<PAGE>

                       COMMON STOCK INFORMATION 

MATEC common stock is listed and traded on the American Stock Exchange 
under the symbol MXC. The range of high and low prices during each 
quarter for the past two years is shown below: 

For the years ended December 31,       1996                 1995
---------------------------------------------------------------------
                                  High     Low         High     Low
---------------------------------------------------------------------
 4th quarter                     4 5/8    2 1/2       4 5/8    3 7/8 
 3rd quarter                     6        4 5/8       4 3/4    3 7/8 
 2nd quarter                     6 3/8    3 15/16     4 5/8    3 7/8 
 1st quarter                     4 1/2    3 3/4       4 1/2    4     

The Company paid no dividend in 1996 or 1995. Under the Term Debt 
Agreement, the Company is restricted to the amount of cash dividends 
paid in any one year. See Note 9 of the Notes to Consolidated Financial 
Statements.  

The approximate number of stockholders of record on March 12, 1997 was 
3,000.  This number does not include stockholders for whom shares are 
held in a "nominee" or "street" name.   





















(Remaining information on Page 1 not incorporated by reference.)





Page 1            
<PAGE>
<PAGE>
<TABLE>
Five Year Financial Summary    
<CAPTION>

Years Ended December 31,                             1996      1995      1994      1993      1992
---------------------------------------------------------------------------------------------------
                                                         (in thousands, except per share data) 
<S>                                                 <C>       <C>       <C>       <C>       <C>
Continuing operations:  
  Net sales                                         $30,857   $28,837   $24,229   $19,899  $19,732
  Gross profit                                        7,527     8,314     7,201     5,212    5,337
  Earnings (loss) before income taxes and cumulative 
   effect of accounting change                         (147)      522      (156)   (1,765)  (1,339)
  Income taxes (benefit)                                (71)      219       (42)     (612)    (431)
  Earnings (loss) before cumulative effect  
   of accounting change                                 (76)      303      (114)   (1,153)    (908)
Discontinued operations - net                             -         -         -     1,286      184 
Cumulative effect of accounting change                    -         -         -       135        - 
---------------------------------------------------------------------------------------------------
Net earnings (loss)                                 $   (76)  $   303   $  (114)  $   268   $ (724)
===================================================================================================
Earnings (loss) per share:
  Continuing operations                             $  (.03)  $   .11   $  (.04)  $  (.40)  $ (.31)
  Discontinued operations                                 -         -         -       .44      .06
  Cumulative effect of accounting change                  -         -         -       .05        -
---------------------------------------------------------------------------------------------------
Earnings (loss)                                     $  (.03)  $   .11   $  (.04)  $   .09   $ (.25)
===================================================================================================
Average shares outstanding                            2,767     2,765     2,765     2,884     2,896
===================================================================================================
Cash dividends per share                            $     -   $     -   $     -   $     -   $   .10
===================================================================================================
Total assets, end of year:
  Continuing operations                             $22,454   $24,225   $20,448   $18,063   $15,658
  Discontinued operations                                 -         -         -         -     2,210
---------------------------------------------------------------------------------------------------
                                                    $22,454   $24,225   $20,448   $18,063   $17,868
===================================================================================================
Long-term debt, end of year                         $ 1,984   $ 2,180   $   428   $   652   $ 1,102
===================================================================================================
</TABLE>
<PAGE>
<PAGE>
Management's Discussion and Analysis 

Financial Condition 

Cash and cash equivalents increased $53,000 from December 31, 1995. 
The Company's operations generated $2,670,000 in cash during the year 
while investing and financing activities used cash of $1,125,000 and 
$1,492,000, respectively. 

The sources of cash from operations were the net noncash items, 
mainly depreciation, of $1,522,000 and $1,224,000 from the favorable 
change in operating assets and liabilities, offset by the $76,000 
loss.  The decrease in inventory, offset in part by a reduction in 
accounts payable were the primary reasons for the decrease in net 
operating assets.  The $2,031,000 decrease in inventory is mainly due 
to the Company's efforts to reduce certain inventory levels and the 
shorter lead times required for certain products.  The Company 
reduced its accounts payable balance by $602,000 from the prior 
year's level.

The Company's primary investing activity during the year was the 
purchase of $1,117,000 of capital equipment.  Machinery and equipment 
additions in the steel cable and electronics segments accounted for 
the majority of the expenditures. These additions are mainly geared 
toward adding new and upgrading existing production capabilities and 
processes within each segment. Capital expenditures for 1997 are 
planned to approximate $1,300,000 with additions of $700,000 and 
$500,000 projected for the steel cable and electronics segments, 
respectively. These additions will mainly be focused on adding 
additional capacity, manufacturing cost reductions, and upgrading 
existing production capabilities.

During the year, the Company reduced its lines of credit borrowings 
by $1,245,000 and its long-term debt by $228,000.  At December 31, 
1996, the Company's unused portion of these lines of credit was 
$1,660,000.

The Company believes that based on its current working capital, the 
expected cash flows from operations, and its current debt 
arrangements its resources are sufficient to meet the financial needs 
and to fund the capital expenditures for the projected levels of 
business in 1997.


Results of Operations -- Overview -- 1996 versus 1995

Net sales increased $2,020,000 (7%) in 1996 as higher sales in the 
steel cable segment were partially offset by sales decreases in the 
electronics and instruments segments.

The overall gross profit percentage decreased from 29% in 1995 to 24% 
in 1996 mainly as a result of lower margins in both the electronics 
and instruments segments.

Selling and administrative expenses decreased $916,000 (13%) from 
1995 mainly due to lower selling expenses in the instruments and 
steel cable segments.
<PAGE>
<PAGE>
The $169,000 (32%) increase in research and development expenses was 
principally a result of higher expenses in the instruments segment.

The $655,000 in restructuring expenses relates to the expenses for 
the phasing out of a product line in the instruments segment and the 
closing of a manufacturing operation in the electronics segment.      

Interest expense increased from $375,000 in 1995 to $416,000 in 1996 
as a result of higher levels of short and long-term debt.  Other 
income (expense), net increased $68,000 over 1995 mainly as a result 
of a $52,000 increase in dividend income and a lower operating loss 
in the real estate operations.  The real estate operations loss 
declined $13,000 from 1995 mainly as a result of increased rental 
income.

The effective income tax benefit rate in 1996 was 48% compared to an 
income tax rate of 42% in 1995.  Factors affecting the comparability 
of rates were the dividend exclusion, nondeductible expenses, and the 
effective state income tax rate due to the limited state tax benefit 
of operating losses within a state. 

While the Company reported a 7% increase in sales, operating profit 
declined $696,000 from 1995 due to a combination of an overall 
decrease in gross margins and restructuring expenses of $655,000, 
partially offset by a net decrease in operating expenses.  
Nonoperating expenses decreased $27,000 from 1995 due to a 
combination of increased dividend income, a lower operating loss in 
the real estate operations, and increased interest expense.  As a 
result, the Company reported a pre-tax loss of $147,000 in 1996 
versus earnings of $522,000 in 1995.  The after tax loss amounted to 
$76,000 in 1996 compared to earnings of $303,000 in 1995.

Business Segment Results -- 1996 versus 1995

Net sales in the steel cable segment increased $2,797,000 (29%) over 
1995 mainly as a result of increased sales to the automotive market.  
The overall gross profit percentage increased 18% over 1995 mainly 
due to the favorable effects of spreading the fixed overhead over the 
higher sales level and operating efficiencies on new production 
programs started in 1995, partially offset by a higher raw material 
percentage caused by product mix changes.  Total operating expenses 
decreased 21% from 1995 primarily as a result of decreases in legal 
fees, advertising and personnel expenses.  As a result of the 
increased sales and gross margin, coupled with lower operating 
expenses, the steel cable segment reported an operating profit of 
$1,087,000 compared to an operating loss of $261,000 in 1995.

Net sales in the electronics segment decreased $563,000 (4%) from 
1995 primarily due to the market conditions and inventory levels of 
both the OEM and contract manufacturers in the telecommunications 
market.  The gross profit percentage decreased 25% from 1995 as a 
result of an increased provision for slow moving inventory, increased 
overhead personnel costs due to additional people, and increased raw 
material costs due to product mix changes.  Total operating expenses 
increased 22% over 1995 mainly due to the restructuring charge and 
increased selling expenses.  The $180,000 restructuring charge 
relates to the closing and moving of the Carlisle manufacturing 
<PAGE>
<PAGE>
operation to the Hopkinton facility.  The selling expense increases 
were due to additional personnel and increased travel and advertising 
expenses.  As a result of the lower sales, the decrease in gross 
margin and the higher operating expenses, the electronics segment 
reported an operating profit of $491,000 in 1996 compared to a profit 
of $1,870,000 in 1995.

The instruments segment reported a $214,000 (3%) decrease in sales 
from 1995 as lower sales to both the colloidal and medical research 
markets were partially offset by a 10% increase in sales to the 
NDT/NDE markets.  Lower sales of the AcoustoSizer(TM) partially 
offset by higher sales of both the ESA and CHDF instruments resulted 
in a net sales decrease to the colloidal market.  While foreign sales 
decreased slightly from 1995, lower domestic sales was the main 
reason for the decrease in sales to the medical research market.  The 
sales increase to the NDT/NDE markets was primarily due to higher 
sales of the Company's custom test systems.  The overall gross profit 
percentage decreased 19% from 1995 as a result of the unfavorable 
effect of spreading the fixed overhead costs over the lower sales 
volume and lower margins realized on the sales of custom test 
systems.  While total operating expenses remained fairly level with 
1995, a selling expense decrease of $680,000 was offset by the 
$475,000 restructuring charge and a $180,000 increase in research and 
development.  The decrease in selling expenses were mainly due to 
lower personnel, travel and advertising expenses.  The restructuring 
costs relate to the phasing out of the AcoustoSizer(TM) product 
line.  Increased personnel costs and expenses related to the 
completion of the new model of the CHDF instrument were the main 
reasons for the higher research and development expenses.  As a 
result of the lower sales level and gross profit percentage, the 
instruments segment reported an operating loss of $360,000 versus an 
operating profit of $298,000 in 1995.  

Results of Operations -- Overview -- 1995 versus 1994

Net sales increased $4,608,000 (19%) in 1995 to $28,837,000, mainly 
as a result of the record sales level reported in the electronics 
segment.

The overall gross profit percentage decreased from 30% in 1994 to 29% 
in 1995 as lower margins in the steel cable and instruments segments 
exceeded the improved margin in the electronics segment.

Selling and administrative expenses increased $570,000 (9%) over 1994 
mainly due to higher selling expenses in the electronics and 
instruments segments.

The $426,00 (44%) reduction in research and development expenses was 
principally a result of lower expenses in the electronics and 
instruments segments.

Other income (expense), net amounted to $374,000 of expense in 1995 
compared to $82,000 of expense in 1994.  Interest expense increased 
$337,000 over 1994 due to the higher levels of short and long-term 
debt.  The real estate operations loss declined $13,000 from 1994 
mainly as a result of lower overall operating expenses.  Other income 
includes $26,000 of dividend income in 1995.
<PAGE>
<PAGE>
The effective income tax rate in 1995 was 42% compared to a benefit 
rate of 27% in 1994.  The difference in rates is mainly due to the 
effective state income tax rate and the limited state tax benefit of 
operating losses within a state.  As disclosed in the Notes to 
Consolidated Financial Statements, the Company recorded a valuation 
allowance to fully reserve for the potential state tax benefits of 
the state net operating loss carryforwards during both years.  The 
change in the valuation allowance in 1995 includes the utilization of 
a portion of prior year state net operating loss carryforwards.

Based on the higher sales level, the increased gross margin and the 
lower percentage of operating expenses to sales, operating profit was 
$896,000 in 1995 versus an operating loss of $73,000 in 1994.  
Nonoperating expenses increased $291,000 over 1994 mainly as a result 
of increased interest expense.  As a result, the Company reported a 
pre-tax profit from continuing operations of $522,000 in 1995 versus 
a loss of $156,000 in 1994.  The after tax earnings amounted to 
$303,000 in 1995 compared to a loss of $114,000 in 1994.


Business Segment Results -- 1995 versus 1994

Sales in the electronics segment increased $4,646,000 (56%) over 1994 
as all product lines reported significant increases.  The sales 
increases were mainly attributable to higher sales to both OEM and 
contract manufacturers in the telecommunications market and to the 
distributor markets.  The overall gross profit percentage increased 
36% over last year mainly as a result of the favorable effects of 
allocating the fixed overhead expenses over the increased sales level 
and manufacturing efficiencies and product yield improvements on 
internally manufactured products.  Total operating expenses remained 
level with 1994 as lower general and administrative and research and 
development expenses were offset by a 24% rise in selling expenses. 
The reduction in G&A expense was due to lower personnel expenses.  
The decrease in R&D expenses resulted from the completion of product 
and process development projects in late 1994.  Increased sales 
commission, personnel, and advertising expenses were the major items 
causing the higher selling expense.  As a result of the significant 
increase in sales and gross margin, coupled with level overall 
operating expenses, the electronics segment's operating profit rose 
to $1,870,000 compared to an operating loss of $63,000 in 1994.
 
Sales in the steel cable segment decreased $369,000 (4%) from 1994.  
While sales to most major markets were comparable to last year, sales 
to the fitness equipment market dropped about $750,000.  The Company 
continues to pursue product opportunities in the automotive market 
and other markets it serves, but continues to see softness in the 
fitness equipment, aerospace and government markets.  The overall 
gross profit percentage decreased about 20% from 1994, prior to the 
favorable effects of the LIFO adjustment in 1994.

The lower margin resulted from the start-up expenses and operating 
inefficiencies associated with several new programs beginning 
production during the year, increased depreciation expense, and the 
effect of the fixed operating costs over the lower sales volume.  
Total operating expenses increased 7% over last year primarily due to 
<PAGE>
<PAGE>
legal fees related to a suit against a former sales representative.  
As a result of the lower sales, the reduced gross margin and the 
increased operating expenses, the steel cable segment reported an 
operating loss of $261,000 compared to an operating profit of 
$628,000 in 1994.

The instruments segment reported a 6% increase in sales over 1994 to 
a record level of $6,178,000.  Higher sales to the NDT/NDE markets 
partially offset by a 9% decrease in sales to both the colloidal and 
medical research markets accounted for the net sales gain.  The 
increased sales to the NDT/NDE markets were attributable to higher 
sales of the Company's custom test systems.  The reduction in sales 
to the colloidal market was due to lower foreign sales of the ESA 
product partially offset by increased sales of the CHDF product.  
Lower foreign sales was the main reason for the decrease in sales to 
the medical research market.  The overall gross profit percentage 
decreased 7% from 1994 as a result of higher occupancy costs due to 
increased space requirements, increased personnel costs caused by 
additional employees and changes in the product mix of sales.  Total 
operating expenses increased 5% over 1994 as higher selling expenses 
were partially offset by lower R&D expenses.  Increased advertising, 
promotional and commission expenses accounted for the higher selling 
expenses.  The decrease in R&D expense was mainly attributable to a 
reduction in expenses associated with the development of the 
AcoustoSizer(TM) partially offset by increased product development 
expenses in the medical research and NDT/NDE market segments.  While 
sales increased slightly over 1994, lower gross margins and higher 
operating expenses resulted in the instruments segment reporting 
$298,000 in operating profit versus an operating profit of $404,000 
in 1994.

<PAGE>
<PAGE>
Consolidated Balance Sheets

December 31,                                         1996         1995 
--------------------------------------------------------------------------
Assets
Current assets:
 Cash and cash equivalents                       $   883,795  $   830,340
 Receivables, net                                  5,764,123    5,672,411 
 Inventories                                       5,463,772    7,719,160
 Deferred income taxes and other current assets    1,037,329    1,032,328
--------------------------------------------------------------------------
 Total current assets                             13,149,019   15,254,239
--------------------------------------------------------------------------
Property, plant and equipment, at cost:
 Land and improvements                             1,005,108    1,005,895
 Buildings and improvements                        6,198,618    6,149,253
 Machinery and equipment                          11,690,193   11,177,306
--------------------------------------------------------------------------
                                                  18,893,919   18,332,454
 Less accumulated depreciation                    12,479,944   11,637,820
--------------------------------------------------------------------------
                                                   6,413,975    6,694,634
Other assets:
 Marketable equity securities                      2,781,708    2,134,799
 Miscellaneous                                       108,915      140,907
--------------------------------------------------------------------------
                                                 $22,453,617  $24,224,579
==========================================================================
Liabilities and Stockholders' Equity
Current liabilities:
 Notes payable                                   $ 1,190,000  $ 2,435,000
 Current portion of long-term debt                   200,000      228,333
 Accounts payable                                  2,035,044    2,636,689
 Accrued liabilities                               1,399,272    1,378,184
 Income taxes                                        118,523      350,305
--------------------------------------------------------------------------
 Total current liabilities                         4,942,839    7,028,511
--------------------------------------------------------------------------
Deferred income taxes                              1,651,568    1,435,568
Long-term debt                                     1,984,400    2,179,960
Stockholders' equity:
  Preferred stock, $1.00 par value-
   Authorized 1,000,000 shares; issued, none               -            -
  Common stock, $.05 par value-Authorized 
   10,000,000 shares; issued 3,804,195 and
                      3,793,695 shares               190,210      189,685
  Capital surplus                                  6,442,439    6,397,485
  Retained earnings                               10,954,963   11,030,591
  Net unrealized gain on marketable
   equity securities                               1,570,324    1,181,415
  Treasury stock at cost, 1,049,467 and
   1,029,315 shares                               (5,283,126)  (5,218,636)
--------------------------------------------------------------------------
  Total stockholders' equity                      13,874,810   13,580,540
--------------------------------------------------------------------------
                                                 $22,453,617  $24,224,579
=========================================================================

See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Operations
<CAPTION>

For the Years Ended December 31,                   1996           1995           1994
----------------------------------------------------------------------------------------- 
<S>                                            <C>            <C>            <C>
Net sales                                      $30,857,396    $28,837,026    $24,228,683
Cost of sales                                   23,330,742     20,522,548     17,028,131
----------------------------------------------------------------------------------------- 
  Gross profit                                   7,526,654      8,314,478      7,200,552
----------------------------------------------------------------------------------------- 
Selling and administrative expenses              5,966,608      6,882,748      6,312,283
Research and development expenses                  704,932        535,619        961,768
Restructuring expenses                             655,000              -              -
----------------------------------------------------------------------------------------
                                                 7,326,540      7,418,367      7,274,051
----------------------------------------------------------------------------------------
  Operating profit (loss)                          200,114        896,111        (73,499)

Other income (expense):
  Interest expense                                (416,060)      (374,832)       (37,691)
  Other, net                                        69,318          1,145        (44,669)
-----------------------------------------------------------------------------------------
                                                  (346,742)      (373,687)       (82,360)
-----------------------------------------------------------------------------------------
Earnings (loss) before income taxes               (146,628)       522,424       (155,859)
Income tax (expense) benefit                        71,000       (219,000)        42,000
-----------------------------------------------------------------------------------------
Net earnings (loss)                            $   (75,628)   $   303,424    $  (113,859)
=========================================================================================
Earnings (loss) per share                      $      (.03)   $       .11    $      (.04)
=========================================================================================
</TABLE>


See notes to consolidated financial statements.  
 
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31,                                    1996         1995            1994 
----------------------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>            <C>         
Cash Flows from Operating Activities:
 Net earnings (loss)                                          $   (75,628)   $   303,424    $  (113,859)
 Adjustments to reconcile net earnings (loss) to net cash
  provided (used) by operating activities:
 Depreciation and amortization                                  1,341,179      1,270,785      1,101,471
 Changes in deferred income taxes                                (144,000)       132,000        (42,000)
 Loss on write-off of assets under restructuring plans            320,000              -              - 
 Other                                                              4,440          2,960              -
 Changes in assets and liabilities:
   Receivables, net                                                32,288     (1,070,365)    (1,363,072)
   Inventories                                                  2,031,151     (2,090,619)    (1,915,987)
   Other current assets                                            96,999         58,936       (163,054)
   Accounts payable and accrued liabilities                      (580,557)      (511,368)     1,874,927
   Income taxes, net                                             (355,782)        24,636        159,830
---------------------------------------------------------------------------------------------------------
 Net cash provided (used) by operating activities               2,670,090     (1,879,611)      (461,744)
---------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
 Capital expenditures, net                                     (1,116,856)    (1,354,383)    (1,903,830)
 Purchases of marketable equity securities                              -              -       (150,000)
 Collection of amount due from sale of discontinued operations          -        250,000        155,000
 Other, net                                                        (7,435)       (26,000)       (22,688)
--------------------------------------------------------------------------------------------------------- 
 Net cash (used) by investing activities                       (1,124,291)    (1,130,383)    (1,921,518)
---------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
 Proceeds from issuance of long-term debt and warrants                  -      2,000,000              -
 Net borrowings (repayments) under lines of credit             (1,245,000)     1,520,000        915,000
 Payments on long-term debt                                      (228,333)      (223,333)      (208,334)
 Purchases of common stock                                        (64,490)          (788)          (881)
 Stock options exercised                                           45,479              -              -
---------------------------------------------------------------------------------------------------------
  Net cash provided (used) by financing activities             (1,492,344)     3,295,879        705,785
---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents               53,455        285,885     (1,677,477)
Cash and Cash Equivalents at beginning of year                    830,340        544,455      2,221,932 
---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at end of year                      $   883,795    $   830,340    $   544,455
=========================================================================================================
Supplemental Disclosures of Cash Flow Information
  Cash paid during the year for:
  Interest                                                    $   433,947    $   403,462    $    78,879
  Income taxes                                                $   187,500    $         -    $    25,620

</TABLE>
<PAGE>
<PAGE>

Consolidated Statements of Cash Flows - continued

Noncash Investing and Financing Activities: 

Under Statement of Financial Accounting Standards No. 115, "Accounting for 
Certain Investments in Debt and Equity Securities", the Company recorded 
the following increases (decreases):
                                
                                          1996        1995         1994
--------------------------------------------------------------------------
Marketable Equity Securities          $  647,000  $   582,000  $ (248,000)
Deferred Income Taxes                    258,000      233,000    (100,000)
Net Unrealized Gain (Loss) on
 Marketable Equity Securities            389,000      349,000    (148,000)


See notes to consolidated financial statements.

<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
                                                                                      Unrealized
                                                                                      Gain (Loss)
                                                                                         on
                                                                                      Marketable
                                    Common Stock           Capital       Retained       Equity        Treasury
                                 Shares       Amount       Surplus       Earnings     Securities        Stock
----------------------------------------------------------------------------------------------------------------
<S>                             <C>          <C>         <C>           <C>            <C>           <C> 
Balance, January 1, 1994        3,793,695    $189,685    $6,374,485    $10,841,026    $  979,818    $(5,216,967)
Net (loss)                              -           -             -       (113,859)            -              -
Purchases of common stock               -           -             -              -             -           (881)
Unrealized (loss) on marketable 
 equity securities                      -           -             -              -      (147,621)             - 
----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994      3,793,695     189,685     6,374,485     10,727,167       832,197     (5,217,848)
Net earnings                            -           -             -        303,424             -              -
Purchases of common stock               -           -             -              -             -           (788)
Unrealized gain on marketable 
 equity securities                      -           -             -              -       349,218              -
Issuance of detachable 
  common stock purchase  
  warrants                              -           -        23,000              -             -              -
----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995      3,793,695     189,685     6,397,485     11,030,591     1,181,415     (5,218,636)
Net (loss)                              -           -             -        (75,628)            -              - 
Purchases of common stock               -           -             -              -             -        (64,490)
Unrealized gain on marketable
  equity securities                     -           -             -              -       388,909              -
Exercise of stock options          10,500         525        44,954              -             -              -
---------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996      3,804,195    $190,210    $6,442,439    $10,954,963    $1,570,324    $(5,283,126) 
===============================================================================================================

</TABLE>

See notes to consolidated financial statements.
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies: 
    
    Principles of consolidation -- The accompanying consolidated financial 
statements include the accounts of MATEC Corporation and its wholly owned 
subsidiaries.  Significant intercompany balances and transactions have 
been eliminated in consolidation.
    
    Use of estimates -- The preparation of the Company's 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 and inventory, useful lives of 
property, plant and equipment, accrued liabilities, and deferred income 
taxes.  
    
    Fair value of financial instruments -- Statement of Financial 
Accounting Standards No. 107 "Disclosures About Fair Value of Financial 
Instruments" requires disclosure of the fair value of certain financial 
instruments.  The carrying amounts of cash, cash equivalents, accounts 
payable and accrued expenses approximate fair value because of their 
short-term nature.  Marketable equity securities are recorded in the 
financial statements at aggregate fair value.  The carrying amounts of the 
Company's debt instruments approximate fair value (Notes 8 and 9).
    
    Cash equivalents -- For purposes of the statements of cash flows, the 
Company considers all highly liquid investments with a maturity of three 
months or less when purchased to be cash equivalents.  Cash equivalents 
are stated at cost plus accrued interest, which approximates market value.
    
    Inventories -- Inventories are stated at the lower of cost or market.  
Steel cable product inventory costs are determined by the last-in, 
first-out method (LIFO).  The remaining product inventory costs are 
determined by the first-in, first-out method (FIFO).  

    Property, plant and equipment -- The Company uses the straight-line 
method of providing for depreciation and amortization of property, plant 
and equipment for financial reporting purposes and accelerated methods for 
tax purposes.  The estimated lives used to compute depreciation and 
amortization are as follows: land improvements - 10 years, buildings and 
improvements - 15 to 40 years and machinery and equipment - 3 to 10 years.

    Marketable equity securities -- Marketable equity securities consist 
of common stocks and are valued under Statement of Financial Accounting 
Standards No. 115 ("SFAS 115") "Accounting for Certain Investments in Debt 
and Equity Securities".  Under SFAS 115, the Company has classified these 
securities as "available for sale" and are valued at fair value, with 
unrealized gains, net of taxes excluded from earnings and reported as a 
separate component of stockholders' equity.
<PAGE>
<PAGE>
Notes continued

    At December 31, 1996 and 1995, the fair market value (based on quoted 
market prices) of these securities was $2,781,708 and $2,134,799, 
respectively, and the amortized cost was $710,384.  Gross unrealized gains 
amounted to $2,071,324 and $1,424,415 at December 31, 1996 and 1995, 
respectively, and there were no unrealized losses at either date.  During 
1996, the Company recorded a $388,909 increase in the "Unrealized Gain 
(Loss) on Marketable Equity Securities" component of stockholders' equity 
and a $349,218 increase in the same account during 1995.
  
    Revenue recognition -- Revenue is generally recognized when product is 
shipped.  Revenue under long-term contracts is recorded primarily on the 
percentage of completion method.  Under this approach, sales and gross 
margin are recognized as the work is performed, based on the ratio that 
incurred costs bear to estimated total completion costs.  Provisions for 
anticipated losses are made in the period in which they first become 
determinable.
  
    Income taxes -- The Company accounts for income taxes under Statement 
of Financial Accounting Standards No. 109 ("SFAS 109") "Accounting for 
Income Taxes". This Statement requires the Company to compute deferred 
income taxes based on the differences between the financial statement and 
tax basis of assets and liabilities using enacted rates in effect in the 
years in which the differences are expected to reverse.

    Earnings (loss) per share --  Earnings (loss) per share have been 
computed based on the weighted average number of shares outstanding during 
the years -- 2,767,391 shares in 1996, 2,764,503 shares in 1995 and 
2,764,687 shares in 1994. No effect has been given to outstanding stock 
options and warrants as no material dilutive effect would result from the 
exercise of these items.

    Stock compensation plans -- The Company applies APB Opinion No. 25 
"Accounting for Stock Issued to Employees" and related interpretations in 
accounting for its stock option plans.

    Recently Issued Accounting Standards -- Effective January 1, 1996, the 
Company adopted Statement of Financial Accounting Standards ("SFAS") No. 
121, "Accounting for the Impairment of Long-Lived Assets and for 
Long-Lived Assets to Be Disposed Of."  This statement establishes 
accounting standards for the impairment of long-lived assets, certain 
identifiable intangibles, and goodwill related to those assets to be held 
and used and for long-lived assets and certain identifiable intangibles  
to be disposed of.  Adoption of the standard had no material effect on the 
Company's financial position and results of operations.

(2) Restructuring Expenses: In the fourth quarter of 1996, the Company 
recorded restructuring expenses of $655,000 pursuant to the phasing out of 
its AcoustoSizer(TM) product line in the Instruments segment and the 
closing of its high frequency fundamental quartz crystal operation in 
Carlisle, Pennsylvania and relocating it to Hopkinton, Massachusetts.  The 
$655,000 in expenses include the write-down of assets of $320,000, 
severance costs of $191,000, warranty reserves of $70,000 and other costs 
of $74,000 relating to the above product line restructurings.


<PAGE>
<PAGE>
Notes continued
(3) Receivables, net: Receivables, net of allowances, consist of the
following:
                                                      1996         1995
--------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful 
  accounts of $145,000 and $194,000                $5,497,657   $5,672,411
Costs and estimated earnings in excess of billings
  on uncompleted contracts                            142,466            -
Refundable income taxes                               124,000            -
--------------------------------------------------------------------------
                                                   $5,764,123   $5,672,411
==========================================================================

(4) Inventories: Inventories consist of the following:
                                                      1996         1995
--------------------------------------------------------------------------
Raw materials                                      $2,585,732   $3,415,021
Work in process                                       849,481      925,168
Finished goods                                      2,028,559    3,378,971
--------------------------------------------------------------------------
                                                   $5,463,772   $7,719,160
==========================================================================
    Inventories of $2,575,000 in 1996 and $2,897,000 in 1995 are 
determined by the LIFO method.  In 1996 and 1995 the amounts of LIFO 
inventories were approximately $36,000 and $23,000 less than the amount of 
such inventories determined on the FIFO basis.

(5) Income Taxes: The components of the provision (benefit) for income 
taxes are as follows:
                                            1996        1995      1994
--------------------------------------------------------------------------
Current provision:
   Federal                                $  63,000  $       -  $       - 
   State                                     10,000     87,000          -
--------------------------------------------------------------------------
                                             73,000     87,000          - 
--------------------------------------------------------------------------
Deferred provision (benefit):
   Federal                                 (105,000)   133,000    (62,000)
   State                                    (39,000)    (1,000)    20,000
--------------------------------------------------------------------------
                                           (144,000)   132,000    (42,000)
--------------------------------------------------------------------------
   Total                                  $ (71,000) $ 219,000  $ (42,000)
==========================================================================
   
<PAGE>
<PAGE>    

Notes continued
    The tax effects of significant items comprising the Company's net 
deferred tax liability as of December 31, 1996 and 1995 are as follows:
                                                     1996         1995
--------------------------------------------------------------------------
Deferred tax liabilities:
   Depreciation                                   $  550,200   $  584,700
   DISC commissions                                  535,200      535,200
   Unrealized gain on marketable equity securities   501,000      243,000
--------------------------------------------------------------------------
   Total deferred tax liabilities                  1,586,400    1,362,900
--------------------------------------------------------------------------
Deferred tax assets:
   Inventory reserves                                545,500      485,600
   State net operating loss carryforwards            318,000      311,600
   Restructuring expenses                             80,000            -
   Allowance for doubtful accounts                    58,400       70,800
   Accrued expenses                                  101,200      100,400
   Federal net operating loss carryforwards                -       18,700
--------------------------------------------------------------------------
   Total deferred tax assets                       1,103,100      987,100
Valuation allowance                                 (318,000)    (311,600)
--------------------------------------------------------------------------
   Deferred tax assets, net                          785,100      675,500
--------------------------------------------------------------------------
Net deferred tax liabilities                      $  801,300   $  687,400
========================================================================== 
 
    Other current assets include deferred income taxes of approximately 
$850,000 and $748,000 in 1996 and 1995.
 
    Valuation allowances have been provided at December 31, 1996 and 1995 
for "state net operating loss carryforwards".  The allowances have been 
recorded since it is more likely than not that the Company may not be able 
to generate operating income to realize the benefit of these losses, by 
the expiration dates beginning in 1997.
    The valuation allowance increased slightly during 1996 as a result of 
additional state net operating losses in 1996.

    The total income tax provision (benefit) differs from that computed by 
applying the Federal income tax rate to income before income taxes. The 
reasons for the difference are as follows:
                                           1996       1995        1994
--------------------------------------------------------------------------
Income taxes at statutory rates          $  (49,854) $ 177,624  $ (52,992)
State income tax, net of Federal
 tax benefit                                (20,000)    57,000     13,000 
Benefit of state operating
 loss carryforward                                -    (25,000)         - 
Non-deductible expenses                      16,000     17,000     15,000 
Dividend exclusion                          (16,000)         -          -
Other, net                                   (1,146)    (7,624)   (17,008)
--------------------------------------------------------------------------
                                         $  (71,000) $ 219,000  $ (42,000)
==========================================================================
<PAGE>
<PAGE>
Notes continued 

(6)  Profit Sharing and Savings Plan: The Company has a trusteed profit 
sharing 401(k) plan that covers all qualified employees.  Under the profit 
sharing section of the plan, the Company may make contributions to the 
plan at the discretion of the Board of Directors.  Under the 401(k) 
section of the plan, the Company matched 50% of employee contributions up 
to 6% of compensation.  Total Company contributions charged to operations 
were $160,000 in 1996, $142,000 in 1995 and $115,000 in 1994.

(7)  Accrued Liabilities: Accrued liabilities consists of the following 
items:
                                                       1996        1995
--------------------------------------------------------------------------
Employee compensation                               $  275,991  $  364,267
Other                                                1,123,281   1,013,917
--------------------------------------------------------------------------
                                                    $1,399,272  $1,378,184
==========================================================================

(8)  Notes Payable: The Company has secured demand lines of credit with 
two banks amounting in total to $2,850,000.  The $2,000,000 line of credit 
is secured by all assets except real estate and marketable equity 
securities.  Advances under this line are based on percentage formulas of 
specific receivable and inventory balances of certain subsidiaries.  The 
Company had $1,040,000 of borrowings outstanding under this line of credit 
at December 31, 1996.  The $850,000 line of credit is secured by 
marketable equity securities.  The Company had $150,000 of borrowings 
outstanding under this line of credit at December 31, 1996.  There are no 
compensating balance requirements or significant commitment fees under 
either arrangement.  The weighted average interest rate on outstanding 
notes payable was 9.21% at December 31, 1996 and 9.4% at December 31, 
1995.

(9)  Long-Term Debt:
Long-term debt consists of the following:
                                                       1996        1995
--------------------------------------------------------------------------
11% Term Debt, $2 million face amount, due in 2000; 
 interest payable quarterly                         $1,984,400  $1,979,960
Industrial Revenue Bonds:
  Principal payment of $200,000 in 1997;
   interest payable semi-annually at a rate of 7.0%    200,000     380,000
  Other                                                      -      48,333
--------------------------------------------------------------------------
                                                     2,184,400   2,408,293
Less current portion                                   200,000     228,333
--------------------------------------------------------------------------
                                                    $1,984,400  $2,179,960
==========================================================================
    The Term Debt Note is secured by all the Company's assets, except for 
real estate, marketable equity securities, and certain specific equipment 
with a total book value of $208,000.  The Term Debt Agreement includes 
covenants covering debt to equity and interest expense ratios and 
restrictions as to the total amount of debt, dividends, and capital stock 
repurchases.  Dividend payments in any fiscal year are limited to 30% of 
the Company's net earnings of the prior fiscal year.  At December 31, 
1996, the Company was not in compliance with the covenant pertaining to 
<PAGE>
<PAGE>
Notes continued
interest expense ratios but received a waiver of compliance from the 
lender.  Under the Agreement, the lender will subordinate its security 
interest for up to $4 million in debt, with corresponding increases in 
the interest rate from the 10% stated rate to 12% based on the 
subordination amount.  The lender subordinated its security interest to 
the $2 million bank line of credit.  As part of the Agreement, the 
Company issued the lender transferable common stock warrants to purchase 
85,000 shares of the Company's common stock at $4.75 per share.  The 
warrants were valued at $23,000 on the date of issuance.  The warrants 
expire on June 30, 2000.
    
    The Industrial Revenue Bonds are secured by certain assets with 
carrying values of $1,836,000.
 
    The aggregate principal payments on long-term debt due in each of the 
next five years are as follows; 1997 - $200,000; 1998 - $0; 1999 - $0; 
2000 - $2,000,000; and 2001 - $0.
    
(10)  Stock Compensation Plans: The MATEC Corporation 1992 Stock Option 
Plan allows for the granting of options to officers, key employees, and 
other individuals to purchase a maximum of 300,000 shares of the 
Company's common stock.  The option price and terms are determined by the 
Company's Stock Option-Compensation Committee.  The options granted may 
qualify as incentive stock options ("ISO's").  Through December 31, 1996, 
all options granted were ISO's.  At December 31, 1996, this Plan has 
83,500 options available for future grant and 294,000 common shares 
reserved for issuance.

    The 1982 Incentive Stock Option Plan allowed for the granting of 
options to employees, including officers, to purchase a maximum of 
150,000 shares of the Company's common stock at a price not less than the 
fair market value of the stock at or about the time of grant.  All 
options under the 1982 Plan expired in 1996.
  
    The Company applies APB Opinion No. 25 and related Interpretations in 
accounting for its plans.  Accordingly, no compensation expense has been 
recognized for these plans.  Had compensation cost for the shares granted 
under the above plans been determined under the provisions of SFAS No. 
123, the expense would not have a material effect on the Company's net 
earnings (loss) and earnings (loss) per share in 1995 and 1996.
<PAGE>
<PAGE>
Notes continued

    A summary of the status of the Company's two fixed stock option plans
 as of December 31, 1996, 1995, and 1994, and changes during the years
 ended on those dates is presented below: 

<TABLE>
<CAPTION>
                                  1996                      1995                       1994
-------------------------------------------------------------------------------------------------------
                            Number    Weighted-avg.   Number    Weighted-avg.    Number    Weighted-avg.
                           of shares exercise price  of shares exercise price   of shares exercise price
-------------------------------------------------------------------------------------------------------
<S>                         <C>         <C>           <C>          <C>           <C>          <C>
Outstanding, January 1,     253,250     $3.83         241,750      $3.81         189,500      $3.76  
  Granted                         -         -          12,500       4.38          55,250       4.05  
  Exercised                 (10,500)     4.33               -          -               -          -
  Expired                   (21,000)     5.08               -          -               -          -
  Forfeited                 (11,250)     4.38          (1,000)      5.25          (3,000)      4.94
------------------------------------------------------------------------------------------------------
Outstanding, December 31,   210,500     $3.66         253,250      $3.83         241,750      $3.81
=======================================================================================================
Exercisable, December 31,   139,800                   131,450                     81,575   
=======================================================================================================
</TABLE>

    The following table summarizes information about fixed stock options
outstanding at December 31, 1996:

<TABLE>
<CAPTION>

                          Options Outstanding                           Options Exercisable
----------------------------------------------------------------    ----------------------------
                                    Weighted Average   
                             ----------------------------- 
   Range of      Number         Remaining                             Number        Weighted-
   Exercise    Outstanding     Contractual      Exercise            Exercisable   Avg. Exercise
    Prices     at 12/31/96        Life            Price             at 12/31/96       Price
------------------------------------------------------------------------------------------------
 <S>           <C>             <C>              <C>                 <C>            <C>
 $3.50         150,000         5.9 years        $ 3.50              120,000        $ 3.50
 $3.63-3.88     27,500         7.2                3.73                9,100          3.65
 $4.25-4.38     33,000         8.3                4.30               10,700          4.28
------------------------------------------------------------------------------------------------
               210,500                                              139,800
================================================================================================
</TABLE>
<PAGE>
<PAGE>
Notes continued

(11)  Other Income (Expense), net: Other, net consists of the following items:
                                             1996       1995       1994
--------------------------------------------------------------------------
Interest income                            $ 26,853   $ 21,006  $  25,872
Real estate operations                      (41,427)   (54,698)   (67,652)
Dividends                                    77,629     25,876          -
Other items, net                              6,263      8,961     (2,889)
--------------------------------------------------------------------------
                                           $ 69,318   $  1,145  $ (44,669)
==========================================================================

    Interest expense in 1996, 1995 and 1994 of $20,300, $32,725, and $44,608,
respectively, is included in real estate operations.

(12)  Business Segments: The Company operates in three industry segments:
Steel Cable, Electronics, and Instruments.  In addition, the Company
operates two real estate subsidiaries.  Operating profit (loss) represents
net sales less all identifiable operating expenses.  General corporate
expenses, income taxes, and other income or expense are excluded from
segment operations.
<PAGE>
<PAGE>
Notes continued

                                              1996         1995       1994
-----------------------------------------------------------------------------
                                                     (in thousands)
Net Sales:
   Steel Cable                               $ 12,545    $  9,748   $ 10,117
   Electronics                                 12,348      12,911      8,265
   Instruments                                  5,964       6,178      5,847
-----------------------------------------------------------------------------
   Total                                     $ 30,857    $ 28,837   $ 24,229
=============================================================================

Operating Profit (Loss):
   Steel Cable                               $  1,087    $   (261)  $    628
   Electronics                                    491       1,870        (63)
   Instruments                                   (360)        298        404
-----------------------------------------------------------------------------
   Total                                        1,218       1,907        969
   General Corporate Expenses                  (1,018)     (1,011)    (1,043)
   Real Estate Operations, Net                    (42)        (55)       (68)
   Other Income (Expense), Net                   (305)       (319)       (14)
-----------------------------------------------------------------------------
Earnings (loss) before income taxes          $   (147)   $    522   $   (156)
=============================================================================
Identifiable Assets:
   Steel Cable                               $  7,232    $  7,111   $  6,601
   Electronics                                  6,049       8,109      5,398
   Instruments                                  2,999       3,511      3,058
   Corporate                                    4,102       3,258      2,968
   Real Estate Operations                       2,072       2,236      2,423
-----------------------------------------------------------------------------
                                             $ 22,454    $ 24,225   $ 20,448
=============================================================================
Capital Expenditures:
   Steel Cable                               $    676    $    923   $  1,021
   Electronics                                    354         209        667
   Instruments                                     80         179        180
   Corporate                                        -           -          2
   Real Estate Operations                          16          43         41
-----------------------------------------------------------------------------
                                             $  1,126    $  1,354   $  1,911
=============================================================================
Depreciation and Amortization:
   Steel Cable                               $    643    $    527   $    385
   Electronics                                    324         330        298
   Instruments                                    154         190        195
   Corporate                                        2           3          5
   Real Estate Operations                         218         221        218
-----------------------------------------------------------------------------
                                             $  1,341    $  1,271   $  1,101
=============================================================================
    Corporate assets consist mainly of cash and cash equivalents and 
marketable equity securities.
<PAGE>
<PAGE>
Notes continued
 
   Summarized financial information covering the Company's domestic and 
foreign (Mexico) operations is outlined below:
                                              1996         1995       1994
-----------------------------------------------------------------------------
                                                     (in thousands)
Net Sales:
   Domestic                                  $25,855      $24,634    $19,739
   Foreign                                     5,002        4,203      4,490
-----------------------------------------------------------------------------
                                             $30,857      $28,837    $24,229
=============================================================================
Operating Profit (Loss):
   Domestic                                  $ 1,284      $ 2,358    $ 1,301 
   Foreign                                       (66)        (451)      (332)
-----------------------------------------------------------------------------
                                             $ 1,218      $ 1,907    $   969 
=============================================================================
Identifiable Assets:
   Domestic                                  $19,890      $22,044    $18,448
   Foreign                                     2,564        2,181      2,000
-----------------------------------------------------------------------------
                                             $24,454      $24,225    $20,448
=============================================================================
    Export sales amounted to approximately $5,703,000, $5,248,000 and 
$4,704,000 in 1996, 1995 and 1994, respectively.

(13) Quarterly Financial Data (unaudited): Selected unaudited quarterly 
financial data for 1996 and 1995 is set forth below:
                                     First    Second     Third   Fourth
------------------------------------------------------------------------
    1996                          (in thousands, except per share data)
Net sales                           $8,652    $8,114    $6,625   $7,466
Gross profit                         2,389     2,142     1,416    1,580
Earnings (loss) before income taxes    364       272        76     (859)
------------------------------------------------------------------------
Net earnings (loss)                 $  218    $  176    $   48   $ (518)
========================================================================
Net earnings (loss) per share       $  .08    $  .06    $  .02   $ (.19)
========================================================================
    1995 
Net sales                           $6,319    $7,026    $7,118   $8,374
Gross profit                         1,818     2,129     1,958    2,410
Earnings before income taxes             8        47        76      391
------------------------------------------------------------------------
Net earnings                        $    5    $   28    $   49   $  221
========================================================================
Net earnings per share              $  .00    $  .01    $  .02   $  .08
========================================================================
    In the 1996 fourth quarter, restructuring expenses reduced earnings before 
income taxes by $655,000 and net earnings by $409,000 or $.15 per share (See 
Note 2).

(14) Contingencies: The Company is involved in litigation in the ordinary 
course of business. The Company believes that the outcome of these actions 
should not have a material adverse effect on the financial condition of the 
Company.
<PAGE>
<PAGE>
Notes continued

(15) Subsequent Event: In March 1997, the Company signed a letter of 
intent with Colloidal Dynamics Pty. Ltd. ("CD") to sell its AcoustoSizer 
(TM) product line and certain related assets for $130,000 in cash and a 
$200,000 note.  The letter also grants CD an option for $20,000 to 
purchase the common stock of CD owned by the Company for $200,000.  The 
transaction is subject to the negotiation and execution of a definitive 
purchase agreement and approval of each company's Board of Directors and 
CD's shareholders.  It is anticipated that the majority of the proceeds 
received by the Company will result in a gain. 

<PAGE>
<PAGE>

Independent Auditors' Report

To the Stockholders and Board of Directors of MATEC Corporation:

    We have audited the accompanying consolidated balance sheets of MATEC 
Corporation and subsidiaries as of December 31, 1996 and 1995, and the 
related consolidated statements of operations, stockholders' equity and 
cash flows for each of the three years in the period ended December 31, 
1996. These financial statements are the responsibility of the Company's 
management. Our responsibility is to express an opinion on these 
financial statements based on our audits.
 
    We conducted our audits in accordance with generally accepted 
auditing standards. Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the financial 
statements are free of material misstatement. An audit includes 
examining, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements. An audit also includes assessing 
the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement 
presentation. We believe that our audits provide a reasonable basis for 
our opinion.

    In our opinion, the consolidated financial statements present fairly, 
in all material respects, the financial position of MATEC Corporation and 
subsidiaries as of December 31, 1996 and 1995, and the results of their 
operations and their cash flows for each of the three years in the period 
ended December 31, 1996 in conformity with generally accepted accounting 
principles.


Deloitte & Touche LLP
Boston, Massachusetts
February 28, 1997 
(March 4, 1997, as to Note 15)














(Remaining information on inside back cover is not incorporated by 
reference.)


inside back cover
<PAGE>
<PAGE>