U.S. Securities and Exchange Commission
Washington, D.C.  20549
Form 10-QSB

(Mark One)
  X  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1996

____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT 

For the transition period from __________ to
___________                 

Commission File Number  1-4142      

TENNEY ENGINEERING, INC.                     
(Exact name of small business issuer as 
specified in its charter)

           NEW JERSEY             22-1323920    
(State or other jurisdiction of  (IRS Employer
incorporation or organization)  Identification No.)

1090 Springfield Road, Union, New Jersey 07083         

(Address of principal executive offices)

(908) 686-7870      
(Issuer's telephone number)

NONE                              
(Former name, former address and former fiscal year, if
changed since last report.)

   Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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   
   
   State the number of shares outstanding of each of
the issuer's classes of common equity, as of the latest
practicable date: 
     Class         Outstanding at September 30, 1996
Common Stock $.01 par value      3,695,592

   Transitional Small Business Disclosure Format:
         Yes ____   No   X  
TENNEY ENGINEERING, INC.

FORM 10-QSB

QUARTER ENDED SEPTEMBER 30, 1996

I N D E X 


                                                        
                                                  PAGE

Part I - Financial Information

Item 1.  Financial Statements

Consolidated Condensed Balance Sheet - 
 September 30, 1996                                  3
 
Consolidated Condensed Statements of Operations -  
 Three and nine months ended September 30,
 1996 and 1995                                       4

Consolidated Condensed Statements of Cash Flows -   
Nine months ended September 30, 1996 and 1995        5 
  
Notes to Consolidated Condensed Financial   
 Statements                                          6 
 
Item 2.  Management's Discussion and Analysis

Management's Discussion and Analysis of Financial  
 Condition and Results of Operations                19


Part II - Other Information                         21
   


       
TENNEY ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1996
(In thousands of dollars - unaudited)

        ASSETS
Current Assets:
   Cash and cash equivalents                  $    120
   Accounts receivable - net                     2,119
   Current portion of installment note
    receivables                                     25
   Inventories                                     618
   Prepaid expenses and other current assets        54
   Deferred tax asset                              259
        Total Current Assets                     3,195
   Plant and equipment, net                        320
   Installment note receivable, noncurrent
    portion                                        290
   Other assets                                    183
        Total Assets                           $ 3,988

   LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
   Note Payable - Bank                             245
   Accounts payable and other accrued
    liabilities                                  1,360
   Current portion of long-term capital
    leases                                          38
   Accrued payroll and payroll taxes               260
   Billings in excess of estimated revenue
    on long-term contracts                         442
   Pension obligation, current portion              79
        Total Current Liabilities                2,424

Long-term debt, net of current portion             558
        Total Liabilities                        2,982

Commitments and contingencies

Stockholders Equity:
   Preferred stock $.01 par value:
         Authorized 5,000,000 shares
         Issued and outstanding - none
   Common stock $.01 par value:
         Authorized 50,000,000 shares
         Issued 3,704,980 shares                    37
   Additional paid-in-capital                    2,295
   Retained earnings (deficit)                  (1,289)
                                                 1,043
Less treasury stock, 9,388 shares at cost           37 
   Total Stockholders Equity                     1,006
   Total Liabilities and Stockholders Equity   $ 3,988

See Notes to Consolidated Financial Statements.

TENNEY ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
                       (In thousands of dollars -
                         except per share amounts)
                  Three Months Ended  Nine Months Ended 
    
                     September 30,        September 30,
                    1996      1995       1996     1995
Net Revenue:
Product and 
 product related  $1,738    $1,523     $6,262   $5,966
Service              304       264        681      669
Parts                140       160        495      642
   Totals          2,182     1,947      7,438    7,277 
    

Cost of Sales:
Product and 
 product related   1,528     1,066      5,022    4,626
Service              197       187        459      509
Parts                 60        67        194      230
   Totals          1,785     1,320      5,675    5,365

Gross Profit         397       627      1,763    1,912

Selling and 
 administrative
 expenses            328       394      1,366    1,355

Income from 
 operations           69       233        397      557

Other expense
 (income):
 Interest expense      6        24         16       91
 Other income, net   ( 0)      ( 4)       ( 5)     (27)
    Totals             6        20         11       64 

Income before 
 income taxes and
 extraordinary items  63       213        386      493
Income taxes
 (benefit)           ( 3)        3       ( 27)       8
Income before 
 extraordinary
 items                66       210        413      485
Extraordinary item - 
 gain on restructuring 
 of debt net of income 
 taxes of $4,000.00 
 and $9,000.00, 
 respectively        -0-       286        -0-      855

Net Income        $   66    $  496     $  413   $1,340

Income per common 
 share before
 extraordinary 
 item             $ 0.02    $ 0.06     $ 0.11   $ 0.13

Extraordinary item 
 per common
 share              0.00      0.07       0.00     0.23
    
Net Income per 
 common share     $ 0.02    $ 0.13     $ 0.11   $ 0.36 
 


Exercise of options would not be dilutative.
See Notes to Consolidated Condensed Financial
Statements.

TENNEY ENGINEERING, INC.
AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(In thousands of dollars - unaudited)

                                      1996       1995
Operating activities:
  Net income                        $  413    $ 1,340
  Adjustments to reconcile 
   income to net cash provided 
   by (used in) operations:
     Depreciation and amortization      62         42
     Gain of debt forgiveness, 
      principal and interest           -0-       (855) 
     Provision for bad debts           -0-         43
     Provision for pension withdrawal 
      liability                        -0-         79
  Changes in operating assets and 
   liabilities:
     Accounts and installments 
      receivables                     (351)      (485)
     Inventories                      (307)        72 
     Prepaid expenses and other 
      current assets                    43         68
     Other assets                      (38)         3
     Deferred tax asset                (31)       -0- 
     Accounts payable and other
      accrued liabilities             (292)      (257)
     Accrued payroll and payroll 
      taxes                             98         34
     Billings in excess of 
      estimated revenues               124       (182)
  Net cash used in operating 
    activities                        (279)       (98)

Investing activities:
  Acquisition of equipment             (71)       (97)
    Cash used in investing activities  (71)       (97)

Financing activities:
  Issuance and (Payments) of 
   note payable - bank and debt        245       (579)
  Exercise of Stock Options and 
   Issuance of Common Stock              2        -0-
     Cash provided (used in) financing 
       activities                      247       (579)

Net decrease in cash and cash 
  equivalents                         (103)      (774)
Cash and cash equivalents, beginning 
  of year                              223        842

Cash and cash equivalents, end 
  of period                         $  120      $  68

Supplemental disclosure of cash flow
 information:
   Interest paid                    $   16      $   6
   Income taxes paid                $  -0-      $  28

See Notes to Consolidated Condensed Financial
Statements.


Note 1:

Summary of Accounting Policies:

The financial information enclosed herewith as at
September 30, 1996 and for the three and nine months
ended September 30, 1996 and 1995 is unaudited, and, in
the opinion of the Company, reflects all adjustments
(which included only normal recurring accruals)
necessary for a fair presentation of the financial
position as of September 30, 1996, the changes in cash
flow for the nine months ended September 30, 1996 and
1995 and the results of operation for these periods.

This quarterly report should be read in conjunction
with the Company's 1995 Annual Report and the September
30, 1996 Management's Discussion and Analysis of
Financial Condition and Results of Operations.
 

Note 2: 

Results of Operations:

The results of operations for the nine months ended
September 30, 1996 are not necessarily indicative of
the results to be expected for the full year.

 
Note 3:

Financial Condition and Results of Operation:

As shown in the accompanying consolidated financial
statements, the Company has earned net income for the
nine months ended September 30, 1996 and 1995,
respectively, from operations, which has resulted in an
improvement in the Company's financial position.

Note 4:

Pension Obligation:

Tenney Engineering, Inc. (the "Company") formerly had
employees who were members of a union and the Company
contributed to a multi-employer pension plan for such
employees in accordance with a collective bargaining
agreement based on monthly hours worked.  Due to the
cessation of manufacturing operations at the Company's
Union, New Jersey manufacturing plant, the Company
ceased being a participant in the multi-employer
pension plan in February 1993.  Under the
Multi-Employer Pension Plan Amendments Act of 1980, the
Company may, under certain circumstances, become
subject to liabilities in excess of contributions made
under its collective bargaining agreement.  

During the fourth quarter of 1993, the Company received
a letter from the Trustees of the Sheet Metal Workers
National Pension Fund ("Plan Trustees") alleging
$529,743.28, principal, due as withdrawal liability. 
Payments may be made in installment with interest and
the Plan Trustees demanded 18 quarterly payments of
$33,879.28 and a final payment of $32,797.59, with the
initial payment to be made by January 19, 1994.  The
Company made a provision for this liability in its 1993
Consolidated Financial Statements.  The Plan Trustees'
demand also stated that the amount due was subject to
adjustment for performance of the Plan during 1992.

The Company did not make the January 19, 1994 payment. 
In December 1994 the Company received from the Plan
Trustees a modified calculation reducing the withdrawal
liability to $502,665 principal amount.  The Plan
Trustees demanded payment of sixteen quarterly
installments of $33,879.28 commencing January 19, 1994
and a seventeenth payment of $29,151.09.

The Company did not make any such payments.
     
On December 7, 1995 the Company was served with a
Summons and Complaint in an action filed in the U.S.
District Court for the Eastern District of Virginia,
Alexandria Division (Case Number 95-1609A) by the Plan
Trustees ("Plaintiff").  A copy of the Complaint was
filed as Exhibit 99 to a report on Form 8-K for an
event occurring December 7, 1995 and reference is made
to the Complaint itself for the terms thereof and the
relief demanded by the Plaintiff.

The Company has negotiated with the Plan Trustees the
amount of the liability and an installment payment
schedule. 

On September 6, 1996, the Company agreed to a
settlement of the matter proposed by the Plan Trustees
and it executed a Settlement Agreement (the
"Agreement"). Among other matters, the Agreement
provides that the Company shall pay the Plan Trustees
$720,090.49 (the "Settled Amount") on account of the
withdrawal liability, statutory interest and counsel
fees, provided, however, that if the Company pays to
Plaintiff $397,330 plus interest scheduled to be paid
$75,000 on or before September 13, 1996 and sixty (60)
monthly payments of $6,613.09 over a five (5) year
period commencing October 1, 1996, the Plan Trustees
will accept such reduced amount in full satisfaction of
the withdrawal liability.  The Agreement contains
various representations and warranties by the Company.
In the event that the Company does not make timely
payments or otherwise defaults under the Agreement, the
Settled Amount will be due to the Plan Trustees.  The
Company made the September 13, 1996 payment of
$75,000.00 and prepaid the October 1, 1996 payment of
$6,613.09.

In conjunction with the Agreement, the Company has
executed a confession of judgment for the Settled
Amount in the form annexed to the Agreement, which may
be filed by the Plan Trustees in the event the Company
fails to make timely payments or otherwise defaults
under the Agreement.

At September 30, 1996, the Company had in reserve on
its balance sheet the amount of $466,711. for the
withdrawal liability to the Plan Trustees.  The
analysis of the liability account is as follows:

Beginning Reserve-June 30, 1996       $581,835
September 13, 1996 Payment to
 Plan Trustees                        ( 75,000)
September 30, 1996 Prepayment of 
 October 1, 1996 Scheduled payment    (  6,613)
Settlement Expenses                   ( 33,511)      
  Balance September 30, 1996          $466,711  

Payments to the Plan Trustees, and related expenses
under the Agreement, will be charged against this
reserve when made.  If the Company does not default and
if all payments are made in accordance with the
provisions of the Agreement, any balance in the reserve
will be recognized as forgiveness of indebtedness when
payments are completed.

In the event that payments to the Plan Trustees are not
timely made or in the event of any other default under
the Agreement, the Plan Trustees may enter judgment
against the Company for the Settled Amount less any
payments made and the Company could owe to the Plan
Trustees an amount in excess of the amount reserved for
the withdrawal liability. 


Note 5:

License agreement:

Concurrent with the Company's announcement to
discontinue manufacturing at the Union Facility, the
Company entered into a six-year licensing agreement
(expiring December 1998) with a privately owned
manufacturer (the "Licensee") of environmental
conditioning equipment.  The terms of the agreement,
among others, provide for:  the Licensee to manufacture
and sell environmental test chambers and other
equipment under the Tenney name with the Company also
retaining the right to manufacture such products; the
Company to receive license fees (up to a maximum of
$1,900,000) equal to 5% of qualifying sales during the
term of the agreement with specified minimum amounts
payable annually; an option for the Licensee to
purchase the Company's rights, title and interest in
the Tenney trademark for $100,000 at the end of the
license term in the event the Company is no longer
manufacturing such products; the Company to perform all
servicing and installation of the aforementioned
equipment. In addition, the Company entered into a
four-year consulting agreement with the Licensee
whereby, for an annual fee of $120,000, expiring
December 31, 1996, the Company will make the services
of the Company's president available to the Licensee
for a specified period of  time.

For the nine months ended September 30, 1996 and 1995,
respectively, the Company has earned License fees of
approximately $344,087 and $275,100.  At September 30,
1996 the Company earned License fees of approximately
$1,324,500 since inception.  Net revenue for the
periods ended September 30, 1996 and 1995 includes
consulting revenue of $90,000. 
 

Note 6:

Accounts receivable:

Accounts receivable consist of the following:
                                                       
              
                                                        
                            
                                                       
                                   September 30, 
                                       1996    
                                                       
                                   (In thousands 
                                     of dollars)

Accounts receivable, billed            $ 2,114
Due from Licensee, net                      33         
                                         2,147
Allowance for doubtful accounts            (28)

                                                   
             Totals                    $ 2,119



At September 30, 1996, sales recognized on the
percentage of completion method approximated
$5,781,000.  


Note 7:

Inventories:

Inventories consist of the following: 
                                                       
                                 September 30, 
                                     1996               
                                (In thousands 
                                  of dollars)

   Raw materials                  $   651  
   Work in process                    277   

           Totals                     928  

   Less:
      Provision for write-downs
      to estimated realizable value   310 

           Totals                 $   618 


Accumulated costs on long-term contracts recognized by
the percentage of completion method (see Note 6) were
approximately  $4,773,000.


Note 8:

Property and Equipment:

Property and equipment, which is stated at cost, is
summarized as follows at September 30, 1996:
                                                     
                                   September 30, 1996  
                                      (In thousands    
                                        of dollars)

Property (see below)                    $   -0-
Equipment                                 1,305        
           
Equipment under capital leases              354        
                                          1,659       
                                                       
Accumulated depreciation                 (1,339)

     Total equipment - net              $   320 




On December 12, 1994, in accordance with a Settlement
Agreement, the Company conveyed to First Fidelity Bank,
N.A. the title to all real estate located in Union, New
Jersey, with a net book value of approximately $340,000
net of accumulated depreciation.

In conjunction with the conveyance of the property, the
Company  entered into a Use and Occupancy Agreement for
approximately 10,500 square feet of space at an annual
rental of $50,000 and  25% of building operating costs
(excluding real estate taxes), which was terminated on
December 14, 1995.  On that date the Company entered
into a three-year lease with the new owner of  the
property for approximately 10,500 square feet at an
annual rental of $70,000.  On January 12, 1996, the
Company and the new owners entered an amendment to the
lease for an additional 8,000 square feet of space at
an annual rental of $20,000, occupancy  not to take
effect until July 1996. Rent totaled $61,011 and
$37,500 for the nine months ended September 30, 1996
and 1995, respectively.

In addition, the Company leases certain equipment for
use in its operations under capital leases.  Property
and equipment at September 30, 1996, included capital
leases of $354,500 and related accumulated depreciation
of $151,000.

At September 30, 1996, the aggregate minimum rental
commitments under non-cancelable leases for the period
shown are as follows:


   Year      Capital Leases     Operating Leases
                  (In thousands of dollars)
                                                       
         
   1996            $   17             $   26
   1997                57                 90
   1998                57                 90
   1999                57                 -0-
   2000                36                 -0-      

   Total           $  224             $  206  

Less imputed interest  15 
Present value of net 
  lease payment    $  209 
Less current
  installments         38 
Long-term debt
  obligation at
  September 30,
  1996             $  171

Imputed interest was calculated using rates between
7.06% - 9.76%


Note 9:

Debt:

Debt  maturing  within  one  year consists of  the 
following  at 
September 30,

                                                        
                                                        
                               1996      1995          
                               (In thousands            
                                 of dollars)
                                                       
                                                       
                                                       

Notes payable - bank          $ 245     $ -0-
Current portion of capital 
  leases                         38        11
Current portion of pension
  obligation                     79       581  
  (see Note 4)
   Total                      $ 362     $ 592 


The Company and Summit Bank (the "Bank") on September
12, 1996 entered into a Loan and Security agreement for
a $300,000 revolving line of credit, interest at 2%
above the prime lending rate (10.25% at September 30,
1996), evidenced by a promissory note (the "Term
Note"), which expires on May 31, 1997.  The Bank was
granted a security interest in substantially all the
Company's assets. In addition, there were certain
financial covenants; as at September 30, 1996, the
Company was in compliance with these financial
covenants.  At September 30, 1996 the Company borrowed
$245,000 under the line of credit.

The Company and First Fidelity Bank N.A. entered into a
Settlement Agreement as at December 12, 1994, in which
the Company conveyed the title to the real estate
located in Union, for a credit of $1,800,000 against
the total indebtedness of $3,758,663, the remaining
balance of $1,958,663 was converted to a non-interest
Note due September 30, 1995, in the amount of $800,000,
payable $200,000 in December, 1994, and the balance of
$600,000 due in nine monthly non-interest-bearing
amounts of $66,667, and forgiveness of debt of
$1,158,663.  The security interest held by the bank in
substantially all the Company's assets remained in
effect until 93 days after the date of the last
payment.  The Company made all payments due during the
nine month period ended September 30, 1995 and
recognized forgiveness of $289,666 for the quarter and
$869,999 for the year.


Long-term debt consists of the following at September
30,
                                                        
                                                        
                                      1996             
                                 (In thousands         
                                   of dollars)

   Capital lease obligations         $ 209
   Multi-employer pension 
     obligation (see Note 4)           466 

        Total long-term debt
          including current
          maturities                   675 
          Less:  current 
          maturities                   117 

          Total long-term debt       $ 558 


Long-term liabilities consist of capital leases entered
into for equipment of $194,000 in 1995, and 30,500 in
1996, and the long-term portion of the multi-employer
pension fund liability.  As stated in Note 4 of the
Notes to Consolidated Financial Statements, the
maturities under the multi-employer pension fund
liability is as follows:

                       1996 -- $13,200
                       1997 -- $80,000
                       1998 -- $80,000
                       1999 -- $80,000
                       2000 -- $80,000
                       2001 -- $56,000


Note 10:

Net Revenue:

Product and product-related net revenue includes
revenue from the Company's manufacturing operation,
license and technology fees and rental income.  Service
revenue includes revenue from the servicing and
installation of equipment and from the services of the
Company's president provided to the Licensee (see Note
5).  Parts revenue includes revenue from the sale of
replacement and spare parts for equipment previously
manufactured by the Company as well as equipment now
being manufactured by the Licensee and competitors.
  

Note 11:

Income taxes:

Effective January 1, 1993, the Company has adopted the
Statement of Financial Accounting     Standards No. 109
("SFAS No. 109"), "Accounting for Income Taxes."  SFAS
109 requires the use of an asset and liability approach
in accounting for income taxes.  Deferred tax assets
and liabilities are recorded based on differences
between the financial statement and tax bases of assets
and liabilities at the tax rates in effect when these
differences are expected to reverse.

Deferred tax assets are reduced by a valuation
allowance if, based on the weight of available
evidence, it is more likely than not that all or some
portion of the deferred tax assets will not be
realized.  The ultimate realization of the deferred tax
asset depends on the Company's ability to generate
sufficient taxable income in the future.  While
management believes that the total deferred tax asset
will eventually be fully realized by future operations,
as a result of the losses experienced prior to 1994,
management recorded a valuation allowance equal to 100%
of the deferred tax asset upon adoption of SFAS 109 on
January 1, 1993.  As a result, the initial adoption of
SFAS 109 has no impact on the Company's consolidated
financial statements.

At September, 30 1996, it was determined that the
valuation allowance should be reduced by $31,000.  This
determination was based primarily on the improvement in
the Company's net income during 1996 and 1995.

Accordingly, management believes that it is more likely
than not that the Company will generate sufficient
taxable income to realize these future tax benefits. 
The changes in the valuation allowance resulted in the
recording at September 30, 1996, of an income tax
benefit of $27,000.

If the Company is unable to generate sufficient taxable
income in the future, increases in the valuation
allowance will be required through a charge to expense. 
If, however, the Company achieves sufficient
profitability to realize all of the deferred tax
assets, the valuation allowance will be further reduced
and reflected as an income tax benefit in future
periods.

The components of the net deferred tax asset are as
follows at September 30,


                                                        
                                                        
                                           1996         
                                        (In thousands  
                                          of dollars)
Deferred tax assets:
   Inventory reserve                       $   105 
   Accounts receivable reserve                  13
   Deferred revenue                            259
   Deferred compensation                        41
   Deferred pension obligation                 197
   Tax loss carryforward                     1,020

      Total deferred tax assets              1,635

Deferred tax liabilities:
   Depreciation                                 (3)

     Valuation allowance                    (1,373)

     Total deferred tax assets              $  259


At September 30, 1996 and September 30, 1995, the
Company utilized net operating loss carryforwards of
$410,000 and $771,000, respectively.  The income tax
expense results from the federal alternative tax which
was allocated as follows:
                                                       
                                                        
                                 1996        1995       
                            (In thousands of dollars)

   Income before 
     extraordinary item         $   4       $   8
     Extraordinary item            -0-         14
       Current income 
       tax expense                  4          22

     Deferred income tax
       benefit                   ( 31)         -0-  

       Net income tax 
       (benefit)                $( 27)      $  22 


At September 30, 1996, the Company has available, for
tax reporting purposes, net operating loss
carryforwards of approximately $3,000,000 which expire
through 2008.

A reconciliation of income tax provision at federal
statutory  rate to the income tax provision at the
effective tax rate as follows:  The effective rate for
1996 is 34% and for 1995 was 34%.

                                                       
   
                                    1996        1995    
                             (In thousands of dollars)

Income taxes computed at 
 the federal statutory rates      $ 139       $ 422
Federal alternative minimum tax       4          22
State taxes (net of federal benefit) 35         122
Realization of benefits of 
 tax loss carryforwards            (174)       (544)
Reduction of valuation 
 allowance                         ( 31)        -0-
  
  Net income tax (benefit)        $( 27)      $  22 


Note 12:

Common stock:

On August 15, 1996, the Board of Directors of the
Company granted and issued, to officers and key
employees, the option to purchase 145,000 shares of the
common stock under the 1995 ten-year incentive stock
option plan for officers and key employees.  On May 24,
1996, at the annual meeting, two amendments to the
Restated Certificate of Incorporation of the Company
were adopted as follows:  (1) An amendment to provide
that the number of shares of the Common Stock the
corporation is authorized to issue be increased from
10,000,000 shares to 50,000,000 shares and that the par
value of such stock be reduced from $.10 per share to
$.01 per share.  The amendment further provides that
the corporation would be authorized to issue Common
Stock in series, in each case at the discretion of the
Board of Directors, without further action by the
shareholders unless otherwise required by law or
regulation or the rules of any stock exchange on which
the corporation's securities may then be listed, and
that the Board of Directors may fix the number of
shares in each such series and the designation and
relatives voting and other rights thereof, and (2) An
amendment to provide that the number of shares of
Preferred Stock the corporation is authorized to issue
be increased from 1,000,000 shares to 5,000,000 shares,
and the par value of such stock be reduced from $1.00
per share to $.01 per share.

On June 1, 1995, the Board of Directors of the Company
granted and issued, to officers and key employees, the
option to purchase 155,000 shares of common stock under
the 1995 ten-year incentive stock option plan for
officers and key employees.  Certain employees with the
right to purchase 57,000 shares of stock under the 1991
ten-year incentive stock option plan surrendered all
outstanding options.   

A summary of plan transactions follows:
                                                        
                                                        
                    Number of        Option Price    
                     Shares            per Share    
Outstanding and 
exercisable - 
January 1, 1995      57,000         $.31250 - $.34375

Granted             155,000         $.23437 - $.25781
Canceled            (57,000)        $.31250 - $.31250

Outstanding and
exercisable - 
December 31, 1995   155,000         $.23437 - $.25781
   
Granted             145,000         $.85937 - $.94530
Exercised           (10,000)             $.23437
                      
Total Outstanding     
and exercisable -
September 30, 1996  290,000        $.23437 - $.94530
 

Note 13:

Commitments and contingencies:

Employment agreement:

In connection with the license agreement which provides
for the Company to receive $120,000 annually pursuant
to a consulting agreement (see Note 5), the Company
entered into a four-year employment agreement with its
president which requires a minimum annual salary of
$200,000 commencing in 1993.

Lease commitment:

DynaTenn, Inc. (d/b/a "DynaVac"), a wholly-owned
subsidiary which manufactures diversified industrial
vacuum equipment, leases its facility in Weymouth,
Massachusetts under an operating lease on a
month-to-month basis.  At September 30, 1996 and 1995
rent charged to operations for this facility
approximated $46,250, and $51,875, respectively.

Tenney Engineering, Inc. leases its facility in Union,
New Jersey under an operating lease which expires in
December 1998 (see Note 8).  

Contingencies:

The Company is involved in various lawsuits.  Other
than the one explained in Note 4, all the others are
covered by insurance and subject to deductible amounts. 
Management believes that the outcome of these lawsuits
will not have a material adverse effect on the
Company's consolidated financial condition.


Note 14:

Extraordinary item:

Extraordinary item consists of gain on restructuring of
debt net of income taxes.  The Settlement Agreement
(see Note 9) also provided for the forgiveness of debt
to be forgiven quarterly when periodic   quarterly
payments totaling $200,000 were made timely.  The
Company during the three months and the six months
ended June 30, 1995 made the required payments and
recognized forgiveness of $289,666, and $579,332
principal and interest, respectively.

             
 *   *   * 


MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION

Operating revenues continue to be sufficient to cover
corporate and associated administrative costs.  Working
capital and stockholders equity continue to grow due to
profitability.

At September 30, 1996 the Company's cash and cash
equivalents totaled $120,000 a decrease of $103,000
from the balance of $223,000 as at December 31, 1995. 
The major sources of cash were operating profit of
$413,000 and an increase of $245,000 in short term bank
borrowing (see Note 9), and an increase of $124,000 in
billings in excess of estimated revenues.  The uses of
cash was the increase in  receivables of $351,000 due
to longer time needed to complete progress billing
milestones, and $307,000, of work-in-process inventory,
and payments of $292,000 of accounts payable.  Net cash
used by operations totaled $279,000 while acquisition
of equipment and financing activities totaled net
$176,000.

The Company's operations consist of manufacturing
through its DynaTenn, Inc. subsidiary (d/b/a "DynaVac")
diversified vacuum systems for space simulation, optic
coating and plasma treatment for medical labware and
servicing, refurbishing, upgrading and installing
environmental equipment, and earning licenses and
technology fees and rental income. 



RESULTS OF OPERATIONS

Total net revenue for the third quarter and
year-to-date period ended September 30, 1996 of
$2,182,000 and $7,438,000 compares to net revenue of
$1,947,000 and $7,277,000 in the corresponding 1995
period.

Product and product-related net revenue for the third
quarter and year-to-date periods ended September 30,
1996 was $1,738,000, and $6,262,000, respectively, and
compares to 1995 revenue of $1,523,000 and $5,966,000
in the corresponding periods, respectively.  The change
is due to the amount of revenue recognized under the
percentage of completion for long-term projects that
were being worked on in our DynaVac subsidiary, and the
increase of used equipment sales.   

Service-related revenue of $304,000 for the third
quarter and $681,000 for the year-to-date period ended
September 30, 1996, compares to the same periods in
1995 of revenue of $264,000, and $669,000,
respectively, an increase of 15% and 2%.  The increase
is due to the receipt of more service calls.  Included
in the nine months ended September 30, 1996 and 1995
service revenue were fees from the Licensee's agreement
for the services of the Company's president of
approximately $90,000 for each period.

Revenue related to the sale of parts totaled $140,000
and $495,000 for the third quarter and year-to-date
periods ended September 30, 1996, respectively.  For
the third quarter and year-to-date periods ended
September 30, 1995, revenue related to the sale of
parts was $160,000 and $642,000, respectively.  The
decrease  was due to the relocation of our parts,
inventory and repair facilities, at our Union, New
Jersey facility, during the second quarter of 1996.  

The Company's order backlog at September 30, 1996,
December 31, 1995 and September 30, 1995 was
approximately $4,263,900,  $3,870,000 and $3,838,900,
respectively.  The increase in backlog since September
30, 1995 is due primarily to an increase in backlog at
the Company's DynaVac subsidiary.

The total cost of sales as a percentage of net revenue
was 82%  for the third quarter and 76% for the
year-to-date period ended September 30, 1996, and
compares to 68% and 73% for the corresponding 1995
periods. 

The third quarter and year-to-date periods ended
September 30, 1996 cost of sales percentage of product
and product-related sales was 88% and 80% and compares
to a cost of sales of  70% and 77% during same periods
in 1995.  The increase is due to project delays and
inefficiencies at the Company's DynaVac subsidiary, due
to limited facilities and backlog flow. 

Service cost of sale as a percentage of sales was 65%
and 67% for the 1996 third quarter and year-to-date
periods ended September 30. This compares to 76% and
67% for 1995 periods ended September 30, 1995.  

Cost of sales as a percentage of sales for the third
quarter and year-to-date period ended September 30,
1996 for parts was 43% and 39%, respectively, and
compares to 27% and 36% for the 1995 corresponding
periods.  The decrease is due to the sales mix of parts
sold, and the relocation of the parts storage area at
the Union, New Jersey facility during June and July,
1996.

Selling and administrative expenses for the third
quarter and year-to-date for the period ended September
30, 1996 was $328,000, and $1,366,000 and compares to
expenses of $394,000 and $1,355,000 in the 1995
periods.  

Interest expense was $6,000 and $16,000, respectively,
for the third quarter and year-to-date period ended
September 30, 1996 and compares to expense of $24,000
and $91,000, respectively in the 1995 periods.  The
decrease is due to not accruing interest on the Pension
Obligation (see Note 4).

The third quarter and year-to-date periods ended
September 30, 1996 net income was $66,000 and $413,000,
respectively, and compares to $496,000 and $1,340,000
for the corresponding periods ended September 30, 1995.
During the third quarter and year-to-date of 1995 the
Company recognized an extraordinary item (see Note 9)
of $286,000 and $855,000, respectively.  
  





PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)     Exhibits

   (27) Financial Data Schedule

(b)     Reports on Form 8-K

A report on Form 8-K for an event occurring on
September 6, 1996, was filed for Item 5, reporting a
settlement between the Company and the Sheet Metal
Workers' National Pension Fund.





SIGNATURES

In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.

                  Tenney Engineering, Inc.      
                       (Registrant)



                       s/Martin Pelman
                              
                       Martin Pelman
                       Vice President, Finance
                       Principal Finance Officer



Dated:  November 7, 1996.