ENVIRONMENTAL TECTONICS CORPORATION



                              1998

                   ANNUAL SHAREHOLDERS' REPORT
<PAGE>
FINANCIAL REVIEW
($ in thousands, except share and per share data)


<TABLE>
<CAPTION>

Fiscal Year End                             1998      1997      1996      1995      1994

<S>                                       <C>       <C>       <C>       <C>       <C>
Net sales                                 $ 29,284  $ 21,884  $ 15,580  $ 16,188  $ 16,986
Gross profit                                 9,298     5,742     5,206     4,097     2,921
Operating income (loss)                      4,208     1,196     1,492      (891)   (1,671)
Net income (loss)                            1,794       (20)      299    (1,405)   (1,413)
Earnings (loss) per common share:
  Basic                                        .50      (.01)      .10      (.49)     (.50)
  Diluted                                      .47      (.01)      .10      (.49)     (.50)
Working capital                             11,462    10,334     7,860     9,038    10,130
Long-term obligations                        4,356     6,997     5,514     7,133     6,718
Total assets                                22,955    23,095    20,926    20,803    18,024
Total stockholders' equity                   8,579     6,409     6,111     5,736     7,050
Weighted average common shares:
  Basic                                  2,990,000 2,965,000 2,935,000 2,874,000 2,838,000
  Diluted                                3,196,000 2,965,000 2,935,000 2,874,000 2,838,000

</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.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Results of Operations

Fiscal 1998 Versus Fiscal 1997

     Certain statements under Item 1 and Item 7 contained herein
or as may otherwise be incorporated by reference herein
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.  Forward-
looking statements include but are not limited to:  statements
regarding future product development, technological advances and
market acceptance of products.  Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements
of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements.  Such factors
include, among other things, general economic and business
conditions, competition, technological advances, political unrest
in customer countries, contract cancellations and other risk
factors that are detailed in this document and in other periodic
reports and registration statements filed by Environmental
Tectonics Corporation with the Securities and Exchange
Commission.  All forward-looking statements included in this
document are based on information available to the Company on the
date hereof, and the Company assumes no responsibility to update
any such forward-looking statements.  Accordingly, past results
and trends should not be used by investors to anticipate future
results or trends.

     The Company had net income of $1,794,000 or $.47 per share
compared to a net loss of $20,000 or $.01 per share in 1997. 
Operating income was $4,208,000, an increase of $3,012,000 or
252% over 1997.  These increases were primarily the result of
increased sales which were $29,284,000, up $7.4 million or 34%
over 1997.

     Domestic sales increased $4,477,000 or 102% over 1997 and
accounted for 30% of the Company's total sales, up from 20% in
1997.  This increase was due to the introduction of the Company's
proprietary  motion-based technology  into  the entertainment 
marketplace as well as a $1,308,000 increase in sales of
industrial sterilizers. Sales to the U.S. Government, principally
for work on two large altitude chambers and a continuation of our
contracted operator maintenance contracts on selected aircrew
training devices, increased $854,000 or 41% and accounted for 10%
of ETC's total sales, the same percentages as 1997.  Sales to
international customers, principally government agencies,
increased $2,068,000 or 13% over 1997 and accounted for 60% of
the Company's total sales, down from 70% in 1997.  The increase
in international sales was due principally to continued work on a
centrifuge for Japan and a multipurpose aircraft trainer for the
United Kingdom Ministry of Defence (UKMOD).  Sales in 1998 to
UKMOD were approximately $9,226,000 or 32% of the Company's total
sales.  Open orders for UKMOD account for 59% of the Company's
sales backlog at February 27, 1998.

     On a segment basis, sales of the Company's Aircrew Training
Systems (ATS) products which create and monitor the physiological
effects of motion, including spatial disorientation and
centrifugal forces,  on humans and equipment for medical,
training, research and entertainment markets were $22,055,000, an
increase of $8,808,000 or 66% over 1997.  Sales of these products
accounted for 75% of ETC's sales compared to 61% in 1997.  Sales
in the Company's other segment, Process Simulation, which designs
and produces chambers that create environments that are used for
sterilization, research and medical applications, decreased
$1,408,000 or 16% and accounted for 25% of ETC's total sales
compared to 39% in 1997.  This reduction was due principally to
international sales of the Company's sterilizers and
environmental chambers, which were $2,533,000 lower in 1998
compared to 1997.  

     Gross profit increased $3,556,000 or 62%.  As a percentage
of sales, gross profit was 32%, up from 26% in 1997.  These
increases were attributable, in part, to the higher sales volume,
which improved plant capacity utilization, as well as an increase
in sales of higher-margined ATS products.

     Operating profit increased $3,012,000 or 252% compared to
1997.  On a segment basis, ATS had an operating profit of
$4,321,000, an increase of 97%, while the Process Simulation had
an operating profit of $691,000 compared to an operating loss of
$304,000 in 1997.  These segment operating profits were offset,
in part, by unallocated corporate expenses of $714,000, an
increase of $61,000 or 9% over 1997.

     Selling and administrative expenses increased $563,000 or
13% due principally to higher variable costs related to the
higher sales volume, such as commissions and travel expenses.  As
a percentage of sales, selling and administrative expenses were
17% compared to 20% in 1997.  This improvement was due, in part,
to the fixed administrative costs being spread over the higher
sales total as well as a reduction in accounting and legal fees.

     Research and development expenses decreased $19,000 or 11%
from 1997.  The Company's research efforts, which were and
continue to be a significant cost of its business, are included
in cost of sales for applied research for specific contracts as
well as research and development for basic research for
feasibility and technology updates.  Capitalized software
development costs for 1998 were $395,000 compared to $494,000 in
1997. Amortization of software costs, which were charged to cost
of sales, were $670,000 and $681,000 for 1998 and 1997,
respectively.

     Interest expense was virtually unchanged from 1998.  Other
expense increased during 1998 principally due to foreign exchange
charges.

     The Company's provision for taxes approximates the statutory
rate.

Fiscal 1997 Versus Fiscal 1996

     Fiscal 1997 sales increased 40% over fiscal 1996 sales as
significant increases in ATS 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 $556,000 of certain slow-moving
products to the lower of cost or market primarily in the ATS
segment, $143,000 of additional depreciation expense for a
demonstration unit transferred from inventory to fixed assets,
$284,000 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 $109,000
of additional amortization expense relating to capitalized
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 this project to determine which, if any, will be
added to the existing claims with the U.S. Government.

     The ATS segment reported a significantly higher sales level,
up $5,209,000 or 65%, as a result of continuing production on
certain large contracts and a further expansion of the Company's
COMS business.  As has been reported, the Company's backlog in
the ATS 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 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 $1,451,000 or
30%, reflecting the completion of certain larger contracts
coupled with increased service and spare parts activity. 
Operating performance was a profit of $151,000 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-downs.

     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
$819,000 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 as 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 salaries expense in the selling and
administrative area despite the heightened activity.

     Research and development expenditures increased slightly as
the Company continued 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 ($202,000) 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.

Liquidity and Capital Resources

     On March 27, 1997, the Company executed an agreement with a
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.  On May 26, 1998, the Company received a
commitment from its bank to maintain the total facility at
$10 million and to extend the maturity date of the entire
facility from May 31, 1999 to May 31, 2000.  Additionally, the
Company issued $4 million of subordinated debentures, bearing
interest at 12% 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; $499,000 of the proceeds from 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 existing credit facility at February 28, 1997.  The Company
had $5,870,000 available under the Credit Agreement at
February 27, 1998.  (See Note 6 of the Notes to the Consolidated
Financial Statements.)

     During fiscal 1998, the Company generated $1,647,000 of cash
from operating activities.  This was the result of net income and
noncash charges as well as a significant reduction in the
Company's accounts receivable.  These cash sources were offset by
increases in costs and estimated earnings in excess of billings
for uncompleted long-term contracts and a reduction in billings
in excess of costs for uncompleted long-term contracts.  The
Company used $1,065,000 for investing activities of acquisition
of equipment and capitalized software development costs.  Funds
were provided to support these investing activities from
available borrowings under the Company's Credit Agreement.  The
Company believes that cash generated from operating activities,
as well as available borrowings under the Credit Agreement, will
be sufficient to meet its obligations.  At May 22, 1998, the
Company had $2.5 million available borrowings under the Credit
Agreement.

     In reference to the Company's outstanding claim with the
U.S. Government, 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 have exceeded claims (see Note 2 of Notes to
Consolidated Financial Statements).

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 May 15,
1998, the Company had 359 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.

<TABLE>
<CAPTION>
                                      Sale Prices           Closing
                                 High            Low       Sale Price
1998
<S>                          <C>            <C>            <C>
First Quarter                $  9-3/8       $  6-1/2       $  9-5/16
Second Quarter                 10-1/8          7-7/8          8-1/2
Third Quarter                  11-3/4          8-1/2          9-1/8
Fourth Quarter                 10              7-3/8          8-3/4

1997

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

</TABLE>

     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.

Backlog

     The Company's sales backlog at February 27, 1998 and
February 28, 1997 for work to be performed and revenue to be
recognized under written agreements after such dates was
approximately $27,523,000 and $25,800,000, respectively.  In
addition, the Company's training and maintenance contracts
backlog at February 27, 1998 and February 28, 1997 for work to be
performed and revenue to be recognized after that date under
written agreements was approximately $2,925,000 and $5,100,000,
respectively.  Of the 1998 backlog, approximately $29,135,000 is
under contracts for ATS and maintenance support.  Approximately
60% of the 1998 backlog is expected to be completed prior to
February 26, 1999.
<PAGE>
Consolidated Balance Sheets
($ in thousands, except share data)

<TABLE>
<CAPTION>

                                                  February 27,  February 28,
                                                      1998          1997    

<S>                                               <C>           <C>
ASSETS

Cash and cash equivalents                         $       225   $       189
Cash equivalents restricted for letters of credit          15           665
Accounts receivable, net                                8,448        11,352
Costs and estimated earnings in excess of
  billings on uncompleted long-term contracts           5,651         3,345
Inventories                                             3,058         2,719
Deferred tax asset                                        770           786
Prepaid expenses and other current assets                 283            92
        Total current assets                           18,450        19,148

Property, plant, and equipment, at cost, net            2,837         2,480
Software development costs, net of accumulated
  amortization of $3,914 and $3,244 
  in 1998 and 1997, respectively                        1,155         1,430
Other assets                                              513            37

  Total assets                                    $    22,955   $    23,095

LIABILITIES 
Current portion of long-term obligations          $       148   $       119
Convertible notes payable - related parties               800         1,300
Accounts payable - trade                                1,424         1,799
Billings in excess of costs and estimated earnings
  on uncompleted long-term contracts                    1,145         2,051
Customer deposits                                       1,373         1,746
Accrued income taxes                                      984           271
Net arbitration awards                                      -           306
Other accrued liabilities                               1,114         1,222
  Total current liabilities                             6,988         8,814

Long-term obligations, less current portion:
  Credit facility payable to banks                        467         6,714
  Subordinated debt                                     3,730             -
  Other                                                   159           283
                                                        4,356         6,997
Deferred tax liability                                    702           875

  Total liabilities                                    12,046        16,686

Redeemable cumulative convertible preferred stock, $100 par and
  redemption value: 25,000 shares authorized; 25,000
  shares issued and outstanding                         2,330             -

STOCKHOLDERS' EQUITY
Common stock - authorized 10,000,000 shares, $.10 par
  value; 3,006,596 and 2,963,083 shares issued and
  outstanding in 1998 and 1997, respectively              300           296
Capital contributed in excess of par value of common stock      2,671      2,007
Retained earnings                                       5,608         4,106

  Total stockholders' equity                            8,579         6,409

  Total liabilities and stockholders' equity      $    22,955   $    23,095

</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Consolidated Statements of Operations
($ in thousands, except share data)

                                      Year Ended    Year Ended
                                      February 27,  February 28,
                                          1998          1997    

Net sales                             $   29,284    $   21,884

Cost of goods sold                        19,986        16,142

    Gross profit                           9,298         5,742

Operating expenses:
  Selling and administrative               4,942         4,379
  Research and development                   148           167

                                           5,090         4,546

     Operating income                      4,208         1,196

Other expenses:
  Interest expense                         1,244         1,247
  Letter of credit fees                       58            23
  Other, net                                 146            34

                                           1,448         1,304

     Income (loss) before provision
       (benefit) for income taxes          2,760          (108)

Provision (benefit) for income taxes         966           (88)

     Net income (loss)                $    1,794    $      (20)

Per share information
  Earnings (loss) per common share:
     Basic                            $      .50    $     (.01)
     Diluted                          $      .47    $     (.01)

Income (loss) available to common
  stockholders                        $    1,502    $      (20)

  Weighted average common shares:
     Basic                             2,990,344     2,965,000
     Diluted                           3,195,801     2,965,000


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

   For the years ended February 27, 1998 and February 28, 1997

<TABLE>
<CAPTION>
                                                              Capital
                                                            contributed
                                                             in excess
                                                               of par                  Total
                                                              value of                 stock-
                                         Common stock          common     Retained    holders'
                                       Shares      Amount      stock      earnings     equity 

<S>                                  <C>           <C>        <C>         <C>         <C>
Balance, February 23, 1996           2,928,944     $  293     $ 1,692     $ 4,126     $ 6,111

Net loss for the year                        -          -           -         (20)        (20)
Issuance of stock purchase warrants          -          -         202           -         202
Shares issued in connection with
  employee stock purchase and
  stock option plans                    34,139          3         113           -         116

Balance, February 28, 1997           2,963,083        296       2,007       4,106       6,409

Net income for the year                      -          -           -       1,794       1,794
Value of warrants issued in 
  connection with issuance
  of subordinated debt                       -          -         499           -         499
Accretion of preferred stock                 -          -           -         (38)        (38)
Dividends on preferred stock                 -          -           -        (254)       (254)
Shares issued in connection with
  employee stock purchase and
  stock option plans                    41,550          3         146           -         149
Shares issued in connection with 
  employee stock award                   1,963          1          19           -          20

Balance, February 27, 1998           3,006,596     $  300     $ 2,671     $ 5,608     $ 8,579

</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 27,    February 28,
                                                                             1998            1997
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                      $    1,794      $      (20)
  Adjustments to reconcile net income (loss) to net
        cash provided by (used in) operating activities:
    Depreciation and amortization                                             1,463           1,452
    Increase in allowance for accounts receivable and inventory                 527             113
    (Increase) decrease in assets:
      Accounts receivable                                                     2,762          (3,755)
      Costs and estimated earnings in excess of billings on uncompleted
        long-term contracts                                                  (2,306)            679
      Inventories                                                              (882)            606
      Prepaid expenses and other current assets                                 (44)            464
      Other assets                                                              (35)            (17)
    Increase (decrease) in liabilities:
      Accounts payable                                                         (375)            213
      Billings in excess of costs and estimated earnings on uncompleted
        long-term contracts                                                  (1,543)         (1,304)
      Customer deposits                                                         264           1,642
      Accrued income taxes                                                      713              83
      Net arbitration awards                                                      -             241
      Other accrued liabilities                                                (414)            410
      Payments under settlement agreements                                     (120)           (530)
    Decrease in deferred income taxes                                          (157)           (281)
          Net cash provided by (used in) operating activities                 1,647              (4)

Cash flows from investing activities:
  Acquisition of equipment                                                     (670)           (231)
  Software development costs capitalized                                       (395)           (494)
          Net cash used in investing activities                              (1,065)           (725)

Cash flows from financing activities:
  Net payments under credit facility                                         (6,247)           (775)
  Net proceeds from subordinated debt                                         3,730               -
  Net proceeds from preferred stock                                           2,292               -
  Payment of dividends on preferred stock                                      (254)              -
  Deferred financing costs                                                     (876)              -
  Decrease in cash equivalents restricted for letters of credit                 650             194
  (Decrease) increase in notes payable - related party                         (500)          1,300
  Increase in other long-term obligations                                         -              68
  Net principal payments of other long-term debt                                 (9)            (16)
  Proceeds from issuance of common stock/warrants                                668            116
          Net cash (used in) provided by financing activities                   (546)           887

          Net increase in cash and cash equivalents                               36            158

Cash and cash equivalents at beginning of year                                   189             31

Cash and cash equivalents at end of year                                  $      225    $       189

Supplemental schedule of cash flow information:
  Interest paid                                                           $    1,123    $       940
  Income taxes paid                                                              434            100

Supplemental information on noncash operating and investing activities:
  The Company reclassed $158 and $286 of inventory to property, plant,
    and equipment during the years ended February 27, 1998 and
    February 28, 1997, respectively.

</TABLE>


The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
1.   Summary of Significant Accounting Policies:

     Nature of Business

     Environmental Tectonics Corporation (ETC or the Company) is
     primarily engaged in the development, marketing and
     manufacturing of Aircrew Training Systems (ATS) and Process
     Simulation equipment.  The Company utilizes its internally
     developed software systems in virtually all of its products. 
     ETC focuses on software  enhancements, product  extensions,
     new  product development and new  marketplace applications.
     Sales of ATS products are made principally to U.S. and
     foreign government agencies and to the entertainment market. 
     Sales of Process Simulation equipment, which includes
     sterilizers and environmental systems, are made for
     commercial and governmental agencies worldwide.

     Principles of Consolidation:

     The consolidated financial statements include the accounts
     of ETC 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 are made for revenue
     recognition under the percentage of completion method (see
     Note 1, Revenue Recognition), claims receivable, inventory,
     and computer software costs.

     The Company has recorded receivables in the amount of $4.6
     million for claims made to or against the United States
     government for contract costs incurred through February 27,
     1998.  The total net claims amount made is approximately
     $10.3 million based on costs incurred through February 28,
     1997 and is subject to negotiation, arbitration and audit by
     the United States government.

     Many existing computer programs use only two digits to
     identify a year in the date field.  These programs were
     designed and developed without considering the impact of the
     upcoming change in the century.  If not corrected, many
     computer applications could fail or create erroneous results
     by or at the year 2000.  The Year 2000 issue affects
     virtually all companies and organizations.  The Company
     estimates that costs associated with the Year 2000 issue
     will not have a material impact on its financial position or
     results of operations.

     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.  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 contracts
     under $100 or to be competed in less than one year and
     revenue on parts and services are recognized as shipped. 
     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 $515 at February 27, 1998.

     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 net realizable value of the inventory and, if necessary,
     writes down the recorded costs.

     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.

     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 $395 and $670, respectively, for the
     year ended February 27, 1998.  Capitalized software costs
     and related amortization totalled $494 and $681,
     respectively, for the year ended February 28, 1997.

     Amortization of Deferred Financing Costs:

     Capitalized costs relating to the recapitalization of the
     Company are amortized over the term of the credit facility. 
     Amortization expense relating to deferred financing costs
     was $241 and $202 in 1998 and 1997, respectively (see
     Note 6).

     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:

     In the first quarter of 1997, the Company adopted Financial
     Accounting Standards Board (FASB) 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:

     In the first quarter of 1997, the Company 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 Costs:

     The Company expenses advertising costs as incurred. 
     Advertising expense was $210 and $189 for the years ended
     February 27, 1998 and February 28, 1997, respectively.

     Earnings (Loss) Per Common Share:

     The Company has adopted 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 did not effect earnings per share for the year
     ended February 28, 1997.

     The following table illustrates the reconciliation of the
     numerators and denominators of the basic and diluted
     earnings per share computations:

     <TABLE>
     <CAPTION>
                                            Year ended February 27, 1998     
                                                      Weighted
                                                       average     Per share
                                         Income        shares        amount  
                                       (numerator)  (denominator)

     <S>                               <C>          <C>            <C>
     Net income                          $ 1,794
     Less preferred stock dividends         (254)
     Less accretion of preferred stock       (38)

     Basic earnings per share
       Income available to common
         stockholders                    $ 1,502      2,990,344       $  .50

     Effective of dilutive securities
       Stock options                                     31,655
       Stock warrants                                   173,802

     Diluted earnings per share
       Income available to common stock-
         holders plus effect of dilutive
         securities                      $ 1,502      3,195,801       $  .47

     </TABLE>

     There were conversion provisions of convertible subordinated
     debt and preferred stock totalling 400,000 shares of common
     stock, which were not included in the computation of diluted
     earnings per share because the effect of assumed conversions
     was antidilutive.  These conversion provisions were still
     outstanding at February 27, 1998.

     <TABLE>
     <CAPTION>
                                            Year ended February 28, 1997     
                                                      Weighted
                                                       average     Per share
                                         Income        shares        amount  
                                       (numerator)  (denominator)

     <S>                               <C>          <C>            <C>
     Basic loss per share
       Loss available to common 
         stockholders                    $   (20)     2,965,000       $ (.01)

     Diluted loss per share
       Loss available to common
         stockholders plus effect
         of dilutive securities          $   (20)     2,965,000       $ (.01)

     </TABLE>

     There were options to purchase 98,810 shares of common stock
     at a range of $2.25 to $4.50 per share and conversion
     features of convertible notes payable totalling 108,333
     shares of common stock, which were not included in the
     computation of diluted earnings per share because of the net
     loss for the year making an increase in common stock
     antidilutive.  These stock options and conversion features
     were both outstanding at February 28, 1997.

     Reporting Comprehensive Income:

     In June 1997, the FASB issued SFAS No. 130, "Reporting
     Comprehensive Income."  SFAS No. 130 establishes standards
     to provide prominent disclosure of comprehensive income
     items.  Comprehensive income is the change in equity of a
     business enterprise during a period from transactions and
     other events and circumstances from nonowner sources.  SFAS
     No. 130 is effective for all periods beginning after
     December 15, 1997.  Subsequent to the effective date, all
     prior-period amounts are required to be restated to conform
     to the provisions of SFAS No. 130.  The adoption of SFAS No.
     130 is not expected to have a material impact on the
     Company's consolidated financial position or results of
     operations.

     Business Segment Presentation: 

     In June 1997, the FASB issued SFAS No. 131, "Disclosures
     about Segments of an Enterprise and Related Information." 
     SFAS No. 131 requires that public business enterprises
     report certain information about operating segments in
     complete sets of financial statements of the enterprise and
     in condensed financial statements of interim periods issued
     to shareholders.  It also requires that public business
     enterprises report certain information about their products
     and services, the geographic areas in which they operate,
     and their major customers.  SFAS No. 131 is effective for
     all periods beginning after December 15, 1997.  The adoption
     of SFAS No. 131 will have no impact on the Company's
     consolidated financial position or results of operations.

     Reclassifications:

     Certain reclassifications have been made to the 1997
     financial statements to conform with the 1998 presentation.

2.   Accounts Receivable:

     The components of accounts receivable at February 27, 1998
     and February 28, 1997 are as follows:

                                              1998       1997 

     U.S. Government receivables billed
       and unbilled contract costs
       subject to negotiation                $ 4,563    $ 5,284
     U.S. commercial receivables billed        1,071      2,477
     International receivables billed          3,193      3,828
                                               8,827     11,589

     Less allowance for doubtful accounts       (379)      (237)

                                             $ 8,448    $11,352

     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, 1995 and 1998.  The Company has
     recorded claims, amounting to $2.75 million, including $150
     recorded in the first quarter of fiscal 1998, 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,
     revenues 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 that the Company has appealed.  During the first
     quarter of fiscal 1998, the Company recorded an additional
     $150 in claims revenue, reflecting additional expenditures
     on the centrifuge contract that will be incorporated into
     additional claims to be filed with the U.S. Government in
     fiscal 1999.  Additional amounts are under review for the
     period November 1995 through October 1996 to determine what,
     if any, additional amounts above the $150 recorded in fiscal
     1998 can be filed as supplemental claims.  Such claims are
     subject to negotiation and audit by the U.S. Government.

     In November 1996, the Company invoiced the balance due under
     a contract with the U.S. Government.  At February 27, 1998,
     approximately $1.7 million was in U.S. Government
     receivables.  Collectibility of these amounts may be
     dependent upon the resolution of the above claims.

     International receivables billed:

     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 the termination, the RTAF made a call on a
     $229 performance bond, as well as a draw on an approximately
     $1.1 million advance payment letter 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 receivable
     balance ($1.8 million), consisting of the performance bond,
     the advance payment, and 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 allotted, or should the RTAF not agree
     to any extension of the time allotted, the RTAF could invoke
     penalties against the Company, including termination of the
     contract and delay penalties.  The contract was not
     completed in the time allotted; however, the Company has
     requested an extension on the completion time due to various
     extenuating circumstances, including certain allowable
     "force majeure" events.

     On December 22, 1997, the Company successfully performed
     acceptance testing and the unit passed with no discrepancy
     reports.  The process towards payment of the open balance is
     currently in progress.  At this point, the Company is not
     able to determine what, if any, impact the extended
     completion period and the current economic condition in
     Thailand will have upon final payment.
<PAGE>
3.   Costs and Estimated Earnings on Uncompleted Contracts:

     The following is a summary of long-term contracts in
     progress at February 27, 1998 and February 28, 1997:

                                              1998       1997 

     Costs incurred on uncompleted long-
       term contracts                        $23,420    $12,539
     Estimated earnings                       10,027      7,507
                                              33,447     20,046
     Less billings to date                   (28,941)   (18,752)

                                             $ 4,506    $ 1,294


                                              1998       1997 

     Included in accompanying balance
       sheets under the following captions:

     Costs and estimated earnings in excess
       of billings on uncompleted long-
       term contracts                        $ 5,651    $ 3,345
     Billings in excess of costs and
       estimated earnings on uncompleted
       long-term contracts                    (1,145)    (2,051)

                                             $ 4,506    $ 1,294

     Included in billings in excess of costs and estimated
     earnings on uncompleted long-term contracts is a provision
     for anticipated losses on contracts of $198 and $163 in 1998
     and 1997, respectively.

4.   Inventories:

     Inventories consist of the following:

                                      Raw      Work in
                                    material   process     Total 

     February 27, 1998               $  404     $2,654     $3,058
     February 28, 1997                  417      2,302      2,719

     Inventory is presented net of an allowance for obsolescence
     of $1,040 and $756 in 1998 and 1997, respectively.
<PAGE>
5.   Property, Plant, and Equipment:

     The following is a summary of property, plant, and
     equipment, at cost, and estimated useful lives at
     February 27, 1998 and February 28, 1997:

     <TABLE>
     <CAPTION>
                                                              Estimated
                                                                useful
                                         1998        1997       lives  

     <S>                               <C>         <C>        <C>
     Land                              $   100     $   100
     Building and building additions     1,811       1,811     40 years
     Machinery and equipment             6,084       5,288    3-5 years
     Office furniture and equipment        759         727     10 years
     Building improvements                 812         812   5-10 years

                                         9,566       8,738
     Less accumulated depreciation      (6,729)     (6,258)

       Property, plant, and equipment,
         net                           $ 2,837     $ 2,480

     </TABLE>

     Depreciation expense for the years ended February 27, 1998
     and February 28, 1997 was $482 and $536, respectively.

6.   Long-Term Obligation and Credit Arrangements:

     Long-term obligations at February 27, 1998 and February 28,
     1997 consist of the following:

     <TABLE>
     <CAPTION>
                                                        1998       1997 

     <S>                                               <C>        <C>
     Credit facility payable to banks                  $   467    $ 6,714
     Subordinated debt, net                              3,730          -
     Products liability settlement (net of unamortized
       discount of $105 and $139, respectively, based
       on imputed rate of 11%)                             220        306
     Term loans payable accruing interest at between
       9% and 9.9% collateralized by priority liens
       on certain equipment                                 87         96
                                                         4,504      7,116
     Less current portion                                 (148)      (119)

                                                       $ 4,356    $ 6,997
     </TABLE>

     The amounts of future long-term obligations maturing in each
     of the next five fiscal years are as follows:

     1999                                              $   148
     2000                                                  617
     2001                                                  106
     2002                                                    7
     2003 and thereafter                                 4,000

     Total future obligations                            4,878

     Unamortized discounts or financing costs
       associated with obligations                        (374)

                                                       $ 4,504

     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 as of February 27,
     1998 and February 28, 1997 are as follows:

                                                1998      1997 

     Approximate average loan balance          $ 3,024   $ 7,131
     Maximum aggregate                         $ 5,134   $ 7,489
     Weighted average interest rate               8.37%    10.60%

     Interest is charged on direct borrowings at the bank's prime
     rate in 1998 and at the bank's prime rate plus 2% in 1997. 
     The interest rates were 8.25% and 10.25% at February 27,
     1998 and February 28, 1997, respectively.

     The Company's letter of credit limit is $5,000, provided
     that the cumulative of all outstanding trade letters of
     credit does not exceed $2,500.  The balances outstanding
     under these provisions at February 27, 1998 were $3,644 and
     $1,255, respectively.  Fees on letters of credit outstanding
     were 1.5% and 2.0% at February 27, 1998 and February 28,
     1997, respectively.

     Recapitalization:

     On March 27, 1997, the Company entered into a revolving
     credit agreement (the Credit Agreement) with a new financial
     institution, establishing a credit facility of $10 million
     through May 31, 1998, at which time the facility is reduced
     to $9 million.  The Credit Agreement is collateralized by
     substantially all of the Company's assets.  The Company is
     prohibited from declaring any cash dividends under the terms
     of the Credit Agreement.  This facility bears interest at
     the bank's prime lending rate or adjusted LIBOR and expires
     on May 31, 1999.  A commitment fee of 0.2% is charged for
     unused available funds.  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
     maintenance, on a quarterly basis, a current ratio of not
     less than 1.50 to 1, a leverage ratio of 1.25 to 1, and a
     funds flow coverage ratio of 1.10 to 1.  Substantially all
     of the Company's short-term financing is provided by this
     bank. The Company incurred $357 of financing fees related to
     origination of the Credit Agreement.  This amount is
     included in prepaid expenses and other assets and will be
     charged to interest expense over the term of the Credit
     Agreement, which is two years.  The Company had $5,870
     available under the Credit Agreement at February 27, 1998.

     Additionally, the Company issued $4 million of subordinated
     debentures, bearing interest at 12% per annum, due March 27,
     2004 to a financial institution, a director of which has
     been subsequently appointed and elected to the Company's
     Board of Directors.  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 credited to
     capital contributed in excess of par value of common stock. 
     This amount, along with financing fees of $311, which were
     netted against the proceeds, will be amortized to interest
     expense over the term of the debentures, which is seven
     years.

     The Company also issued 25,000 shares of 11% redeemable
     convertible preferred stock for $2.5 million.  Each share of
     convertible 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. Financing fees for the
     preferred stock were approximately $208, which were netted
     against the proceeds and will be accreted to retained
     earnings over five years.  The preferred stock is
     mandatorily redeemable by the Company beginning in 2002 at a
     rate of one-third per year.

     Total financing fees associated with the recapitalization
     were approximately $876.  The proceeds from these
     transactions were used to repay, in full, amounts
     outstanding with a prior lender.

     The components of the subordinated debt and preferred stock
     at February 27, 1998 are as follows:

                                         Subordinated  Preferred
                                             debt        stock  

     Face value                             $ 4,300     $ 2,500
     Deferred financing costs                  (311)       (208)
     Accretion of preferred stock                 -          38
     Amortization of financing costs             41           -

     Balance at February 27, 1998           $ 3,730     $ 2,330

     As a condition to the issuance of the prior 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.

     Product Liability Settlement:

     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
     is amortized over the term of the settlement.

     The carrying value of the aforementioned financial
     instruments approximates its fair value at February 27,
     1998. 

7.   Related Parties:

     Convertible Notes Payable:

     Notes payable represent amounts due from directors,
     executive officers and their affiliates.  Notes payable, due
     on demand, 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 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, as defined, at conversion.  In March and
     April 1998, the Company repaid $500 of these obligations.

     ETC Europe:

     The Company transacts its business in Europe through ETC
     Europe, an affiliated entity which is 99% owned by the
     president of the Company.  Sales through ETC Europe were
     $4,932 and $3,481 in 1998 and 1997, respectively.  Amounts
     due from ETC Europe as of February 27, 1998 and February 28,
     1997 were $-0- and $587, respectively.

     Subordinated Debt and Preferred Stock:

     A director of ETC is also a director of one of its creditors
     (see Note 6). 

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 27, 1998 are
     $60 in 1999; $21 in 2000; $18 in 2001; $16 in 2002; and $5
     in 2003.

     Total rental expense for all operating leases for the years
     ended February 27, 1998 and February 28, 1997 was
     approximately $106 and $197, respectively.

9.   Income Taxes:

     The components of the provision (benefit) for income taxes
     are as follows:

                                   Year Ended     Year Ended
                                   February 27,   February 28,
                                       1998           1997    

     Currently payable:
       Federal                       $ 1,099        $   190
       State                              24              3
                                       1,123            193

     Deferred:
       Federal                          (142)          (333)
       State                             (15)           (48)
                                        (157)          (281)

                                     $   966        $   (88)

     A reconciliation of the statutory federal income tax
     (benefit) to the effective tax is as follows:

                                   Year Ended     Year Ended
                                   February 27,   February 28,
                                       1998           1997    

     Statutory income tax             34.0%          (34.0)%
     State income tax, net of
       federal tax benefit            (0.6)           (1.7)
     Foreign sales corporation        (4.9)          (63.9)
     Other                             6.5            18.1

                                      35.0%          (81.5)%

     The tax effects of the primary temporary differences are as
     follows:

                                                 1998     1997

     Deferred tax assets:
       Net arbitration award against Company    $   -    $  127
       Net products liability settlement           70       116
       Vacation reserve                            43        48
       Inventory reserve                          389       285
       Receivable reserve                         142        89
       Warranty reserve                            44        44
       Other, net                                  82        77

         Total current deferred tax asset       $ 770     $ 786

     Deferred tax liabilities:
       Amortization of capitalized software     $ 432     $ 539
       Depreciation                               270       336

         Total noncurrent deferred tax
           liability                            $ 702     $ 875

10.  Business Segment Information:

     The Company primarily manufactures, under contract, various
     types of high-technology equipment which it has designed and
     developed.  The Company considers its business activities to
     be two segments: ATS and Process Simulation.  The ATS
     business produces devices which create and monitor the
     physiological effects of motion, including spatial
     disorientation and centrifugal forces for medical, training,
     research and entertainment markets.  The Process Simulation
     business produces chambers that create environmental
     situations that are used for sterilization, research and
     medical applications.

     <TABLE>
     <CAPTION>
                                              Process
                                    ATS     Simulation   Corporate    Total 

     <S>                          <C>       <C>          <C>         <C>
     1998
     Net sales                    $22,055     $ 7,229     $    -     $29,284
     Operating income (loss)        4,231         691       (714)      4,208
     Identifiable assets           16,609       2,744      2,832      22,185

     1997
     Net sales                    $13,247     $ 8,637     $    -     $21,884
     Operating income (loss)        2,153        (304)      (653)      1,196
     Identifiable assets           14,071       4,912      3,326      22,309

     </TABLE>

     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 19%, 11% and 10% of sales in 1998 were made to
     two international customers and one domestic commercial
     account, totalling sales of $5,492, $3,266 and $3,013,
     respectively, in the ATS segment.  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
     ATS segment.

     Included in the segment information for the year ended
     February 27, 1998 are export sales of $17,490.  Of these
     amounts, there are sales to or relating to governments in
     Europe ($6,197), the Middle East ($2,547) and Asia ($3,546)
     for the sales of ATS equipment.  Sales to the U.S.
     Government and its agencies aggregate $2,936 for the year
     ended February 27, 1998.

     Included in the segment information for the year ended
     February 28, 1997 are export sales of $15,422.  Of these
     amounts, there are sales to or relating to governments or
     commercial customers of Europe ($3,826), the Middle East
     ($1,167) and Asia ($4,496) for the sales of ATS and
     Sterilizer equipment.  Sales to the U.S. Government and its
     agencies aggregated $2,082 for the year ended February 28,
     1997. 

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.  At
     February 27, 1998, there were 316,000 shares available to be
     granted under the Plan.  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 (loss) and earnings (loss) per
     share would have been reduced to the pro forma amounts
     indicated below.

                                            1998        1997 

     Net income (loss):
       As reported                         $ 1,794     $  (20)
       Pro forma                           $ 1,765     $  (37)

     Basic earnings (loss) per share:
       As reported                         $   .50     $ (.01)
       Pro forma                           $   .49     $ (.01)

     Diluted earnings (loss) per share:
       As reported                         $   .47     $ (.01)
       Pro forma                           $   .46     $ (.01)

     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 27, 1998
     and February 28, 1997, and changes during the years ending
     on those dates is presented below.

     <TABLE>
     <CAPTION>
                                                    1998                 1997       
                                                       Weighted             Weighted
                                                       average              average
                                                       exercise             exercise
                                              Shares    price      Shares    price  

     <S>                                     <C>       <C>        <C>       <C>
     Outstanding at beginning of year         98,810     $3.75     79,550    $3.19
     Granted                                       -         -     54,900     4.33
     Exercised                               (39,835)     3.16    (32,040)    3.30
     Forfeited                               (12,800)     4.50     (3,600)    4.25
     Outstanding at end of year               46,175      3.97     98,810     3.75

     Options exercisable at year end          11,144               48,635
     Weighted average fair value of
       options granted during the year                   $   -               $4.41

     </TABLE>

     The following information applies to options outstanding at
     February 27, 1998 and February 28, 1997:

                                          1998            1997   

     Number outstanding                    46,175          98,810
     Range of exercise prices      $2.25 to $4.50  $2.25 to $4.50
     Weighted average exercise
       price                                $3.97           $3.75
     Weighted average remaining
       contractual life years           6.4 years       6.6 years

12.  Claims and Litigation:

     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.  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 $91 and
     $83 in 1998 and 1997, 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, although the Company denies
     liability therefor and does not believe that such additional
     costs will be material.

14.  Subsequent Event:

     In April 1998, the Company acquired 65% ownership of a
     simulation and advanced training device manufacturing
     company located in Warsaw, Poland for $375,000 in cash, a
     10% interest-only three-year note payable for $350,000, and
     55,000 shares of ETC's common stock.
<PAGE>
15.  Quarterly Consolidated Financial Information (Unaudited):

     Financial data for the interim periods of 1998 and 1997 were
     as follows:

     <TABLE>
     <CAPTION>

                                                               Quarter Ended                
     Fiscal Year 1998                              May        August     November   February
                                                    30          29          28         27   

     <S>                                         <C>         <C>         <C>        <C>
     Net sales                                   $ 6,644     $ 7,181     $ 7,639     $ 7,820
     Gross profit                                  1,960       2,358       2,467       2,513
     Operating income                                790       1,095       1,143       1,180
     Income before income taxes                      546         631         755         828
     Net income                                      360         406         491         537
     Earnings per common share:
       Basic                                         .10         .11         .14         .15
       Diluted                                       .10         .10         .13         .14

     <CAPTION>
                                                               Quarter Ended                
     Fiscal Year 1997                              May        August     November   February
                                                    31          30          29         28   

     <S>                                         <C>         <C>         <C>        <C>
     Net sales                                   $ 4,509     $ 4,807     $ 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 share:
       Basic                                         .04         .06         .09        (.20)
       Diluted                                       .04         .06         .09        (.20)

     </TABLE>

<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 27, 1998 and February 28, 1997, 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
$4.6 million related to claims made to or against the United
States government for contract costs incurred through
February 27, 1998.  The total net claims amount made is
approximately $10.3 million based on costs incurred through
February 28, 1997 and is subject to negotiation, arbitration and
audit by the United States government.

     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 27, 1998 and
February 28, 1997, and the consolidated results of their
operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.




Philadelphia, Pennsylvania
May 1, 1998