Exhibit 13
<TABLE>
<CAPTION>
FINANCIAL REVIEW
($ in thousands, except per share data)


Fiscal Year End             1997      1996        1995        1994      1993
<S>                       <C>       <C>         <C>         <C>       <C>
Net sales                 $21,884   $15,580     $16,188     $16,986   $24,363
Cost of goods sold         16,142(1) 10,374      12,091      14,065    17,209
Operating expenses          4,546     3,714       4,988       4,592     5,792
Net income (loss)             (20)      299      (1,405)     (1,413)      373
Earnings (loss) per
  common shares and
  common stock equiva-
  lent shares                (.01)      .10        (.49)       (.50)      .13
Working capital             9,548     7,860       9,038      10,130     9,457
Long-term obligations       6,997     5,514       7,133       6,718     4,383
Total assets             $ 22,309  $ 20,926    $ 20,803    $ 18,024   $21,306
</TABLE>

No cash dividends have ever been paid on the Company's common
stock, and the Company is currently prohibited from declaring any
cash dividends under the terms of its credit facility.

(1)  Cost of goods sold includes $556 for inventory write-downs,
     $143 for additional depreciation recorded on a demonstrator
     unit transferred from inventory to fixed assets, $284 for a
     reserve for an arbitration settlement related to the
     Company's government claims awarded after fiscal year-end,
     and additional amortization expense of $109 for capitalized
     software.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
($ in Thousands, except per share amounts)

Results of Operations

Fiscal 1997 Versus Fiscal 1996

     Fiscal 1997 sales increased 40% over fiscal 1996 sales as
significant increases in Aircrew Training Systems products and
the Sterilizers segment were only partially offset by a decrease
in the Environmental line (for information concerning business
segments, see Note 10 to the consolidated financial statements).

     Cost of goods sold as a percentage of sales increased to 74%
from 67% in fiscal 1996.  Overall, this increase primarily
reflected the write-down of $556 of certain slow-moving products
primarily in the Aircrew Training Systems segment, $143 of
additional depreciation expense for a demonstrator unit
transferred from inventory to fixed assets, $284 related to the
Company's outstanding claim with the U.S. Navy, including an
arbitration award in late April 1997 to one of the Company's
subcontractors in the Navy CFET project for various work
performed in the building part of the project, and $109 of
additional amortization expense relating to capitalized software
costs of a certain product.  The Company continues to actively
market the slow-moving items.  The Company is currently reviewing
the arbitration costs as well as additional expenditures made
through October 1996 on the CFET project to determine which, if
any, will be added to the existing claims against the U.S.
Government.

     The Aircrew Training Systems segment reported a
significantly higher sales level, up $5,209, or 65%, as a result
of continuing production on certain large contracts and a further
expansion of the Company's Contractor Operator and Maintenance
(COMS) business.  As has been reported, the Company's backlog in
the Aircrew Training systems segment has grown significantly in
the most recent period, reflecting, to some extent, a
stabilization of the world defense market.  However, despite the
sales increase, operating income decreased, reflecting a portion
of the aforementioned inventory write-downs, depreciation and
amortization expense and arbitration award as well as a larger
allocated share of the selling, general and administrative pool
of expenses.

     Sales in the Sterilizers segment increased $1,451, or 30%,
reflecting the completion of certain larger contracts coupled
with increased service and spare parts activity.  Operating
performance was a profit of $151 versus a loss in the prior
period.  This profit resulted from the higher volume coupled with
a slight increase in the gross margin on a better mix of work and
only partially offset by the aforementioned inventory write-down.

     The Environmental Systems segment experienced both decreased
sales and a higher operating loss.  This segment experienced
lower bookings throughout the period coupled with higher costs on
certain products.  The Company has recently implemented personnel
and product changes to strengthen operating results.

Operating and Other Expenses

     Selling and administrative expenses in fiscal 1997 increased
$819 compared to the prior period but as a percent of sales
decreased to 20.0% from 22.8%.  Approximately 90% of the increase
was comprised of increased sales commissions, advertising and
trade shows, and accounting and legal fees.  The increase in
commissions reflected a greater mix of commissionable sales and
the increased sales activity.  Advertising, brochures and trade
show activity increased because the Company made a conscious
effort to expand its presence and influence via technical
publications, symposiums, etc.  Accounting and legal fees
increased as the Company evaluated its options for
recapitalization that was ultimately completed in March 1997. 
The increased costs were partially offset by lower salary expense
in the selling and administrative area despite the heightened
activity.

     Research and development expenditures increased slightly. 
The Company continues to monitor this activity tightly.

     Interest expense increased in fiscal 1997 over fiscal 1996. 
The increase reflected amortization in the current period of a
non-cash deferred finance charge ($202) associated with warrants
issued in conjunction with the Company's credit facility renewal
in February 1996 coupled with interest charges for federal and
state tax settlements.  Interest on bank borrowing decreased as a
result of lower average loan balances.

     Other expenses decreased, primarily reflecting reduced
foreign exchange and other fees.

Fiscal 1996 Versus Fiscal 1995

     Fiscal 1996 sales decreased from fiscal 1995 sales as
decreases in the Sterilizers and Environmental Systems segments
were only partially offset by increased sales in the Aircrew
Training Systems segment.  (For information concerning business
segments, see Note 10 to the consolidated financial statements.)

     Cost of goods sold as a percentage of sales decreased to 67%
from 75% in fiscal year 1995, primarily reflecting higher sales
in the Aircrew Training Systems segment (Aircrew Training Systems
sales historically reflect higher gross margins) coupled with the
continuing positive effects of stringent cost controls.

     The Aircrew Training Systems segment reported a
significantly increased operating income in fiscal 1996 versus
fiscal 1995, reflecting the aforementioned increased sales volume
(up 40% from the prior fiscal year).  Operating income in the
Aircrew Training Systems segment was also positively affected by
the continued expansion of the Company's COMS business which
involves training, operation and support at various operations
throughout the world.

     The Sterilizers segment incurred a higher operating loss in
fiscal 1996 versus fiscal 1995, reflecting the decreased sales
volume (down 32%), partially offset by reduced operating
expenses.

     The Environmental Systems segment realized a lower operating
loss in fiscal 1996 versus fiscal 1995 despite a 21% decrease in
sales volume.  Reduced operating income from the sales reduction
was offset by the completion of higher margin projects
domestically and the positive impact of reduced operating
expenses.

     International sales have been a significant portion of the
Company's business in recent years.  In fiscal 1996,
approximately 59% of the Company's sales represented foreign
sales.  International sales were spread across all business
segments in the 1996 fiscal period, representing 27% of the total
sales from the Sterilizers and Environmental Systems segments. 
Management believes that the international market will continue
to comprise a significant portion of the Company's new business
in the next fiscal year.

Operating and Other Expenses

     Selling and administrative expenses decreased in fiscal 1996
versus fiscal 1995.  The reduction resulted from a reduced number
of full-time equivalent employees in fiscal 1996 coupled with
continuing stringent cost controls.

     Research and development expenditures in fiscal 1996
decreased significantly from the prior period.  This primarily
reflected the completion in certain major contracts of the
development stage on new products, line extensions and software
design and the beginning of production upon the attainment of
technical feasibility.

     Interest expense increased in fiscal 1996 versus fiscal
1995, reflecting higher interest rates coupled with higher
interest amortization expense on long-term obligations, that were
only partially offset by a lower average loan balance.

     Letter of credit fees and other expenses both decreased in
the 1996 fiscal period compared to 1995, reflecting reduced bank
fees and loan amortization costs.

Liquidity and Capital Resources 

     At February 28, 1997, the Company had a revolving credit
facility with a bank (the "Old Credit Facility") that provided
financing of up to an aggregate of $7.7 million.  The facility
was due to expire on March 31, 1997.  

     In connection with the 1996 extension of the Old Credit
Facility to March 31, 1997, the Company issued to the bank
warrants to purchase 100,000 shares of the Company's common stock
at a price equal to $5.18.  The Company has agreed to file a
registration statement with the Securities and Exchange
Commission to register the common stock issuable upon exercise of
the warrants.  If the Registration Statement is not effective
prior to July 15, 1997, the Company will forfeit a $375,000
escrow to the bank.

     On March 27, 1997, the Company executed a revolving credit
agreement (the "Credit Agreement") with a new bank establishing a
credit facility of $10 million.  The facility bears interest at
the bank's prime rate and expires on May 31, 1999.  Substantially
all of the Company's short-term financing is provided by this
bank.  Additionally, the Company issued $4 million of
subordinated debentures, bearing interest at 12% per annum, due
March 27, 2004 to a financial investor.  In connection with the
subordinated debentures, warrants were issued to acquire 166,410
shares of the Company's common stock at an exercise price of
$1.00 per share.  $499 of the proceeds from the sale of the
debentures was allocated to the warrants and will be charged to
income over the term of the debentures.  The Company also issued
25,000 shares of 11%, $100 face value, convertible preferred
stock for $2.5 million.  Each share of preferred stock is
convertible, at the option of the shareholder, into 13.33 shares
of the Company's common stock at a price of $7.50 per share.

     The proceeds from these transactions were used to repay
amounts outstanding under the Old Credit Facility at February 28,
1997.

     Because of write-downs of certain inventory and other year-
end adjustments that resulted in the Company recognizing a net
loss of $20 for the fiscal year ended February 28, 1997, as of
June 6, 1997, the bank has made all credit availability under the
Credit Agreement subject to specific prior approval by the bank
pending a review of the Company's financial condition.  The
Company believes this restriction will be temporary.

     During fiscal 1997, the Company's net cash position
increased to $189 at February 28, 1997 from $31 at February 23,
1996.  Cash was used in operations due to a significant increase
in accounts receivable due to the increase in sales and a
decrease in the billings in excess of costs and estimated
earnings on uncompleted contracts as more jobs proceeded through
their production cycle.  The cash used in operations was offset
by the positive impact of non-cash expenditures and a significant
increase in customer deposits.

     Non-cash expenditures included fixed asset depreciation and
capitalized software ($1,215), amortization of deferred finance
charges associated with the aforementioned 1996 refinancing
($202), and an increase in receivable and inventory reserves
($769).  Customer deposits increased at year-end, reflecting a
significant level of fourth-quarter job bookings.

     Partial offsets to the increased cash flow were an increase
in accounts receivable ($3,755), reflecting a higher level of
sales in the fourth quarter, continued payments under two
settlement agreements ($530), and a decrease in billings in
excess of costs on uncompleted long-term contracts, as some
larger contracts entered the production cycle.

     Cash used in investing activities decreased as a result of
lower capitalization of software costs and fewer equipment
acquisitions.

     Cash from financing was positive.  The 1997 financing was
short-term loans from affiliated parties of $1,300, that more
than offset bank repayments of $775.

     The Company has recorded approximately $2.9 million in
unbilled costs subject to negotiation, which includes contract
costs through October 1995 and which may not be received in full
during fiscal 1998.  This amount includes claims made against the
U.S. Government involving a U.S. Navy gyrolab contract and a
large centrifuge contract.  Additionally, the Company is
currently reviewing expenditures through October 1996 on the Navy
centrifuge contract to determine which, if any, will be added to
the existing claims with the U.S. Government.  Such claims are
customary in U.S. Government contracts.  To the extent the
Company is unsuccessful in further recovering contract costs,
such an event could have a material adverse effect on the
Company's liquidity and results of operations.  Historically, the
Company has had good experience in that recoveries against the
U.S. Government have exceeded claims.

     During the year ended February 28, 1997, the Company's
principal sources of cash were customers' advance deposits and
loans from affiliates.  These funds were primarily used to
support an increase in accounts receivable, a reduction in
billings in excess of costs on long-term contracts, and
repayments under the bank line of credit.

Backlog

     The Company's sales backlog at February 28, 1997 and
February 23, 1996 for work to be performed and revenue to be
recognized under written agreements after such dates was
approximately $25.8 million and $20.9 million, respectively.  In
addition, the Company's training and maintenance contracts
backlog at February 28, 1997 and February 23, 1996 for work to be
performed and revenue to be recognized after that date under
written agreements was approximately $5.1 million and $2.1
million, respectively.  Of the 1997 backlog, approximately $21.9
million is under contracts for aircrew training systems and
maintenance support principally for U.S. (approximately $300) and
foreign governments (approximately $19.0 million).  The U.S.
Government contracts are subject to termination at the
convenience of the Government with equitable cancellation cost
recovery.  Approximately 80% of the 1997 backlog is expected to
be completed prior to February 27, 1998.  Subsequent to year-end,
on May 1, 1997 the Company announced receipt of the largest
contract in its 28-year history.  The Ministry of Defense of the
United Kingdom awarded the Company a $21.3 million contract for
the design, manufacture, installation and long-term maintenance
support of a training and human research centrifuge which will be
located at the Royal Air Force Base at Henlow, Bedfordshire,
England.

Market for the Registrant's Common Stock and Related Security
Holder Matters

     The Company's Common Stock (the "Common Stock") is traded on
the American Stock Exchange under the symbol ETC.  As of June 6,
1997, the Company had 392 shareholders of record.

     The following table sets forth the quarterly ranges of high
and low sale prices, and the closing sale price, for shares of
the Common Stock for the periods indicated.  Such prices
represent quotations between dealers and do not include mark-ups,
mark-downs or commissions, and may not necessarily represent
actual transactions.


                                Sale Prices         Closing
1997                          High       Low       Sale Price

First Quarter               $ 8-1/2    $ 3          $ 5-5/16
Second Quarter                5-7/8      4-1/2        5-5/8
Third Quarter                 8          5-5/8        6-3/8
Fourth Quarter                7-1/2      6            6-5/8

1996

First Quarter                 3-7/8      2-1/2        2-3/4
Second Quarter                3-5/8      2-3/4        3-1/8
Third Quarter                 3          2-1/4        2-13/16
Fourth Quarter                4-1/8      2-5/16       3-1/2

     The Company has not paid any cash dividends on the Common
Stock in the past and does not anticipate that any cash dividends
will be declared or paid in the foreseeable future.  The
Company's current line of credit facility prohibits the payment
of any dividends by the Company without the lender's prior
written consent.
<PAGE>
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
                                                 February 28,    February 23,
                                                     1997            1996    
<S>                                              <C>             <C>
ASSETS
Cash and cash equivalents                           $   189         $    31
Cash equivalents restricted for letters
  of credit                                             665             859
Accounts receivable, net                             11,352           7,710
Costs and estimated earnings in excess of
  billings on uncompleted long-term contracts         3,345           4,024
Inventories                                           2,719           3,611
Prepaid expenses and other current assets                92             556
     Total current assets                            18,362          16,791

Property, plant, and equipment, at cost, net          2,480           2,498
Software development costs, net of accumulated
  amortization of $3,244 and $2,563 in 1997
  and 1996, respectively                              1,430           1,617
Other assets                                             37              20

     Total assets                                   $22,309         $20,926

LIABILITIES
Current portion of long-term obligations            $   119         $ 2,441
Convertible notes payable - related parties           1,300              -
Accounts payable - trade                              1,799           1,586
Billings in excess of costs and estimated
  earnings on uncompleted long-term contracts         2,051           3,355
Customer deposits                                     1,746             104
Accrued income taxes                                    271             188
Net arbitration awards                                  306             445
Other accrued liabilities                             1,222             812
     Total current liabilities                        8,814           8,931

Long-term obligations, less current portion:
  Credit facility payable to banks                    6,714           5,214
  Other                                                 283             300
                                                      6,997           5,514
Deferred income taxes, net                               89             370

     Total liabilities                               15,900          14,815

STOCKHOLDERS' EQUITY
Common stock - authorized 10,000,000 shares,
  $.10 par value; 2,963,083 and 2,928,944 shares
  issued and outstanding in 1997 and 1996,
  respectively                                          296             293
Capital contributed in excess of par value of
  common stock                                        2,007           1,692
Retained earnings                                     4,106           4,126

     Total stockholders' equity                       6,409           6,111

     Total liabilities and stockholders' equity     $22,309         $20,926
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
($ in thousands, except per share data)

                                                 Year Ended      Year Ended
                                                 February 28,    February 23,
                                                     1997            1996    
<S>                                              <C>             <C>
Net sales                                           $21,884         $15,580

Cost of goods sold                                   16,142          10,374

     Gross profit                                     5,742           5,206

Operating expenses:
  Selling and administrative                          4,379           3,560
  Research and development                              167             154

                                                      4,546           3,714

     Operating income                                 1,196           1,492

Other expenses:
  Interest expense                                    1,247             925
  Letter of credit fees                                  23              23
  Other, net                                             34             106

                                                      1,304           1,054

     (Loss) income before (benefit) provision
       for income taxes                                (108)            438

(Benefit) provision for income taxes                    (88)            139

     Net (loss) income                              $   (20)        $   299

(Loss) earnings per share
  (primary and fully diluted)                       $  (.01)        $   .10

</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
($ in thousands)

   For the years ended February 28, 1997 and February 23, 1996
<TABLE>
<CAPTION>
                                                          Capital
                                                        contributed
                                                        in excess of
                                                          par value
                                      Common Stock        of common   Retained
                                   Shares     Amount        stock     earnings
<S>                              <C>         <C>        <C>           <C>
Balance, February 24, 1995       2,906,980     $291        $1,618      $3,827

Net income for the year                  -        -             -         299
Shares issued in connection with
  employee stock purchase and
  stock option plans                 3,809        -            11           -
Shares issued in connection with
  employee stock award              18,155        2            63            

Balance, February 23, 1996       2,928,944      293         1,692       4,126

Net loss for the year                    -        -             -         (20)
Issuance of stock purchase
  warrants                               -        -           202           -
Shares issued in connection with
  employee stock purchase and
  stock option plans                34,139        3           113           -

Balance, February 28, 1997       2,963,083     $296        $2,007      $4,106

</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Consolidated Statements of Cash Flows
($ in thousands)
<TABLE>
<CAPTION>
                                                 Year Ended      Year Ended
                                                 February 28,    February 23,
                                                     1997            1996    
<S>                                              <C>             <C>
Cash flows from operating activities:
  Net (loss) income                                 $   (20)        $   299
  Adjustments to reconcile net (loss) income
    to net cash (used in) provided by operating
    activities:
      Depreciation and amortization                    1,452          1,006
      Increase in allowance for doubtful accounts        113             29
      (Increase) decrease in assets:
        Accounts receivable                           (3,755)         1,891
        Costs and estimated earnings in excess
          of billings on uncompleted long-term
          contracts                                      679           (873)
        Inventories                                      606           (467)
        Prepaid expenses and other current assets        464           (438)
        Other assets                                     (17)             -
      (Decrease) increase in liabilities:
        Accounts payable                                 213            (61)
        Billings in excess of costs and estimated
          earnings on uncompleted long-term
          contracts                                   (1,304)         2,012
        Customer deposits                              1,642           (443)
        Accrued income taxes                              83            (17)
        Net arbitration awards                           241              -
        Other accrued liabilities                        410           (104)
        Payments under settlement agreements            (530)          (353)
      (Decrease) increase in deferred income taxes      (281)           118
          Net cash (used in) provided by
            operating activities                          (4)         2,599

Cash flows from investing activities:
  Acquisition of equipment                              (231)          (314)
  Software development costs capitalized                (494)          (696)
  Decrease in cash surrender value of insurance
    policy                                                 -             43
          Net cash used in investing activities         (725)          (967)

Cash flows from financing activities:
  Net payments under credit facility                    (775)        (1,450)
  Decrease (increase) in cash equivalents
    restricted for letters of credit                     194           (267)
  Increase in notes payable - related party            1,300              2
  Increase in other long-term obligations                 68              -
  Net principal payments of other long-term debt         (16)           (28)
  Proceeds from issuance of common stock                 116             76
          Net cash provided by (used in)
            financing activities                         887         (1,667)

          Net increase (decrease) in cash and 
            cash equivalents                             158            (35)
Cash and cash equivalents at beginning of year            31             66

Cash and cash equivalents at end of year              $  189         $   31

Supplemental schedule of cash flow information:
  Interest paid                                       $  940         $  881
  Income taxes paid                                      100             38

</TABLE>
Supplemental information on noncash operating and investing
activities:

     The Company transferred $286 of inventory to property,
plant, and equipment during the year ended February 28, 1997.

The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share amounts)

1.   Summary of Significant Accounting Policies:

     Nature of Business:

     The Company is primarily engaged in the development and
     manufacture of aircrew and disaster simulation training
     systems, sterilizers, and environmental systems. The Company
     focuses on product extension and new product development. 
     Sales of aircrew training systems are made principally to
     U.S. and foreign governmental agencies.  Sales of
     sterilizers and environmental systems are made to commercial
     and governmental entities worldwide.

     Principles of Consolidation:

     The consolidated financial statements include the accounts
     of Environmental Tectonics Corporation (the Company) and its
     wholly-owned subsidiary, ETC International Corporation.  All
     material intercompany accounts and transactions have been
     eliminated.  The Company's fiscal year is the 52- or 53-week
     annual accounting period ending the last Friday in February.

     Use of Estimates:

     In preparing financial statements in conformity with
     generally accepted accounting principles, management is
     required to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and the
     disclosure of contingent assets and liabilities at the date
     of the financial statements and revenues and expenses during
     the reporting period.  Actual results could differ from
     those estimates.  Significant estimates include revenue
     recognition under the percentage of completion method (see
     Note 1, Revenue Recognition), claims receivable, inventory,
     and computer software costs.  

     The Company has recorded approximately $2.9 million in
     claims receivable for contract costs incurred through
     February 28, 1997 (see Note 2), which are subject to
     negotiation and audit by the U.S. and foreign governments. 
     To the extent the Company is unsuccessful in realizing these
     claims, there could be a material adverse effect on the
     Company's liquidity and results of operations.

     Subsequent to February 28, 1997, $284 was awarded to one of
     the Company's subcontractors in the Navy CFET project for
     various work performed in the building part of the project. 
     The Company is currently reviewing the arbitration costs as
     well as additional expenditures made through October 1996 on
     the CFET project to determine which, if any, will be added
     to the existing claims with the U.S. Government.

     Revenue Recognition:

     Revenue is recognized on long-term contracts utilizing the
     percentage of completion method based on costs incurred as a
     percentage of estimated total costs.  Revenue recognized on
     uncompleted long-term contracts in excess of amounts billed
     to customers is reflected as an asset.  Amounts billed to
     customers in excess of revenue recognized on uncompleted
     long-term contracts is reflected as a liability.  When it is
     estimated that a contract will result in a loss, the entire
     amount of the loss is accrued.  The effect of revisions in
     cost and profit estimates for long-term contracts is
     reflected in the accounting period in which the facts
     requiring the revisions become known.  The effect of
     revisions in estimates of contract revenues was to increase
     net loss before tax by approximately $406 and decrease net
     income before tax by approximately $83 in fiscal 1997 and
     1996, respectively.  Contract progress billings are based
     upon contract provisions for customer advance payments,
     contract costs incurred, and completion of specified
     contract objectives.  Contracts may provide for customer
     retainage of a portion of amounts billed until contract
     completion.  Retainage is generally due within one year of
     completion of the contract.  Revenue for service contracts
     is recognized ratably over the life of the contract; related
     material costs are expensed as incurred.

     Cash and Cash Equivalents:

     Cash and cash equivalents include short-term deposits at
     market interest rates with original maturities of three
     months or less.  The Company maintains cash balances at
     several financial institutions located in the Northeast. 
     Accounts in each institution are insured by the Federal
     Deposit Insurance Corporation up to $100.  Uninsured
     balances aggregate to $245 at February 28, 1997.

     Inventories:

     Inventories are valued at the lower of cost or market.  Cost
     is determined principally by the first-in, first-out method. 
     The costs of finished goods and work-in-process inventories
     include material, direct engineering, manufacturing labor,
     and overhead components.  The Company periodically reviews
     the inventory and, if necessary, writes down the recorded
     costs.  During the fourth quarter of fiscal year 1997, the
     Company determined that a write-down adjustment of
     approximately $556 was necessary on certain slow moving
     products.

     Depreciation of Property, Plant, and Equipment:

     Property, plant, and equipment are depreciated over their
     estimated useful lives by the straight-line method for
     financial reporting purposes.  Accelerated depreciation
     methods are used for tax purposes.  Upon sale or retirement
     of property, plant, and equipment, the costs and related
     accumulated depreciation are eliminated from the accounts. 
     Any resulting gains or losses are included in the
     determination of net income.  During the fourth quarter of
     1997, the Company transferred from inventory to fixed assets
     a demonstrator unit and recorded $143 of additional
     depreciation expense.

     Amortization of Capitalized Software Development Costs:

     The Company capitalizes the qualifying costs of developing
     software contained in certain products. Capitalization of
     costs requires that technological feasibility has been
     established.  When the software is fully documented and
     tested, capitalization of development costs cease and
     amortization commences over a period ranging from 36 to 60
     months (dependent upon the life of the product) on a
     straight-line basis which, at a minimum, approximates
     estimated sales.

     Realization of capitalized software costs is subject to the
     Company's ability to market the related product in the
     future and generate cash flows to support future operation.

     Capitalized software costs and related amortization 
     totalled $494 and $681 for the year ended February 28, 1997. 
     Capitalized software costs and related amortization totalled
     $696 and $573 during the year ended February 23, 1996.
     During 1997, the Company reevaluated the amortization period
     of costs associated with a certain product and, as a result,
     an additional $109 was expensed during the fourth quarter of
     1997.

     Amortization of Deferred Financing Costs:

     Capitalized costs relating to the acquisition of the
     Company's credit facility are amortized over the term of the
     credit facility.  Amortization expense relating to deferred
     financing costs was $202 and $3 in 1997 and 1996,
     respectively.

     Amortization of Discount on Settlement Payable:

     The discount on settlement payable related to a products
     liability settlement, the liability that was recognized in
     fiscal 1996, is amortized over the term of the note. 
     Amortization expense was $34 and $55 in fiscal 1997 and
     1996, respectively.

     Income Taxes:

     The Company accounts for income taxes using the liability
     method, which reflects the impact of temporary differences
     between values recorded for assets and liabilities for
     financial reporting purposes and values utilized for
     measurement in accordance with tax laws.

     Long-Lived Assets:

     The Company has 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," which provides guidance on when to recognize and how to
     measure impairment losses of long-lived assets and certain
     identifiable intangibles and how to value long-lived assets
     to be disposed of.  The adoption of SFAS No. 121 had no
     material effect on the Company's consolidated financial
     position or results of operations.

     Stock Options:

     The Company has adopted SFAS No. 123, "Accounting for Stock-
     Based Compensation," which contains a fair value-based
     method for valuing stock-based compensation that entities
     may use, which measures compensation cost at the grant date
     based on the fair value of the award.  Compensation is then
     recognized over the service period, which is usually the
     vesting period.  Alternatively, the standard permits
     entities to continue accounting for employee stock options
     and similar instruments under Accounting Principles Board
     (APB) Opinion No. 25, "Accounting for Stock Issued to
     Employees."  Entities that continue to account for stock
     options using APB Opinion No. 25 are required to make pro
     forma disclosures of net income and earnings per share, as
     if the fair value-based method of accounting defined in SFAS
     No. 123 had been applied.  The Company's Incentive Stock
     Option Plan is accounted for under APB Opinion No. 25.

     Advertising and Trade Shows Costs:

     The Company expenses advertising costs as incurred. 
     Advertising and trade show expense was $189 and $83 for the
     years ended February 28, 1997 and February 23, 1996,
     respectively.

     (Loss) Earnings Per Common Share:

     (Loss) earnings per common share in 1997 and 1996 are based
     on net income divided by the weighted average number of
     common shares and common stock equivalent shares (shares
     issuable upon the exercise of stock purchase warrants and
     options, unless anti-dilutive) outstanding.  The weighted
     average number of common shares and common stock equivalent
     shares outstanding was 2,965,000 and 2,935,000 in 1997 and
     1996, respectively.

     The Financial Accounting Standards Board has issued SFAS
     No. 128, "Earnings Per Share," which is effective for
     financial statements issued after December 15, 1997.  The
     new standard eliminates primary and fully diluted earnings
     per share and requires presentation of basic and diluted
     earnings per share together with disclosure of how the per
     share amounts were computed.  Basic earnings per share
     excludes dilution and is computed by dividing income
     available to common shareholders by the weighted average
     common shares outstanding for the period.  Diluted earnings
     per share reflects the potential dilution that could occur
     if securities or other contracts to issue common stock were
     exercised and converted into common stock or resulted in the
     issuance of common stock that then shared in the earnings of
     the entity.  Due to the antidilutive effect resulting from
     the loss, the adoption of this standard will not effect
     earnings per share for the year ended February 28, 1997.

     Reclassifications:

     Certain reclassifications have been made to the 1996
     financial statements to conform with the 1997 presentation.

2.   Accounts Receivable:

     The components of accounts receivable at February 28, 1997
     and February 23, 1996 are as follows:

                                                 1997     1996 

      U.S. Government receivables billed and
        unbilled contract costs subject to
        negotiation                             $ 5,284  $ 3,848

      U.S. commercial receivables billed          2,477      746
      International receivables billed            3,828    3,240
                                                 11,589    7,834
      Less allowance for doubtful accounts         (237)    (124)

                                                $11,352  $ 7,710


     U.S. Government receivables billed and unbilled contract
     costs subject to negotiation:

     Unbilled contract costs subject to negotiation represent
     claims made or to be made against the U.S. Government under
     a contract for a centrifuge.  These costs were recorded
     during fiscal years 1994 and 1995.  The Company has recorded
     claims, amounting to $2.6 million, to the extent of contract
     costs incurred. These costs have been incurred in connection
     with U.S. Government-caused delays, errors in specifications
     and designs, and other unanticipated causes and may not be
     received in full during fiscal 1998.  In accordance with
     generally accepted accounting principles, revenue recorded
     by the Company from a claim does not exceed the incurred
     contract costs related to the claim.  The Company currently
     has approximately $8.6 million in claims filed with the U.S.
     Government.  The U.S. Government has responded to the claims
     with either denials or deemed denials which the Company has
     appealed.  Additionally, the Company is now reviewing
     expenditures from November 1995 through October 1996 to
     determine what, if any, additional amounts can be filed as a
     supplemental claim.  Such claims are subject to negotiation
     and audit by the U.S. Government.

     In November 1996, the Company invoiced the balance due under
     the centrifuge contract; at February 28, 1997, approximately
     $1.7 million was included in U.S. Government receivables.

     Collectibility of these amounts may be dependent upon the
     resolution of the above claims.

     International receivables billed:

     International receivables billed includes $1.3 million
     related to an arbitration award resulting from certain
     claims made against a foreign government (see Note 12).

3.   Costs and Estimated Earnings on Uncompleted Contracts:

     The following is a summary of long-term contracts in
     progress at February 28, 1997 and February 23, 1996:

                                                 1997     1996 

      Costs incurred on uncompleted long-term
        contracts                               $12,539  $19,538
      Estimated earnings                          7,507    7,406
                                                 20,046   26,944
      Less billings to date                     (18,752) (26,275)

                                                $ 1,294  $   669



                                                 1997     1996 
      Included in accompanying balance 
        sheets under the following captions:

      Costs and estimated earnings in excess
        of billings on uncompleted long-term
        contracts                               $ 3,345  $ 4,024
      Billings in excess of costs and
        estimated earnings on uncompleted
        long-term contracts                      (2,051)  (3,355)

                                                $ 1,294  $   669


     Included in billings in excess of costs and estimated
     earnings on uncompleted long-term contracts is a provision
     for anticipated losses on contracts of $163 and $72 in 1997
     and 1996, respectively.

4.   Inventories:

     Inventories consist of the following:

                                     Raw      Work in
                                   material   process     Total 

      February 28, 1997              $417      $2,302     $2,719
      February 23, 1996               696       2,915      3,611


     Inventory is presented net of a write-down of $756 and $100
     in 1997 and 1996, respectively.

5.   Property, Plant, and Equipment:

     The following is a summary of property, plant, and
     equipment, at cost, and estimated useful lives at
     February 28, 1997 and February 23, 1996:
<TABLE>
<CAPTION>
                                                                Estimated
                                                                  useful
                                          1997        1996        lives  
      <S>                               <C>         <C>         <C>
      Land                              $   100     $   100
      Building and building additions     1,811       1,811       40 years
      Machinery and equipment             5,288       4,793      3-5 years
      Office furniture and equipment        727         716       10 years
      Building improvements                 812         812     5-10 years

                                          8,738       8,232
      Less accumulated depreciation      (6,258)     (5,734)

        Property, plant, and equipment,
          net                           $ 2,480     $ 2,498

</TABLE>
     Depreciation expense for the years ended February 28, 1997
     and February 23, 1996 was $536 and $375, respectively.

6.   Long-Term Obligation and Credit Arrangements:

     Long-term obligations at February 28, 1997 and February 23,
     1996 consist of the following:
<TABLE>
<CAPTION>
                                                        1997       1996 
      <S>                                              <C>        <C>
      Credit facility payable to bank due 
        March 31, 1997 (a)                             $6,714     $7,489
      Products liability settlement (net of
        unamortized discount of $139 and $173,
        respectively, based on imputed rate
        of 11%) (b)                                       306        422
      Term loans payable accruing interest
        between 9.0% and 9.9% collateralized by
        priority liens on certain equipment                96         44
                                                        7,116      7,955
      Less current portion                               (119)    (2,441)

                                                       $6,997     $5,514
</TABLE>
     (a)  At February 28, 1997, the Company had a revolving
          credit facility with a bank which provided financing of
          up to an aggregate of $7.7 million, expiring on
          March 31, 1997.  The proceeds from the credit facility
          were utilized to provide working capital financing and
          to support the issuance of letters of credit.  The
          credit facility included certain covenants related to,
          among other things, prohibitions on the payment of cash
          dividends, minimum tangible net worth requirements, and
          various financial ratios. The credit facility is
          collateralized by substantially all assets of the
          Company.

          Direct borrowings under the credit facility were
          limited to the lesser of $7.5 million or the Company's
          borrowing base as calculated pursuant to the terms of
          the agreement (approximately $7.8 million borrowing
          base at February 28, 1997).  The letter of credit
          sublimit was $7 million.  At February 28, 1997, there
          were $665 letters of credit outstanding (of which
          approximately $464 were cash collateralized), exclusive
          of a $1.1 million letter of credit for the RTAF which
          was drawn against in the first quarter of fiscal 1995
          (see Note 12).  Interest is charged on direct
          borrowings at the bank's prime rate plus 2.0%.  The
          interest rate was 10.25% at February 28, 1997 and
          February 23, 1996.  The Company was required to pay a
          commitment fee of 0.5% per annum on the average unused
          balance.  Fees on letters of credit outstanding were
          2.0% per year.

          The approximate average loan balance, maximum aggregate
          borrowings outstanding at any month-end payable to
          banks during the fiscal years, and weighted average
          interest rate computed by the days outstanding method
          are as follows:
<TABLE>
<CAPTION>
                                              Year Ended    Year Ended
                                              February 28,  February 28,
                                                  1997          1996    
      <S>                                     <C>           <C>
      Approximate average loan balance           $ 7,131      $ 8,189

      Maximum aggregate borrowings outstand-
        ing at any month-end                     $ 7,489      $ 8,938

      Weighted average interest rate               10.60%       10.33%
</TABLE>
          As a condition to the issuance of the original credit
          facility, warrants to purchase 100,000 shares of the
          Company's common stock at $5.00 per share were issued
          on November 20, 1990.  These warrants expired on
          November 20, 1995.  As a condition to the extension of
          the credit facility through March 31, 1997, warrants
          were issued to purchase 100,000 shares of the Company's
          common stock at a price equal of $5.18.  The warrants
          will be exercisable through 2001.  If the holder
          desires to sell or transfer any of its warrants, the
          Company has the right of first refusal.  A deferred
          charge of $202 was assigned to the warrants and
          amortized to profit and loss during the year ended
          February 28, 1997.  Warrants issued provide for
          adjustments of the exercise price and the number of
          shares issuable thereunder in the event that the
          Company issues additional shares of common stock or
          rights to purchase common stock at a price less than
          the current warrant price or current market price,
          whichever is greater.  The Company has agreed to file a
          registration statement with the Securities and Exchange
          Commission to register the common stock issuable upon
          exercise of the warrants.  If the Registration
          Statement is not effective prior to July 15, 1997, the
          Company will forfeit a $375 escrow to the bank.

          On March 27, 1997, the Company executed an agreement
          (the "Credit Agreement") with a bank establishing a
          revolving credit facility of $10 million through
          May 31, 1998, at which time the facility is reduced to
          $9 million.  The facility bears interest at the bank's
          base rate or adjusted Libor and expires on May 31,
          1999.  The credit facility includes certain covenants
          related to, among other things, prohibitions on
          incurring additional debt, change in ownership of
          certain officers, payment of dividends and certain
          financial ratio requirements.  The credit facility is
          collateralized by substantially all of the assets of
          the Company.  

          Because of write-downs of certain inventory and other
          year-end adjustments that resulted in the Company
          recognizing a net loss of $20 for the fiscal year ended
          February 28, 1997, as of June 6, 1997, the bank has
          made all credit availability under the Credit Agreement
          subject to specific prior approval by the bank pending
          a review of the Company's financial condition.  The
          Company believes this restriction will be temporary.

          Additionally, the Company issued $4 million of
          subordinated debentures, bearing interest at 12% per
          annum, due March 27, 2004.  In connection with the
          subordinated debentures, warrants were issued to
          acquire 166,410 shares of the Company's common stock at
          an exercise price of $1.00 per share; proceeds from the
          debentures will be allocated to the warrants and
          charged to income over the term of the debentures.  The
          Company also issued 25,000 shares of 11%, $100 face
          value, convertible preferred stock for $2.5 million. 
          Each share of preferred stock is convertible, at the
          option of the shareholder, into 13.33 shares of the
          Company's common stock at a price of $7.50 per share.  

          The proceeds from these transactions were used to repay
          amounts outstanding under the existing credit facility
          at February 28, 1997.  Accordingly, the current amounts
          refinanced have been reclassified as long-term
          obligations.  

     (b)  During June 1995, the Company entered into a settlement
          with the employee of a customer who brought a products
          liability claim against the Company.  The settlement of
          $1,195 will be satisfied with (i) funds of $547
          (including accrued interest) previously deposited by
          the Company's products liability insurance carrier with
          the U.S. District Court, and (ii) a settlement payable
          to the plaintiff for the remaining amount of $648.  The
          Company paid $53 by July 20, 1995 and $100 on April 20,
          1996.  In September 1996, the Company renegotiated the
          payment schedule.  For the period from October 1996 to
          September 1997, the Company will pay $10 per month. 
          Beginning October 1997, the Company will pay $5 per
          month until the obligation is satisfied.  The claimant
          did reserve the right to pursue additional payment
          amounts as per the original settlement agreement of
          July 29, 1995.  The Company has recorded a discount of
          $207 on this settlement based on an imputed interest
          rate of 11%, which will be amortized over the term of
          the settlement.

     The amount of long-term obligations maturing in each of the
     next five fiscal years is $95 in 1998; $60 in 1999; $60 in
     2000; $60 in 2001; $60 in 2002; and $80 thereafter.  

7.   Notes Payable - Related Parties:

     Notes payable of $1.3 million represent amounts due from
     directors, executive officers and their affiliates.  Notes
     payable, due January 1, 1998, bear interest at 10% and are
     subordinated to the Company's credit facility.  The payees
     have the right to convert the notes into shares of the
     Company's common stock.  The notes are convertible into
     approximately 108,000 shares, at a price of $12, if
     converted on or before June 30, 1997.  After June 30, 1997,
     the notes can be converted at a price which is the greater
     of $5 or 75% of the average closing price of the Company's
     common stock. Subsequent to year-end, the Company repaid
     $500 of the outstanding notes payable.

8.   Leases:

     Operating Leases:

     The Company leases certain premises and office equipment
     under operating leases which expire over the next five
     years.  Future minimum rental payments required under
     noncancellable operating leases having a remaining term
     expiring after one fiscal year as of February 28, 1997 are
     $18 in 1998; $15 in 1999; $14 in 2000; $12 in 2001; and $2
     in 2002.

     Total rental expense for all operating leases for the years
     ended February 28, 1997 and February 23, 1996 was
     approximately $197 and $219, respectively.
<PAGE>
9.   Income Taxes:

     The components of the (benefit) provision for income taxes
     are as follows:
<TABLE>
<CAPTION>
                                              Year Ended    Year Ended
                                              February 28,  February 28,
                                                  1997          1996    
      <S>                                     <C>           <C>
      Current payable:
        Federal                                  $   190      $    21
        State                                          3            -
                                                     193           21

      Deferred:
        Federal                                     (233)          72
        State                                        (48)          46
                                                    (281)         118

                                                 $   (88)     $   139
</TABLE>
     A reconciliation of the statutory federal income tax
     (benefit) to the effective tax is as follows:
<TABLE>
<CAPTION>
                                              Year Ended    Year Ended
                                              February 28,  February 28,
                                                  1997          1996    
      <S>                                     <C>           <C>
      Statutory income tax                       (34.0)%        34.0%
      State income tax, net of federal tax
        benefit                                   (1.7)          8.8
      Foreign sales corporation                  (63.9)        (13.8)
      Other                                       18.1           2.7

                                                 (81.5)%        31.7%
</TABLE>
     The tax effects of the primary temporary differences giving
     rise to the Company's net deferred tax liability for the
     years ended February 28, 1997 and February 23, 1996 are as
     follows:
<TABLE>
<CAPTION>
                                                  1997        1996 
      <S>                                        <C>         <C>
      Deferred tax liabilities:
        Amortization of capitalized software     $  539      $  629
        Depreciation                                336         371
        Other, net                                    -           4
                                                    875       1,004

      Deferred tax assets:
        Net arbitration award against Company       127         174
        Net products liability settlement           116         165
        Vacation reserve                             48          71
        Inventory reserve                           285          39
        Receivable reserve                           89          74
        Warranty reserve                             44         111
        Other, net                                   77           -
                                                    786         634

      Net deferred tax liability                $    89      $  370

</TABLE>
10.  Business Segment Information:

     The Company primarily manufactures, under contract, various
     types of high technology equipment which it has also
     designed and developed.  A significant portion of the
     equipment is sold directly or through distributors to
     foreign markets.  Except for the foreign sales activity and
     certain operations and maintenance contracts, all operations
     of the Company are conducted in the United States. 
     Information on the Company's industry segments is as
     follows:
<TABLE>
<CAPTION>
                                              Year Ended    Year Ended
                                              February 28,  February 28,
                                                  1997          1996    
      <S>                                     <C>           <C>
      Net sales:
        Aircrew Training Systems                $ 13,247      $  8,038
        Sterilizers                                6,213         4,762
        Environmental Systems and other            2,424         2,780

            Total                               $ 21,884      $ 15,580

      Operating income (loss)(1):
        Aircrew Training Systems                $  2,153      $  2,240
        Sterilizers                                  151          (232)
        Environmental Systems and other             (455)         (118)
                                                   1,849         1,890
      General corporate expenses                    (653)         (398)
          Operating income                         1,196         1,492

      Interest expense                            (1,247)         (925)
      Letter of credit fees                          (23)          (23)
      Other, net                                     (34)         (106)

          (Loss) income before income taxes     $   (108)     $    438

      Identifiable assets:
        Aircrew Training Systems                $ 14,071      $ 14,154
        Sterilizers                                3,819         2,376
        Environmental Systems and other            1,093         1,417
        Corporate assets                           3,326         2,979

          Total assets                          $ 22,309      $ 20,926

</TABLE>
(1)  Included in operating income (loss) in fiscal 1997 are $556
     for inventory write-downs, $143 for additional depreciation
     recorded on a demonstrator unit transferred from inventory
     to fixed assets, $284 for a reserve for an arbitration
     settlement related to the Company's government claims
     awarded after fiscal year-end, and additional amortization
     expense of $109 for capitalized software.
<PAGE>
10.  Business Segment Information (Continued):

     Operating income (loss) consists of net sales less
     applicable costs and expenses relating to these revenues.
     General corporate expenses, letter of credit fees, interest
     expense, other expenses, and income taxes have been excluded
     from the determination of segment operating income (loss). 
     General corporate expenses are primarily central
     administrative office expenses.  Property, plant, and
     equipment and, accordingly, depreciation and capital
     expenditures are not identifiable with specific business
     segments because most of these assets are used in each of
     the segments.

     Approximately 17% and 11% of sales in 1997 were made to two
     international customers, totalling sales of $3,826 and
     $2,527, respectively, in the Aircrew Training Systems
     segment.  Approximately 15% of sales in 1996 were made to
     one international customer, totalling sales of $2,366 in the
     Aircrew Training Systems segment.

     Included in the segment information for the year ended
     February 28, 1997 are export sales of approximately $15,422. 
     Of these amounts, there are sales to or relating to the
     Governments of United Kingdom ($3,826), Japan ($2,527),
     China ($1,969), Tunisia ($684) and Egypt ($483) for the sale
     of the Aircrew Training Systems segment.  Sales to the U.S.
     Government and its agencies aggregate approximately $2,082
     for the year ended February 28, 1997.

     Included in the segment information for the year ended
     February 23, 1996 are export sales of approximately $9,198. 
     Of these amounts, there are sales to or relating to the
     Governments of Japan ($559), Bangladesh ($602) and the
     United Kingdom ($2,366) for the sale of Aircrew Training
     equipment.  Sales to the U.S. Government and its agencies
     aggregate approximately $1,631 for the year ended
     February 23, 1996.

11.  Stock Options:

     The Company has a fixed Incentive Stock Option Plan (the
     Plan) accounted for under APB Opinion No. 25 and related
     Interpretations.  The Plan allows the Company to grant
     options to employees for up to 500,000 shares of common
     stock and will terminate on August 24, 1998.  The options,
     which have a term of 10 years when issued, vest over a four-
     year period.  The exercise price of each option shall not be
     less than 100% of the current market price of the Company's
     stock on the date of grant.  Accordingly, no compensation
     cost has been recognized for the Plan.  Had compensation
     cost for the Plan been determined based on the fair value of
     the options at the grant dates consistent with the method of
     SFAS No. 123, the Company's net income and earnings per
     share would have been reduced to the pro forma amounts
     indicated below.
<TABLE>
<CAPTION>
                                                1997       1996
       <S>                                      <C>        <C>
       Net (loss) income       As reported      $(20)      $299
                               Pro forma        $(37)      $299

       Primary and fully       As reported      $(.01)      .10
       diluted earnings per    Pro forma        $(.01)      .10
       share
</TABLE>
     The fair value of each option grant is estimated on the date
     of grant using the Black-Scholes options-pricing model with
     the following weighted average assumptions used for grants
     in 1997: dividend yield of 0%; expected volatility of 60%;
     risk-free interest rate of 6.2%%; and expected life of four
     years.

     A summary of the status of the Plan as of February 28, 1997
     and February 23, 1996, and changes during the years ending
     on those dates is presented below.
<TABLE>
<CAPTION>
                                                        1997                         1996          
                                                              Weighted                    Weighted
                                                              average                     average
                                                              exercise                    exercise
                                                 Shares         price         Shares        price  
      <S>                                      <C>            <C>           <C>           <C>
      Outstanding at beginning of year            79,550       $  3.19       102,450       $  3.24
      Granted                                     54,900          4.33             -          -
      Exercised                                  (32,040)         3.30             -          -
      Forfeited                                   (3,600)         4.25       (22,900)         3.19
      Outstanding at end of year                  98,810          3.75        79,550          3.19

      Options exercisable at year end             48,635
      Weighted average fair value of options
        granted during the year                                $  2.29                     $  -

</TABLE>
     The following information applies to options outstanding at
     February 28, 1997:

       Number outstanding                                98,810
       Range of exercise prices                  $2.25 to $4.50
       Weighted average exercise price                    $3.75
       Weighted average remaining contractual
         life                                         6.6 years


12.  Claims and Litigation:

     In October 1993, the Company was notified by the Royal Thai
     Air Force ("RTAF") that the RTAF was terminating a certain
     $4.6 million simulator contract with the Company.  Although
     the Company had performed in excess of 90% of the contract,
     the RTAF alleged a failure to completely perform.  In
     connection with this termination, the RTAF made a call on a
     $229 performance bond, as well as a draw on approximately
     $1.1 million of advance payment letters of credit.  Work
     under this contract had stopped while under arbitration, but
     on October 1, 1996, the Thai Trade Arbitration Counsel
     rendered its decision under which the contract was
     reinstated in full and the Company was given a period of
     nine months to complete the remainder of the work.  Upon
     completion of the contract, the RTAF will pay the Company
     the open receivables balance, consisting of the performance
     bond and the advance payment, plus the 10% due on the
     balance of the contract.  Except as noted in the award, the
     rights and obligations of the parties remain as per the
     original contract.  Should the Company fail to perform under
     the contract in the time period allotted, the RTAF could
     invoke penalties against the Company, including termination
     of the contract and delay penalties.  Based on the progress
     to date and recent discussions with the RTAF, the Company
     estimates it will probably exceed the nine-month contract
     completion period due to an extended delay in obtaining an
     export license for certain hardware required to complete the
     job.  This license has been cleared and the hardware is in
     the country.  The Company has submitted a request for a
     contract extension under the "force majeure" clause of the
     RTAF contract, and the customer has agreed to an extension
     to complete the installation and training. 

     A lawsuit was commenced against the Company in April 1997 in
     the United States District Court for the District of Puerto
     Rico by an employee of a customer who claims to have been
     injured as a result of an alleged malfunction of a
     sterilizer manufactured by the Company.  The plaintiff is
     seeking $3 million in damages.  The Company has up to $10
     million of products liability coverage, subject to a $100
     deductible.  The outcome of this litigation is not currently
     predictable.

     Certain other claims, suits, and complaints arising in the
     ordinary course of business have been filed or are pending
     against the Company.  In the opinion of management, after
     consultation with legal counsel, all such matters are
     reserved for or adequately covered by insurance or, if not
     so covered, are without merit or are of such kind, or
     involve such amounts, as would not have a significant effect
     on the financial position or results of operations of the
     Company if disposed of unfavorably.

13.  Related Party Transactions:

     The Company transacts certain business in Europe through
     Environmental Tectonics Corporation (Europe) Ltd., (ETC
     Europe), an affiliated entity which is 99% owned by the
     president of the Company.  ETC Europe provides certain
     marketing and administrative services relating to European
     sales and maintenance contracts.  Administrative fees paid
     to ETC Europe were approximately $45 and $80 for the years
     ended February 28, 1997 and February 23, 1996, respectively.

14.  Employee Benefit Plan

     The Company maintains a retirement savings 401(k) plan for
     eligible employees.  The Company's contributions to the plan
     are based on a percentage of the employees' qualifying
     contributions.  The Company's contributions totalled $83 and
     $88 in 1997 and 1996, respectively.

     From time to time, the Company had not made employee
     contribution payments to the trustee of its employee benefit
     plan concurrent with payroll payments to such employees. 
     The Company is now making these payments concurrent with its
     payroll.  By reason of such past late payments, the Company
     may be subject to certain additional interest and taxes as
     well as potential penalties.

15.  Quarterly Consolidated Financial Information (Unaudited):

     Financial data for the interim periods of 1997 and 1996 were
     as follows:
<TABLE>
<CAPTION>
                                                   Quarter Ended            
                                      May      August    November   February
                                      31         30         29         28   
       <S>                          <C>        <C>        <C>        <C>
       Net sales                    $4,509     $4,897     $5,568     $ 6,910
       Gross profit                  1,395      1,582      1,774         991
       Operating income (loss)         439        581        703        (527)
       Income (loss) before income
         taxes                         175        255        421        (959)
       Net income (loss)               120        172        287        (599)
       Earnings (loss) per common
         shares and common stock
         equivalent shares          $  .04     $  .06     $  .09     $  (.20)

<CAPTION>
                                                   Quarter Ended            
                                      May      August    November   February
                                      26         25         24         23   
       <S>                          <C>        <C>        <C>        <C>
       Net sales                    $3,712     $3,559     $4,087     $ 4,222
       Gross profit                  1,426      1,251      1,270       1,259
       Operating income                330        300        447         415
       Income before income taxes      109         69        165          95
       Net income                       70         45        107          77
       Earnings per common shares
         and common stock equiva-
         lent shares                $  .02     $  .02     $  .04     $   .02

</TABLE>
16.  Fourth-Quarter Adjustments:

     The Company recorded the following significant fourth
     quarter adjustments:

     (1)  $556 or $.12 per share was charged to cost of goods
          sold which related to the write-down of certain slow-
          moving products.

     (2)  $284 or $.06 per share was to record an arbitration
          settlement awarded after the fiscal year ended February
          28, 1997.

     (3)  $109 or $.03 per share was the result of reevaluation
          of the amortization period of costs associated with
          capitalized software of a certain product.

     (4)  $143 or $.03 per share was a charge to depreciation for
          an inventory item transferred from inventory to
          property, plant, and equipment. <PAGE>
       Report of Independent Certified Public Accountants




Board of Directors
Environmental Tectonics Corporation


     We have audited the accompanying consolidated balance sheets
of Environmental Tectonics Corporation and Subsidiary as of
February 28, 1997 and February 23, 1996, and the related
consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended.  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.

     As discussed in Note 1 to the consolidated financial
statements, the Company has recorded receivables in the amount of
$2.9 million for claims made to or against the United States and
foreign governments for contract costs incurred through
February 28, 1997.  The total net claims amount made and to be
made are approximately $8.6 million based on costs incurred
through February 28, 1997 and are subject to negotiation,
arbitration, and audit by the United States and foreign
governments.

     In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Environmental Tectonics
Corporation and Subsidiary as of February 28, 1997 and
February 23, 1996, and the consolidated results of their
operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.

/s/Grant Thornton LLP

Philadelphia, Pennsylvania
June 9, 1997