiscal 1998, 1997 or 1996.

Long Lived Assets

Long lived assets are stated at cost and amortized using the straight-line
method over the assets' estimated useful lives.  The Company evaluates the
possible impairment of long-lived assets whenever events or circumstances
indicate that the carrying value of the assets may be impaired.  The Company
made an evaluation of such impairment in connection with its transition to a
new market and no writedown of long-term assets was deemed necessary assuming
the Company continues as a going concern.

Property and Equipment

Property and equipment are stated at cost.  Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
related assets as follows:

            Equipment and software   3-5  years
            Furniture and fixtures   3-5  years
                 Leased equipment    2-5  years

Leasehold improvements are amortized over the lesser of the life of the lease
or the estimated useful life of the improvement.

Cost of additions and improvements are capitalized while expenditures for
maintenance and repairs are charged to expense as incurred.  When assets are
retired, the related cost and accumulated allowances are removed from the
accounts, and any gain or loss is reflected in income.

Income Taxes

Income taxes are accounted for under the liability method.  Under this method,
deferred tax assets and liabilities are recorded based on temporary
differences between the financial statement amounts and tax bases of assets
and liabilities measured using enacted tax rates in effect for the year in
which the differences are expected to reverse.  The Company periodically
evaluates the realizability of its net deferred tax asset.  A valuation
allowance against the net deferred tax asset is established if, based upon the
available evidence, it is more likely than not that some or all of the
deferred tax asset will not be realized.
<TABLE>
<CAPTION>

Net Loss Per Common Share

Net loss per share is calculated as follows:

(In thousands, except per share amounts)       Year ended March 31,
                                             1998       1997       1996
<S>                                          <C>        <C>        <C>
Net loss                                     ($5,143)   ($3,131)   ($9,941)
Basic and Diluted
Weighted-average common 
 shares outstanding                            6,814      6,717      6,550
Net loss per common share                     ($0.75)    ($0.47)    ($1.52)
</TABLE>

Stock options to purchase 1,457,608, 914,203 and 966,765 shares of common
stock were outstanding during the years ended March 31, 1998, 1997 and 1996,
respectively, but were not included in the calculations of diluted EPS because
their effect would be antidilutive.  Although these options were antidilutive
in 1998, 1997 and 1996, because they were still outstanding, they may be
dilutive in future years' calculations should the Company be profitable in
those years.

Reclassifications

Certain prior year balances have been reclassified to conform to the current
year's presentation.

<TABLE>
<CAPTION>

C.  Inventories

Inventories consist of the following (000's):
                                                         March 31,
                                                     1998        1997
<S>                                                  <C>         <C>
Finished goods                                       $    0      $  726
Work in process                                       4,585       5,647
Purchased parts                                       1,058         941
                                                     $5,643      $7,314
</TABLE>

<TABLE>
<CAPTION>
D.  Property and Equipment

Property and equipment consist of the following (000's):
                                                         March 31,
                                                     1998        1997
<S>                                                  <C>         <C>
Equipment                                            $2,765      $2,792
Software                                                375         375
Leasehold improvements                                  582         582
Furniture and fixtures                                  172         172
                                                      3,894       3,921
Less:  accumulated depreciation and amortization     (3,717)     (3,388)
                                                     $  177      $  533
</TABLE>

E.  Commitments and Contingencies

Leasing Arrangements

The Company leases its principal office and manufacturing facility and certain
other facilities under operating leases.  In fiscal years ended March 31,
1998, 1997 and 1996, rental expense under such operating leases was
approximately $193,146, $173,367, and $249,502, respectively.  The lease terms
expire at various dates through January 2001.  The terms require future
minimum base rent payments under noncancellable leases of $259,343 in each of
the fiscal years ending March 31, 1999, 2000 and 2001.  The Company is
obligated to pay additional rent comprised of property taxes, utilities, and
facility operating expenses.

Litigation

On January 24, 1997, Micron Display Technology ("Micron Display") brought suit
in Idaho against the Company alleging in five counts breach of contract,
breach of implied warranties, and breach of express warranties, in connection
with a Model 5200 PanelPrinter (the "PanelPrinter") which the Company alleged
Micron Display purchased from the Company in 1996.  On January 30, 1997, the
Company filed an action in Massachusetts against Micron Display alleging in
two counts breach of contract and violation of M.G.L. c. 93A, in connection
with Micron Display's nonpayment for the PanelPrinter.

The parties disputed which documents constituted the contract between them. 
Further, Micron Display alleged, among other things, that the PanelPrinter
failed to meet certain performance specifications contained in what it
contended constituted the contract, and that, as a consequence, it was
entitled to the return of its $1.0 million deposit and the conversion of the 
parties' relationship  to a lease of the PanelPrinter, or a PanelPrinter of
like quality.  The Company maintained that other documents constituted the
contract, pursuant to which there was no right to convert the relationship to
a lease, and further denied that the PanelPrinter failed to meet
specifications set forth in the document cited by Micron Display.  The Company
sought approximately $1.4 million as the balance of the unpaid contract price,
and additional remedies under the Massachusetts Unfair Business Practices Act.

On July 23, 1997, the parties executed a Settlement Agreement resolving their
disputes and releasing all claims against each other.  Both lawsuits have now
been dismissed.  While the specific terms of the Settlement Agreement are
confidential, the settlement generally provided for a lump sum payment to be
made by Micron Display to the Company at the time the Settlement Agreement was
executed, and further monthly installment payments to be made thereafter. 
These payments, together with Micron Display's initial deposit, constitute
payment in full for the PanelPrinter.  The Company in turn has agreed to
provide Micron Display with an extended warranty with respect to the
PanelPrinter, as well as technical assistance and certain modifications to the
PanelPrinter.  No significant amounts due to or from Micron remain outstanding
at March 31, 1998.

<TABLE>
<CAPTION>
F.  Accrued Expenses

Accrued expenses consist of the following (000's):
                                                          March 31,
                                                      1998        1997
<S>                                                   <C>         <C>
Payroll and related costs                             $  641      $376
Professional fees                                         83       132
Warranty                                                 104       124
Other                                                    360       181
                                                      $1,188      $813
</TABLE>

<TABLE>
<CAPTION>
G.  Income Taxes

No provision for income taxes was recorded in fiscal 1998, 1997, or 1996 due
to taxable losses in those years.

A reconciliation of the provision for income taxes at the federal statutory
rate is as follows:

                                                         March 31,
                                                  1998     1997     1996
<S>                                               <C>      <C>      <C>
Provision for income taxes at the
 federal statutory rate                           (34.0%)  (34.0%)  (34.0%)
Net operating loss carryforward                    34.0     34.0     34.0
Provision for income taxes                          0.0%     0.0%     0.0%
</TABLE>

<TABLE>
<CAPTION>
The components of the deferred tax assets and the related valuation allowance
are as follows (000's):

                                                        March 31,
                                                    1998         1997
<S>                                                 <C>          <C>
Net operating loss and credit carryforwards         $  9,902     $  9,715
Capitalized research and development expenses          2,370        1,789
Inventory reserves                                     1,102          690
Depreciation and other reserves                          286          180
Total deferred tax assets                           $ 13,660     $ 12,374
Valuation allowance                                 ($13,660)    ($12,374)
Net deferred tax assets                             $      0     $      0
</TABLE>

Due to the uncertainty surrounding the timing of realizing the benefits of its
favorable tax attributes in future tax returns, the Company has established a
full valuation allowance against its net deferred tax asset.

At March 31, 1998, the Company had net operating loss carryforwards for 
federal income tax purposes of approximately $23,600,000 which will expire
from 2003 to 2013.  Approximately $1,510,000 of the net operating loss
carryforward relates to option related deductions which, when benefited will
result in a credit to additional paid-in-capital of approximately $513,000
rather than a reduction in the current tax provision.  At March 31, 1998,
federal and state research and development credit carryforwards were
approximately $1,338,000 which will expire from 2002 to 2013.  In general,
such carryforwards may be used to reduce future taxable income or reduce
future taxes.  However, certain provisions of the Internal Revenue Code could
potentially limit annual utilization of the operating loss and research and
development tax credit carryforwards if there has been a fifty percent
ownership change within the prior three year period.  As a result of the
Company's initial public offering, the Company believes that certain of its
annual limits are in effect.

H.  Investment in Business Alliance

In October 1994, the Company entered into a strategic partnership with
Integrated Circuits Testing, GmbH ("ICT") to develop and introduce an
electrical test system for AMLCD's.  In addition, in fiscal 1995 the Company
acquired a 10% equity interest in ICT.

During fiscal 1997, a portion of ICT was spun-off to Electron-Beam  Technology
GmbH (EBETECH), a separate corporation owned by the Company, Seimens AG
(Seimens) and a group of other investors.  ICT was sold to Opal in October
1996 and EBETECH was sold to ETEC Systems Inc. (ETEC) in March 1997.

Under the terms of the Company's sale of its ownership interest in EBETECH,
the Company is jointly and severally liable for any claims under an
indemnification clause up to a maximum of $292,000.  The amount of potential
escrow decreases quarterly through the indemnification period which ends in
September 1998.

I.  Stockholders' Equity

Stock-Based Compensation Plans

The Company has adopted the disclosure requirements of Statement of Financial
Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based Compensation",
for stock options granted in fiscal 1996 and 1997.  The Company continues to
recognize compensation costs using the intrinsic value based method described
in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees".  Compensation cost of $50,000 was recognized in fiscal 1998.  No
compensation cost was recognized in fiscal 1997 and 1996.

For the purpose of providing pro forma disclosures, the fair values of options
granted were estimated using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1998, 1997 and 1996,
respectively:  a risk-free interest rate of 6.2%, 6.4% and 6.3%, and an
expected life of 6 years, expected volatility of 90% and no expected dividends
for each of the three years in the period ended March 31, 1998.

<TABLE>
<CAPTION>
Net loss and net loss per share as reported in these consolidated financial
statements and on a pro forma basis, as if the fair value based method
described in SFAS No. 123 had been adopted, are as follows (in thousands,
except per share amounts):

                                                 Year Ended March 31,
                                             1998        1997        1996
<S>                         <C>             <C>         <C>         <C>
Net loss                    As reported     (5,143)     (3,131)      (9,941)
                            Pro forma       (5,430)     (4,115)     (10,726)

Basic net loss per share    As reported     ($0.75)     ($0.47)      ($1.52)
                            Pro forma       ($0.80)     ($0.61)      ($1.64)

Diluted net loss per share  As reported     ($0.75)     ($0.47)      ($1.52)
                            Pro forma       ($0.80)     ($0.61)      ($1.64)
</TABLE>

The effects of applying SFAS No. 123 for the purpose of providing pro forma
disclosures may not be indicative of the effects on reported net income and
net income per share for future years, as the pro forma disclosures include
the effects of only those awards granted after April 1, 1995.

Stock Option Plans

In July 1986, the Company adopted the 1986 Stock Option Plan (the "1986
Plan").  The 1986 Plan provides for the granting of incentive stock options
(within the meaning of Section 422A of the Internal Revenue Code) and
nonstatutory options to key employees and consultants to purchase shares of
the Company's Common Stock at not less than fair market value at the date of
grant.  Options granted pursuant to the plan are exercisable for a period of
ten years from grant and typically vest over four years beginning on the first
anniversary of the grant.  The 1986 Plan was terminated on March 29, 1993.  As
of March 31, 1998 there are 123,010 options outstanding.

In March 1993, the Company adopted the 1993 Stock Option Plan (the "1993
Plan") which has substantially the same terms as the 1986 Plan and which
provides for the granting of incentive stock options (within the meaning of
Section 422A of the Internal Revenue Code) and nonstatutory options to key
employees, directors, and consultants.

In July 1994, the Stockholders approved a stock option plan for non-employee
directors.  Options are granted according to a formula based on term of office
and are exercisable for a period of ten years from date of grant.  Stock
options usually vest 25% on each of the first four anniversary dates.

The Company has reserved 1,500,000 shares of Common Stock for issuance
pursuant to the 1986 and 1993 Plans.  At March 31, 1998, 134,834 shares were
available for option grants and options for 412,161 shares were exercisable.
The Company has reserved 100,000 shares of Common Stock for issuance pursuant
to the 1994 Non-Employee Director Plan.  At March 31, 1998, 2,084 shares were
available for option grant and options for 80,833 shares were exercisable.

On August 21, 1995, the Company granted 199,643 options at the current fair
market value with similar terms and conditions to previously issued but
unexercised grants.  In exchange for the new grant, employees agreed to a
cancellation of the prior options.  On February 12, 1997 the Company granted
548,027 options at the current fair market value with similar terms and
conditions to previously issued but unexercised grants.  In exchange for the
new grant, employees agreed to a three-for-four cancellation of the prior
options.

<TABLE>
<CAPTION>
The following table summarizes the Company's stock option plans at March 31:


                         1998              1997              1996
                            Weighted          Weighted           Weighted
                            Average           Average            Average
                            Exercise          Exercise           Exercise
                 Shares      Price     Shares     Price    Shares    Price
<S>              <C>         <C>      <C>         <C>       <C>       <C>
Outstanding at 
  beginning
of year            914,203   $2.0628   1,004,043  $4.5960     887,327  $4.9424
Granted            692,666   $1.0524   1,017,127  $2.1838     611,843  $5.3925
Exercised          (17,014)  $0.8483     (77,458) $0.9303    (129,814) $0.9036
Forfeited         (132,247)  $2.4606  (1,029,509) $4.7382    (365,313) $8.0835
Outstanding at 
 end of year     1,457,608   $1.5607     914,203  $2.0628   1,004,043  $4.5960

Options exercisable 
 at yearend        492,994               379,836              415,202

</TABLE>
<TABLE>
<CAPTION>
                                                       March 31,
                                                1998     1997     1996
<S>                                             <C>      <C>      <C>
Weighted-average grant-date fair value 
of options granted during the year              $0.7281  $0.9779  $3.9338
</TABLE>

<TABLE>
<CAPTION>
The following table summarizes information about stock options outstanding at
March 31, 1998.

                                         Options Outstanding
                                               Weighted
                                                 Average           Weighted
                                               Remaining            Average
Range of                     Number           Contractual          Exercise
Exercise Price          Outstanding       Life (In Years)             Price
<S>       <C>            <C>                   <C>                 <C>
$0.6000   $0.9000           96,814             2.13                $0.8992
 0.9690    0.9690          467,500             8.54                 0.9690
 1.0000    1.1250           32,916             9.59                 1.0556
 1.2500    1.2500          154,750             9.29                 1.2500
 1.5000    1.5000           29,696             5.33                 1.5000
 1.6250    1.6250          570,266             7.54                 1.6250
 2.5000    5.7500           60,000             8.22                 3.4063
 7.1250    7.1250           40,000             6.33                 7.1250
 7.2000    7.2000              666             4.95                 7.2000
 8.2500    8.2500            5,000             6.49                 8.2500
$0.6000   $8.2500        1,457,608             7.67                $1.5607
</TABLE>


<TABLE>
<CAPTION>
The following table summarizes information about stock options outstanding at
March 31, 1998

                                             Options Exercisable
                                                                  Weighted
                                                                   Average
Range of                              Number                      Exercise
Exercise Price                   Exercisable                         Price
<S>          <C>                    <C>                           <C>
$0.6000      $0.9000                 96,814                       $0.8992
 0.9690       0.9690                      0                        0.0000
 1.0000       1.1250                 10,833                        1.0868
 1.2500       1.2500                      0                        0.0000
 1.5000       1.5000                 26,196                        1.5000
 1.6250       1.6250                280,985                        1.6250
 2.5000       5.7500                 32,500                        4.1154
 7.1250       7.1250                 40,000                        7.1250
 7.2000       7.2000                    666                        7.2000
 8.2500       8.2500                  5,000                        8.2500
$0.6000      $8.2500                492,994                       $2.1491
</TABLE>

Employee Stock Purchase Plan

Under the 1994 Employee Stock Purchase Plan, employees are entitled to
purchase shares of Common Stock through payroll deductions of up to 10% of
their compensation.  The price paid for the Common Stock is equal to 85% of
the lower of the fair market value of the Company's Common Stock on either the
first or last day of the offering period.  The offering is a six month period
starting each May and November 1st.  The Company has reserved 200,000 shares
of Common Stock for issuance pursuant to the 1994 Employee Stock Purchase
Plan.  At March 31, 1998, 106,529 shares have been issued and 93,471 shares
were available for future participants.  Shares purchased under the Employee
Stock Purchase Plan total 44,796 in fiscal 1998, 24,577 in fiscal 1997 and
21,866 in fiscal 1996.  Weighted average grant date fair value of shares
purchased under the Employee Stock Purchase Plan was $0.592 in fiscal 1998,
$1.83 in fiscal 1997 and $1.52 in fiscal 1996.

For the purpose of providing pro forma disclosures, the fair values of shares
purchased were estimated using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for purchases in 1998, 1997 and
1996, respectively: a risk-free interest rate of 5.56%, 5.33% and 5.64%, and
an expected life of 6 months, expected volatility of 90% and no expected
dividends for each of the three years in the period ended March 31, 1998.

J.  Accounts Receivable

The Company had approximately $83,000 of unbilled receivables included in the
accounts receivable at March 31, 1998 and March 31, 1997.  This balance
relates to amounts due under contracts with DARPA and is subject to the final
closing of the contract by a government administrative agency.

K.  Line of Credit

In March 1997, the Company entered into a three year asset-based revolving
line of credit agreement which provides for borrowings of up to $4.0 million
based on accounts receivable and inventory balances.  The line of credit
requires a minimum outstanding balance of $1.0 million for the first year and
is collateralized by a first priority lien on all assets of the Company.

The line of credit bears an interest rate charged on the outstanding balance
of the prime rate plus 2.25% but in no event less than 9% per annum.  The
borrowing base for accounts receivable is up to 80% of the Company's eligible
receivables and the inventory borrowing base is up to 30% of the Company's
eligible inventory.  The line is subject to the Company's compliance with
certain financial covenants the most restrictive of which relates to tangible
net worth.  Under the line of credit, the Company is required to maintain
tangible net worth of at least $6 million.  At March 31, 1998, the Company was
in default of this covenant.  The Company has obtained a waiver of the default
as of March 31 through June 30, 1998.  However, it is probable that the
Company will not meet the covenant in fiscal 1999.  Therefore, the debt has
been classified as short-term on March 31, 1998.

L.  Export Sales

Export sales have been made to Japan, Korea, Taiwan, Europe and Canada.  For
the years ended March 31, 1998, 1997 and 1996, export sales accounted for 
approximately $0, $1,000,000, and $4,700,000, respectively of total revenues.

M.  Significant Customers

During the fiscal years ended March 31, 1998, 1997 and 1996, the Company's
product revenue included sales to three customers of $1.4 million, $1.7
million and $1.8 million, sales to three customers of $0.8 million, $1.3
million and $2.7 million, and sales to three customers of $2.0 million, $2.1
million and $2.4 million, respectively.  Additionally, contract research
revenues from an agency of the U. S. government for the years ended March 31,
1998, 1997, and 1996 accounted for approximately $0, $579,000, and $2,858,000
of total revenues, respectively.

N.  401(k) Savings Plan

Effective April 1, 1993, the Company established the MRS Technology, Inc.
401(k) Savings Plan (the "Plan").  The Plan is a defined contribution plan
which covers substantially all of the Company's employees.  Participants may
make voluntary contributions of 1% to 15% of their annual compensation.
Contributions by the Company are discretionary.  The Company made no
contributions to the Plan during the fiscal years ended March 31, 1998, 1997
and 1996.

<TABLE>
<CAPTION>
Quarterly Financial Information (Unaudited)
(In thousands, except per share amounts)
                                First    Second    Third    Fourth    Year
<S>                             <C>      <C>       <C>      <C>       <C>
Year ended March 31, 1998
Total revenues                  $  418   $3,215    $2,328   $1,187    $7,148
Gross margin                      (127)     806       620   (1,809)     (510)

Net loss                        (1,131)    (384)     (339)  (3,290)   (5,143)
Net loss per share - Basic       (0.17)   (0.06)    (0.05)   (0.48)    (0.75)

Year ended March 31, 1997
Total revenues                  $1,711   $3,487    $1,588     $355    $7,141
Gross margin                       216      786       150     (115)    1,037

Net income (loss)               (1,280)    (595)   (1,374)     118    (3,131)
Net income (loss) per share -
 Basic                           (0.19)   (0.09)    (0.20)    0.02     (0.47)
</TABLE>

ITEM 9.  Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

PART III

<TABLE>
<CAPTION>

ITEM 10. Directors and Executive Officers of the Registrant
        (Executive Officers listed in Part I)

(a)  Directors

                      Director   Position with   Director   Term of Office
Name                   Since     the Company      Class       will expire
<S>                    <C>       <C>               <C>           <C>
Ronald K. Haigh        1994         Director       III           1998
Paul Wiefels           1998         Director       III           1998
Pierre Fougere         1998         Director        I            1999
Robert P. Schechter    1988         Director        I            1999
Carl P. Herrmann       1997      President, CEO,    II           2000
                                   & Chairman
</TABLE>

Ronald K. Haigh, Director.  Mr. Haigh has been an independent manufacturing
technology consultant since July 1994.  From 1988 to June 1994, he was at
Summit Technology, a manufacturer of laser-based ophthalmic surgery systems,
most recently as Vice President, Manufacturing.  Prior to that he had
significant semiconductor equipment manufacturing experience at Eaton
Corporation.

Paul Wiefels, Director. Mr. Wiefels has been a partner with The Chasm Group, a
consulting firm focused on helping technology companies achieve market
leadership positions, since 1992.  He provides counsel ranging from strategy
development and marketing communications planning to market research and
product planning.  Prior to joining the The Chasm Group, he served as director
of marketing consulting with Landor Associates, an international branding and
identity consultancy.  Prior to joining Landor, he was a worldwide director of
product marketing for Ingres Corporation (now a division of Computer
Associates).  Mr. Wiefels began his high tech career with Apple Computer,
where he served in marketing management positions with Apple's U.S. and
international operations.

Pierre Fougere, Director.  Mr. Fougere's career spans more than thirty years
of international management expertise in electronics and high technology
components and systems.  Prior to establishing his own consulting business in
1989, Mr. Fougere held several positions within the MATRA Group, most recently
as Executive Vice President, Chairman and CEO of Matra Datavision (CAD/CAM
software).  Mr. Fougere currently serves on several other boards and is the
Chairman of the Board of Financiere Saint Florentin, Chateau Lilian Ladouys
and Matra Datavision Inc.

Robert P. Schechter, Director.  Mr. Schechter joined Natural MicroSystems
Corporation as President and Chief Executive Officer in April 1995 and in May
1996 was also elected Chairman of the Board.  From 1987 to December 1994 he
was at Lotus Development Corporation, most recently as Senior Vice President,
International Business Group.  From 1973 and until he joined Lotus, Mr.
Schechter was associated with Coopers & Lybrand, most recently as a Partner
and Northeast Regional Chairman of Coopers & Lybrand's High Technology
Industry Group.  Mr. Schechter is a director of Raptor Systems, Inc. and
Natural MicroSystems Corporation.

Carl P. Herrmann, has been President, CEO and Chairman of the Board since
February 1998.  Mr. Herrmann has been serving on the Board of Directors of MRS
since May of 1997.  Prior to joining MRS' Board of Directors he has been an
independent management and international marketing consultant since December
1994.  From July 1991 to November 1994, he was at Solbourne Computer, Inc.
from April 1992 as President and Chief Executive Officer.  From May 1989 to
November 1990 he was the Hong Kong-based Director of Asia/Pacific Operations
for Amphenol Corp.  From October 1984 to April 1989 he was Managing Director
of GenRad Inc.'s regional operations based in Singapore.  From August 1983 to
September 1984 he was the Tokyo-based Vice President of TEL-GenRad, KK, a
joint venture developing and manufacturing PC board and semiconductor test
systems.  Mr. Herrmann received a BA from the University of Pennsylvania and
an MBA from the Wharton School.

(b) Reports of Beneficial Ownership.

See the information under the caption "Section 16(a) Beneficial Ownership 
Reporting Compliance"  on page 13 of the  Proxy Statement, which information
is incorporated by reference.

ITEM 11. Executive Compensation

See the information under the caption "Executive Compensation" beginning on
page 6 of the Proxy Statement, which information is incorporated by reference.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management

See the information under the caption "Share Ownership of Principal
Stockholders and Management" beginning on page 2 of theProxy Statement, which
information is incorporated by reference.


ITEM 13.  Certain Relationships and Related Transactions

See the information under the caption "Compensation Committee Interlocks and
Insider Participation" on page 11 of the Proxy Statement, which information is
incorporated by reference.

PART IV

ITEM 14.  Exhibits, Financial Statement Schedules, and Reports on
Form 8-K

(a)  1    (a). Financial Statements
             See Index to Consolidated Financial Statements on
Page 23.

All schedules are omitted as the required information is not applicable or the
information is presented in the Consolidated Financial Statements or Notes
thereto.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed and no matters submitted to a vote of
security holders during the fourth quarter of fiscal 1998.

<TABLE>
<CAPTION>
(c)  Exhibits

Exhibit        Description                                         Page
<S>   <C>      <C>                                                   <C>
3.0            Articles of Incorporation and Bylaws

       3.1     Restated Articles of Organization                     A
       3.2     Amended and Restated By-Laws                          A
       3.3     Articles of Amendment to the Articles ofOrganization  B

4.0            Instruments defining the rights of security  
                holders, including indentures:

       4.0     Specimen Certificate of Common Stock                  A


10.0           Material Contracts

      10.1     DARPA Contact                                         A
      10.12    CRADA Agreement for Development of
                Illumination System
      10.13    CRADA Agreement for Development of a
                High Accuracy Transport System                       A
      10.14    Lease relating to Company's Headquarters              A
      10.15    1986 Stock Option Plan                                A,F
      10.16    1993 Stock Option Plan                                C,F
      10.17    DARPA Modification                                    B
      10.18    Lease relating to Company's Headquarters - 
                Third Amendment                                      B
      10.22    1994 Employee Stock Purchase Plan
      10.23    Stock Option Plan for Non-Employee Directors
      10.25    Lease relating to Company's Headquarters 
                Fourth Amendment Dated February 1, 1995              D
      10.27    DARPA Modification - SPIN #P0004                      D
      10.28    DAPRA Modification - SPIN #P0005                      D
      10.29    DAPRA Modification - SPIN #P0006                      D
      10.30    DAPRA Modification - SPIN #P0007                      D
      10.31    DAPRA Modification - SPIN #P0008                      D
      10.32    October 19, 1994 Business Agreement with
                ICT Integrated Circuit Testing GmbH                  D
      10.33    October  19, 1994 First  Amendment  to
                Business Agreement with ICT                          D
      10.34    November 17, 1994 Subscription Agreement
                with Warranty and Shareholder Agreement (ICT)        D
      10.35    Common Stock Purchase Warrant dated October 19,
                1994 and delivered November 17, 1994.                D
      10.36    Statement of Takeover Pursuant toLimited Liability 
                Company Act Section 55(1) dated February 16, 1995.   D
      10.37    Acceleration of ICT Part III Agreement                E
      10.39    DARPA Modification                                    E
      10.42    Employment Agreement Letters                          E
      10.43    Share Purchase Agreement ETEC/EBETECH                 F
      10.44    Employment Agreement Letter                           F
      10.45    Employment Agreement                                  G
      10.46    Consulting Agreement                                  G

21.0           Subsidiaries of the Registrant

      21.0.    Subsidiaries                                          A

23.0           Consents of Experts and Counsel

      23.1     Consent of Coopers & Lybrand L.L.P.
</TABLE>

A     Incorporated by reference from Registration Statement on Form S-1        
      (Commission File No. 33-64220).  
      These contracts relate to Executive Compensation.
B     Incorporated by reference to the Company's Annual Report on Form 10-K    
      for the year ending March 31, 1994.
C     Incorporated by reference to the Company's Proxy Statement for the       
      Annual Meeting of Stockholders  held on July 28, 1994.
D     Incorporated by reference to the Company's Annual Report on Form 10-K    
      for the year ending March 31, 1995.
E     Incorporated by reference to the Company's Annual Report on Form 10-K    
      for the year ending March 31, 1996.
F     Incorporated by reference to the Company's Annual Report on Form 10-K    
      for the year ending March 31, 1997.
G     Incorporated by reference to the Company's Annual Report on Form 10-K    
      for the year ending March 31, 1998.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned, authorized officers.

MRS Technology, Inc.
(Registrant)

By:  /s/ Carl P. Herrmann

President and Chief Executive Officer
Date:          6/5/98

Pursuant to the requirements of the Securities and 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.


Signature                       Title                         Date

(1) Principal Executive Officer:

/s/ Carl P. Herrmann   President and Chief Executive Officer   6/5/98



(2) Principal Financial Officer:

/s/ Patricia F. DiIanni   Chief Financial Officer              6/5/98


(3) A majority of the Board of Directors:


/s/ Carl P. Herrmann     Chairman of the Board                6/5/98


/s/ Ronald K. Haigh      Director                             6/5/98


/s/ Pierre Fougere       Director                             6/5/98


/s/ Paul Wiefels         Director                             6/5/98


/s/ Robert P. Schechter  Director                             6/5/98





June 12, 1998

Securities and Exchange Commission
Washington, DC 20549

Gentlemen:

Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 10-K.

Sincerely,
MRS Technology, Inc.
/s/Patricia F.DiIanni
Vice President and
Chief Financial Officer