SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 (FEE REQUIRED)

    For the Fiscal Year Ended June 30, 1998
                                     OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

    For the transition period from               to

                        Commission File No. 0-12942

                             PARLEX CORPORATION
           (Exact Name of Registrant as Specified in its Charter)

            Massachusetts                           04-2464749
  (State or other jurisdiction of      (IRS Employer Identification Number)
   incorporation or organization)

145 Milk Street, Methuen, Massachusetts                01844
(Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code:        978-685-4341
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:

                                          Name of exchange on
     Title of each Class                    which registered
     -------------------                  -------------------
Common Stock ($.10 par value)               National Market

      Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the Securities 
Exchange Act of 1934 during the preceding 12 months (or for such shorter 
period that the registrant was required to file such reports), and (2) has 
been subject to such filing requirements for the past 90 days.
                           YES   [X]     NO   [ ]

      Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K 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]

      The aggregate market value of shares of the Registrant's Common Stock, 
par value $.10 per share, held by non-affiliates of the Registrant at 
September 1, 1998 as computed by reference to the closing price of such 
stock was approximately $34,727,571.

       The number of shares of the Registrant's Common Stock, par value $.10 
per share, outstanding at September 1, 1998 was 4,640,649 shares.

Documents Incorporated By Reference

      Portions of the definitive proxy statement to be filed with the 
Commission within 120 days after the close of the fiscal year are 
incorporated by reference into Part III of this report.


                                   Part I
Item 1. Business
----------------

      Parlex is a leading supplier of flexible interconnects principally for 
sale to the automotive, military/aerospace, computer, telecommunications and 
industrial markets.  The Company's product offering, which the Company 
believes is the broadest of any company in the flexible interconnect 
industry, includes flexible circuits, laminated cable, flexible/cable hybrid 
circuits and flexible interconnect assemblies.  Flexible circuits, which 
consist of conductive copper patterns that are laminated to flexible 
substrate materials such as polyimide or polyester, are used to provide 
connections between components and electronic systems and as a substrate to 
support electronic devices.  Laminated cables, which consist of flat or 
round wire laminated to a flexible substrate material, provide connections 
between electronic sub-systems and replace conventional wire harnesses.  
Flexible/cable hybrid circuits combine the lower cost of laminated cable 
with the technology of flexible circuits into a single cost-effective 
interconnect.  Flexible interconnect assemblies are formed by adding 
components such as integrated circuits, connectors, resistors and capacitors 
to flexible circuits or laminated cables.  The advantages of flexible 
interconnects over alternative technologies such as rigid printed circuits 
include three-dimensional packaging and superior thermal qualities as well 
as reduced size and weight.  The Institute for Interconnecting and Packaging 
of Electronic Circuits ("IPC"), an international trade organization, 
estimates that worldwide sales of flexible circuits in 1997 exceeded $2.5 
billion.  The IPC has reported that the flexible circuit industry in North 
American has grown at rates between 17% and 19% in each of the past three 
years.

      The Company believes that its creative engineering expertise and its 
ability to advance the technology of manufacturing processes and materials 
allow it to provide its customers with a comprehensive range of flexible 
interconnect solutions.  Beginning at the design phase, the Company's design 
engineers work closely with its customers to ensure the produceabilty of a 
design.  Once a design has been completed, the Company utilizes its 
innovative materials and processes, including PALFlex, PALCoat, U-Flex, 
Pemacs and PALCore, to produce a flexible interconnect product that meets 
its customers' performance needs and cost objectives.

      The Company's objective is to be the supplier of choice for key 
customers in markets where cost-effective flexible interconnects provide 
added value to the customers' products.  Within its targeted market 
segments, the Company believes that its ability to develop strategic 
customer relationships and provide a broad product offering serves as a 
competitive advantage.  These relationships have enabled the Company to work 
closely with its customers from the design phase through production to 
ensure that its customers' flexible interconnect requirements are met.  In 
fiscal 1998, the Company's top customers in terms of revenues were Motorola, 
Northern Telecom, Allied-Signal, AMP and Hewlett Packard.

      An important element of the Company's growth strategy has been 
diversification among its targeted markets.  Since 1992, the Company has 
reduced revenues from military/aerospace applications from approximately 53% 
to 20% of total revenues, while increasing overall revenues by approximately 
111% through June 30, 1998.  As a result of the Company's growth in recent 
years, the Company has expanded its manufacturing operations to better 
accommodate its customers' geographic and cost requirements.  In 1995, the 
Company established Parlex (Shanghai) Circuit Co., Ltd. ("Parlex Shanghai"), 
a joint venture in China designed to serve the Asian market with flexible 
circuits as well as to produce certain products more cost-effectively for 
North American customers.  The Company has opened an interconnect finishing 
facility in Empalme, Mexico which will begin to ship product in fiscal year 
1999.  The Company has also established logistic support capabilities in 
Singapore and France.

Industry Overview

      Over the past two decades, electronic systems have become smaller, 
lighter and more reliable, while demands for performance at lower costs have 
increased dramatically.  Although rigid printed circuits are a conventional 
form of electronic packaging, their two-dimensional form limits the options 
available to the design engineer.  As the demand for more portable 
electronic packaging has increased, so too has the demand for flexible, 
three-dimensional circuits.  In addition to the improved packaging and 
performance characteristics, flexible circuits offer superior thermal 
dissipation characteristics compared to rigid circuits, making flexible 
circuits attractive for use in advanced, high-speed electronics.

      Flexible interconnects are used in most segments of the electronics 
industry.  The primary market segments that place high value on superior, 
cost-effective flexible interconnect solutions include:

      Automotive.  Automobile manufacturers increasingly use electronics to 
enhance vehicle performance and functionality, while at the same time 
reducing electronic component size, weight and manufacturing and assembly 
costs.  Flexible circuits and laminated cables can provide cost-effective 
interconnect solutions for such applications as dashboard instrumentation, 
automotive entertainment systems, electronic engine control units, steering 
wheel controls, power distribution, sensors and anti-lock brakes.  Providers 
of flexible interconnects typically work closely with the companies that 
supply these electronic systems to the vehicle manufacturers.  Because 
automotive production cycles generally last three to five years and designs 
are unlikely to change during that period, a flexible interconnect that is 
designed into an automobile model or platform provides a relatively 
predictable source of demand over an extended time period.

      Telecommunications.  The telecommunications market has two distinct 
segments:  infrastructure equipment and subscriber equipment.  
Infrastructure equipment consists of support electronics for the 
distribution of voice and data transmission.  The growth of data transfer 
via the internet has dramatically increased demand for this type of 
equipment. Infrastructure equipment employs sophisticated electronics which 
usually require the use of complex flexible interconnects.  Subscriber 
equipment consists of cellular devices including battery assemblies.  Tight 
packaging and the need to reduce weight have driven the demand for flexible 
interconnects in this segment.  Laminated cables and single and double-sided 
flexible circuits are generally used in subscriber equipment.

      Computer.  The IPC has reported that the computer market represents 
approximately 37% of the worldwide consumption of flexible interconnects.  
Demand for flexible circuits and laminated cable in this market is driven by 
short product life cycles as consumers demand increasingly powerful, less 
expensive, smaller, faster and lighter equipment.  Disk drives represent the 
largest application for flexible circuits in this market.  Other 
applications include notebook displays, mass storage devices and 
interconnects for peripheral equipment such as scanners, printers and 
docking stations.

      Military/Aerospace. Military/Aerospace electronics were at one time 
the primary applications for flexible circuitry.  Because of product 
complexity and space restrictions, aerospace requirements often demand 
multilayer rigid-flexible circuits.  Typical applications are navigation 
systems, flight controls, displays, communications equipment and munitions.  
Although overall spending in this segment has decreased, the Company 
estimates procurement of flexible interconnects will continue to experience 
modest growth.  The Company believes that the trend toward "smart" military 
systems will continue to drive demand for flexible interconnects in this 
segment.

      Industrial.  The industrial market, which the Company defines to 
include medical electronics, encompasses many applications.  Virtually any 
electronic device in which tight packaging, light weight or high reliability 
is a priority is a candidate for flexible interconnects.  Typical 
applications include electronic scales, industrial controls, metering 
devices, scanners, sensors and medical monitoring equipment.

The Parlex Solution

      Parlex combines creative engineering design capabilities with 
innovative manufacturing processes to provide its customers with a complete 
and cost-effective flexible interconnect solution.  The solution begins in 
the design phase, where Parlex engineers typically work closely with 
customers to develop a technically superior flexible interconnect design.  
Although the Company's customers generally provide the initial engineering 
guidelines for a particular interconnect, the Company's design engineers are 
often called upon to work in tandem with a customer's design team to develop 
a solution.  An important part of the Parlex solution is ensuring the 
produceability of a design at an early stage before time and money are spent 
on manufacturing.

      Once the design is completed, the Company applies its experience with 
innovative materials and manufacturing processes to produce a flexible 
interconnect solution that meets the customer's needs and cost objectives.  
The Company has developed materials and processes that provide its customers 
improved performance at a lower cost.  Over the past several years, the 
Company has gained substantial experience in introducing programs for high-
volume products, and it believes this expertise is a key factor in its 
ability to provide its customers with cost-effective flexible interconnect 
solutions.

      The Company believes manufacturers with the capability to supply a 
broad range of products with a diverse mix of performance characteristics 
and with a global presence will capture additional market share in the 
flexible interconnect industry.  The Company is one of a limited number of 
independent manufacturers that offers a range of flexible interconnect 
solutions from design concept through high-volume production.  By offering 
its broad range of products and services, the Company can provide design and 
manufacturing solutions for its customers while reducing its customers' time 
-to-market and product development costs.

Strategy

      The Company's objective is to be the flexible interconnect supplier of 
choice for key customers in its target markets.  The Company's strategy to 
achieve this objective includes the following key elements:

   *  Develop Innovative Processes and Materials.  The Company believes that 
      its ability to develop innovative materials and processes enhances the 
      opportunity for growth within its targeted markets.  The Company 
      intends to continue to focus its development efforts on proprietary 
      flexible materials and processes that have a broad range of 
      applications.  These materials and processes enable the Company to 
      produce cost-effective flexible interconnects, at reduced cycle time, 
      that are reliable and improve its customers' product performance.  The 
      Company's PALFlex, PALCoat, U-Flex and PALCore technologies are 
      examples of materials and manufacturing processes that have resulted 
      from the Company's focus on innovation.

   *  Develop Strategic Relationships with Target Customers.  The Company 
      seeks to develop strategic relationships with key customers in 
      targeted industries.  As a value-added strategic partner with its 
      customers, the Company works with a customer's technology roadmap to 
      design and develop cost-effective flexible interconnect solutions.  
      The Company believes that these relationships are most effective where 
      the Company is providing a significant portion of a customer's 
      flexible interconnect requirements.  Through these strategic 
      relationships, the Company achieves greater visibility into the 
      customer's entire range of flexible interconnect requirements.

   *  Diversify Customer Base across Specific Markets.  The Company seeks to 
      serve a variety of markets to help mitigate the effects of economic 
      cycles in any one industry.  The    Company's business units are 
      aligned to specific market segments in order to better understand and 
      service customers within particular industries.  In  addition, the 
      Company believes its diversification among the major segments provides 
      greater insight into emerging technological requirements.  For 
      example, the Company has applied its knowledge of shielding 
      requirements in the computer industry to gain a competitive advantage 
      in the telecommunications market.

   *  Offer the Broadest Range of Products in the Flexible Interconnect 
      Industry.  The Company intends to continue to provide a broad product 
      offering that allows it to service virtually all of its customers' 
      flexible interconnect requirements.  Parlex is not aware of any other 
      company in the flexible interconnect industry that offers a broader 
      range of products.  The Company's product line includes flexible and 
      rigid-flexible circuits from one to 24 layers, laminated cables, 
      flexible/cable hybrid circuits and flexible interconnect assemblies.  
      The Company uses a variety of materials in its products, including 
      adhesiveless and adhesive-based polyimide as well as polyester.

   *  Expand Global Presence.  The Company believes that flexible 
      interconnect customers will increasingly require service on a global 
      basis.  To address these requirements, the Company has continued to 
      expand its global presence in emerging markets and throughout the 
      world.  For example, the Company established a joint venture company 
      in China as a base for its operations in that region and to serve the 
      emerging market in China.  The Company has also developed, and plans 
      to continue to develop, strategic relationships and alliances that it 
      believes are necessary for the success of its international business.  
      The Company is also exploring the formation of a joint venture to 
      produce laminated cables in Asia where it believes the market for this 
      product is substantially greater than in North America.  Additionally, 
      in May 1998, the Company established a facility in Mexico.  This 
      branch will be performing the finishing, and, in some instances, 
      assembly operations to parts being manufactured at the Company's 
      flexible circuit and laminated cable facilities.

Current Products

      The Company's current flexible interconnect products include flexible 
circuits, laminated cables, flexible/cable hybrid circuits and flexible 
interconnect assemblies.  The products are produced to customers' 
application-specific requirements and are designed by the Company, the 
customer or jointly.  Lead times for the design and manufacture of the 
Company's products generally range from one week for some products to three 
months for more sophisticated products.

      Flexible Circuits

      Flexible circuits, which consist of conductive copper patterns that 
are laminated to flexible substrate materials such as polyimide or 
polyester, are used to provide connections between electronic components and 
as a substrate to support these electronic devices.  The circuits are 
manufactured by passing base materials through multiple processes such as 
drilling, photo imaging, etching, copper plating and finishing.  Flexible 
circuits can be produced in single or multiple layers.  The Company produces 
a wide range of flexible circuits including:

   *  Single-Sided Flexible Circuits have a conductive pattern only on one 
      side and are commonly used for cellular phones, batteries for portable 
      electronics and dashboard displays.  Parlex has converted many double-
      sided flexible circuits to single-sided by incorporating its HSI+ 
      (high speed interconnect) screening technology that incorporates 
      superior shielding qualities and eliminates a separate shield layer.  
      The Company manufactures single-sided circuitry in both the United 
      States and at Parlex Shanghai, where substantially all of the 
      production to date has been single-sided.

   *  Double-Sided Flexible Circuits have conductive patterns on both sides 
      which are interconnected by a drilled and copper-plated hole.  The 
      Company's double-sided circuits are used primarily in the automotive 
      market.  Other applications include high definition displays, 
      instrumentation products and digital data converters.

   *  Multilayer and Rigid-Flexible Circuits consist of layers of circuitry 
      that are stacked and laminated.  These circuits are used where the 
      complexity of the electronic design demands multiple layers of 
      flexible circuitry.  If some of the layers are rigid board material, 
      the product becomes a rigid-flexible circuit.  Multilayer and rigid-
      flexible circuits are common in military applications for flight 
      computers, multipurpose displays and flight control systems.  In 
      commercial applications, these products are used on high speed 
      telephone distribution equipment, computer networking electronics and 
      patient monitoring devices.  The Company has manufactured these 
      circuits with up to 40 layers in prototype programs and 24 layers in 
      production.

      Laminated Cables

      The Company manufactures laminated cables in an efficient roll process 
proprietary to Parlex.  Substantially all of the laminated cable that the 
Company produces uses flat wire.  Approximately 70% of the laminated cable 
that the Company produces is insulated with polyester material allowing for 
maximum flexibility while the remainder is insulated with polyimide material 
for its enhanced performance at elevated temperatures.  The Company's 
laminated cables are capable of handling both power (high current) and 
signal (low current) levels.

      Improving the process by which laminated cable is manufactured can 
increase functionality and lower the cost of production.  To this end, the 
Company has developed U-Flex, a technique that forms conductors into a u-
shape, followed by an injection molding process which provides the function 
of a connector.  This technique improves electrical performance and 
eliminates the need for a separate costly connector.  The Company has also 
developed Pemacs shielding, which adds a specially designed silver ink to 
laminated cable to meet stringent electronic shielding requirements without 
compromising flexibility.  The Company's auto line cable process 
incorporates pushpins into the laminated cable to provide for automatic 
alignment to a printed circuit board for subsequent soldering.

      Flexible/Cable Hybrid Circuits

      In many cases, although a laminated cable is capable of carrying the 
necessary signals, etched circuitry is required for termination.  For these 
applications the Company manufactures flexible/cable hybrid circuits, which 
take advantage of the lower cost of laminated cables and the technology of 
flexible circuits by combining them into a single interconnect.  
Flexible/cable hybrid circuits are currently used in switching stations, 
postage metering devices and electronic scales.  On some products, Parlex 
adds its HSI+ process to the flexible/cable hybrid circuit to provide signal 
clarity and shielding to the cable and the flexible circuit.

      Flexible Interconnect Assemblies

      Both flexible circuits and laminated cables can be converted into an 
electronic assembly by adding electronic components.  This process can be as 
simple as adding a connector or as complex as assembling and soldering many 
components such as capacitors, resistors and integrated circuits.  In some 
cases, the Company subcontracts with electronic manufacturing service 
companies for component placement and attachment.

      The following table describes applications in which the Company's 
products are used:

<TABLE>
<CAPTION>
          Product                            Applications
          -------                            ------------

      <S>                                <C>
      Flexible Circuits                  Automotive Displays
       Single-Sided                      Batteries for Cell Phones
                                         Printers
                                         Computer Networks

      Double-Sided                       Engine Controls
                                         Laptop Computers
                                         Cellular Phones

      Multilayer & Rigid-Flexible        Computer Networks
                                         Telecom Switching Systems
                                         Aircraft Displays
                                         Automotive Transmission Systems

      Laminated Cables                   Postage Meters
                                         Automotive Sound Systems
                                         Laptop Computers
                                         Industrial Controls
                                         Electronic Scales

      Flexible/Cable Hybrid Circuits     Printers
                                         Sensors
                                         Scanning Devices
                                         Night Vision Systems
</TABLE>

New Product Development

      An important part of the Company's strategy is development of new 
materials, processes and products.  During the past three fiscal years, the 
Company has invested an aggregate of $8.2 million in research and 
development.  The Company believes that its commitment to innovation is 
evidenced by the fact that it has developed new materials for use in its 
products even though it is not considered a materials supplier.  The Company 
has developed the following new products:

      PALFlex.  The Company has developed an adhesiveless polyimide-based 
material, PALFlex (Parlex Adhesiveless Laminate for Flex).  PALFlex is both 
a material and a manufacturing process that the Company believes is an 
enabling technology that provides superior performance at a lower cost than 
with traditional copper-clad materials.  PALFlex provides additional cost 
benefits by allowing the Company to combine certain material manufacturing 
steps with circuit manufacturing, eliminating several major process steps 
including conventional drilling, plasma, etching, copper deposition and 
copper plating.  PALFlex has been developed for high volume automotive 
applications but could potentially be used across a number of product lines.  
Because PALFlex is produced in roll form and the copper thickness can be 
controlled to tight tolerances, the Company believes that PALFlex may serve 
as the foundation for its development of products to serve the emerging fine 
line, micro-via market.  The Company shipped its first product incorporating 
the current version of PALFlex in fiscal year 1998.

      PALCoat.  Working closely with Coates ASI, a materials manufacturer, 
and Teledyne HALCO, an equipment manufacturer, the Company developed 
PALCoat, a new material for coating the outside of the circuit.  PALCoat has 
been designed to provide the electrical and physical characteristics 
required for a new generation of products but at a substantially lower cost 
than what is commercially available.  PALCoat is in production validation 
testing with two of the Company's automotive customers, and the Company 
currently expects to begin production in November 1998.

      PALCore HP.  The Company developed PALCore as a low-cost multilayer 
flexible material to minimize the difference between the cost of materials 
used in flexible circuits and those used in conventional rigid circuits.  
The Company has licensed PALCore to Allied-Signal and Polyclad Laminates for 
thin core rigid board applications, which are products that the Company does 
not produce.  Parlex receives a royalty in connection with sales by the 
licensees.  The Company has recently applied for patents for a new cost 
reduced version of PALCore which should enter production in calendar year 
1999.

Joint Venture, Mexico Operations, and Strategic Relationships

      Parlex Shanghai Joint Venture.  In 1995, the Company established a 
joint venture company in China, Parlex Shanghai, to manufacture and sell 
flexible circuits.  The participants in Parlex Shanghai are the Company 
(50.1% equity), Jin Ling, Inc., a Chinese printed circuit board company 
(40.0% equity), and Mascon, Inc., a Massachusetts-based international 
marketing and manufacturing company (9.9% equity).  The Company established 
Parlex Shanghai to better serve customers and potential customers that have 
manufacturing facilities in Asia and to more cost effectively manufacture 
certain products for worldwide distribution.

      Parlex Shanghai commenced operations in September 1995 and serves 
customers both in North America and Asia.  Parlex Shanghai's largest China-
based customer is General Motors Chinese joint venture and its largest 
United States-based customer is Thomas & Betts.  In addition to serving 
customers in Asia, Parlex Shanghai provides the Company with a competitive 
production capability for lower technology products to serve the Company's 
customers in other parts of the world.

      Parlex Mexico.  Parlex established a Mexican operation for use in the 
finishing, assembly and testing for its flexible circuit and laminated cable 
products.  The leased facility is in the Maquilas Teta-Kawi Industrial Park 
located in Empalme(, Sonora, Mexico.  This facility allows Parlex to perform 
labor intensive operations in a competitive and highly skilled labor market.

      Samsung Agreement.  In September 1994, the Company entered into a 
five-year manufacturing and sales agreement with Samsung Electro-Mechanics 
Co., Ltd. of Korea ("Samsung") whereby Samsung was granted the exclusive 
right to manufacture flexible multilayer and rigid-flexible products in 
Korea using the Company's PALCore technology.  Under the terms of the 
agreement, Samsung may only sell PALCore products to the Company, customers 
designated by the Company or to pre-existing Samsung customers approved by 
the Company.

      Pucka Agreements.  In 1996 the Company granted Pucka Industrial Co., 
Ltd. of Taiwan ("Pucka") a five year exclusive, area specific license to 
design, manufacture and sell flexible circuits using the Parlex HIS+ 
shielding process in Taiwan and, with the prior approval of the Company, 
other territories.  During the term of the agreement and for a period of 
three years thereafter, Pucka may not sell, manufacture or distribute any 
flexible circuit technology product which competes with the Company's 
products using the Company's HSI+ shielding processes.  Under a separate 
agreement, the Company appointed Pucka as its sole and exclusive distributor 
and independent sales representative for laminated cable in Taiwan and, with 
prior approval of the Company, other territories.

Customers

      The Company's customers are a diverse group of original equipment 
manufacturers that serve a variety of industries.  A list of representative 
customers appears below:

<TABLE>
<CAPTION>
            Automotive            Computer            Industrial
            ----------            --------            ----------

            <S>                   <C>                 <C>
            Delco                 Iomega              AMP
            Delphi                Dell                Foxboro
            Motorola              Compaq              Hewlett Packard
            Siemens               EMC                 Pitney Bowes
                                                      Texas Instruments

<CAPTION>
            Military/Aerospace         Telecommunications
            ------------------         ------------------

            <S>                        <C>
            Allied-Signal              Motorola
            Lockheed-Martin            Northern Telecom
            Textron                    Ericsson
            General Dynamics
            Raytheon
</TABLE>

      In Fiscal 1998, the Company sold products to approximately 700 
customers, counting divisions within certain major companies as separate 
customers.  In fiscal year 1996, 1997 and 1998, sales to several divisions 
of Motorola comprised approximately 29%, 20% and 23%, respectively, of the 
Company's total revenues.  The Company's top 20 customers accounted for 
approximately 66%, 69% and 66% of total revenues in fiscal 1996, 1997 and 
1998, respectively.

Sales and Customer Service

      The Company has organized its sales and customer service into business 
units that are tied to the following specific industry segments:  
automotive, military/aerospace, telecommunications, computer and industrial.  
The Company believes that this organizational structure allows its business 
unit managers to increase their focus on a specific industry and develop 
targeted customers within those industries.  Business unit managers are 
assigned customer service representatives to support their customers' day-
to-day requirements.  The business unit managers draw upon the expertise of 
the Company's engineering staff as an integral part of the sales process.  
In the United States, business unit managers coordinate the efforts of a 
network of 19 independent manufacturers' representative organizations.  In 
fiscal 1998, manufacturers' representative organizations accounted for 
approximately 70% of total revenues.

      The sales process involves extensive work with the customer's design 
engineers and the Company's design and engineering staff.  The business unit 
manager then works closely with the Company's applications engineers to 
prepare a feasibility study to assess the cost of producing the interconnect 
solution to the customer's specifications.  The process can often involve 
multiple design and manufacturing iterations to assure that the product can 
be produced to specifications at the lowest possible cost.

      The business unit manager leads the Company's effort to become the 
preferred supplier with target customers.  The manager's ability to 
understand the quality, cost, delivery, technology and service objectives of 
target customers is critical to the Company's goal of achieving the highest 
level of customer satisfaction.  In order to develop strategic relationships 
with target customers, the Company has participated in joint training, 
engineering seminars, manufacturing intern programs and as members of 
customers' problem solving teams.  The Company often has access to a 
customer's materials resource planning schedule, which allows the Company to 
better forecast the customer's near and mid-term requirements.

      The Company has direct sales and customer support offices in Austin, 
Texas and San Diego, California.  The Company uses these offices to provide 
applications engineering, logistical support and coordination of activities 
between the customer and the Company.  The Company has entered into 
agreements with distribution companies in Singapore and in France to provide 
forward stocking and inventory coordination for regional customers.  These 
relationships obviate the requirement to establish a local presence, while 
providing the customer with service comparable to that of a local provider.

      Under the terms of the Chinese joint venture agreement, Parlex 
Shanghai has agreed that it will sell its products outside China only 
through the Company and Mascon.  In turn, the Company has agreed that it 
will sell flexible circuits in China only through the joint venture.

Manufacturing Processes

      The Company's manufacturing processes are designed to accommodate high 
throughput, as well as to minimize cost and maximize yield.  All of the 
Company's manufacturing facilities are certified to the international 
standard ISO 9002.  In Fiscal 1998, the Company's US facilities were 
certified to the automotive standard QS 9002.

      The manufacturing process varies a great deal from product to product.  
While the production of laminated cable is a "dry" process incorporating 
virtually no chemical treatment, a multilayer flexible circuit is processed 
through a dozen or more chemical operations.  Although there is a no 
standard process, significant elements of production are highlighted in the 
following chart:

<TABLE>
<CAPTION>

     "Dry"                            "Wet"                  Laminated
Flexible Circuit                 Flexible Circuit              Cable
   Processes                        Processes                Processes
----------------                 ----------------            ---------

<S>                              <C>                      <C>
Drilling                         Copper deposition        Lamination
Automated optical inspection     Carbon coating           Slitting
Lamination                       Chemical cleaning        Conductor forming
Electrical testing               Developing               Injection molding
Routing                          Etching                  Shielding
Die cutting                      Solder leveling          Laser skiving
Assembly                         Gold plating             Assembly
</TABLE>

      The Company's computer aided manufacturing system takes the customer's 
design and programs the various steps that will be required to manufacture 
the particular product.  The product then follows the appropriate production 
flow until finally released for shipment by the quality organization.

      The Company believes that its substantial capital investment and its 
manufacturing expertise in a number of specialized areas have contributed to 
its position as an industry leader.  A substantial amount of the Company's 
production equipment is unique to its processes and technologies.  Examples 
include cable laminators, roll plating, roll etching, precision cable 
slitters and automatic punching equipment.

      The Company has added or is in the process of adding capacity at all 
of its facilities.  In the Methuen, Massachusetts facility, the Company is 
adding an additional 60, 000 square feet to its current manufacturing space 
of 125,000 square feet.  In the Salem, New Hampshire facility, the Company's 
manufacturing space has been expanded by 12,000 square feet to a total of 
46,000 square feet.  Parlex Shanghai has a leased facility in Shanghai, 
China which has been expanded 11,000 square feet to a total of 35,000 square 
feet.  The Company is also well along in a major equipment acquisition 
program.  When the building and equipment programs are complete, the total 
capacity will have increased by over 35%.

Materials and Materials Management

      The Company aggressively attempts to control the cost of purchased 
materials and the level of inventories.  The Company believes it benefits 
from long-term relationships with its suppliers.  The Company's goal is to 
attain a competitive price from suppliers and foster a shared vision towards 
advancing technology.

      The Company purchases raw circuit materials, process chemicals and 
various components from multiple outside sources.  The Company often makes 
long-term purchasing commitments with key suppliers for specific customer 
programs.  These suppliers commit to provide cooperative engineering as 
required and in some cases to maintain a local inventory in order to provide 
shorter lead times and reduced inventory levels for the Company.  In many 
cases the Company's customers approve, and often specify, sources of supply.  
The Company relies on key suppliers for certain raw materials.

                    Top Five Suppliers in Fiscal 1998

<TABLE>
<CAPTION>
                 Supplier                Items Supplied
                 --------                --------------

                 <S>                     <C>
                 Dupont                  Flexible Laminates
                                         Coverlay Film

                 AMP                     Connectors

                 Sheldahl                Flexible Laminates
                                         Cable Insulation

                 Steel Heddle            Copper Wire

                 Atotech                 Chemicals
</TABLE>

      The Company qualifies its suppliers through a vendor rating system 
which limits the number of suppliers to those that can provide the Company 
with the best total value and quality.  The Company monitors each supplier's 
quality, delivery, service and technology to insure that the Company will 
receive materials that meet its objectives.

Management Information Systems

      The Company presently has a mainframe-based information system that 
allows for integration of manufacturing, accounting, sales, material 
management and engineering data.  The Company recently entered into a 
contract with a systems integrator to develop a client/server system that 
will enhance the timeliness and quality of information concerning the 
Company's operations.  This system is designed to automate the Company's 
activity-based cost system and provide automatic quoting, quote tracking and 
MRP.  The new system, which is scheduled to be fully implemented by January 
1999, will enable the Company to make software changes more easily, allowing 
faster project completion and improved customer satisfaction.  The new MIS 
system will be fully compliant with year 2000 requirements.

Competition

      The Company's business is highly competitive.  The Company competes 
against other manufacturers of flexible interconnects as well as against 
manufacturers of rigid-printed circuits.  Competitive factors among flexible 
circuit and laminated cable suppliers are price, product quality, 
technological capability and service.  The Company believes that it competes 
favorably with respect to these competitive factors, but believes that its 
competitive strength is in its ability to apply technology to reduce cost.  
The Company competes against rigid board products on the basis of product 
versatility, although price can also be a competitive factor if the 
difference between the cost of a rigid circuit and a flexible circuit 
becomes too great.  The principal competitors for flexible circuits are 
Sheldahl (automotive), AdFlex (telecommunications), M-Flex (computer) and 
Flex Circuits, Inc. (aerospace).  For laminated cable, the principal 
competitors are AMP and Fujikura Ltd.  (a Japanese company).

Backlog

      The Company's backlog consists of orders for which a written purchase 
order has been received.  In situations where the order requires an 
engineering effort, it will be included in backlog even though a delivery 
schedule will not be finalized until this phase is completed.  On some major 
multi-year contracts, such as with Motorola, the customer's forecast for a 
13-week period is added to backlog at the end of each quarter.  The 
Company's standard purchase orders are cancelable, but require the payment 
of certain costs upon cancellation.  A certain portion of the Company's 
backlog may be subject to cancellation without significant penalty.  The 
Company's backlog as of June 30, 1998 increased to $26 million from $23 
million in the immediately preceding year ended June 30, 1997.  Due to the 
timing of orders, delivery intervals, product mix and the possibility of 
customer changes in delivery schedules, the Company's backlog at any 
particular date may not be indicative of actual sales for any succeeding 
period.

Intellectual Property

      The Company has acquired patents and it seeks patents on new products 
and processes where it believes patents would be appropriate to protect the 
Company's interests. Although the Company believes that patents are an 
important part of its competitive position, it does not believe that any 
single patent or group of patents is critical to its success.  Due to the 
rapid technological change in its business, the success of its business 
depends more on its design creativity and manufacturing expertise than on 
patents and other intellectual property.  The Company owns 17 patents issued 
in the United States and has applied for corresponding patents with certain 
relevant foreign patent offices.  Federal trademark registrations have been 
obtained for PALFlex, PALCore and U-Flex and Company has applied for 
registration of PALCoat.  The Company also relies on internal security 
measures and on confidentiality agreements for protection of trade secrets 
and proprietary know-how.  There can be no assurance the Company's efforts 
to protect its intellectual property will be effective to prevent 
misappropriation or that others may not independently develop similar 
technology.

      Under the terms of the Chinese joint venture agreement, the Company 
transferred certain technology to Parlex Shanghai and has agreed to provide 
it with additional technology and expertise as the joint venture's 
capabilities and markets develop.  Certain technology, including PALFlex, is 
excluded from the arrangement.

Environmental Regulations

      Flexible circuit manufacturing requires the use of metals and 
chemicals.  Water used in the manufacturing process must be treated to 
remove metal particles and other contaminants before it can be discharged 
into the municipal sanitary sewer system.  The Company operates and 
maintains water effluent treatment systems and uses approved laboratory 
testing procedures to monitor the effectiveness of those systems at its 
Methuen, Massachusetts facility.  The Company operates those treatment 
systems under effluent discharge permits issued by a number of governmental 
authorities.  Air emissions resulting from the Company's manufacturing 
processes are regulated by permits issued to the Company by government 
authorities.  These permits must be renewed periodically and are subject to 
revocation in the event of violations of environmental laws.  The Company 
believes that the waste treatment equipment at its facility is currently in 
compliance with the requirements of environmental laws in all material 
respects and that its air emissions are within the limits established in the 
relevant permit.  However, there can be no assurance that violations will 
not occur in the future.  The Company is also subject to other environmental 
laws including those relating to the storage, use and disposal of chemicals, 
solid waste and other hazardous materials, as well as to work place health 
and safety and indoor air quality emissions.  Furthermore, environmental 
laws could become more stringent or might apply to additional aspects of the 
Company's operations over time, and the costs of complying with such laws 
could be substantial.  Compliance with state and federal laws did not have a 
material impact on the Company's capital expenditures, earnings or 
competitive position in fiscal 1998.  In fiscal 1999, capital expenditures 
associated with environmental compliance are estimated to be $300,000.

Employees

      As of September 1, 1998, the Company employed 605 people in the United 
States including 521 in production, 59 in marketing, sales, engineering, and 
customer support and 25 in administration.  Of the 605 employees, 558 were 
direct employees of Parlex and 47 worked for interim staffing agencies.  
Parlex Shanghai employs approximately 185 people.  The United States 
employees of Parlex are not represented by a collective bargaining unit and 
the Company believes its relations with its workforce are good.


Item 2. Properties
------------------

      The Company's executive offices and its product and process 
development and primary flexible circuit manufacturing facilities are 
located in a single 125,000 square feet facility in Methuen, Massachusetts 
which the Company owns subject to no encumbrances.  The facility currently 
operates three shifts, six days a week.  The Company is in the process of 
adding 60,000 square feet to this facility.  See "Item 1-Business-
Manufacturing Processes."

      The Company's laminated cable operations are housed in a single 46,000 
square feet facility in Salem, New Hampshire, which is leased through 2007.  
The Salem, New Hampshire facility is approximately nine miles from the 
Methuen facility.  During construction in the Methuen, Massachusetts 
facility, corporate offices have been temporarily relocated to the Salem, 
New Hampshire facility.

      Parlex Shanghai has a leased facility in Shanghai, China of 
approximately 35,000 square feet.  

      The Company leases a 16,000 square foot finishing facility in 
Empalme(, Sonora, Mexico.


Item 3. Legal Proceedings
-------------------------

      The Company has no material pending legal proceedings.


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

      This item is inapplicable. 


                                   Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
-----------------------------------------------------------------------------

(a)   Price Range of Common Stock

      The Company's Common Stock is listed on the Nasdaq National Market, 
      under the symbol "PRLX".  The following table sets forth reported high 
      and low sale prices for the Common Stock for the periods indicated.  
      The information reflects the Company's declaration of a three-for-two 
      spilt of its Common Stock effected as a 50% stock dividend on April 
      27, 1997.

<TABLE>
<CAPTION>
                               High         Low
                               ----         ---

      <S>                     <C>         <C>
      Fiscal 1998
      -----------
        First Quarter         $24.00      $13.88
        Second Quarter         31.25       11.25
        Third Quarter          19.50       14.00
        Fourth Quarter         21.50       12.75

      Fiscal 1997
      -----------
        First Quarter           9.67        5.33
        Second Quarter          7.83        5.83
        Third Quarter          16.33        6.67
        Fourth Quarter         15.25       10.00
</TABLE>

(b)   Approximate Number of Holder of Common Stock

      As of September 1, 1998, there were approximately 101 holders of 
      record of the Common Stock.

(c)   Dividends

      The Company has never declared or paid cash dividends on its Common 
      Stock.  The Company currently intends to retain further earnings, if 
      any, to fund the development and growth of its business and does not 
      anticipate paying any cash dividends in the foreseeable future.  
      Future cash dividends, if any, will be determined by the Board of 
      Directors and will be based on the Company's earnings, capital, 
      financial condition and other factors deemed relevant by the Board of 
      Directors.


Item 6. Selected Consolidated Financial Data
--------------------------------------------

<TABLE>
<CAPTION>
                                           Year Ended June 30,
                              1994      1995      1996      1997      1998
                             -------   -------   -------   -------   -------
                                  (in thousands, except per share data)

<S>                          <C>       <C>       <C>       <C>       <C>
Statement of income data:
Total revenues               $34,926   $40,251   $47,257   $55,087   $60,275
Cost of products sold         29,150    32,946    40,308    44,137    47,304
                             -----------------------------------------------
Gross profit                   5,776     7,305     6,949    10,950    12,971
Selling, general and
 administrative expenses       4,637     4,998     5,518     7,288     8,272
                             -----------------------------------------------
Operating income               1,139     2,307     1,431     3,662     4,699
Income from operations
 before income taxes           1,007     2,240     1,170     3,381     5,130
Net income                     1,007     1,486       770     2,120     3,157
Basic income per share(1)      $0.29     $0.41     $0.22     $0.59     $0.73
                               =============================================
Diluted income per share (1)   $0.28     $0.40     $0.21     $0.57     $0.71
                               =============================================

Weighted average shares-basic  3,466     3,651     3,556     3,569     4,296
                               =============================================
Weighted average shares-diluted3,605     3,762     3,675     3,715     4,466
                               =============================================

<FN>
<F1>   Information reflects the Company's declaration of a three-for-two 
       split of Common Stock effected as a 50% stock dividend on April 21, 
       1997.
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                        Year Ended June 30,
                             1994      1995      1996      1997      1998
                            -------   -------   -------   -------   -------
                                (in thousands, except per share data)

<S>                         <C>       <C>       <C>       <C>       <C>
Balance Sheet Data:
Working capital             $ 6,704   $ 8,466   $ 9,148   $ 9,592   $26,286
Total assets                 20,845    24,517    29,662    32,234    56,181
Short-term debt, including
 current portion of
 long-term debt                200        200       501     1,000       432
Long-term debt, less
 current portion               950      2,300     3,650     2,500     1,166
Stockholders' equity        12,880     14,667    15,455    17,788    41,591
</TABLE>


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

Overview

      The Company is a leading suppler of flexible interconnects principally 
for sale to the automotive, military/aerospace, computer, telecommunications 
and industrial markets.  Prior to 1990, substantially all of the Company's 
sales were for military/aerospace applications.  Beginning in 1990, the 
Company developed a business strategy of pursuing broader commercial 
applications for its products.  The execution of this strategy has resulted 
in a reduction of revenues from the military/aerospace sector as a 
percentage of the Company's total revenue from 53% in fiscal year 1992 to 
20% in fiscal year 1998, while increasing overall revenues approximately 
111%.

      The Company believes that its development of innovative materials and 
processes provides it with a competitive advantage in the markets in which 
it competes.  During the past three years, the Company has invested over 
$8.0 million (or approximately 5% of total revenues) in research and 
development to develop materials and enhance its manufacturing processes.  
The Company includes in cost of products sold its expenditures for its 
research and development activities.

      To better serve customers that have production facilities in Asia and 
to more cost effectively manufacture certain products for worldwide 
distribution, the Company formed a Chinese joint venture, Parlex (Shanghai) 
Circuit Co., Ltd., in 1995.  The Company owns 50.1% of the equity interest 
in Parlex Shanghai.  Accordingly, Parlex Shanghai's results of operations, 
cash flows and financial position are included in the Company's consolidated 
financial statements (see Note 1 to the Consolidated Financial Statements).

      In May 1998, the Company entered into an agreement to lease a facility 
in Mexico to perform the finishing and, in some cases, assembly operations 
to parts being manufactured at its other production facilities.  The Company 
anticipates that significant benefit will be realized from the performance 
of these labor intensive operations in Mexico.  The start-up costs did have 
a negative impact on the margins in the fourth quarter ended June 30, 1998, 
and an impact on margins is anticipated for the first quarter in the year 
that commenced July 1, 1998.

      The Company is currently involved in an expansion program.  As a 
result of the follow-on common stock offering completed in October 1997, 
approximating $20.4 million, the Company now has sufficient resources to 
expand its Methuen, Massachusetts facility by an additional 60,000 square 
feet, of which 40,000 will be used for additional manufacturing capacity, 
with the remaining space to be used for administrative needs.  The Company 
has also increased its manufacturing space at its production facilities in 
Salem, New Hampshire and Shanghai, China.  The Company has also invested in 
equipment that will increase its manufacturing capacity, and allow for the 
introduction of new technologies.

Results of Operations

      The following table sets forth, for the periods indicated, selected 
items in the Company's Statements of Income as a percentage of total 
revenues.  The table and the discussion below should be read in conjunction 
with the Consolidated Financial Statements and Notes thereto:

<TABLE>
<CAPTION>
                                                 Year Ended June 30,
                                           ------------------------------
                                            1998        1997        1996
                                            ----        ----        ----

<S>                                        <C>         <C>         <C>
Total revenues                             100.0%      100.0%      100.0%
Cost of products sold                       78.5%       80.1%       85.3%
Gross profit                                21.5%       19.9%       14.7%
Selling, general and administrative
 expenses                                   13.7%       13.2%       11.7%
Operating income                             7.8%        6.6%        3.0%
Income from operations before income taxes   8.5%        6.1%        2.5%
Net income                                   5.2%        3.8%        1.6%
</TABLE>

Results of Operations for the Past Three Fiscal Years

Total Revenues

      Total revenues rose to $60,275,171in fiscal year 1998, a 9% increase 
from the $55,086,853 reported in fiscal 1997, while revenues rose 17% in 
fiscal 1997 from the $47,257,025 reported in fiscal year 1996.  Revenues 
grew in each of the Company's principal product lines - flexible circuits, 
laminated cable, flexible/cable hybrid circuits and flexible interconnect 
assemblies.  The increase in total revenues in each year was primarily 
attributable to an increase in the volume of units shipped.

      Total revenues included licensing and royalty fees of $226,835, 
$109,710, and $155,000 in fiscal 1998, 1997 and 1996, respectively.  
Although the Company intends to continue its practice of developing 
materials and processes that it can license to third parties, it does not 
expect that royalty revenues will represent a significant portion of total 
revenues in the near term.

Cost of Products Sold 

      Cost of products sold in fiscal 1998, 1997, and 1996 was $47.3 
million, $44.1 million, and $40.3 million, respectively.  As a percentage of 
revenue, cost of products sold was 78.5%, 80.1%, and 85.3% in each of fiscal 
1998, 1997, and 1996, respectively.  The improvement in the current fiscal 
year resulted from assigning production to the facility most economically 
suited to manufacture a particular type of product.

      The decrease in the percentage in fiscal 1997 from fiscal 1996 was 
primarily the result of manufacturing yield improvements, particularly in 
connection with a major automotive program for Motorola, while general 
productivity gains and increased absorption of overhead also contributed to 
the reduction.  These improvements were made possible by enhancements to the 
manufacturing process, the acquisition of additional production equipment 
and cost savings on materials and supplies.

Selling, General and Administrative Expenses

      Selling, general and administrative expenses in fiscal 1998, 1997, and 
1996 were $8.3 million, $7.3 million, and $5.5 million, respectively.  As a 
percentage of total revenues, selling, general and administrative expenses 
were 13.7%, 13.2%, and 11.7% in fiscal years 1998, 1997, and 1996, 
respectively.   The dollar increase in the past two fiscal years is 
primarily attributable to the opening of field offices in Texas and San 
Diego, hiring of additional sales personnel, additional commissions 
associated with incremental sales, and additional costs being incurred by 
the Chinese joint venture.  The Company anticipates that selling, general, 
and administrative expenses as a percentage of revenues will decrease as 
revenues increase.

Other Income

      Other income of $684,000 this year is comprised, for the most part, of 
interest income ($610,000) and, to a lesser extent, the gain on the sale of 
equipment, and items of a miscellaneous nature.  In 1997, other income of 
$156,000 was principally the result of a gain on the sale of equipment, 
while the $91,000 in 1996 was comprised entirely of items of a miscellaneous 
nature.

Interest Expense

      Interest expense was $254,000 this year versus $436,000 in fiscal 
1997.  The reduction in expense is attributable to a lower level of average 
borrowings under the Company's revolving credit facility.  The increase in 
fiscal 1997 to $436,000 from $351,000 in 1996 was principally the result of 
increased borrowings to finance capital expenditures.  Interest rates during 
the period remained relatively constant.

Provision for Taxes

      The Company's effective tax rate in fiscal 1998 was 30% versus 37% and 
33% in fiscal years 1997 and 1996, respectively.  This year the Company 
benefited from the income generated by the Chinese joint venture, which 
currently is not subject to tax.  Items of a miscellaneous nature are 
attributed to the increase in 1997 from 1996.

Liquidity and Capital Resources

      In fiscal 1998, the Company had net income of $3.2 million, as well as 
depreciation and amortization of $2.4 million, thus adding $5.6 million to 
cash flow.  Cash flow was reduced by $3.4 million relating to increased 
working capital, resulting in a positive cash flow from operations of $2.2 
million.

      In October 1997, the Company completed a stock offering of 1,000,000 
shares of its common stock, priced at $22.00 per share.  After deducting 
underwriting discounts, commissions and offering expenses paid by the 
Company, the net proceeds to the Company approximated $20.4 million.

      During fiscal year 1998, the Company paid off its revolver loan 
balance and has spent approximately $8.5 million to expand its manufacturing 
facilities and purchase capital equipment that will increase its 
manufacturing capacity and accommodate various new technological processes.  
It is anticipated that in fiscal 1999 an additional $9.0 million will be 
expended to complete the Company's planned expansion.

      The Company has a $10,000,000 unsecured revolving line of credit.  As 
of June 30, 1998, no monies were borrowed against this line.

      The Company believes that its cash on hand, its anticipated cash flow 
from operations, and the amount available under its revolving credit 
facility, should be sufficient to meet its foreseeable needs.

      The Company has a deferred compensation obligation that is owed to the 
Chairman of the Board of Directors.  Under the current arrangement, monthly 
payments begin in June 1999, or the first month after the termination of 
employment, whichever occurs first, and continues for no fewer than 60 
months or, at the election of the employee prior to his termination of 
employment, for up to 120 months.  Amounts to be paid within one year are 
not expected to be material.  

New Accounting Pronouncements

      In June 1997, the Financial Accounting Standards Board ("FASB") issued 
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, 
"Disclosures About Segments of an Enterprise and Related Information."  SFAS 
No. 130 establishes standards for reporting and display of comprehensive 
income and its components (revenues, expenses, gains and losses) in a full 
set of general purpose financial statements.  SFAS No. 131 establishes 
standards for the way that public business enterprises report information 
about operating segments in annual financial statements and requires that 
those enterprises report selected information about operating segments in 
interim financial reports.  It also establishes standards for related 
disclosures about products and services, geographic areas and major 
customers. SFAS No. 130 will be adopted by the Company during the first 
quarter of fiscal 1999 and SFAS NO. 131 will be adopted by the Company 
during the fourth quarter of fiscal 1999.  These standards are not expected 
to have a material effect on its consolidated financial position and results 
of operations.

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative 
Instruments and Hedging Activities."  SFAS No. 133 establishes accounting 
and reporting standards for derivative instruments, including certain 
derivative instruments embedded in other contracts and for hedging 
activities.  SFAS No. 133 will be adopted by the Company during fiscal year 
2000.  This standard is not expected to have a material effect on its 
consolidated financial position, results of operations and financial 
statement disclosures.

Year 2000 Disclosure Statement

      The Year 2000 will effect not only the Company's internal computer 
systems, but also those external systems with which the Company exchanges 
any date related information, its customers, suppliers, banks, insurance 
companies, stockholders, etc.  In order to properly assess the extent this 
problem may have on  its operations, the Company has and is continuing to 
survey its key suppliers, service providers, and trading partners as to 
their level of preparedness and the effect it will have on the Company's 
operations..

      The Company is confident that its enterprise system will be fully Year 
2000 compliant by the first quarter of 1999.  Quite apart from the Year 2000 
problem, the Company is in the process of replacing its legacy computer 
system with a client server system for which both the hardware and software 
has been certified as Year 2000 compliant.  The total cost of this project 
is approximately $1,050,000 of which approximately $300,000 was expended 
during fiscal 1998.

      The Company is in the process of inventorying all its mission critical 
manufacturing systems in order to determine any Year 2000 issues that may 
exist.  While the Company anticipates that some software upgrades will be 
required, it does not believe that any issues exist which will prevent these 
systems from operating as expected after January 1, 2000.

      This inventory will be completed by the beginning of the fourth 
quarter of 1998 and testing to identify needed remediation will be completed 
by the end of that quarter.  Any required remediation of all mission 
critical systems will be completed by the end of the first quarter of 1999 
and the testing necessary to validate compliance is scheduled to be 
completed by mid 1999.

      The Year 2000 issue does present some risk that the company's 
operation may suffer disruption as a result of either a computer malfunction 
or a corruption of date sensitive data.  If this does occur, the Company 
believes that it most likely will be due to factors external to the company.  
Because of the Company's internal Year 2000 program, the Company does not 
believe there is a significant risk of disruption of operations due to 
malfunction of its internal systems or equipment.

                       CERTAIN FACTORS THAT MAY AFFECT
                          FUTURE OPERATING RESULTS

      This Report contains certain forward-looking statements that involve 
risks and uncertainties.  When used in this Report, the worked "believes," 
"expects," "anticipates," "intends," "estimates," "should," "will likely" 
and similar expressions are intended to identify such forward-looking 
statements.  The cautionary statements made in this Report should be read as 
being applicable to all related forward-looking statements wherever they 
appear herein.  The Company's actual results could differ materially from 
those discussed here.  Important factors that could cause or contribute to 
such differences include those herein.  The Company undertakes no obligation 
to update publicly any forward-looking statements, whether as a result of 
new information, future events or otherwise.

      Fluctuations in Operating Results; Variability of Orders.  The 
Company's operating results have historically been subject to fluctuations, 
and the Company expects that they will continue to fluctuate due to a 
variety of factors, including the timing and volume of orders from, and 
shipments to, customers, the timing of introductions of and market 
acceptance of new products and general economic trends.  Typically, in the 
flexible interconnect industry, a substantial portion of sales in a given 
quarter depends on obtaining orders for products to be manufactured and 
shipped in the same quarter in which those orders are received.  Although 
the Company monitors its customers' needs, it often has limited knowledge of 
the magnitude or timing of future orders.  As a result, the timing of 
revenues may be affected by the need to ramp up to or down from volume 
production in response to fluctuations in customer demand, the introduction 
of replacement products or the balancing of inventory.  A significant 
decrease in the number, magnitude or timing of orders in any given quarter 
could have a material adverse effect on the Company's business, financial 
condition and operating results.  Because it is difficult for the Company to 
readily reduce spending on certain operating expenses, such as fixed 
manufacturing costs, development costs and ongoing customer service, a 
reduction in sales could have a material adverse effect on near-term profit 
margins.  Results of operations in any given period are therefore not 
necessarily indicative of the results to be expected for any future period.  
Due to all of the foregoing factors, it is possible that in some future 
quarter the Company's operating results may be below the expectations of 
public market analysts and investors.

      Expansion of Manufacturing Capacity.  The Company believes its long-
term competitive position depends in part on its ability to increase its 
manufacturing capacity.  The Company's business, financial condition and 
operating results could be materially and adversely affected if the Company 
is not able to obtain sufficient manufacturing capacity to meet increases in 
demand for its products.  The Company intends in the future to expand its 
manufacturing capacity.  The failure of the Company to complete the 
expansion on schedule and within budget could have a material adverse effect 
on its business, financial condition and operating results.  In addition, 
the Company is in the process of implementing new operations control and 
accounting information systems, which may temporarily impact the Company's 
operations.

      Market and Customer Concentration.  Applications for flexible 
interconnects include automotive electronics, military/aerospace products, 
computers and computer peripherals, telecommunications subscriber and 
infrastructure equipment, as well as circuits and cables for medical and 
industrial applications.  Although the Company markets products for each of 
these applications in order to avoid a dependency on any one sector, a 
significant downturn in any of these market sectors could have a material 
adverse effect on the Company's business, financial condition and operating 
results.  Historically, the Company has sold a substantial portion of its 
flexible interconnects to a limited number of customers.  In fiscal 1996, 
1997, and 1998, sales to Motorola accounted for approximately 29%, 20% and 
23% respectively, of the Company's total revenues and the Company's top 20 
customers accounted for approximately 66%, 69% and 66% of the Company's 
total revenues, respectively.   The Company expects that a limited number of 
customers will continue to account for a high percentage of its total 
revenues in the foreseeable future.  The loss of a significant customer or a 
substantial reduction in orders by any significant customer could reduce the 
Company's cash flow and have a material adverse effect on the Company's 
business, financial condition and operating results.

      Current and Future Capital Needs.  The development and manufacture of 
flexible interconnects is highly capital intensive.  In order to remain 
competitive, the Company must continue to make significant expenditures for 
capital equipment, expansion of operations and research and development.  
The Company expects that substantial capital will be required to expand its 
manufacturing capacity and fund working capital for anticipated growth.  To 
the extent the Company's financial resources are insufficient to fund these 
activities, the Company will need to raise additional funds either through 
borrowings or further equity financings.  There can be no assurance that 
such additional capital will be available on reasonable terms or at all.  
The inability of the Company to obtain adequate additional financing on 
reasonable terms when needed would have a material adverse effect on the 
Company's business, financial condition and operating results.  Furthermore, 
the Company's credit facility contains various financial covenants 
predicated on the Company's present and future financial condition.  In the 
event the Company is no longer able to meet the covenants contained in the 
credit facility, it may be required to repay the debt incurred thereunder. 

      Foreign Operations.  The Company is currently expanding its operations 
globally.  The Company owns a 50.1% equity interest in a joint venture in 
China.  Manufacturing and sales operations outside the United States are 
accompanied by a number of risks inherent in international operations, 
including imposition of governmental controls, compulsory licensure 
requirements, compliance with a wide variety of foreign and United States 
export laws, currency fluctuations, unexpected changes in trade 
restrictions, tariffs and barriers, political and economic instability, 
longer payment cycles typically associated with foreign sales, difficulties 
in administering business overseas, labor union issues and potentially 
adverse tax consequences.  Although the Company's current products are 
designed to meet the regulatory standards of certain foreign countries, any 
inability to meet foreign regulatory approvals on a timely basis could have 
an adverse effect on the Company's business, financial condition and 
operating results.

      Competition.  The Company's business is highly competitive.  The 
flexible interconnect industry is differentiated by customers, markets and 
geography, with each niche having its own combination of complex packaging 
and interconnect requirements.  The Company experiences competition 
worldwide in the flexible interconnect market from a number of foreign and 
domestic providers as well as from alternative technologies such as rigid 
printed circuits.  Many of the Company's competitors are larger and have 
greater financial resources than the Company.  There can be no assurance 
that existing or future competitors will not be able to duplicate the 
Company's strategies or that the Company will continue to be able to compete 
successfully.

      Limited Sources of Supply.  The Company purchases raw materials, 
process chemicals and various components from multiple outside sources.  In 
fiscal 1998, the Company's largest supplier of raw materials was Dupont, 
from which it purchased in excess of 40% of its materials and supplies.  Any 
unanticipated disruption in shipments from Dupont would have a material 
adverse effect on the Company's business, financial condition and operating 
results.  Although there exist alternate suppliers for the raw materials, 
process chemicals and various components that the Company currently 
purchases from its suppliers, because of the Company's limited inventory of 
raw materials and tight manufacturing cycles, any unanticipated interruption 
of supply could have a short-term material adverse effect on the Company's 
business, financial condition and operation results.

      Intellectual Property.  The Company relies on a combination of patent 
and trade secret laws and non-disclosure and other contractual agreements to 
protect its proprietary rights.  There can be no assurance that the 
Company's efforts to protect its intellectual property will be effective in 
preventing misappropriation or that others may not independently develop 
similar technology.  In addition, litigation may be necessary to protect the 
Company's proprietary rights or to defend against claims of infringement.  
Although no claims have been asserted against the Company for infringement 
of the proprietary rights of others, there can be no assurance that third 
parties will not assert such claims in the future.  If any infringement 
claim is asserted, the Company may be required to obtain a license of such 
rights.  There can be no assurance that any such license would be available 
on reasonable terms, if at all.  Litigation with respect to patents and 
other intellectual property matters could result in substantial costs and 
diversion of management and other resources and could have a material 
adverse effect on the Company's business, financial and operating results.

      Technological Change.  The market for the Company's products and 
services is characterized by rapidly changing technology and continuing 
process development.  The future success of the Company's business will 
depend in large part upon its ability to maintain and enhance its 
technological capabilities, develop and market products and services that 
meet changing customer needs and successfully anticipate or respond to 
technological changes on a cost-effective and timely basis.  In addition, 
the flexible interconnect industry could in the future encounter competition 
from new technologies that render interconnect technology less competitive 
or obsolete.  There can be no assurance that the Company will effectively 
respond to the technological requirements of the changing market.  Moreover, 
there can be no assurance that the materials and processes that the Company 
is currently developing will result in commercially viable technological 
processes or that there will be commercial applications for these 
technologies.  To the extent that the Company determines that new 
technologies and equipment are required to remain competitive, the 
development, acquisition and subsequent implementation of such technologies 
and equipment are likely to continue to require significant capital 
investment.  The Company's failure to keep pace with technological change 
could have a material adverse effect on its business, financial condition 
and operating results.

      Dependence on Key Personnel.  The Company is dependent upon a number 
of its key management personnel.  In addition, the future success of the 
Company depends on its continuing ability to attract and retain highly-
qualified technical and managerial personnel.  Competition for such 
personnel is intense, and there can be no assurance that the Company will be 
successful in attracting and retaining such personnel.  The loss of service 
of one or more key individuals, or the inability to attract additional 
qualified personnel, could have a material adverse effect on the Company's 
business, financial condition and operating results.  The Company maintains 
a key person life insurance policy in the amount of $1.0 million on each of 
Mr. Herbert W. Pollack and Mr. Peter J. Murphy.

      Environmental Regulations.  The Company is subject to a variety of 
environmental laws relating to the storage, discharge, handling, emission, 
generation, manufacture, use and disposal of chemicals, solid and hazardous 
waste and other toxic and hazardous materials used to manufacture, or 
resulting from the process of manufacturing, the Company's products.  The 
Company cannot predict the nature, scope or effect of future legislation or 
regulatory requirements to which its operations might be subject or the 
manner in which existing or future laws or regulations will be administered 
or interpreted, including whether they will be applied in the future to 
materials, product or activities to which they have not been applied 
previously.  Complying with a new or more stringent laws or regulations, or 
to more vigorous enforcement of the current or future policies of regulatory 
agencies, could require substantial expenditures by the Company and could 
have a material adverse effect on its business, financial condition and 
operating results.  Environmental laws and regulations require the Company 
to maintain and comply with a number of permits, authorizations and 
approvals and to maintain and update training programs and safety data 
regarding materials used in its processes.  Violations of those requirements 
could result in financial penalties and other enforcement actions, and could 
require the Company to halt one or more portions of its operations until a 
violation is cured.  Although the Company works to operate in compliance 
with these environmental laws, there can be no assurance that the Company 
will succeed in that effort at all times.  The combined costs of curing 
incidents of non-compliance, resolving enforcement actions that  might be 
initiated by government authorities or satisfying business requirements 
following any period affected by the need to take such actions could have a 
material adverse effect on the Company's business, financial condition and 
operating results.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

      As of June 30, 1998, the Company is exposed to market risks which 
include changes in U.S. and foreign interest rates and fluctuations in 
exchange rates.

      The Company maintains a portion of its cash and cash equivalents in 
financial instruments with purchased maturities of three months or less.  
These financial instruments are subject to interest rate risk and will 
decline in value if interest rates decrease.  Due to the short duration of 
these financial instruments, an immediate decrease in interest rates would 
not have a material effect upon the Company's financial position.
 
      The Company's outstanding bank loan bears interest at a rate of 125 
basis points over the Singapore Interbank Offer Rate ("SIBOR") and is 
therefore affected by changes in market interest rates.  However, the 
Company has the option to pay the balance in full at any time without 
penalty.  As a result, the Company believes that the market risk is not 
material.

      The Company also has a revolving credit agreement which bears interest 
at the bank's corporate base rate which is also affected by changes in 
market interest rates.  The Company does not have any outstanding borrowings 
at June 30, 1998 and has the option to repay borrowings at anytime without 
penalty and therefore believes that the market risk is not material.

      The remainder of the Company's long term debt bears interest at fixed 
rates and are therefore not subject to market risk. 

      The Company has a subsidiary located in Shanghai, China.  Sales are 
typically denominated in the local currency (functional currency), thereby 
creating exposure to changes in exchange rates. The changes in the 
Chinese/U.S. exchange rate may positively or negatively impact the Company's 
sales, gross margins and retained earnings.  Based upon the current volume 
of transactions in China and the stable nature of the exchange rate between 
China and the U.S., the Company does not believe the market risk is 
material.


Item 8.  Financial Statements and Supplementary Data 
----------------------------------------------------

      See the Consolidated Financial Statements included in this report; 
also see Note 12 to Consolidated Financial Statements.


Parlex Corporation and Subsidiaries

Consolidated Balance Sheets as of June 30, 1998
and 1997 and Consolidated Statements of Income, 
Stockholders' Equity, and Cash Flows for the 
Years Ended June 30, 1998, 1997 and 1996 
and Independent Auditors' Report


INDEPENDENT AUDITORS' REPORT

To the Stockholders and Directors
 of Parlex Corporation:

We have audited the accompanying consolidated balance sheets of Parlex 
Corporation and its Subsidiaries as of June 30, 1998 and 1997, and the 
related consolidated statements of income, stockholders' equity, and cash 
flows for each of the three years in the period ended June 30, 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, such consolidated financial statements present fairly, in 
all material respects, the financial position of Parlex Corporation and its 
Subsidiaries at June 30, 1998 and 1997, and the results of their operations 
and their cash flows for each of the three years in the period ended June 
30, 1998, in conformity with generally accepted accounting principles.

August 5, 1998

PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------

ASSETS                                                                  1998            1997
                                                                        ----            ----


<S>                                                                 <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                         $  5,824,233    $    596,614
  Short-term investments                                               6,789,469               -
  Accounts receivable - less allowance for doubtful accounts
   of $252,000 in 1998 and $143,000 in 1997                           11,145,750       9,029,388
  Inventories                                                          9,346,657       7,262,477
  Refundable income taxes                                                323,626               -
  Deferred income taxes                                                  372,725         294,033
  Other current assets                                                 1,706,367         850,956
                                                                    ----------------------------
      Total current assets                                            35,508,827      18,033,468
                                                                    ============================

PROPERTY, PLANT AND EQUIPMENT:
  Land                                                                   468,864         468,864
  Buildings                                                            7,724,022       7,017,478
  Machinery and equipment                                             27,200,755      22,823,785
  Leasehold improvements and other                                     2,270,658       2,178,499
  Construction in progress                                             4,390,805       1,795,559
                                                                    ----------------------------
      Total                                                           42,055,104      34,284,185

  Less accumulated depreciation and amortization                     (22,031,645)    (20,671,859)
                                                                    ----------------------------
      Property, plant and equipment - net                             20,023,459      13,612,326
                                                                    ----------------------------
OTHER ASSETS                                                             649,198         588,098
                                                                    ----------------------------
TOTAL                                                               $ 56,181,484    $ 32,233,892
                                                                    ============================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                 $    121,158    $    500,000
  Bank loan                                                              310,577         500,000
  Accounts payable                                                     6,437,169       5,047,284
  Accrued liabilities                                                  2,353,800       2,150,228
  Income taxes payable                                                         -         244,404
                                                                    ----------------------------
      Total current liabilities                                        9,222,704       8,441,916
                                                                    ----------------------------
LONG-TERM DEBT                                                         1,165,751       2,500,000
                                                                    ----------------------------
OTHER NONCURRENT LIABILITIES                                           2,247,444       1,986,924
                                                                    ----------------------------
MINORITY INTEREST IN PARLEX SHANGHAI                                   1,954,472       1,521,362
                                                                    ----------------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $1.00 par value - authorized, 1,000,000
   shares; none issued                                                         -               -
  Common stock, $.10 par value - authorized, 10,000,000
   shares; issued, 4,850,649 and 3,798,750 shares in 1998
   and 1997, respectively                                                485,065         379,875
  Additional paid-in capital                                          23,872,745       3,334,424
  Retained earnings                                                   18,268,743      15,111,769
  Unrealized gain on short-term investments                               10,192               -
  Cumulative translation adjustments                                      (8,007)         (4,753)
  Less treasury stock, at cost - 210,000 shares in 1998 and 1997      (1,037,625)     (1,037,625)
                                                                    ----------------------------
      Total stockholders' equity                                      41,591,113      17,783,690
                                                                    ----------------------------
TOTAL                                                               $ 56,181,484    $ 32,233,892
                                                                    ============================

</TABLE>


See notes to consolidated financial statements.


PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------

                                                      1998            1997            1996
                                                      ----            ----            ----

<S>                                                <C>             <C>             <C>
REVENUES:
  Product sales                                    $60,048,336     $54,977,143     $47,102,025
  License fees and royalty income                      226,835         109,710         155,000
                                                   -------------------------------------------

      Total revenues                                60,275,171      55,086,853      47,257,025
                                                   ===========================================

COSTS AND EXPENSES:
  Cost of products sold                             47,304,136      44,136,738      40,307,894
  Selling, general and administrative expenses       8,271,704       7,288,544       5,518,292
                                                   -------------------------------------------

      Total costs and expenses                      55,575,840      51,425,282      45,826,186
                                                   -------------------------------------------

OPERATING INCOME                                     4,699,331       3,661,571       1,430,839

OTHER INCOME, Net                                      683,776         155,604          90,588

INTEREST EXPENSE                                      (253,509)       (436,008)       (351,125)
                                                   -------------------------------------------

INCOME FROM OPERATIONS BEFORE
 INCOME TAXES                                        5,129,598       3,381,167       1,170,302

PROVISION FOR INCOME TAXES                          (1,539,514)     (1,249,202)       (386,961)
                                                   -------------------------------------------

INCOME BEFORE MINORITY INTEREST                      3,590,084       2,131,965         783,341

MINORITY INTEREST                                     (433,110)        (11,509)        (12,855)
                                                   -------------------------------------------

NET INCOME                                         $ 3,156,974     $ 2,120,456     $   770,486
                                                   ===========================================

BASIC INCOME PER SHARE                             $       .73     $       .59     $       .22
                                                   ===========================================

DILUTED INCOME PER SHARE                           $       .71     $       .57     $       .21
                                                   ===========================================

</TABLE>


See notes to consolidated financial statements.




PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Unrealized
                                  Common Stock      Additional                             Cumulative     Gain on
                               -------------------    Paid-in     Retained     Treasury    Translation  Short-Term
                                Shares     Amount     Capital     Earnings       Stock     Adjustments  Investments     Total
                                ------     ------   -----------   --------     --------    -----------  -----------     -----

<S>                            <C>        <C>       <C>          <C>          <C>            <C>          <C>        <C>
BALANCE, JULY 1, 1995          2,579,409  $257,941  $ 3,226,316  $12,220,827  $(1,037,625)   $     -      $     -    $14,667,459

  Exercise of stock options
   (pre-split basis)               3,250       325       17,175            -            -          -            -         17,500

  Translation adjusment                -         -            -                                 (162)           -           (162)

  Net income                           -         -            -      770,486            -          -            -        770,486
                               -------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1996         2,582,659   258,266    3,243,491   12,991,313   (1,037,625)      (162)           -     15,455,283

  Stock dividend               1,186,311   118,631     (118,631)           -            -          -            -              -

  Tax benefit arising from
   the exercise of
   nonqualified stock options          -         -      114,309            -            -          -            -        114,309

  Exercise of stock options       29,780     2,978       95,255            -            -          -            -         98,233

  Translation adjustment               -         -            -            -                  (4,591)           -         (4,591)

  Net income                           -         -            -    2,120,456            -          -            -      2,120,456
                               -------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1997         3,798,750   379,875    3,334,424   15,111,769   (1,037,625)    (4,753)           -     17,783,690

  Tax benefit arising from
   the exercise of
   nonqualified stock options          -         -       97,702            -            -          -            -         97,702

  Stock offering, net of
   expenses                    1,000,000   100,000   20,281,799            -            -          -            -     20,381,799

  Exercise of stock options       51,899     5,190      158,820            -            -          -            -        164,010

  Translation adjustment               -         -            -            -            -     (3,254)           -         (3,254)

  Unrealized gain on
   short-term investments                                                                          -       10,192         10,192

  Net income                           -         -            -    3,156,974            -          -            -      3,156,974
                               -------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1998         4,850,649  $485,065  $23,872,745  $18,268,743  $(1,037,625)   $(8,007)     $10,192    $41,591,113
                               =================================================================================================
</TABLE>



See notes to consolidated financial statements.




PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------

                                                                       1998           1997           1996
                                                                       ----           ----           ----

<S>                                                                <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                       $  3,156,974    $ 2,120,456    $   770,486
                                                                   ------------------------------------------

  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization of equipment and other assets       2,426,831      1,899,325      1,678,150
    (Gain) loss on sale of equipment                                    (68,573)      (129,269)        13,652
    Amortization on investments available for sale                       49,761              -              -
    Gain on sale of investments available for sale                       (8,133)             -              -
    Deferred income taxes                                                98,640         86,375         37,510
    Deferred compensation                                                83,188         74,999         70,341
    Minority interest                                                   433,110         11,509         12,855
    Changes in current assets and liabilities:
      Accounts receivable - net                                      (2,116,362)    (1,576,055)      (681,780)
      Inventories                                                    (2,084,180)       490,947     (1,669,348)
      Refundable income taxes                                          (225,924)        17,794        188,875
      Other current assets                                             (855,411)      (151,570)      (257,520)
      Accounts payable and accrued liabilities                        1,593,457        220,520      1,314,166
      Income taxes payable                                             (244,404)       358,713              -
                                                                   ------------------------------------------
        Total adjustments                                              (918,000)     1,303,288        706,901
                                                                   ------------------------------------------
        Net cash provided by operating activities                     2,238,974      3,423,744      1,477,387
                                                                   ------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of investments available for sale                       (27,010,059)             -              -
  Maturities of investments available for sale                       15,893,751              -              -
  Sales of investments available for sale                             4,295,403              -              -
  Additions to property, plant and equipment                         (8,463,111)    (2,619,074)    (2,968,713)
  Increase in other assets                                              (86,841)      (206,449)      (122,146)
  Proceeds from sale of equipment                                        77,800        164,220         10,198
                                                                   ------------------------------------------
        Net cash used for investing activities                      (15,293,057)    (2,661,303)    (3,080,661)
                                                                   ------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the issuance of common shares - net                  20,381,799              -              -
  Proceeds from bank loan                                                     -         99,332        400,668
  Payment of bank loan                                                 (189,423)             -              -
  Capital contributions to joint venture - minority interest                  -              -        160,322
  Issuance of long-term debt                                          1,000,000              -              -
  Borrowings (payments) under revolving credit agreement             (3,000,000)      (650,000)     1,450,000
  Payments of other long-term debt                                      (72,020)      (100,000)      (200,000)
  Exercise of stock options                                             164,010         98,233         17,500
                                                                   ------------------------------------------
        Net cash provided by (used for) financing activities         18,284,366       (552,435)     1,828,490
                                                                   ------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                  (2,664)             -              -
                                                                   ------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                             5,227,619        210,006        225,216

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                            596,614        386,608        161,392
                                                                   ------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                             $  5,824,233    $   596,614    $   386,608
                                                                   ==========================================

SUPPLEMENTARY DISCLOSURE OF NONCASH TRANSACTIONS:
  Property and equipment contributed as capital by joint
   venture partner                                                 $          -    $   277,000    $ 1,060,000
                                                                   ==========================================
  Property, plant and equipment acquired in exchange for
   accounts receivable                                             $          -    $         -    $   400,000
                                                                   ==========================================
  Property and equipment purchased under capital lease             $    358,929    $         -    $         -
                                                                   ==========================================
</TABLE>


See notes to consolidated financial statements.



PARLEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Business - Parlex Corporation ("Parlex" or the "Company") is a world 
      leader in the design and manufacture of flexible interconnect 
      products.  Parlex produces custom flexible circuits and laminated 
      cables utilizing proprietary processes and patented technologies which 
      are designed to satisfy the unique requirements of a wide range of 
      customers.  Parlex provides its products and engineering services to a 
      variety of markets including automotive, computer, military-aerospace, 
      telecommunications, industrial control, medical and consumer.

      Basis of Consolidation - The consolidated financial statements include 
      the accounts of Parlex, its wholly owned subsidiaries and its 50.1% 
      investment in Parlex (Shanghai) Circuit Co., Ltd. (see Note 2), whose 
      fiscal year end is March 31.  This entity is consolidated on a three-
      month time lag.  Intercompany transactions have been eliminated.

      Foreign Currency Translation - The functional currency of foreign 
      operations is deemed to be the local country's currency.  Assets and 
      liabilities of operations outside the United States are translated 
      into United States dollars using current exchange rates at the balance 
      sheet date.  Results of operations are translated at average exchange 
      rates prevailing during each period.

      Cash and Cash Equivalents - Cash and cash equivalents include short-
      term highly liquid investments purchased with remaining maturities of 
      three months or less.

      Inventories - Inventories of raw materials are stated at the lower of 
      first-in, first-out cost or market.  Work in process represents costs 
      accumulated under a job-cost accounting system less the estimated cost 
      of shipments to date, in the aggregate not in excess of net realizable 
      value.  At June 30, inventories consisted of:

                                          1998               1997
                                          ----               ----

      Raw materials                    $3,413,657         $2,706,302
      Work in process                   5,933,000          4,556,175
                                       -----------------------------

      Total                            $9,346,657         $7,262,477
                                       =============================

      Property, Plant and Equipment - Property, plant and equipment are 
      stated at cost and are depreciated using the straight-line method over 
      their estimated useful lives:  buildings - 40 years; machinery and 
      equipment - 5-15 years; and leasehold improvements over the terms of 
      the leases.

      Revenue Recognition - Product sales are recognized upon shipment.  
      License fees and royalty income are recognized when earned and as 
      related costs are incurred.

      Research and Development - Research and development costs are expensed 
      as incurred and amounted to $3,123,000, $2,717,000 and $2,380,000 for 
      the years ended June 30, 1998, 1997 and 1996, respectively.  These 
      amounts are reflected in the Company's cost of products sold.

      Income Taxes -The Company accounts for income taxes in accordance with 
      Statement of Financial Accounting Standards ("SFAS") No. 109, 
      "Accounting for Income Taxes."  This statement requires an asset and 
      liability approach to accounting for income taxes based upon the 
      future expected values of the related assets and liabilities.  
      Deferred income taxes are provided for items which are recognized in 
      different years for tax and financial reporting purposes.

      Income Per Share - The Company has adopted the provisions of SFAS No. 
      128, "Earnings Per Share," which became effective in the second 
      quarter of fiscal 1998.  Under the provisions of SFAS No. 128, basic 
      income per share is calculated on the weighted-average number of 
      common shares outstanding.  Diluted income per share is calculated on 
      the weighted-average number of common shares and common share 
      equivalents resulting from options outstanding.  All prior period 
      amounts have been restated to reflect the adoption of SFAS No. 128.  
      Both basic and diluted income per share give retroactive effect to the 
      three-for-two stock split in 1997.

      A reconciliation between shares used for computation of basic and 
      dilutive income per share is as follows:

                                       1998           1997           1996
                                       ----           ----           ----

Shares of basic computation          4,295,706      3,569,052      3,556,458
Effect of dilutive stock options       169,821        145,987        118,272
                                     ---------------------------------------

Shares for dilutive computation      4,465,527      3,715,039      3,674,730
                                     =======================================

      Use of Estimates - The preparation of the Company's consolidated 
      financial statements in conformity with generally accepted accounting 
      principles necessarily 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 balance 
      sheet dates.  Estimates include reserves for accounts receivable, 
      useful lives of properties, accrued liabilities including health 
      insurance claims, and deferred income taxes.  Actual results could 
      differ from those estimates.

      Fair Value of Financial Instruments - SFAS No. 107, "Disclosures About 
      Fair Value of Financial Instruments," requires disclosure of the fair 
      value of certain financial instruments.  The carrying amounts of cash, 
      accounts receivable, accounts payable and accrued expenses approximate 
      fair value because of their short-term nature.  The carrying amounts 
      of the Company's debt instruments approximate fair value because of 
      the relative consistency of interest rates since its issuance.

      Stock-Based Compensation - During 1997, the Company adopted the 
      disclosure provisions of SFAS No. 123, "Accounting for Stock-Based 
      Compensation." SFAS No. 123 encourages, but does not require, the 
      recognition of compensation expense for the fair value of stock 
      options and other equity instruments issued to employees and 
      nonemployee directors.  The Company continues to account for stock-
      based compensation in accordance with Accounting Principles Board 
      ("APB") Opinion No. 25, using the intrinsic value method.  The 
      difference between accounting for stock-based compensation under APB 
      Opinion No. 25 and SFAS No. 123 is disclosed in Note 8. 

      New Accounting Pronouncements - In June 1997, the Financial Accounting 
      Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive 
      Income," and SFAS No. 131, "Disclosures About Segments of an 
      Enterprise and Related Information."  SFAS No. 130 establishes 
      standards for reporting and display of comprehensive income and its 
      components (revenues, expenses, gains and losses) in a full set of 
      general purpose financial statements.  SFAS No. 131 establishes 
      standards for the way that public business enterprises report 
      information about operating segments in annual financial statements 
      and requires that those enterprises report selected information about 
      operating segments in interim financial reports.  It also establishes 
      standards for related disclosures about products and services, 
      geographic areas and major customers.  SFAS No. 130 will be adopted by 
      the Company during the first quarter of fiscal 1999 and SFAS No. 131 
      will be adopted by the Company during the fourth quarter of fiscal 
      1999.  These standards are not expected to have a material effect on 
      its consolidated financial position and results of operations.

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative 
      Instruments and Hedging Activities."  SFAS No. 133 establishes 
      accounting and reporting standards for derivative instruments, 
      including certain derivative instruments embedded in other contracts 
      and for hedging activities.  SFAS No. 133 will be adopted by the 
      Company during fiscal year 2000.  This standard is not expected to 
      have a material effect on its consolidated financial position, results 
      of operations and financial statement disclosures.

2.    JOINT VENTURE

      In May 1995, the Company entered into an agreement to establish a 
      limited liability company in the form of a joint venture in the 
      People's Republic of China. The Company owns 50.1% of the joint 
      venture.  The joint venture manufactures flexible printed circuits and 
      commenced operations in September 1995.

3.    CASH AND SHORT-TERM INVESTMENTS

      A summary of the Company's investments available for sale by major 
      security type at June 30, 1998 was as follows:

<TABLE>
<CAPTION>
                                                Gross        Gross
                               Amortized     Unrealized    Unrealized         Fair
     Security Type                Cost          Gains        Losses           Value
     -------------             ---------     ----------    ----------         -----

<S>                           <C>              <C>          <C>            <C>
Corporate Debt Securities     $12,150,064      $23,588      $(12,892)      $12,160,760
U.S. Government Obligations       500,034            -          (504)          499,530
                              --------------------------------------------------------

                              $12,650,098      $23,588      $(13,396)      $12,660,290
                              ========================================================
</TABLE>

      The fair value of debt securities at June 30, 1998, by contractual 
      maturity, was as follows:

      Due in one year or less (including
       approximately $5,800,000 classified
       as cash equivalents)                                  $10,943,337
                                                               1,716,953
                                                             -----------
      Due in one to five years                               $12,660,290
                                                             ===========

4.    ACCRUED LIABILITIES

      Accrued liabilities at June 30 consisted of:

                                                 1998            1997
                                                 ----            ----

      Payroll and related expenses            $1,489,205      $1,421,872
      Accrued health insurance                   202,353         256,916
      Other                                      662,242         471,440
                                              --------------------------

      Total                                   $2,353,800      $2,150,228
                                              ==========================

5.    INDEBTEDNESS

      The Company's China joint venture has a short-term bank loan bearing 
      interest at 1.25% over the Singapore Interbank Offer Rate ("SIBOR").  

      Long-term debt at June 30 consisted of:

                                                 1998            1997
                                                 ----            ----

      Revolving Credit Agreement              $        -      $3,000,000
      Capital lease obligations                  286,909               -
      China joint venture bank note            1,000,000               -
                                              --------------------------

      Total long-term debt                     1,286,909       3,000,000

      Less current portion                       121,158         500,000
                                              --------------------------

      Long-term debt - net                    $1,165,751      $2,500,000
                                              ==========================

      On November 12, 1997, the Company renegotiated its unsecured Revolving 
      Credit Agreement (the "Agreement") (originally dated June 22, 1994) 
      making available up to a total of $10,000,000 through September 30, 
      2000.  On October 1, 2000, the Agreement converts to a term loan with 
      principal and interest payments due monthly over a sixty-month period 
      to September 30, 2005.  Borrowings under the Agreement are at the 
      bank's corporate base rate (8.5% at June 30, 1998), and carry an 
      annual commitment fee of 1/4% on the average daily unused portion of 
      the bank's commitment.  Interest is payable monthly.  At June 30, 
      1998, there was no outstanding debt and the unused commitment amounted 
      to $10,000,000.

      The Agreement has restrictive covenants related to tangible net worth, 
      current ratio, working capital, debt service ratio, and the ratio of 
      total liabilities to equity.  

      During fiscal 1998 the Company's China joint venture entered into a 
      long-term bank loan agreement for $1,000,000, bearing interest at 
      9.45%.  The loan is payable in installments through 2002.  

      The maturities for long-term debt at June 30, 1998 are as follows:

            1999                        $  121,158
            2000                           312,326
            2001                           447,677
            2002                           405,748
                                        ----------

                                        $1,286,909
                                        ==========

      Interest paid during the years ended June 30, 1998, 1997 and 1996 was 
      approximately $115,000, $394,000 and, $251,000, respectively.

6.    OTHER NONCURRENT LIABILITIES

      Other noncurrent liabilities at June 30 consisted of:

                                                 1998            1997
                                                 ----            ----

      Deferred income taxes (Note 7)          $1,223,121      $1,045,789
      Deferred compensation                    1,024,323         941,135
                                              --------------------------

                                              $2,247,444      $1,986,924
                                              ==========================

      The timing of deferred compensation payments cannot presently be 
      determined.  Amounts, if any, which may be paid within one year are 
      not material.

7.    INCOME TAXES

      The provision for income taxes consisted of:

                              1998              1997             1996
                              ----              ----             ----

      Current:
        State             $  (172,771)      $  (157,115)      $ (57,943)
        Federal            (1,268,103)       (1,005,712)       (291,508)
      Deferred                (98,640)          (86,375)        (37,510)
                          ---------------------------------------------

      Total               $(1,539,514)      $(1,249,202)      $(386,961)
                          =============================================

      A reconciliation of the statutory federal income tax rate to the 
      effective income tax rate is as follows:

                                                     1998      1997      1996
                                                     ----      ----      ----

Statutory federal income tax rate                    34 %      34 %      34 %
State income taxes, net of federal tax benefit        2         3         3
Foreign income - not subject to taxation             (5)        -         -
Foreign Sales Corporation                            (1)       (1)       (1)
Tax credits                                          (1)       (1)        -
Other                                                 1         2        (3)
                                                     ----------------------

Effective income tax rate                            30 %      37 %      33 %
                                                     ======================

      Deferred income tax assets and liabilities at June 30 are attributable 
      to the following:

                                             1998            1997
                                             ----            ----

Deferred tax liabilities:
  Depreciation                            $1,597,409      $1,421,917
  Prepaid expenses                            29,918          29,807
                                          --------------------------

                                           1,627,327       1,451,724
                                          --------------------------
Deferred tax assets:
  Inventories                                 63,730          44,084
  Allowance for doubtful accounts             63,341          46,760
  Accruals                                   110,148         126,398
  Self-insurance                              79,836         101,831
  Deferred compensation                      409,404         376,128
  Tax credit carryforwards                    50,472           4,767
                                          --------------------------

                                             776,931         699,968
                                          --------------------------

Net deferred tax liability                $  850,396      $  751,756
                                          ==========================

      Deferred taxes have not been recorded on undistributed earnings of the 
      China Joint Venture (approximately $460,000) because such amounts are 
      considered permanently invested.

      Income tax payments of approximately $1,557,000, $751,500 and $445,000 
      were made in 1998, 1997 and 1996, respectively.

8.    STOCKHOLDERS' EQUITY

      The Board of Directors is authorized to establish one or more series 
      of preferred stock and to fix and determine the number and conditions 
      of preferred shares, including dividend rates, redemption and/or 
      conversion provisions, if any, preference and voting rights.  At June 
      30, 1998, the Board of Directors has not authorized any series of 
      preferred stock.

      In October 1997, the Company sold 1,000,000 shares of its common stock 
      in an underwritten public offering.  Proceeds to the Company totaled 
      $20.4 million, net of expenses associated with the offering.  The 
      proceeds are being used to expand manufacturing facilities and 
      purchase capital equipment.  A portion of the proceeds was also used 
      to repay all the outstanding indebtedness under the Company's 
      Revolving Credit Agreement.

      The Company has incentive and nonqualified stock option plans covering 
      officers, key employees and directors who are not otherwise employees.  
      The options are generally exercisable commencing one year from the 
      date of grant and typically expire in either five or ten years, 
      depending on the plan.  The option price for the incentive stock 
      options and for the directors' plan is fair market value at the date 
      of grant.  Nonqualified stock options are granted at fair market value 
      or at a price determined by the Board of Directors, depending on the 
      plan.  In certain cases, the Company may, at the option of the Board 
      of Directors, reimburse the employees for the tax cost associated with 
      their options.

      Effective August 20, 1996 the Company established the 1996 Outside 
      Directors' Stock Option Plan (the "1996 Plan").  The 1996 Plan 
      provides for the automatic grant of 1,500 options annually to each 
      member of the Board of Directors who is not an employee of the 
      Company.  Discretionary grants of up to 2,250 options annually per 
      director may also be made at the discretion of the Board of Directors.  
      All grants are made at the market value of the stock on the date of 
      the grant and there are 150,000 shares available for grant under the 
      1996 Plan, of which 7,500 were granted during the year.

      At June 30, 1998, there were 293,693 shares reserved for future grants 
      for all of the above-mentioned plans.

      The following is a summary of activity for all of the Company's stock 
      option plans:

                                                 Weighted-
                                                  Average
                                                   Shares      Exercise
                                    Under        Price Per      Shares
                                    Option         Share      Exercisable
                                    ------       ---------    -----------

July 1, 1995                       290,814        $ 4.32         94,872

  Granted                           39,750          5.84
  Surrendered                       (9,375)         3.59
  Exercised                         (4,875)         2.77
                                   ---------------------

June 30, 1996                      316,314          4.56        148,778

  Granted                           10,500          6.67
  Surrendered                       (6,000)         3.30
  Exercised                        (29,780)         4.70
                                   ---------------------

June 30, 1997                      291,034          4.77        191,085

  Granted                           95,750         18.50
  Surrendered                       (1,315)         5.13
  Exercised                        (51,899)         3.16
                                   ---------------------

June 30, 1998                      333,570        $ 8.96        199,375
                                   ====================================

      The following table sets forth information regarding options 
      outstanding at June 30, 1998:

                        Options Outstanding             Options Exercisable
            -----------------------------------------   -------------------
                             Weighted-
                              Average       Weighted-              Weighted-
                             Remaining      Average                Average
Exercise       Number       Contractual     Exercise               Exercise
 Prices     Outstanding     Life (Years)     Price       Number      Price
--------    -----------     ------------    --------     ------    ---------

$ 2.67         22,500           1.2          $ 2.67      22,500      $ 2.67
  4.00         15,000           0.6            4.00      15,000        4.00
  4.17         48,814           0.9            4.17      48,626        4.17
  4.59         75,000           0.9            4.59      75,000        4.59
  5.67         22,500           1.2            5.67      13,500        5.67
  5.84         29,256           2.7            5.84      11,249        5.84
  6.67          9,750           7.0            6.67       7,500        6.67
 12.35         15,000           7.6           12.35       6,000       12.35
 15.50          7,500           9.4           15.50           -           -
 18.75         88,250           4.1           18.75           -           -
              -------------------------------------------------------------

              333,570           2.6          $ 8.96     199,375      $ 4.68
              =============================================================

      As described in Note 1, the Company uses the intrinsic value method in 
      accordance with APB No. 25 to measure compensation expense associated 
      with grants of stock options to employees.  Had the Company used the 
      fair value method to measure compensation, the Company's net income 
      and diluted income per share would have been $2,944,591 or $.66 per 
      share in 1998, $2,029,904 or $.55 per share in 1997 and $752,847 or 
      $.20 per share in 1996.

      The fair value of each stock option is estimated on the date of grant 
      using the Black-Scholes option-pricing model.  Key assumptions used to 
      apply this pricing model are as follows:

<TABLE>
<CAPTION>
                                               1998           1997            1996
                                               ----           ----            ----

<S>                                         <C>            <C>             <C>
Average risk-free interest rate                5.2%           6.2%            6.2%
Expected life of option grants              2.5 years       2.5 years       2.5 years
Expected volatility of underlying stock         72%           143%            143%
Expected dividend rate                         None           None            None
</TABLE>

      The weighted-average fair value of options granted in 1998, 1997 and 
      1996 was $8.34, $5.71 and $4.43, respectively.

      The option pricing model was designed to value readily tradable stock 
      options with relatively short lives.  The options granted to employees 
      are not tradable and have contractual lives of ten years.  However, 
      management believes that the assumptions used and the model applied to 
      value the awards yields a reasonable estimate of the fair value of the 
      grants made under the circumstances.

9.    BENEFIT PLANS

      The Company has a qualified profit-sharing retirement plan to provide 
      benefits to eligible employees.  Annual contributions to the plan are 
      at the discretion of the Board of Directors and are discretionary in 
      amounts.  No contributions were made to the plan for the years ended 
      June 30, 1998, 1997 and 1996.

      During fiscal 1995, the Company adopted a 401(k) Savings Plan (the 
      "Plan") covering all employees of the Company who have six consecutive 
      months of service and have attained the age of twenty-one.  Matching 
      employer contributions can be made to the Plan at the discretion of 
      the Board of Directors.  The Company contributed $90,000 to the Plan 
      for the year ended June 30, 1998.  No matching contributions were made 
      to the Plan for the years ended June 30, 1997 and 1996.

10.   COMMITMENTS AND CONTINGENCIES

      The Company leases certain property and equipment under agreements 
      generally with initial terms from three to five years with renewal 
      options.  Rental expense for each of the years ended June 30, 1998, 
      1997 and 1996 approximated $263,000, $285,000 and $153,000, 
      respectively.  Future payments under noncancelable operating leases 
      are:

                   1999                 $361,000
                   2000                  298,000
                   2001                  213,000
                   2002                  192,000
                   2003                  192,000

      From time to time, the Company is subject to various legal proceedings 
      and claims, either asserted or unasserted, which arise in the ordinary 
      course of business.  While the outcome of these claims cannot be 
      predicted with certainty, management is not aware of any current legal 
      matters that will have a material adverse effect on the Company's 
      consolidated financial position or results of operations.

11.   BUSINESS SEGMENT, MAJOR CUSTOMER  AND INTERNATIONAL OPERATIONS

      The Company operates within a single segment of the electronics 
      industry as a specialist in the interconnection and packaging of 
      electronic equipment with its product lines of flexible printed 
      circuits, laminated cable, and related assemblies.

      Sales to several divisions of one customer represented 23%, 20% and 
      29% and of total revenues in 1998, 1997 and 1996, respectively.

      Summarized information relating to international operations is as 
      follows:

<TABLE>
<CAPTION>
                                                 Year Ended June 30,
                                    ---------------------------------------------
                                        1998             1997             1996
                                        ----             ----             ----

<S>                                 <C>              <C>              <C>
Revenues:
  United States                     $48,521,351      $48,434,315      $43,662,143
  China                               5,192,052        2,309,103        1,218,795
  Export sales from United States     8,445,678        5,533,199        2,376,087
  Intercompany sales                 (1,883,910)      (1,189,764)               -
                                    ---------------------------------------------

Total revenues from unaffiliated
 customers                          $60,275,171      $55,086,853      $47,257,025
                                    =============================================

Operating income:
  United States                     $ 3,617,537      $ 3,502,468      $ 1,412,422
  China                                 923,687           61,403           40,723
  Eliminations                          158,107           97,700          (22,306)
                                    ---------------------------------------------

Total operating income              $ 4,699,331      $ 3,661,571      $ 1,430,839
                                    =============================================

Identifiable assets:
  United States                     $52,924,162      $29,879,581      $28,929,914
  China                               5,945,297        4,137,596        2,789,430
  Eliminations                       (2,687,975)      (1,783,285)      (2,057,288)
                                    ---------------------------------------------

Total identifiable assets           $56,181,484      $32,233,892      $29,662,056
                                    =============================================
</TABLE>

      The increase in identifiable assets in the United States during fiscal 
      1998 was primarily the result of the public offering of stock in 
      October 1997 (see Note 8).

12.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

      Summarized quarterly financial data are as follows (in thousands 
      except per share amounts):

                             First        Second       Third        Fourth
                             -----        ------       -----        ------

1998 Quarters

Revenues                    $13,717      $14,184      $14,296      $18,078
Gross profit                  3,178        2,869        3,027        3,897
Net income                      728          587          823        1,019
Net income per share:
  Basic                         .19          .14          .18          .22
  Diluted                       .18          .13          .17          .21

1997 Quarters

Revenues                    $12,807      $14,068      $13,225      $14,987
Gross profit                  1,895        2,595        2,985        3,475
Net income                      188          558          643          731
Net income per share:
  Basic                         .06          .16          .18          .20
  Diluted                       .05          .15          .17          .19


Item 9. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure
-------------------------------------------------------------------

      This item is inapplicable.

                                  Part III

Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------

      The information required by the Item is incorporated by reference from 
the information under the captions "Election of Directors", "Board of 
Directors Meetings and Committees of the Board", "Executive Officers" and 
"Security Ownership of Certain Beneficial Owners and Management" in the 
Company's definitive proxy statement to be filed with the Commission within 
120 days of June 30, 1998.


Item 11.  Executive Compensation
--------------------------------

      The information required by the Item is incorporated by reference from 
the information under the captions "Compensation of Executive Officers" and 
"Board of Directors Meetings and Committees of the Board", in the Company's 
definitive proxy statement to be filed with the Commission within 120 days 
from June 30, 1998.


Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

      The information required by this Item is incorporated by reference 
from the information under the caption "Security Ownership of Certain 
Beneficial Owners and Management" in the Company's definitive proxy 
statement to be filed with the Commission within 120 days from June 30, 
1998.


Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

      This Item is not applicable.

                                   Part IV

Item 14.  Exhibits, Financial     (a)      Documents filed as a part of this 
          Statement Schedules              Form 10-K.
          And Reports on          1.       Financial Statements.
          Form 8-K.                        The Financial Statements
                                           in the accompanying table of
                                           contents to Consolidated
                                           Financial Statements are
                                           filed as a part of this 
                                           Form 10-K.
                                  2.       Financial Statement Schedules.
                                           Schedules are omitted because of 
                                           the absence of conditions under 
                                           which they are required or 
                                           because the required information 
                                           is included in the Consolidated
                                           the absence of conditions under
                                           which they are required or
                                           because the required information
                                           Financial Statements or notes 
                                           thereto.
                                  3.       Exhibits.
                                           The exhibits listed below are 
                                           either filed herewith or, if not 
                                           filed, are incorporated by 
                                           reference from the filings noted 
                                           in parathenses.
                                  (3)(A)   Restated Articles of Organization 
                                           as amended, (dated August 2, 
                                           1983); (filed as Exhibits 3-A and 
                                           3-B to the Company's Registration 
                                           Statement on Form S-1, file No. 
                                           2-85588, and incorporated herein
                                           by reference).
                                  (3)(B)   Articles of Amendment to Restated 
                                           Articles of Organization, dated 
                                           December 1, 1987; (filed as 
                                           Exhibit 10-Q to Form 10-K for the
                                           fiscal year ended June 30, 1988).
                                  (3)(C)   By-laws; (filed as Exhibit 3-C to 
                                           the Company's Registration 
                                           Statement on Form S-1, file No. 
                                           2-85588, and incorporated herein 
                                           by reference).
                                  (3)(D)   Articles of Amendment to Restated 
                                           Articles of Organization,dated 
                                           October 21, 1997; (filed as 
                                           Exhibit 3-D to Form 10-Q for the 
                                           quarter ended December 28, 1997).
                                  (10)(A)  1985 Employees' Nonqualified 
                                           Stock Option Plan dated December 
                                           2, 1985*; (filed as Exhibit 10-L 
                                           to Form 10-K for the fiscal year 
                                           ended June 30, 1986).
                                  (10)(B)  Employment Agreement between 
                                           Parlex Corporation and Mr. 
                                           Herbert W. Pollack, dated May 1, 
                                           1986;* (filed as Exhibit 10-M to 
                                           Form 10-K for the fiscal year 
                                           ended June 30, 1986).
                                  (10)(C)  1989 Outside Directors' Stock 
                                           Option Plan;* (filed as Exhibit 
                                           10-Z to Form 10-K for the fiscal 
                                           year ended June 30, 1991).
                                  (10)(D)  1989 Employees' Stock Option 
                                           Plan*; (filed as Exhibit 10-AA to 
                                           Form 10-K for the fiscal year 
                                           ended June 30, 1991).
                                  (10)(E)  Chinese Joint Venture Contract, 
                                           Articles of Association, and 
                                           Agreement of Technology License 
                                           and Technical Service May 29, 
                                           1995; (filed as Exhibit 10-AH to 
                                           Form 10-K for the fiscal year 
                                           ended June 30, 1995).
                                           Confidential treatment has been 
                                           granted for portions of this 
                                           exhibit.
                                  (10)(F)  Manufacturing and Sales Agreement
                                           between Samsung Electro-Mechanics 
                                           Co., Ltd. and Parlex Corporation 
                                           dated September 29, 1994; (filed 
                                           as Exhibit 10-AK to Form 10-K for 
                                           the fiscal year ended June 30, 
                                           1995).  Confidential treatment 
                                           has been granted for portions of 
                                           this exhibit.
                                  (10)(G)  Employment Agreement between 
                                           Parlex Corporation and Peter J. 
                                           Murphy dated June 26, 1996*; 
                                           (filed as Exhibit 10-AM to
                                           Form 10-K for the fiscal year 
                                           ended June 30, 1996).
                                  (10)(H)  License Agreement between Parlex
                                           Corporation and Polyclad 
                                           Laminates, Inc., effective June 
                                           1, 1996; (filed as Exhibit 10-AN 
                                           to Form 10-K for the fiscal year 
                                           ended June 30, 1996). 
                                           Confidential treatment has been 
                                           granted for portions of this 
                                           exhibit.
                                  (10)(I)  Agreement between Parlex 
                                           Corporation and Allied Signal 
                                           Laminate Systems, Inc., effective 
                                           May 5, 1995; (filed as Exhibit 
                                           10-AO to Form 10-K for the fiscal 
                                           year ended June 30, 1996).  
                                           Confidential treatment has
                                           been granted for portions of this 
                                           exhibit.
                                  (10)(J)  License Agreement between Parlex 
                                           Corporation and Pucka Industrial 
                                           Co., Ltd., effective July 1, 
                                           1996; (filed as Exhibit 10-AP to 
                                           Form 10-K for the fiscal year 
                                           ended June 30, 1996).  
                                           Confidential treatment has been 
                                           granted for portions of this 
                                           exhibit.
                                  (10)(K)  Agreement of Lease between PVP-
                                           Salem Associates, L.P. and Parlex 
                                           Corporation dated August 12, 
                                           1997; (filed as Exhibit 10-L to 
                                           Form 10-K for the fiscal year 
                                           ended June 30, 1997).
                                  (10)(L)  Employment Agreement between 
                                           Parlex Corporation and Herbert W. 
                                           Pollack dated July 1, 1997*; 
                                           (filed as Exhibit 10-M to Form 
                                           10-K for the fiscal year ended 
                                           June 30, 1997).
                                  (10)(M)  Patent Assignment Agreement 
                                           between Parlex Corporation and 
                                           Polyonics, Inc. dated June 16, 
                                           1997; (filed as Exhibit 10-N to 
                                           Form 10-K for the fiscal year 
                                           ended June 30, 1997).
                                  (10)(N)  1996 Outside Directors' Stock 
                                           Option Plan*; (filed as Exhibit 
                                           10-O to Form 10-K for the fiscal 
                                           year ended June 30, 1997).
                                  (10)(O)  Shelter Service Agreement between 
                                           Parlex Corporation and Offshore 
                                           International Inc. dated March 6, 
                                           1998; filed herewith.
                                  (10)(P)  Commercial Loan Agreement dated 
                                           November 12, 1997; filed 
                                           herewith.
                                  (11)     Computation of Income per share; 
                                           filed herewith. Subsidiaries of 
                                           the Registrant; filed herewith.
                                  (23)     Independent Auditors' Consent; 
                                           filed herewith
                                  (24)     Power of Attorney; filed 
                                           herewith.
                                  (27)     Financial Data Schedule; filed 
                                           herewith.

___________________
*Denotes management contract or compensatory plan or arrangement.

(B)   Reports on Form 8-K
      The Company filed no reports
      on Form 8-K with the Securities
      and Exchange Commission
      during the quarter ended
      June 30, 1998.

Signatures

         Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, the registrant has duly caused this report 
to be signed on its behalf by the undersigned, thereunto duly authorized.

Parlex Corporation

*/s/  Herbert W. Pollack
-----------------------------------------------------
Herbert W. Pollack, Chairman

Date: September 29, 1998
      -----------------------------------------------

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

*/s/  Steven M. Millstein
-----------------------------------------------------
Steven M. Millstein, Principal Accounting and 
 Financial Officer

Date: September 29, 1998
-----------------------------------------------------

*/s/  Sheldon A. Buckler
-----------------------------------------------------
Sheldon A. Buckler, Director

*/s/  Richard W. Hale
-----------------------------------------------------
Richard W. Hale, Director

*/s/  M. Joel Kosheff
-----------------------------------------------------
M. Joel Kosheff, Director 

*/s/  Peter J. Murphy
-----------------------------------------------------
Peter J. Murphy, Director and Chief Executive Officer

*/s/  Lester Pollack
-----------------------------------------------------
Lester Pollack, Director

*/s/  Benjamin M. Rabinovici
-----------------------------------------------------
Benjamin M. Rabinovici, Director

*/s/  Steven M. Millstein
-----------------------------------------------------
* by Steven M. Millstein, Attorney-in-Fact

Date: September 29, 1998
      -----------------------------------------------

      As of the date of submission of this filing, no annual report or proxy 
material with respect to the fiscal year ended June 30, 1998 has been sent 
to the security holders.  Such annual report and proxy material will be 
submitted to the Commission at the time it is furnished to the security 
holders.



                                EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit                         Description                          Page
-------                         -----------                          ----

 <S>        <C>                                                       <C>
 10-O       Shelter Plan Service Agreement between Parlex             45
            Corporation and Offshore International, Inc. 
            dated March 6, 1998.

 10-P       Commercial Loan Agreement dated November 12, 1997.        63

 11         Statement Regarding Computation of Per Share Earnings     77

 21         Subsidiaries of the Registrant                            78

 23         Independent Auditors' Consent                             79

 24         Powers of Attorney                                        80

 27         Financial Data Schedule                                   81
</TABLE>