SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                   FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

                  For the fiscal year ended December 31, 1998

                                      or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

COMMISSION FILE NUMBER 333-64373

                     COMPUTER TECHNOLOGY ASSOCIATES, INC.
            (Exact name of registrant as specified in its charter)

     COLORADO                                    84-0797618
(State or other jurisdiction of             (I.R.S. Employer
 incorporation or organization)                  Identification No.)

6903 ROCKLEDGE DRIVE, BETHESDA, MD                  20817
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code (301) 581-3200

Securities registered pursuant to Section 12(b) of the Act:        NONE

Securities registered pursuant to Section 12(g) of the Act:        NONE

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

   Indicate  by  check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation  S-K  is  not contained herein, and will not be contained, to
the best of the registrant's  knowledge,  in  definitive  proxy  or information
statements  incorporated  by  reference  in Part III of this Form 10-K  or  any
amendment to this Form 10-K. [ X ]

    As of FEBRUARY 28, 1999, there were outstanding  8,584,095  shares  of  the
registrant's common stock, par value $.01, which is the only class of common or
voting  stock of the registrant. The aggregate market value of the common stock
held by non-affiliates  of  the  registrant  as  of that date was $9,917,232 as
determined by independent appraisal.



<PAGE>

                     COMPUTER TECHNOLOGY ASSOCIATES, INC.
                          ANNUAL REPORT ON FORM 10-K
                     FOR THE YEAR ENDED DECEMBER 31, 1998
                               TABLE OF CONTENTS

                           PART I
                                                                PAGE
ITEM 1    BUSINESS                                            1

ITEM 2.   PROPERTIES                                          8

ITEM 3.   LEGAL PROCEEDINGS                                   9

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9

                           PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND
          RELATED STOCKHOLDER MATTERS 10

ITEM 6.    SELECTED FINANCIAL DATA 14

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS
                         16

ITEM 7A.   QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
           MARKET RISK 22

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 22

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE 23

                                   PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 24

ITEM 11.   EXECUTIVE COMPENSATION 26

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT 28

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 29

                                    PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
          REPORTS ON FORM 8-K 31

SIGNATURES



<PAGE>
                      PART I

ITEM 1. BUSINESS

     CTA  provides  rapid development and deployment  of  advanced  information
technology ("IT") solutions  for complex enterprise requirements. The Company's
offerings include project management  consulting, network engineering, embedded
IT systems engineering, Enterprise Resource  Planning  ("ERP") installation and
integration,  data warehousing and data base migrations,  electronic  commerce,
client-server and  other  web  based applications development and legacy system
modernization. CTA's mission is to provide for rapid, low risk installation and
integration of complex information  technology through the use of a disciplined
incremental implementation approach.  In  addition  to its strong technical and
program management capabilities, the Company has established  a  reputation for
consistently  high  levels  of customer satisfaction based on a combination  of
service, quality and value. The  Company's  current  business strategy includes
developing  an  international  client  base  which  is  balanced   across  both
government and commercial sectors of the IT services market.

COMPANY HISTORY

     The  Company  was founded in 1979 as Computer Technology Associates  Inc.,
specializing in consulting  services  related  to  the  evaluation  of computer
systems  embedded  in larger systems such as spacecraft, missiles and aircraft.
In the mid-1980's, the  Company's  consulting  business  expanded  into systems
integration  of  avionics,  command  and  control,  and  other decision support
systems.  Originally qualified to receive small business related  support  from
the federal  government,  the Company established major relationships with U.S.
military operations at the  Defense Department's Cheyenne Mountain Complex, the
Naval Air Warfare Center, Weapons  Division, NASA's Goddard Space Flight Center
and the Air Force's Consolidated Space  Operations Center. In 1992, the Company
ended its eligibility for government programs  that  assist  small  businesses,
with  the  last significant contract awarded under these programs completed  in
early 1996.  Since 1992, the Company has replaced contracts awarded under these
assistance programs with contracts awarded under full and open competition. The
share of IT revenues  derived  from competitive awards grew from 19% in 1992 to
100% in 1997.

     In the 1990's, the Company  targeted  U.S.  government  IT  contracts that
allowed  it  to  broaden  the  Company's base of skills to include a number  of
business oriented IT disciplines equally applicable to the federal civil agency
and  state  government  IT markets.  The  Company  then  established  strategic
alliances with certain specialized  software companies that enabled it to enter
the commercial IT market and win contracts  with  commercial  customers such as
Cessna, Reynolds Metals and Allied-Signal.

     In  1992,  the  Company  acquired  a  79%  interest  in CTA Space  Systems
("CTASS") to expand its business from providing IT services  related  to  space
systems  to  providing  full  turn-key space systems. In 1994, CTA acquired the
remaining minority interest in  CTASS.  CTASS  pioneered  small satellite-based
store-and-forward  technology,  which  it originally developed  to  interrogate
dispersed buoys equipped with acoustic sensors.  In  1994,  the Company entered
the  commercial GEO communications satellite market with CTASS'  award  of  the
contract  for  the  Indostar  turn-key  direct-to-home  ("DTH")  system from PT
MediaCitra  Indostar. The contract provided for the Company to build  a  small,
three-axis stabilized  commercial  communications satellite, which was launched
in 1997, and a complete facility in  Jakarta, Indonesia including broadcast and
subscriber   management   software,  communications   uplinking   systems   and
hardware/software systems for  spacecraft  telemetry,  tracking and control. In
late  1997,  the Company sold CTASS and certain related businesses  to  Orbital
Sciences Corporation  in  order to focus on its core IT business. See Note 2 of
Notes to Consolidated Financial Statements.

CORPORATE ORGANIZATION

     Following the sale of  the  Space  and  Telecommunications  business,  the
Company  organized  into Federal and Commercial operating units. These business
units focused on specific  client  groups,  namely,  federal,  state  and local
government and commercial clients. Subsequently, management determined  that to
better  focus  the  provision  of  services  to  our  clients,  an organization
consisting of Software Engineering and Systems Engineering groups would be more
appropriate. Accordingly, the Company's Software Engineering Group  focuses  on
the  installation  and  integration  of  ERP  software,  software migration and
conversions,  e-commerce implementation and Year 2000 services.  The  Company's
Systems Engineering  Group  focuses  on  complex  embedded computer systems and
project management and engineering consulting.

INFORMATION TECHNOLOGY SERVICES

     The Company believes that it possesses a level of IT technical and project
management experience and expertise that allows it  to offer rapid, high value,
solutions  to  a  range  of  client IT requirements.  The  Company's  principal
business focus is in the areas  of  1) legacy information system modernization,
including Year 2000 compliance upgrades, 2) electronic commerce implementations
and other web based applications including  the  engineering and implementation
of  secure  and  highly  reliable  computer  and network  systems,  3)  network
integration  and  application development, 4) the  development,  migration  and
maintenance of large  scale  databases,  5) the installation and integration of
ERP software, and 6) a range of IT services  associated  with  complex embedded
computer systems. The Company is currently planning to focus the  provision  of
these services across a wide range of vertical markets.

     The Company believes that it is one of the industry leaders in the rapidly
growing  market for federal, state and commercial Year 2000 compliance upgrades
based on its  combination  of  direct  Year  2000 conversion experience, use of
automated tools and its ability to offer its customers  solutions to both their
embedded  and  non-embedded  Year  2000  compliance requirements.  The  Company
expects that it will continue to receive revenues  from  additional  Year  2000
engagements  during  the next 18 months. However, these engagements and related
revenues are expected  to peak prior to calendar year 2000 as customers address
their needs. Thereafter,  the  Company  expects that revenues derived from year
2000 engagements will steadily decline. The  Company believes that current Year
2000  related  business  will  be  replaced  with legacy  system  modernization
projects including web based applications and client-server conversions.

INFORMATION TECHNOLOGY SERVICES--BUSINESS STRATEGY

     The principal strategies that the Company  is  pursuing  to  expand its IT
services business include:

     INCREASING  PENETRATION  OF  EXISTING CUSTOMER BASE.  The Company  focuses
heavily on achieving consistently high  levels  of  customer  satisfaction  and
technical  excellence. Due to its long-term incumbent position as a key systems
integrator for  some  of  the  nation's  largest  and  most complex information
systems,  the Company has gained a unique and profound understanding  of  those
systems. The  Company  believes  this  knowledge provides it with a substantial
advantage  in  terms  of  cost,  technical  expertise   and  demonstrated  past
performance in competing for future work related to these  systems. The Company
believes  that  its  Year  2000  conversion initiative will result  in  similar
competitive advantages with respect to a wide range of new customers.

     PENETRATING  NEW MARKETS BY LEVERAGING  CORE  COMPETENCIES.   The  Company
seeks out and exploits  opportunities  to market to new customers the expertise
it  has  gained in past IT assignments. The  Company's  experience  in  federal
government,  state  government and commercial Year 2000 compliance projects has
proven to be a key factor  differentiating  the  Company in competitive bidding
situations with new customers. The Company plans to  use  such  engagements  to
establish relationships with an expanded base of customers that can be used for
marketing  the  Company's  expertise  in additional areas such as legacy system
modernization, data base migrations, and web enabled applications development.

     ESTABLISHING MARKETING ALLIANCES TO OFFER COMPLETE SOLUTIONS.  The Company
has  established,  and  will continue to establish,  marketing  alliances  with
software product and tool  providers  which allow the Company to offer turn-key
solutions for such applications as Enterprise  Resource Planning and electronic
commerce.

     ACQUIRING STRATEGIC IT SERVICES BUSINESSES.  The Company intends to pursue
acquisitions  that will expand the Company's commercial  IT  services  customer
base and provide specialized capabilities and skills that enhance the Company's
penetration of the commercial IT services market.

INFORMATION TECHNOLOGY SERVICES--CONTRACTS AND PROGRAMS

    Certain  of  the  Company's  significant  IT  contracts  and  programs  are
described below.  Total  contract  values  include  both  realized  (earned and
recorded)  and  unrealized  (to  be  earned  and  recorded  in  future periods)
revenues. Government  contracts are typically funded annually and  there are no
assurances  that  funding will continue beyond the current fiscal year  or,  if
they are funded beyond the current fiscal year, for how many additional years.

    U.S. GOVERNMENT--DOD

    RANGE SYSTEMS MANAGEMENT.   In  1993,  the  Company  was  awarded the Range
Instrumentation  Development  ("RID") contract, pursuant to which  the  Company
supports a wide variety of aircraft  range  system activities for the Naval Air
Warfare Center ("NAWC") located at China Lake,  California,  including software
development,  test  and  evaluation,  system  integration  and  fabrication  of
electronic  threat  simulators.  The  RID  contract  is  a  cost-plus-award-fee
contract,  has  a  total  value of $88 million and work under this  contact  is
scheduled to be completed in December 1999.

    AVIONICS SYSTEMS INTEGRATION.   The  Company  participates  in  the design,
development,  fabrication,  modification and testing of hardware for the  NAWC,
performing a wide range of support activities. These activities include systems
engineering, systems analysis,  software development, configuration management,
verification and validation, maintenance  and  operation  services  for various
naval  aircraft  and  the  development  and  maintenance  of large-scale hybrid
simulators   (which   integrate  computer  simulations  with  actual   aircraft
avionics). The Company  has  performed this work since its first NAWC contract,
awarded in 1985. In 1995, this contract was recompeted under a program reserved
for small businesses and the Company  successfully teamed with a small business
contractor, which was awarded the prime  contract. The current NAWC contract is
a cost-plus-award-fee contract, has a total  value to CTA of $33 million and is
scheduled for completion in March 2000.

    INFORMATION SYSTEMS SECURITY.  The Company,  as a subcontractor to SAIC, is
a  member  of  the  team  awarded the Center for Information  Systems  Security
contract  in  1995  by  the Defense  Information  Systems  Agency.  Under  this
five-year omnibus security  engineering  contract, the Company will continue to
provide technical support to information systems security activities within the
DOD and other U.S. government departments  and  agencies. Activities under this
contract include designing and implementing the measures  necessary  to detect,
document and counter a wide range of threats to on-line and stored information.
The Information Systems Security contract is a time-and-materials contract, has
a  total  value  to  CTA  of  $8  million  and  is  scheduled for completion in
July 2000. In addition, the Company's clients for information  system  security
services  include  the Department of Treasury, General Services Administration,
Defense Finance and Accounting Service as well as several commercial companies.

    MEDICAL INFORMATION  SYSTEMS.  The Company is providing medical information
systems expertise to the DOD Department  of  Health Affairs Consolidated Health
Care System. This second generation medical information  system  implements the
most  advanced  technology  available  in  the  industry today. Its goal  is  a
paperless, globally accessible electronic patient  record  system that provides
authorized medical professionals with vital patient medical  histories  in near
real  time,  regardless  of  where  the patient data may have been collected or
stored, or where the patient may be physically  located  when medical attention
is required. This technology not only enables more accurate  record keeping but
also reduces the response time required to obtain medical information from days
or weeks to literally seconds. This contract is a cost-plus-fixed-fee contract,
has a total value of $30 million and is scheduled for completion in March 2001.

    U.S. GOVERNMENT--CIVILIAN AGENCIES

    FEDERAL AVIATION ADMINISTRATION ("FAA").  For the FAA, the Company provides
services related to the design, development, integration and test  of  the U.S.
air  traffic  control ("ATC") system and has been supporting the FAA automation
programs since  1982.  Currently,  the  Company  is performing on the following
programs for the FAA:

    (i) providing  engineering support to the FAA as  a  subcontractor  to  TRW
under the AUA Technical  Assistance  contract  in  implementing its programs to
replace the ATC system. This contract is a time-and-materials  contract,  has a
total  value  to  CTA  of  $40  million  and  is  scheduled  for  completion in
December 2002.

    (ii) providing support to the FAA as a subcontractor to TRW under  the  ASD
SETA  contract  for  the  overall  architectural  design  and  evolution of the
National Airspace System. This contract is a time-and-materials contract, has a
total  value  to  CTA  of  $17  million  and  is  scheduled  for completion  in
September 2001.

    (iii)  assisting  the  FAA,  as  a  subcontractor to TRW under the  Weather
Technical Assistance contract in the areas of program engineering, hardware and
software  engineering,  program  and  project   management,   system  test  and
evaluation,  system  implementation  and  human  factors.  This contract  is  a
cost-plus-fixed-fee  contract, has a total value to CTA of $3  million  and  is
scheduled for completion in March 2000.

    (iv) providing engineering  and management support services to the FAA as a
subcontractor to SRC under the ANN Technical Assistance contract. This contract
is a cost-plus-award-fee contract,  has  a total value to CTA of $5 million and
is scheduled for completion in September 2000.

    DEPARTMENT OF JUSTICE.  In February 1994, the Department of Justice ("DOJ")
awarded the Company a contract to assist the  FBI in its program to streamline,
consolidate and automate its Criminal Justice Information  System, which serves
over 80,000 law enforcement users. Under this seven-year contract,  the Company
is assisting the FBI in virtually every aspect of the engineering process, from
procurement  of  new information systems to the re-engineering of the processes
that this system supports.  The  DOJ  contract  is  a  combined fixed-price and
cost-plus  contract,  has  a total value of $40 million and  is  scheduled  for
completion in September 2001.

    TREASURY  DEPARTMENT.  Under  a  contract  awarded  in  1995,  the  Company
provides system  engineering  and  technical  analysis  support to the Treasury
Department,  primarily  for  the  Internal  Revenue  Service's   computer-based
information  processing  system  modernization  effort.  The Company's  support
functions  include  engineering  services  and telecommunication  and  security
services.  In the longer term, the Company will  be  developing  and  assessing
advanced  user   interface  concepts,  technologies  and  prototypes  (such  as
hypertext and speech  recognition)  and  assessing  and  recommending tools and
environments  to  support  future  software  development. This  contract  is  a
time-and-materials contract, has a total value  of $40 million and is scheduled
for completion in June 2000.

    GENERAL  SERVICES  ADMINISTRATION. The Company  provides  support  for  the
Federal Supply Service's  central  offices, its eleven regional offices and its
various  commodity  centers  and  depots.  The  Company  provides  applications
software  and  database  maintenance  and   upgrades,  network  administration,
mainframe  to  client-server  conversions  and  implementation   of  electronic
commerce applications. The Company's current Federal Supply Service contract is
a follow-on contract to the original Federal Supply Service contract  that  was
awarded  to  the Company in 1992. The current contract has a total value of $31
million and is scheduled for completion in September 2001.

    STATE GOVERNMENT AND COMMERCIAL

    YEAR 2000  CONVERSION.   The  Company  is  a  leading provider of Year 2000
compliance services to both commercial clients and state and local governments.
The Company currently has contracts to provide such  services  to 14 commercial
clients  centered in the Financial Services and Process Manufacturing  vertical
markets and  12 state and local governments. These contracts incorporate a wide
range of services including IT inventory assessment, code remediation, testing,
auditing  of  third   party-vendor  remediated  systems  and  embedded  systems
compliance evaluations.   The  Company's historical, positive performance track
record has fostered significant  financial  confidence within the customer base
that has resulted in multi-year contractual awards  that  range  from   $1 - $5
million  for  its  commercial  customers to $1 -  $25 million for its state and
local government customers.

    IT SYSTEMS ENGINEERING.  In  June  of  1996,  the  Company  was  awarded  a
contract  by  USAA,  a San Antonio, Texas-based, provider of insurance, banking
and investment services  to  provide  technical  and engineering support to the
USAA   Information  Technology  Division.  The  Company's   functions   include
(i) project management support, including resource forecasting and tracking and
scheduling,  (ii)  systems  engineering,  including  configuration  management,
systems   requirements  management  and  test  planning  and  execution,  (iii)
procurement  support,  including  the  development  of  procurement strategies,
evaluation  criteria  and requests for proposals and (iv) development  of  cost
estimates for USAA procurement.  The  USAA  contract  is  a  time-and-materials
contract, and is scheduled for completion in March 2000.

    EMERGING  COMMERCIAL  OFFERINGS  &  PROGRAMS.  In keeping with  its  stated
strategy to leverage Year 2000 contracts, the Company has staffed its Year 2000
projects  with  senior  business  and systems  professionals  whose  experience
profiles go far beyond those required  to perform general Year 2000 assessments
and  remediation.  By  incorporating  a high-level  skill  set  with  a  proven
methodology,  customers  have  yielded an  experience-enhanced  view  of  their
current IT portfolios that not only accelerates Year 2000 remediation, but also
provides for cost-effective alternatives  for  contingency  planning,  platform
consolidation, systems maintenance and ERP integration. As a result, nearly all
the  Company's commercial clients and a third of the state and local government
clients have requested assistance with non-Year 2000 IT systems efforts.

    In  order to better leverage this opportunity, the Company has combined its
service capabilities  into  three  primary  offerings: Platform Conversions and
Migrations, Application Integration and ERP enhancement.  Platform  Conversions
and Migrations focus on the transformation of code and data.  Projects  of this
type  may  be  driven  by  customer  requirements  for system consolidation, by
"orphaned"  (vendor abandoned) systems that are still  considered to be mission
critical or by clients who need to modify their systems to handle Euro-Currency
transactions.   Application  Integration  is  directed toward  the  linkage  of
legacy mainframe and client/server platforms.   ERP  enhancement  consists of a
combined  product  and  service  offering  that facilitates the integration  of
disparate ERP systems within the corporate enterprise.

    The  Company  is  utilizing  these offerings  to  enhance  its  competitive
positioning within its installed base  and to create a compelling rationale for
new  clients  to consider working with CTA.  For  its  Financial  clients,  the
company has targeted  these  offerings  at  this  market's high demand for data
mining  and  customer  portfolio management systems. These  systems  provide  a
comprehensive  view  of   customer  product  and  service  purchases,  customer
portfolio  profitability  and   customer  activity  trends.  This  offering  is
currently in the planning stages  at  USAA, a San Antonio, Texas-based provider
of insurance, as a natural extension to  the  current contract with USAA for IT
engineering services.

    For the Company's process manufacturing clients,  these offerings allow for
the successful implementation of a hybrid ERP system; where  new investments in
packaged ERP systems (i.e., manufacturing, financial, inventory)  and  existing
investments in viable legacy systems (i.e., order processing, sales management,
distribution)  provide  for  the  framework  of a unified system structure. The
Company is currently initiating these offerings  at  Dannon  Foods and Centocor
Pharmaceuticals.

    For its State and local clients, the Company's offerings provide  a pathway
for migration from maintenance-intensive, sunset (obsolete) systems to advanced
open-systems  technology.   State  and local government also have the need  for
ERP-type systems, particularly in the  areas  of  human  resources services and
financial management. These initiatives are often hampered  by the government's
ability to sustain expertise in aging legacy environments and hire and maintain
technical  staff  in  a  highly competitive marketplace. With the  addition  of
selective  systems outsourcing  as  an  adjunct  to  the  standard  IT  Systems
Engineering   offering,   the  Company  has  created  a  comprehensive  program
consisting of Year 2000 compliance,  sunset  system maintenance support, phased
platform  migration  and  ERP  system  support.  Selective  state  agencies  in
California, Connecticut, Kansas and Texas  are  reviewing  these  options  as a
natural extension to their current Year 2000 contracts with CTA.

INFORMATION TECHNOLOGY SERVICES--COMPETITION

    The IT services industry in which the Company operates is highly fragmented
with  no single company or small group of companies in a dominant position. The
Company's  competitors  include  large,  diversified  firms  with substantially
greater financial resources and larger technical staffs than the  Company, such
as BDM, Cap Gemini, CSC, EDS, IBM, Lockheed Martin, PRC, SAIC, as well as firms
that  receive  preferences under government programs for small businesses.  The
firms that compete with the Company include consulting firms, computer services
firms, applications  software  companies  and  accounting firms, as well as the
computer  service  arms of computer manufacturing  companies  and  defense  and
aerospace firms. In  addition,  the  internal  staffs  of client organizations,
non-profit federal contract research centers and universities  are,  in effect,
competitors of the Company.

    The  primary  competitive  factors  in  the information technology industry
include technical, management and marketing competence,  as  well as price. The
Company competes for commercial work by identification of unique  market niches
in which the Company believes it has superior technical service capability.

TYPES OF CONTRACTS

      GENERAL.   The  Company's  services are provided primarily through  three
types  of  contracts:  fixed-price,  time-and-material   and  cost-reimbursable
contracts. Fixed-price contracts require the Company to perform  services under
the  contract at a stipulated price. Time-and-material contracts reimburse  the
Company  for  the  number  of  labor hours expended at established hourly rates
negotiated   in   the   contract   and  the   cost   of   materials   incurred.
Cost-reimbursable contracts reimburse the Company for all actual costs incurred
in  performing  the  contract, to the extent  that  such  costs  are  within  a
specified maximum and  allowable under the terms of the contract, plus a fee or
profit.

    The following table shows the approximate percentage of revenue by contract
type recognized by the Company's  continuing  operations  during  the indicated
periods:

<TABLE>
<CAPTION>
                               YEAR
                               ENDED
                            DECEMBER 31,
<S>                  <C>       <C>      <C>
TYPE OF CONTRACT       1996      1997    1998
  Fixed-price           11%       14%     24%
  Time-and-materials    53%       54%     47%
  Cost-reimbursable     36%       32%     29%

                       100%      100%    100%
   Total
</TABLE>


      GOVERNMENT  CONTRACT  REQUIREMENTS.   Many of the government programs  in
which the Company participates as a contractor  or subcontractor may extend for
several years, but they are normally funded on an  annual  basis. The Company's
U.S.  government  contracts  and  subcontracts  are  subject  to  modification,
curtailment  and  termination  in  the  event of changes in government funding.
Accordingly, all of the Company's contracts and subcontracts involving the U.S.
government may be terminated at any time by the U.S. government, without cause,
for the convenience of the U.S. government.  If  a  U.S. government contract is
terminated  for  convenience,  the  Company  would  be  entitled   to   receive
compensation  for  the  services  provided  or  costs  incurred  at the time of
termination and a negotiated amount of the profit on the contract.

    Among the factors that could materially adversely affect the Company's U.S.
government  contracting business are budgetary constraints, changes  in  fiscal
policies or available  funding,  reduction  of  defense  or aerospace spending,
changes in U.S. government programs or requirements, curtailment  of  the  U.S.
government's  use  of  technology  services  firms, the adoption of new laws or
regulations,  technological developments and general  economic  conditions.  In
addition, increased  competition  and U.S. government budget constraints in the
defense area, and in areas not related  to  defense, may limit future growth in
Company revenues from U.S. government agencies and contractors.

    The Company's costs and revenues under government  contracts are subject to
adjustment as a result of annual audits performed by the  DCAA on behalf of the
DOD. Audits of the Company by the DCAA and other agencies have  been  completed
for all years through 1996 without material adjustment.

BACKLOG

    As the Company has evolved from Federal government contractor to commercial
IT services provider, the concept of backlog has become less important.  In the
commercial  marketplace,  nearly all of the Company's orders are terminable  by
either the customer or the  Company  on  short notice. Government contracts are
generally  multi-year  awards  subject  to annual  funding  appropriations  and
termination  for  convenience  by  the government  customer.  The  Government's
ability to select multiple winners under  IDIQ  contracts, as well as its right
to limit orders to any particular awardee, mean that there is no assurance that
contract backlog will result in actual orders to  the Company. Accordingly, the
Company does not believe that backlog is material to its business.

    The  Company's  backlog  represents  an estimate of  the  remaining  future
revenues from existing signed contracts and  contracts  that  have been awarded
but not yet signed. Using the best available information, the Company estimates
backlog on a quarterly basis. Changes in the backlog calculation  from  quarter
to quarter result from: (a) additions for future revenues from the execution of
new contracts or extension or renewal of existing contracts; (b) reductions for
revenues  earned from fulfilling contracts during the most recent quarter;  (c)
reductions  from  the  early  terminations of contracts; and (d) adjustments to
estimates of previously included  contracts.  The Company's backlog at December
31, 1998 was approximately $148 million.

EMPLOYEES

    At  December  31,  1998,  the Company had 774 employees,  approximately  80
percent of whom are IT professionals  and  20 percent in management and support
positions. The Company also utilizes the services  of  independent  contractors
and  as  of  December  31,  1998  had approximately 175 independent contractors
working on client engagements.  None of the Company's employees are represented
by a labor union and the Company believes  its  relations with its employees to
be good.

    The Company must compete against other employers  for  the  acquisition  of
high  quality,  professional  staff  members.  The  Company  cannot  assure the
retention of current staff or that replacement staff will be available at equal
cost.  Competitors  of  the  Company may be able to attract or retain employees
more successfully than the Company  based  on  levels of benefits, demographics
and other factors.

    The Company also regularly utilizes the services of consultants as an
integral part of its work on specific projects. The Company is not materially
dependent upon the services of any individual consultant or consulting firm.

ITEM 2. PROPERTIES

    The  Company  leases  approximately 23,000 square  feet  at  its  corporate
headquarters in Bethesda, Maryland under a lease expiring in 2005. In addition,
the  Company has principal leased  facilities  in  Ridgecrest,  California  and
Colorado  Springs,  Colorado.  The  Company  believes that these properties are
adequate to serve the Company's present business operations.

ITEM 3. LEGAL PROCEEDINGS

    The Company is currently involved in certain  legal  proceedings incidental
to the ordinary course of its business. The Company does not  believe  that any
liabilities relating to the legal proceedings to which it is a party are likely
to be, individually or in the aggregate, material to its consolidated financial
position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None



<PAGE>
                       PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    There  is no established public trading market for the stock of the Company
or its subsidiaries.   However,  the  Company  has  maintained a limited market
("Limited  Market")  as  described below to provide liquidity  for  its  Common
Stock.

THE LIMITED MARKET

    Since  its  inception, the  Company  has  pursued  a  policy  of  remaining
essentially employee owned and, therefore, there has never been a public market
for the Common Stock.   Prior  to  September  1992,  the Company has offered to
repurchase  shares  from  shareholders  on  several  occasions   primarily  for
contribution to the Company's Employee Stock Ownership Plan ("ESOP").  In order
to  provide liquidity for its shareholders, however, the Company established  a
Limited  Market  through  an agreement with Capitol Securities Management, Inc.
("Capitol") whereby Capitol  maintains  the Limited Market. From September 1992
through December 1998, the Company has conducted  six  trades  in  the  Limited
Market,  one  each in 1992, 1993, 1995 and 1998 and two in 1994. There were  no
trades conducted in 1996 or 1997.

    It is anticipated  that the Limited Market will continue to permit existing
shareholders to sell shares  of Common Stock on at least one predetermined date
each year (the "Trade Date").   Such  sales  will  be  made  at  the prevailing
Formula  Price,  or  such  other  price  as  may be determined by the Board  of
Directors  with  the  advice  of  an  independent  appraiser,   to   employees,
consultants  and  directors  of the Company.  In addition, the Company will  be
authorized, but not obligated,  to  purchase  shares  of  Common  Stock  in the
Limited  Market to satisfy its requirements (including for sale to the trustees
of the Company's ESOP), but only if and to the extent that the number of shares
offered for  sale  by  shareholders  exceeds  the number of shares sought to be
purchased by authorized buyers.

    In the event that the aggregate number of shares  offered  for  sale by the
sellers  is  greater than the aggregate number of shares sought to be purchased
by authorized  buyers  and  the  Company, offers to sell will be treated in the
following manner: Offers to sell 1,000  shares or less of Common Stock or up to
the first 1,000 shares if more than 1,000 shares of Common Stock are offered by
any seller will be accepted first.  Offers  to  sell  shares in excess of 1,000
shares of Common Stock will be accepted on a pro-rata basis based on the number
of  shares  owned by those shareholders wanting to sell shares.   If,  however,
there are insufficient  purchase  orders  to  support the primary allocation of
1,000 shares of Common Stock or less per seller,  then the purchase orders will
be allocated equally among each of the proposed sellers  up  to  each  seller's
total  number  of  shares  offered  for  sale.   Subject to applicable legal or
contractual restrictions and the availability of funds,  the  Company currently
intends  to  purchase  sufficient  shares  on  each  Trade  Date  so that  each
shareholder wishing to sell shares will be able to sell at least 1,000  shares.
Such  restrictions include those contained in the Colorado Business Corporation
Act, which prohibit a corporation from purchasing its outstanding shares if, as
a result  of  such  purchase,  (i) the corporation would not be able to pay its
debts  as  they  become  due in the  usual  course  of  business  or  (ii)  the
corporation's total assets  would  be  less than its total liabilities plus any
amount necessary, if the corporation were  to  be  dissolved at the time of the
distribution,  to  satisfy  any  preferential  payments  upon   dissolution  of
shareholders holding a class of stock being repurchased by the corporation. The
Company's  current credit agreement also restricts the Company from  purchasing
Common Stock  if  doing  so  would  cause  it  to  violate one of the financial
covenants   in   the  credit  agreement.  These  financial  covenants   include
requirements to preserve a certain fixed charge coverage ratio, earnings before
interest and taxes  to  interest  expense  ratio  and total outstanding debt to
accounts  receivable  ratio.  In addition, the Company  may  enter  into  other
contracts  in  the  future  which  restrict   its  ability  to  repurchase  its
outstanding Common Stock.

    To the extent that the aggregate number of  shares  sought  to be purchased
exceeds the aggregate number of shares offered for sale, the Company  may,  but
is not obligated to, sell authorized but unissued shares of Common Stock in the
Limited  Market.  If  the  number of purchase orders exceeds the number of sell
orders plus any shares sold  by  the  Company,  the  aggregate number of shares
offered for sale will be allocated, pro rata, among the  purchasers  based upon
the total number of shares each has subscribed for.

     All  sellers in the Limited Market, other than the Company, pay Capitol  a
commission  generally equal to 1.5 percent of the proceeds from such sales.  No
commission is  paid  by  purchasers  in the Limited Market. Prior to each Trade
Date, Capitol will receive sell orders  from  shareholders  and buy orders from
authorized purchasers and the Company.  On each Trade Date, Capitol  will match
sellers  and  buyers  of  the  Company's Common Stock (including, to the extent
applicable, the Company) according  to  the  proration  rules  described above.
Capitol will then forward payments to sellers, minus the commission,  and  will
issue in book-entry form, the shares of Common Stock to the purchasers. Capitol
will  not buy or sell shares of Common Stock for its own account or as an agent
for the Company.

    Each shareholder of the Company who elects to purchase or sell Common Stock
has an  account  established  with Capitol. On the day after each Trade Date, a
confirmation of purchases or sales  is  generated  for each shareholder showing
price per share, number of shares, commission paid,  net dollars transacted and
settlement date. The purchase price for Common Stock purchased  on a Trade date
must generally be received by Capitol within three business days following such
date.

     While  the  Company established the Limited Market to attempt  to  provide
liquidity to shareholders,  there  can  be  no  assurance  that  there  will be
sufficient  liquidity  to  permit  shareholders  to  resell their shares in the
Limited Market.

THE FORMULA

    The purchase price of the shares of Common Stock in the Limited Market will
be  at  the formula price described below (the "Formula  Price").  The  Formula
Price is  established  by  the  Board  of Directors of the Company based on the
performance of the Company as measured by  certain factors listed below as well
as certain other factors also listed below which  are  determined  based on the
recommendation  of  an  independent  appraiser.   The  Formula  Price  will  be
redetermined  at  least  annually.   The  price  is determined according to the
following formula (the "Formula"): the price per share  is equal to the product
of (i) a number representing one minus the discount for the  limited  liquidity
of the stock ("D") and (ii) a fraction, the denominator of which is the  number
of  outstanding  shares and share equivalents ("Wi") and the numerator of which
is the sum of (A)  a  number which is the product of 2.25 and the book value of
the Company at the end  of  the applicable period ("BV") and (B) a number which
is the product of (a) 11.34 ("K")  and (b) a number equal to the product of (I)
a market index ("MI") based on certain comparable companies, (II) the after tax
profits  from  operations for the last  12  month  period  ("P")  and  (III)  a
fraction, the denominator  of  which is 2 and the numerator of which is the sum
of (A) the change in contract margin  ("CM"),  which  is  a number equal to the
contract margin for the last 12 months divided by the contract  margin  for the
prior  12  month  period,  where  contract  margin  is  the  contract  fee as a
percentage  of  contract cost adjusted for program reserves and allowances  and
(B) the change in  revenue growth ("R"), which is a number equal to a fraction,
the numerator of which is revenue for the last 12 months and the denominator of
which is the revenue  for  the  prior  12  month period times the change in the
consumer price index for that period.  The Formula  Price  of  the Common Stock
expressed as an equation, is as follows:

                              {Formula Price = D}

    The "discount factor" is a number which is intended to reflect the discount
for  the  limited  liquidity  of the Common Stock and the "market index"  is  a
number  which is intended to reflect  existing  securities  market  conditions.
Both of these  factors are established annually by the Board of Directors based
upon the recommendation of an independent appraisal firm.  The 11.34 multiplier
is a constant representing  the  factor necessary to equalize the initial stock
price calculated by the Formula to  the appraised price for the Common Stock on
the date the Formula was adopted.  The  remainder  of the factors will be based
on the Company's historical financial data.


PROCEDURES FOR DETERMINING FORMULA PRICE

    The Formula is used to determine the offering price  at  which  the  Common
Stock  will  be  sold  and  will  trade  in  the  Limited Market, except in the
circumstances set forth below.  The present Formula was adopted by the Board of
Directors  on September 14, 1998, following a determination  by  the  Board  of
Directors that  the  prior formula was not resulting in a fair market value for
the Common Stock.  The  Board of Directors believes the current Formula results
in a fair market value for  the  Common Stock within a broad range of financial
criteria.

    In redetermining the current Formula,  net  income  for the trailing twelve
months was adjusted for all factors associated with the sale  of  the Company's
Space  and Telecommunications business having a financial impact on  continuing
operations  in 1997. The adjusted net income for use in the Formula at June 30,
1998 was $2,482,000.

     Annually, the Company provides audited financial statements and other data
as requested  by the independent appraiser.  The independent appraiser analyzes
that data and recommends  two  factors  of the Formula: the Market Index ("MI")
and the Discount Factor ("D").  Based on  this  recommendation,  the  Board  of
Directors  determines the Formula Price. The Board of Directors also obtains an
appraisal of  the  current  fair  market  value  of  the  Common Stock from the
independent appraiser in order to confirm that the Formula  has  resulted  in a
price  which  falls  within  an  acceptable range of values for the fair market
value of the Common Stock.

    In those circumstances when the  Board  of Directors determines the Formula
has  not  resulted in a fair market value for the  Common  Stock,  the  Company
establishes  a  price  for the Common Stock within the range established by the
independent appraisal. The  price  of  $5.05  per share at June 30, 1997 and at
December  31, 1997 was based solely on an independent  appraisal  as  were  all
share prices  prior  to the adoption of the Formula. Such appraisal is required
on  an annual basis for  purposes  of  valuing  the  assets  contained  in  the
Company's  ESOP  and  for  determining the price at which the ESOP may purchase
shares of Common Stock.

PRICE RANGE OF COMMON STOCK

    The following table sets forth the price per share (after giving effect for
all years presented for a 2  for  1  split  of  the  Company's  common stock in
February 1998) at which the Common Stock was valued by the Board  of  Directors
based  on  an appraisal performed by the Company's independent appraiser,  Legg
Mason Wood Walker,  Inc., for the last twelve years.  The 1992, 1993, both 1994
and 1995 appraisal prices were also the prices at which shares were sold in the
Limited Market for each  of the following periods ending on the dates set forth
below.
<TABLE>
<CAPTION>

           EFFECTIVE DATE OF APPRAISAL     PRICE PER SHARE

              <S>                                  <C>
              December 31, 1998                    $7.800
              June 30, 1998                        $5.840
              December 31, 1997                    $5.050
              June 30, 1997                        $5.050
              December 31, 1995                    $4.745
              December 31, 1994                    $4.695
              June 30, 1994                        $4.485
              December 31, 1993                    $4.364
              December 31, 1992                    $3.583
              December 31, 1991                    $3.002
              December 31, 1990                    $2.088
              December 31, 1989                    $2.050
              December 31, 1988                    $2.015
              December 31, 1987                    $1.400
              December 31, 1986                    $0.888
</TABLE>

Report of Independent Appraiser

    Since 1986, Legg Mason Wood Walker, Inc. ("Legg Mason") has been engaged by
the Company to act as the independent appraiser for the Company with respect to
the  Common  Stock.   Legg Mason  was  selected  because  it  is  a  nationally
recognized  investment banking  firm  that  has  extensive  experience  in  the
valuation of  securities of all types, including closely-held and seldom traded
securities.

    In connection  with  the  Board's  determination of the Formula Price, Legg
Mason recommends to the Board of Directors  (i)  the  discount  factor ("D") to
reflect the limited liquidity of the Company's Common Stock and (ii) the market
index ("MI") to reflect existing securities market conditions. Legg  Mason also
provides  to  the  Board  of  Directors an assessment as to whether the Formula
Price calculated is within a range  which Legg Mason considers reasonable. Legg
Mason makes these determinations based  on its own analysis after reviewing and
analyzing numerous factors including, without  limitation,  (i)  the  Company's
annual  and  quarterly  reports, (ii) interviews with management regarding  the
Company's business, earnings,  cash  flow, assets and prospects, (iii) contract
backlog data and contract profiles prepared  by  Company  management, (iv) data
regarding  the  financial performance and market valuation of  selected  public
companies deemed  by  Legg  Mason  to be comparable to the Company and (v) data
relating to recent merger and acquisition activity of selected public companies
deemed by Legg Mason to be comparable to the Company.


DIVISION OF MARKET REGULATION

    Section 5 of the Securities Exchange  Act  of  1934  (the  "Exchange  Act")
generally  prohibits operation of an "exchange" to effect any transaction in  a
security, or  to report any such transaction, unless the exchange is either (i)
registered as a  national  securities  exchange under Section 6 of the Exchange
Act or (ii) exempted from such registration  because,  in  the  opinion  of the
Commission,  the  limited  volume of the transactions effected on such exchange
does not make it necessary,  appropriate  or  in the public interest to require
such registration. The Limited market is not registered  as  an  exchange under
the  Exchange  Act.  The  Company  has  had  discussions with the staff of  the
Division of Market Regulation concerning the operation of the Limited Market in
compliance  with  the  Exchange  Act.  While the Commission  has  not  formally
indicated to the Company any specific  concerns  regarding the operation of the
Limited  Market  it may do so in the future.  If the  Commission  requires  the
Limited  Market to  register  as  an  exchange  or  otherwise  raises  concerns
regarding  operation  of the Limited Market, there can be no assurance that the
Company will be able to continue operation of the Limited Market.

HOLDERS OF COMMON STOCK

    As of February 28,  1999,  there were approximately 270 common stockholders
of the Company.

DIVIDENDS

    It is the current policy of  the  Company to retain all earnings to provide
funds for the Company's growth. Therefore, the Company has no current intention
of paying cash dividends on the Common  Stock.   The  Company  has not made any
distributions  to  its  shareholders  since  1988.  The  Company's bank  credit
agreement  requires  advance approval by the bank for the Company  to  pay  any
dividends.

ITEM 6. SELECTED FINANCIAL DATA

    The following selected consolidated financial data for each of the years in
the five year period ended December 31, 1998 and as of December 31, 1994, 1995,
1996,  1997  and  1998  have  been  derived  from  the  consolidated  financial
statements of the Company.  The  consolidated  financial statements for each of
the five years ended December 31, 1994 through 1998  have been audited by Ernst
& Young LLP, independent auditors. The data (in thousands, except for per share
data) should be read in conjunction with the consolidated financial statements,
related  notes,  and  other financial information included  elsewhere  in  this
document.


<PAGE>

<TABLE>
<CAPTION>
                         1994     1995      1996       1997       1998
<S>                   <C>      <C>         <C>       <C>        <C>
  Income Statement
  Data:
  Contract revenues   $107,471  $105,224   $96,246    $92,239   $117,184
  Cost of contract      90,102    96,633    87,644     78,530     91,747
  revenues
  Selling, general
  and administrative     6,723     4,117     5,431      9,622     15,585
  expenses
  Other expenses           833     (292)     2,447      3,668      3,040

  Operating profit       9,813     4,766       724        419      6,812
  Interest expense         907       850       969      1,589      1,195

  Income (loss)
  before income taxes    8,906     3,916     (245)    (1,170)      5,617
  Provision (benefit)
  for income taxes       3,830     1,567      (80)      (500)      2,225

  Income (loss) from
  continuing             5,076     2,349     (165)      (670)      3,392
  operations
  Income (loss) from
  discontinued
  operations, net of     (617)     (403)  (10,872)        648    (2,482)
  income taxes(1)(2)

  Net income (loss)     $4,459    $1,946 $(11,037)  $    (22)   $    910


  Basic earnings
  (loss) per share:
   Continuing            $0.53     $0.27   $(0.02)    $(0.07)    $  0.39
   operations
   Discontinued         (0.06)    (0.05)    (1.22)      0.07       (0.29)
   operations

  Earnings (loss) per    $0.47     $0.22   $(1.24)    $  0.00    $  0.10
  share
  Diluted earnings
  (loss) per share:
   Continuing            $0.50     $0.25   $(0.02)    $(0.07)    $  0.38
   operations
   Discontinued         (0.06)    (0.04)    (1.22)      0.07       (0.28)
   operations

  Earnings (loss) per
  share-diluted          $0.44     $0.21   $(1.24)    $  0.00    $  0.10
  Weighted average
  number of shares       9,567     8,863     8,875      9,092      8,694
  outstanding
  Diluted average
  number of shares      10,092     9,418     8,875      9,092      8,815
  outstanding
</TABLE>

<TABLE>
<CAPTION>


                                          DECEMBER 31,
                        1994     1995      1996       1997       1998
<S>                    <C>       <C>      <C>         <C>        <C>
  Balance Sheet Data:
  Cash and cash        $ 3,902   $   235  $     16          $          $
  equivalents                                               -          -
  Working capital       20,638    19,713    13,721     12,588     12,242
  Total assets          89,816    91,530    92,690     45,288     57,348
  Short-term debt       15,750    17,074    28,335      9,112     17,890
  Long-term debt        17,765    17,431    18,510      3,333      3,802
  Total stockholders'   27,950    28,773    17,793     15,810     15,734
  equity
</TABLE>



<PAGE>

(1) During 1997, the Company  sold its Space and Telecommunications Systems and
its  Mobile  Information  and Communications  Services  businesses  to  Orbital
Sciences Corporation.  Results  of  operations  have  been  restated to exclude
revenues  and expenses of discontinued operations from captions  applicable  to
continuing operations. See Note 2 to the Consolidated Financial Statements.

(2) During  1995,  the  Company  discontinued  the operations of its Simulation
Systems Division, which manufactured aircraft flight  simulators  for  sale  or
lease,  and  sold  its  assets  to  a  company  principally owned by one of the
Company's principal stockholders. Results of operations  have  been restated to
exclude   revenues  and  expenses  of  discontinued  operations  from  captions
applicable  to  continuing operations. See "Certain Transactions" and Note 2 to
the Consolidated Financial Statements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS

This filing may contain  "forward-looking"  statements, as that term is defined
in  the  Private  Securities Litigation Reform Act  of  1995.  Such  statements
include, but are not  limited  to,  statements  concerning  expectations of the
Company's future performance in terms of revenue and earnings.  There can be no
assurance  that actual results will not differ materially from those  projected
or suggested  in  such  forward-looking statements. Factors which could cause a
material difference in results  include, but are not limited to, the following:
regional and national economic conditions;  changes  in interest rates; changes
in government spending policies and/or decisions concerning  specific programs;
individual  business  decisions  of  customers  and  clients;  developments  in
technology;  competitive  factors and pricing pressures; changes in  government
laws and regulations; acts  of  God;  and  the Company's ability to achieve the
objectives of its business plans.

The following discussion and analysis should  be  read  in conjunction with the
consolidated financial statements and notes thereto included  elsewhere in this
document.

OVERVIEW

Computer Technology Associates, Inc. (the "Company," formerly CTA INCORPORATED)
provides  information  technology  services  to  Federal, State and  commercial
markets  including  Year  2000  services,  network design  and  implementation,
mainframe to client-server conversions, software  language  upgrades,  database
development   and   maintenance,  electronic  data  interchange  and  automated
enterprise management  technologies.  During 1996, the Company completed a five
year prime contract with the U.S. Navy and, although it was ineligible to rebid
this contract as the prime contractor,  is  now a major subcontractor receiving
approximately 45% of the total contract revenues. During 1997, the Company sold
the  Advanced  Information  Systems division and  several  systems  engineering
contracts ended. As a result,  the  Company's revenues from systems engineering
services,  principally  to the Federal  government,  have  declined  from  $105
million, or 100% of contract  revenues,  in  1995  to  $74  million,  or 64% of
contract  revenues,  in 1998. Since 1997, the Company has focused its marketing
efforts on software engineering,  primarily  Year  2000 services, for State and
local governments and commercial entities in order to  increase  such revenues.
Also  during  1997,  the  Company  disposed of its Space and Telecommunications
Systems and its Mobile Information and  Communications  Services businesses. In
1998, the Company realigned its corporate organization to  further  refine  its
focus on the rapidly growing market for commercial and governmental IT services
creating  the  CTA  Systems  Engineering Group and the CTA Software Engineering
Group.

RESULTS OF OPERATIONS

                The following  tables  set forth certain items in the Company's
Statements of Operations as a percentage of contract revenues:

<TABLE>
<CAPTION>
                                                      YEAR  ENDED
                                                      DECEMBER 31,
                                                 1996     1997    1998
<S>                                              <C>     <C>      <C>
  Contract revenues:
      Systems Engineering                          95.5%    79.6%   62.8%
      Software Engineering                          4.5     20.4    37.2
  Total contract revenues                         100.0    100.0   100.0
  Cost of contract revenues                        91.1     85.2    78.3
  Selling, general and administrative expenses      5.6     10.4    13.3
  Supplemental ESOP contribution                    0.0      3.2     0.9
  Other expenses                                    2.5      0.8     1.7

  Operating profit                                  0.8      0.4     5.8
  Interest expense                                  1.0      1.7     1.0

  Income (loss) before income taxes               (0.2)    (1.3)     4.8
  Provision (benefit) for income taxes            (0.0)    (0.6)     1.9

  Income (loss) from continuing operations        (0.2)    (0.7)     2.9
  Income (loss) from discontinued operations,    (11.3)     0.7     (2.1)
  net of income taxes

  Net income (loss)                              (11.5)%   (0.0)%    0.8%


</TABLE>

The following  tables set forth certain items in
the Company's Statements of Operations by operating segment:

<TABLE>
<CAPTION>
                                            Year  ended December 31,
                                         1996       1997       1998
                                          (In thousands of dollars)
Contract revenues:
<S>                                      <C>       <C>        <C>
   Systems Engineering                   $91,953    $73,464    $73,579
   Software Engineering                    4,293     18,775     43,605

                                         $96,246    $92,239   $117,184


  Operating profit:
   Systems Engineering                    $2,442     $2,933     $5,259
    Software Engineering                     729      1,154      4,593
   Other expenses                         (2,447)    (3,668)    (3,040)

                                          $  724     $  419   $  6,812


</TABLE>

1998 COMPARED WITH 1997

CONTRACT REVENUES. Contract revenues increased  27%  to  $117.2 million in 1998
from  $92.2  million  in  1997  as  a  result  of a 132% increase  in  software
engineering contract revenues.

Systems engineering contract revenues increased  to  $73.6 million in 1998 from
$73.5  million  in  1997.   Decreases  in  revenues  on  the  General  Services
Administration ("GSA") Eastern Zone contract, which ended in the  third quarter
of 1997, and on the Technical Engineering and Management Support IV ("TEMS IV")
program at Hanscom Air Force Base, which is winding down, and smaller decreases
in  other  Federal  programs,  were  partially  offset by increases in contract
revenues on embedded systems Year 2000 contracts and on GSA Schedule contracts.

Software engineering contract revenues increased  to $43.6 million in 1998 from
$18.8 million in 1997. The increase is primarily attributable  to new Year 2000
conversion  contracts  with  the  States  of  Michigan and Texas and commercial
companies such as Wells Fargo Bank and Norrell.

Commercial  contract  revenues  from  both  systems  engineering  and  software
engineering  services increased to $50.7 million,  or  43%  of  total  contract
revenues, in 1998  from  $18.8  million,  or 20% of total contract revenues, in
1997.

 COST OF CONTRACT REVENUES. Cost of contract  revenues increased 16.8% to $91.7
million, or 78.3% of contract revenues, in 1998,  from  $78.5 million, or 85.2%
of contract revenues, in 1997. This decrease in cost of contract  revenues as a
percentage of contract revenues resulted primarily from the increase  of higher
margin commercial contracts as a percentage of overall contract revenues.

SG&A. Selling, general and administrative expenses ("SG&A") increased to  $15.6
million, or 13.3% of contract revenues, in 1998, from $9.6 million, or 10.4% of
contract  revenues,  in  1997.  The  increase  in  SG&A  reflects the Company's
continued  investment  in  infrastructure  and in the initiatives  required  to
implement the Company's marketing strategies  and increased focus on commercial
markets.

SUPPLEMENTAL ESOP CONTRIBUTION. During 1998, the  Board of Directors elected to
make a supplemental contribution of approximately $1.1 million to the Company's
employee stock ownership plan (ESOP).

OTHER EXPENSES.  Other expenses increased to $2.1 million  in  1998  from  $0.7
million  in 1997 due to additional reserves and write-downs of certain contract
receivables.

OPERATING  PROFIT.   As a result of the foregoing, the Company had an operating
profit of $6.8 million in 1998 and an operating profit of $0.4 million in 1997.

LOSS FROM DISCONTINUED  OPERATIONS.  The  loss from discontinued operations for
1998 reflects an adjustment of $2.1 million  for  the  final  settlement of the
sales price of the Company's Space and Telecommunications business,  which  was
sold  in  the  third  quarter  of 1997, and a binding arbitration award of $2.0
million to a former employee of that business. The amounts are presented net of
income tax benefit in the Consolidated Statements of Operations.

1997 COMPARED WITH 1996

CONTRACT REVENUES. Contract revenues  decreased  4.2%  to $92.2 million in 1997
from  $96.2 million in 1996. Software engineering contract  revenues  increased
337% to  $18.8  million  in  1997  from   $4.3  million  in 1996. Such increase
resulted primarily from the Company's Year 2000 Century date  Change conversion
contracts.  The  Company  performed  such  services in 1997 for the  States  of
Nebraska, Kansas, Iowa and others as well as Cessna Aircraft and Virginia Tech.

A new systems engineering contract in 1997,  providing  program  management and
integration  for  the  Assistant  Secretary  of  Defense  for  Health  Affairs,
generated revenues of $7.1 million. Another new program, the Defense Enterprise
Integration Services (DEIS) subcontract to Computer Sciences Corporation  (CSC)
generated  revenues of $4.1 million in 1997. Contract revenues on the Company's
contact with  the  GSA's Federal Supply Service increased 65% from $6.5 million
in 1996 to $10.8 million in 1997.

These increases in contract  revenues were offset by decreases in revenues from
the TEMS IV program at Hanscom Air Force Base of $10.4 million in 1997 compared
to 1996 as the program winds down.  Revenues  on  the  Naval Air Weapons Center
(NAWC)  contract at China Lake, California decreased in 1997  by  $5.2  million
compared to 1996. In the first quarter of 1996, the Company completed its five-
year contract  with  the  NAWC, the last of the Company's significant contracts
awarded during its period of  eligibility for small business awards which ended
in 1992. Although it was ineligible  to  rebid  for  this contract as the prime
contractor, the Company is a major subcontractor to the  small  business  prime
contractor  who was awarded the NAWC follow-on contract, from which the Company
receives approximately  45%  of the contract revenues. Contract revenues on the
NAWC subcontract increased by $0.3 million in 1997 compared to 1996.

Contract  revenues  in  1997  decreased   by   $2.0   million   on   the  Range
Instrumentation  Development  contract and by $1.3 million on the AUA technical
assistance contract. Contracts  which  ended  in  1997,  such  as  the  Systems
Engineering  Analysis  contract  with  NASA  and  the GSA Eastern Zone contract
contributed  to  the  decline  in revenues, as did the  sale  of  the  Advanced
Information Systems division. Contracts  which  ended  in 1996, such as the Air
Force  Warning  System integration contract, also contributed  to  the  overall
decline in contract revenues in 1997.

The Company revised  its estimates of the full contract value and profitability
of its Eastern Zone contract with the GSA, resulting in a reduction in revenues
and operating profit in  1996 of $2.6 million, reflecting the Company's current
estimate of the contract's  profit  at  completion.  The  Eastern Zone contract
incurred significant start-up costs related to the establishment  of  nine  new
facilities required for contract performance and to difficulties encountered in
cost-effective  staffing  of the personnel required under the contract. The use
of subcontract personnel to fill critical positions resulted in cost overruns.

The Company initially expected  that  future contract performance over the full
contract term at originally anticipated  staffing levels would result in profit
sufficient to offset early program losses.  However,  revenues  on the contract
were  not  sufficient to offset these losses. The Company has submitted  claims
against the  U.S.  government  seeking recovery of $1.5 million of the overrun.
The Company has recorded these claims  as an unbilled receivable, against which
it has certain reserves which it deems adequate.

 COST OF CONTRACT REVENUES.  Cost of contract revenues decreased 10.4% to $78.5
million, or 85.2% of contract revenues, in 1997 from $87.6 million, or 91.1% of
contract revenues, in 1996. The decrease  in  cost  of  contract  revenues as a
percentage of contract revenues resulted primarily from the effect  of  changes
in  the estimated contract value and profitability of the Eastern Zone contract
in 1996.  Without giving effect to the reduction in revenues due to the Eastern
Zone contract,  the  cost  of  contract  revenues  as  a percentage of contract
revenues for 1996 was 88.7%. The decrease in cost of contract  revenues in 1997
would have been even more significant were it not for the indirect  cost impact
of  $0.9  million  related  to  the  sale  of  the Space and Telecommunications
business  and  one-time  start-up  costs  of $1.0 million  related  to  certain
software engineering contracts.

SG&A. Selling, general and administrative expenses  ("SG&A") for 1997 increased
77.2% to $9.6 million, or 10.4% of contract revenues,  from  $5.4  million,  or
5.6% of contract revenues, in 1996. Higher costs and reduced revenues accounted
for  the  increase  in  SG&A  as a percentage of contract revenues in 1997. The
increase in SG&A reflects the Company's  continued investment in infrastructure
and in the initiatives required to implement the Company's marketing strategies
and increased focus on commercial markets  as  well as the indirect cost impact
of  $0.3  million  related  to  the  sale of the Space  and  Telecommunications
business.

SUPPLEMENTAL ESOP CONTRIBUTION. During  1997, the Board of Directors elected to
make a supplemental contribution of approximately $3.0 million to the Company's
ESOP  out of the proceeds from the sale of  the  Space  and  Telecommunications
business  to  allow  the  employees  to share in the Company's future potential
performance, if any. The Board authorized  the  supplemental contribution after
the sale had closed and the Company's new bank credit facility was in place.

OTHER EXPENSES.  Other expenses decreased to $0.7  million  in  1997  from $2.4
million  in 1996. The decrease is due primarily to the write-off in the  fourth
quarter of  1996 of capitalized software costs of $0.8 million and $0.9 million
related to the Company's unsuccessful initial public offering.

OPERATING PROFIT  (LOSS).  As  a  result  of  the foregoing, the Company had an
operating profit of $0.4 million in 1997 compared  to  an  operating  profit of
$0.7 million in 1996.

INTEREST EXPENSE.  Interest expense increased to $1.6 million in 1997 from $1.0
million  in  1996 due to the payment of additional interest on the subordinated
debt as a result  of  the  sale  of  the  Space  and Telecommunications Systems
business to Orbital. Interest expense allocated to  discontinued operations was
$2.1 million in 1997 and $3.3 million in 1996.

INCOME  (LOSS)  FROM  DISCONTINUED  OPERATIONS.  The income  from  discontinued
operations  in  1997  was $0.6 million, net of tax benefits  of  $1.4  million,
compared to a loss from  discontinued  operations  of $10.9 million, net of tax
benefits of $5.6 million in 1996. The income in 1997  includes  a  gain  on the
sale of the segments to Orbital Sciences Corporation of $3.9 million. The  loss
in  1996  includes a charge of $6.4 million from the write-off of the Company's
investment  in  GEMnet and a charge of $2.8 million for additional reserves due
to schedule delays  on  the Indostar program. During 1996, the Company had been
in discussions with certain  international  companies  to  continue  the GEMnet
program  after  the  1995  launch failure. These discussions did not produce  a
viable solution and as a result  the  Company  decided to terminate the program
and write-off its remaining investment.

LIQUIDITY AND CAPITAL RESOURCES

The Company's net income (loss) was $0.9 million,  ($0.02  million), and ($11.0
million) 1998, 1997 and 1996, respectively. Its cash flow provided by (used in)
operating activities was  $(1.8 million), $(10.2 million), and  $(5.5  million)
in 1998, 1997 and 1996, respectively. The principal factors accounting for  the
provision  (use)  of  cash in operating activities in 1998 were $2.3 million in
losses on disposal of segments and sale of assets, $1.5 million of depreciation
and amortization expense,  $1.1  million in other non-cash expenses and changes
in working capital accounts using  $7.6  million of cash. The principal factors
accounting for the provision (use) of cash in operating activities in 1997 were
$(3.9  million)  non-cash  gain  on  disposal  of  segments,  $2.8  million  of
depreciation  and amortization expense, ($3.6 million)  payment  of  previously
accrued interest, and changes in working capital accounts using $5.6 million of
cash. The principal  factors  accounting  for  the  provision  (use) of cash in
operating activities in 1996 was the net loss of  $11.0 million and an increase
in  accounts  receivable and other net assets of $6.6 million, offset  by  $5.6
million of depreciation and amortization expense and the $6.4 million write-off
of the investment in GEMnet.

Cash provided by  (used  in) investing activities totaled $(4.5 million), $14.4
million, and $(6.2 million)  in 1998, 1997 and 1996, respectively. Additions to
furniture and equipment were $2.4  million,  $3.6  million, and $6.5 million in
1998, 1997 and 1996, respectively. Proceeds from the  sale of segments provided
$18 million in 1997 and an adjustment to the sales price  of  the  segments  in
1998 used  $2.1 million.

Cash  provided  by  (used  in)  financing  activities  was  $6.2 million, $(4.2
million), and $11.5 million in 1998, 1997 and 1996, respectively. Financing was
primarily provided by borrowings under the credit facility and  offset  by  the
repayment  of  long-term debt and the purchase of treasury stock. The Company's
net borrowings (payments)  under  the  credit facility were $8.8 million, $(3.7
million), and $12.0 million for 1998, 1997  and  1996,  respectively.  The 1997
amount is net of $5 million proceeds from a new three-year term loan. Repayment
of  long-term  debt  was  $1.7  million  in 1998 and $0.5 million in 1997.  Net
purchases of treasury stock were $1.0 million,  $0.1  million, and $0.5 million
in 1998, 1997 and 1996, respectively.

     In November 1997, the Company entered into a three-year  agreement  with a
bank for a revolving credit facility, which was amended in 1998, providing  the
availability to borrow up to $18 million, which includes a facility for letters
of credit up to $4 million, and which also provides a $5 million term facility.
At  December  31, 1998, there was $16.2 million outstanding under the revolving
credit facility  and  $3.3  million  outstanding under the term facility, to be
repaid in equal quarterly payments.

     Borrowings under the credit facility  are  secured by substantially all of
the Company's assets and bear interest at either  the  lender's  prime  rate or
LIBOR plus 1.5% to 2.25% (based on the Company's ratio of total funded debt  to
earnings   before  interest,  taxes,  depreciation  and  amortization)  at  the
Company's discretion.   The  weighted  average  rate  in  effect for short-term
borrowings at December 31, 1998 was approximately 7.5%.  Under  the  agreement,
the  Company  pays  an  annual commitment fee on the unused credit line and  an
annual administration fee  on  the  total  revolving  credit  line.  The credit
facility  requires  advance  approval  by the bank for the Company to pay  cash
dividends.  The agreement also includes  financial  covenants which require the
Company to maintain certain financial ratios such as  a  fixed  charge coverage
ratio, earnings before interest and taxes to interest expense ratio  and  total
outstanding debt to accounts receivable ratio. The agreement also requires  the
Company  to  obtain  the  consent of the bank prior to making aggregate capital
expenditures for itself and  its  subsidiaries of greater than $2.5 million per
year.  The Company believes it is in  compliance  with  all  of  the  financial
covenants.

     In  January  1998,  the  Company  completed  the $2.0 million tender offer
accrued for as of December 31, 1997. The Company believes  that  cash flow from
operations  and  available  bank  borrowings  will  provide adequate funds  for
continued operations for the next twelve months.

OTHER MATTERS

     The Company has assigned certain individuals to  identify and correct Year
2000  compliance  issues.   Information  technology ("IT")  systems  with  non-
compliant code are expected to be modified  or  replaced  with systems that are
Year 2000 compliant. The individuals are also responsible for investigating the
readiness  of  suppliers,  customers  and  other third parties along  with  the
development of contingency plans where necessary.

All IT systems have been inventoried and assessed  for compliance, and detailed
plans are in place for required system modifications  or replacements.  Systems
conversion and testing activities are underway with approximately two-thirds of
the systems already compliant.  IT systems are expected  to  be fully compliant
by the end of the third quarter of 1999.  Inventories and assessments of non-IT
systems  have been completed. Progress of the Year 2000 compliance  program  is
continuously being monitored by senior management.

The Company  has  identified  critical  suppliers,  customers  and  other third
parties   and   has  surveyed  their  Year  2000  remediation  programs.   Risk
assessments and contingency  plans,  where  necessary, will be finalized in the
third quarter of 1999.

Incremental costs directly related to Year 2000  issues  are  estimated  to  be
$650,000  to  be  incurred between 1998 and 1999 of which $420,000 (or 65%) has
been  spent  to date.   Approximately  10%  of  the  total  estimated  spending
represents costs to modify existing systems.  Costs incurred prior to 1998 were
immaterial.  This  estimate assumes that the Company will not incur significant
Year 2000 related costs  on  behalf  of  suppliers,  customers  or  other third
parties.

The Company's most likely potential risk is the inability of some customers  to
order  and  pay  on  a  timely  basis.  Contingency plans for Year 2000-related
interruptions are being developed  and will include, but not be limited to, the
development  of  emergency  backup  and  recovery  procedures,  remediation  of
existing systems parallel with installation  of  new systems and identification
of alternate suppliers.  All plans are expected to  be  completed by the end of
the third quarter of 1999.

     The Company's Year 2000 efforts are ongoing and its  overall plan, as well
as  the  consideration  of contingency plans, will continue to  evolve  as  new
information  becomes  available.    While  the  Company  anticipates  no  major
interruption of its business  activities,  that will be dependent in part, upon
the ability of third parties to properly remediate  their IT and non-IT systems
in  a  timely  manner.   Although  the   Company  has implemented  the  actions
described above to address third party issues, it has  no  ability to influence
the  compliance  actions  of  such  parties.   Accordingly, while  the  Company
believes its actions in this regard should have  the  effect  of  reducing Year
2000 risks, it is unable to eliminate them or estimate the ultimate effect Year
2000 risks will have on the Company's operating results.

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The  market risk inherent in the Company's financial instruments and  positions
represents  the potential loss arising from adverse changes in interest  rates.
At December 31,  1998  and 1997 the principal amount of the Company's aggregate
outstanding variable rate  indebtedness  was  $19.5  million and $12.4 million,
respectively.  A hypothetical 10% adverse change in interest  rates  would have
had  an  annualized  unfavorable  impact of approximately $146,000 and $95,000,
respectively, on the Company's earnings  and  cash flows based upon these year-
end debt levels.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                        The information
required by this item is included under Item 14(a) of this document.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

                                                         None


<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The following table sets forth certain information  regarding  the  directors
and executive officers of the Company as of December 31, 1998:

<TABLE>
<CAPTION>
NAME                 AGE POSITION
<S>                 <C>  <C>
  C.E. Velez         58  President, Chief Executive Officer and
                         Chairman of the Board
  Gregory H. Wagner  50  Executive Vice President, Chief
                         Financial Officer and Treasurer
  Terry J.           55  President, Systems Engineering Group
  Piddington
  Sy Inwentarz       47  President, Software Engineering Group
  Harvey D.          68  Director
  Kushner(1)
  David R. Mackie    60  Director
  (1)
  Raymond V.         65  Director
  McMillan (1)
  George W.          72  Director
  Morgenthaler(1)
  James M. Papada,   50  Director
  III(1)
  Arturo             68  Director
  Silvestrini(1)
</TABLE>
___________

(1)  Member of the Compensation Committee and the Audit Committee of the  Board
     of Directors.
___________

Dr. C.E. "Tom" Velez,  a  founder of the Company, has been President and 
Chairman of the Board since the Company's  organization  in  1979.  Prior  to  
founding  the Company, Dr. Velez  was  employed  by  Martin  Marietta  
Aerospace for three years as Director,  Software  Engineering Research and 
Development, and  was  previously employed at the NASA Goddard  Space  Flight  
Center  for  12  years  in various positions including Chief of the Systems 
Development and Analysis Branch.

Gregory H. Wagner  has  been  Executive  Vice  President  and  Chief Financial 
Officer and Treasurer of the Company since November 1992. From 1988  to  1992,  
he was Vice President  of  Finance of the Company. Mr. Wagner was previously 
employed  with Martin Marietta  Aerospace for ten years in various positions, 
most recently as Director of Business Management.

Terry J. Piddington  has been President of the Company's Systems Engineering 
Group since October 1997  and  before that had been Executive Vice President of 
the Company since February 1987.  From  1985  to  1987,  he  was  a  Vice  
President of the Company's Systems Engineering Services Division.

Sy   Inwentarz has  been  President  of  the  Company's Software Engineering 
Group since March 1998. From 1996 until he joined  the  Company, he was a 
Managing Principal with IBM Global Services. From 1992 to 1996  he  was  a  
Vice  President of Computer Horizons Corp., a business solutions software 
supplier. Prior  to 1992, he held various positions with Hewlett-Packard and 
American Hoechst.

Harvey D. Kushner  has been a Director of the Company since July 1989. Mr. 
Kushner formed Kushner Management  Planning  Corporation  in  1988  which  is  
a professional services firm advising in management, business and technology 
development. From 1987  to  1988,  he  was an officer of Atlantic Research 
Corporation. Prior  to 1987, Mr. Kushner had  been  employed  by  the  ORI  
Group for 33 years, having served  as  Chairman  of the Board of Directors, 
Chief Executive  Officer,  and President for 20 years.

David R. Mackie has been a Director of the Company since 1997. Since 1985 he 
has been an independent  consultant  and  is currently a Partner in Diplomatic 
Resolutions, Inc. Prior to 1985, he held various  positions  with Tandem 
Computers, where he was one of the co-founders, and Hewlett-Packard.

Raymond V. McMillan  has been a Director of the Company since August 1996 and 
President of Information  Technology  Services  from April 1996 to his 
retirement in October 1997 and before that had been Executive  Vice  President  
of  the Company since February 1991. From 1988 to 1991, he was a Vice President 
of the  Company. From 1984  to  1987,  he  was  a Brigadier General in the Air 
Force responsible  for management of the integration and test of the DOD's 
Integrated Tactical Warning and Attack Assessment System.

George W. Morgenthaler has been a Director of the Company since August 1991. 
From 1986 to the  present,  he  has  served  on the faculty of the University 
of Colorado at Boulder as Professor, Aerospace Engineering Sciences. He 
previously served four years as Department Chairman and  Associate  Dean of the 
College of Engineering and Applied Science. From 1960 to 1986, he was  with  
Martin Marietta; his last position was as Vice President of Energy, Technology 
and  Special  Products. He is on the Board of Directors of Dynamic Materials 
Corp., a NASDAQ company.

James M. Papada,  III  has been a Director of the Company since August 1996. 
Since prior to 1991, he has  been  a  senior partner in the corporate depart-
ment of the law firm of Stradley, Ronon, Stevens & Young, a limited liability 
partnership in Philadelphia, Pennsylvania, specializing in merger and 
acquisition transactions.  He  is  also  the Chairman of the Board of 
Technitrol, Inc.,  a multi-national, diversified manufacturing  company listed 
on the New York Stock Exchange. He is also a Director of ParaChem  Southern,  
Inc., a manufacturer of specialty  chemical  products  and  GlassTech,  Inc., a 
manufacturer  of  glass tempering  and bending systems. From February 1983  
until  December  1987,  Mr.Papada was President  and  Chief  Operating Officer 
of Hordis Brothers, Inc., a privately held glass fabricator.

Arturo Silvestrini has been a Director of the Company since August 1991. From 
November 1991  to December 1996, he was President and CEO of Earth Observation 
Satellite Corporation.  From  1965  to  1991,  he  was with Computer Sciences 
Corporation (CSC),  as President of various Divisions,  Deputy  to  the  
President  of  CSC Systems Group and as Senior Vice President for European 
operations.

Executive officers  are  reviewed  annually  by  the  Board of Directors 
and serve at the pleasure of the Board.


<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information regarding the compensation for 1998, 
1997 and 1996 of  the  Company's  Chief  Executive  Officer  and  the three 
other most highly compensated  executive  officers in 1998 (the "Executive  
Officer  Group")  for services rendered in all  capacities  to  the Company. 
The Company has no other executive officers.

                            SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                   LONG-TERM COMPENSATION
                  ANNUAL
               COMPENSATION
                                         Other   Restricted Option  All Other
NAME AND PRINCIPAL      Salary  Bonus   Annual      Stock   Awards Compensation
POSITION(S)        YEAR   ($)    ($) Compensation Awards ($)  (#)    ($)(2)
                                        ($)(1)
<S>                <C>  <C>    <C>    <C>        <C>        <C>    <C>
C.E. Velez         1998 308,000 145,673  2,052       --     22,895   17,915
President, Chief   1997 280,000 130,220  2,090       --       --     14,480
Executive Officer  1996 276,743  --      1,870       --     59,010    5,700
and Chairman of
the Board
  Gregory H.       1998 187,000 88,494    954        --     13,900   32,411
  Wagner           1997 170,000 112,455   927        --       --     32,461
Executive Vice     1996 167,900  --       856        --     85,828    5,700
President, Chief
Financial Officer
and Treasurer
  Terry J.         1998 180,000 75,634   1,548       --     12,828   24,131
  Piddington-      1997 155,000 25,033   1,396       --       --     14,028
President, Systems 1996 153,350  --      1,221       --     32,666    5,700
Engineering Group
  Sy Inwentarz (3) 1998 161,826 93,399    696        --     150,000  15,217
President,         1997   --     --       --         --       --       --
Software           1996   --     --       --         --       --       --
Engineering Group
</TABLE>

___________


(1)
Represents long  term disability premiums and group life insurance premiums for 
amounts in excess of $50,000.

(2)
Includes amounts  of  the  Company's  contributions  allocated to participants' 
accounts pursuant to the Company's 401(k) plan and ESOP, other relocation 
reimbursements and miscellaneous cash payments pursuant to the Company's 
cafeteria plan.

(3)
Mr. Inwentarz joined the Company in March 1998 at an annual salary of $225,000.




OPTION GRANTS DURING 1998

The following table sets forth information concerning the stock options granted 
during fiscal 1998 to each member of the Executive Officer Group.

<TABLE>
<CAPTION>
                           % of
               Number of   Total
                Shares    Options
              Underlying  Granted                       Grant Date
                Options     to     Exercise  Expiration   Present
NAME            GRANTED  Employees   Price      DATE     Value ($)
                  (#)       in      ($/SH)                  (1)
                          Fiscal
                           YEAR
<S>            <C>        <C>      <C>        <C>        <C>
  C.E. Velez    17,909     2.0%      $5.05     2/12/05    $42,623
                 4,986      0.6      5.05      5/14/05     11,867
  Gregory H.    10,873      1.2      5.05      2/12/05     25,878
  Wagner
                 3,027      0.3      5.05      5/14/05      7,204
  Terry J.       9,914      1.1      5.05      2/12/05     23,595
  Piddington
                 2,914      0.3      5.05      5/14/05      6,935
  Sy Inwentarz  150,000    16.5      5.05      3/24/05    357,000
</TABLE>

(1)  The  Company  uses  the Black-Scholes model to estimate the fair values of
     options, assuming a risk-free  interest  rate equal to the ninety-day U.S.
     Treasury  Bill rate, expected lives of five  to  ten  years,  an  expected
     volatility factor of .197 and no expected dividends.

FISCAL YEAR-END OPTION VALUES

The following table  sets  forth  information concerning the exercise of stock 
options during fiscal 1998 and the number and value of unexercised stock 
options held at year-end by each member of the Executive Officer Group.

<TABLE>
<CAPTION>
                                      Number of         Value of
                                     Securities        Unexercised
               Shares                Underlying       In-the-Money
              Acquired    Value      Unexercised       Options at
NAME             on    Realized($) Options at FY-End  FY-End ($)(1)
             Exercise(#)                 (#)          Exercisable/
                                    Exercisable/      UNEXERCISABLE
                                    UNEXERCISABLE
<S>           <C>       <C>       <C>               <C>
  C.E. Velez     --        --       39,340/42,565    120,184/123,052
  Gregory H.     --        --       73,884/25,844    225,715/74,714
  Wagner
  Terry J.       --        --       21,776/23,718     66,525/68,546
  Piddington
  Sy             --        --       --  /150,000      --  /412,500
  Inwentarz
</TABLE>

___________


(1)  There was no public  trading  market  for the Common Stock on December 31,
     1998. Accordingly, solely for purposes  of  this table, the values in this
     column have been calculated on the basis of an  estimated  market price of
     $7.80 per share, less the aggregate exercise price of the options.


<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with regard to the benefi-
cial ownership of the  Common  Stock  as  of  December  31,  1998 by (i) each 
person known by the Company to own beneficially more than 5% of  the  outstan-
ding  shares of Common Stock,  (ii)  each  director,  each  executive officer 
and each member  of  the Executive Officer Group and (iii) all  current direc-
tors and executive officers of the Company as a group:

<TABLE>
<CAPTION>
                                   Shares         Percent
NAME AND ADDRESS OF BENEFICIAL  Beneficially   Beneficially
OWNER(1)(2)                       OWNED (1)      OWNED(3)
<S>                             <C>           <C>
  5% Stockholders:
  C.E. Velez                    4,681,420 (4)      50.4%
  ESOP                          1,615,318          17.4
  B.A. Claussen                   883,752 (5)       9.5
  Directors and executive
  officers:
  C.E. Velez                   4,681,420 (4)       50.4%
  Terry J. Piddington            443,903 (6)        4.8
  Raymond V. McMillan            230,346 (7)        2.5
  Gregory H. Wagner              192,212 (8)        2.1
  George W. Morgenthaler          20,705 (9)         *
  Harvey D. Kushner               18,195 (10)        *
  James M. Papada, III             7,755 (11)        *
  Arturo Silvestrini               3,948             *
  David R. Mackie                  3,373             *
  Sy Inwentarz                        -              *
All current directors and
executive officers as a group     5,601,857        60.3%
(10 persons as of December 31,      (12)
1998)
</TABLE>

___________

*  Less than 1%.


1. Beneficial ownership as of December 31, 1998 for each person includes shares
   subject to options held by such person  (but  not  held by any other person)
   which are exercisable within 60 days after such date.  All share amounts are
   exclusive  of  shares  beneficially  owned  through  the  ESOP.   Beneficial
   ownership  is  determined  in  accordance  with  the  rules  of  the SEC and
   generally includes voting or investment power with respect to securities.

2. The  address  for  each  beneficial  owner  except  for  Mr. Claussen is c/o
   Computer  Technology  Associates,  Inc.  6903  Rockledge  Drive,   Bethesda,
   Maryland  20817. Mr. Claussen's address is c/o SymSystems, L.L.C., 12508  E.
   Briarwood Avenue, Englewood, Colorado 80112.

(3)  The percent  beneficially  owned  is  based  on 8,584,095 shares of Common
     Stock deemed outstanding as of December 31, 1998 and non-qualified options
     to purchase 705,744 shares of Common Stock which are currently exercisable
     within 60 days after such date.

(4)
Includes non-qualified options to purchase 39,340 shares of Common Stock .

(5)
Includes non-qualified options to purchase 200,000 shares of Common.

(6)
Includes non-qualified options to purchase 21,776 shares of Common Stock.

(7)
Includes non-qualified options to purchase 199,988 shares of Common Stock.

(8)
Includes non-qualified options to purchase 73,884 shares of Common Stock..

(9)
Includes non-qualified options to purchase 1,354 shares of Common Stock.

(1)  Includes non-qualified options to purchase 5,646 shares of Common Stock.

(2)  Includes non-qualified options to purchase 630 shares of Common Stock.

(3)  Includes non-qualified options to purchase 342,618 shares of Common Stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 1995, the  Company  discontinued  the  operations of its Simulation 
Systems Division, which manufactured aircraft flight  simulators for sale or 
lease. The assets of the division consisted primarily of a  cockpit  flight  
simulator  and  various fixed  assets, which had an aggregate value of $3.1 
million, net of accumulated depreciation.  These  assets  were  sold  on  
September  1,  1995  to a company principally owned by Mr. Claussen, one of the 
Company's principal stockholders, for two notes secured by the assets with 
an aggregate principal amount  of $2.2 million,  bearing  interest  at  the  
Company's borrowing rate which has ranged between 6.00% and 7.75% per annum, 
and  a  15%  minority interest in the entity purchasing the division, which 
has been assigned  a  value  of $0.2 million. In August 1998, the Company 
received $0.2 million in cash on the $1.8 million note and forgave the 
balance (which was charged against the Company's  allowance for doubtful  
accounts). The other note was repaid from the Company's common  stock
held by Mr. Claussen and the Company's minority interest reduced to 10.6%.

In March 1991, the Company made a loan to Mr. Claussen of $368,623 for the 
purchase of his new residence.  The interest rate on this loan varied from 
4.69% to 7.75% per annum and equaled the  interest  rate on the Company's 
revolving line of credit under the Credit Facility. Mr. Claussen  paid  all  
outstanding principal and accrued interest on the loan in January 1996.

In connection with  Mr.  Claussen's  resignation  as  an officer and director 
of the Company, during December 1996 he entered into an Employee Separation and 
Non-Competition Agreement  (the  "Separation  Agreement")  with the Company   
whereby, in consideration  for Mr. Claussen's agreement to not compete with 
the Company for a five (5) year  period,  the  Company  agreed:   (i)  to allow 
Mr. Claussen to retain his outstanding stock options in the Company until 
November 28, 2003 and (ii) to pay Mr. Claussen $175,000 per year for a period  
of five years.  At the same  time,  Mr.  Claussen  and  Dr.  Velez  agreed to 
terminate  the  Buy-Sell Agreement which had formerly restricted the transfer  
of  their  shares  in the Company.  Mr. Claussen then executed a Stock Restric-
tion Agreement with respect to  his  Common  Stock  on  the  same terms as the 
Stock Restriction Agreements signed by all other shareholders of the Company.

The Company also entered into a Consulting Agreement with Mr. Claussen during 
December 1996 for  a  five  (5)  year term, whereby Mr. Claussen agreed to 
provide consulting services to the Company,  including  with  respect  to  the 
procurement for the Company  of  commercial and international business.  
During  the  term  of  the Consulting Agreement,  the  Company is required to 
pay Mr. Claussen a fee equal to one percent (1%) of (i) the  gross  revenues  
derived  by  the  Company from contracts  secured  primarily  through  Mr.  
Claussen's efforts and which  will generate greater than $5 million of 
aggregate revenue  for  the  Company.  The Company has not paid any fees to 
Mr. Claussen under the Consulting Agreement.

Between May 1993  and  July  1995, the Company made loans aggregating $500,000 
to Dr. Velez for the purchase and  construction of a new residence, evidenced 
by a revolving promissory note due August  2000  bearing interest at the same 
rates applicable to  the  Company under its Credit Facility.  Dr.  Velez  paid  
all  outstanding principal and accrued interest on the loan in November 1997.


<PAGE>
*                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

14(A) CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES:

                                                                PAGE
Report of Independent Auditors                                  F-1

Consolidated Balance Sheets                                     F-2

Condolidated Statements of Operations                           F-4

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows                           F-6

Notes to Consolidated Financial Statements                      F-8

Financial Statement Schedules:

Schedule II - Valuation and Qualifying Accounts and Reserves     F-24

All other schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the related
instructions or are inapplicable and therefore have been omitted.

Exhibits:

        23(a) Consent of Ernst & Young LLP                       F-25
        23(b) Consent and Report of Legg Mason Wood Walker, Inc. F-26

14(B) REPORTS ON FORM 8-K.

There were no reports on Form 8-K filed during the fourth quarter of 1998.

14(C) FINANCIAL DATA SCHEDULE














<PAGE>
                        REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Shareholders
Computer Technology Associates, Inc.

We have audited  the  accompanying  consolidated  balance  sheets  of  Computer
Technology Associates, Inc. (formerly CTA INCORPORATED) and subsidiaries  as of
December  31,  1998  and  1997,  and  the  related  consolidated  statements of
operations, stockholders' equity, and cash flows for each of the three years in
the  period  ended  December  31, 1998.  Our audits also included the financial
statement  schedule  listed  in  the  index  at  Item  14(a).  These  financial
statements and the schedule are the responsibility of the Company's management.
Our responsibility is to express an  opinion  on these financial statements and
the schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards.   Those  standards require that we plan and  perform  the  audit  to
obtain reasonable assurance  about whether the financial statements are free of
material misstatement.  An audit  includes examining, on a test basis, evidence
supporting the amounts and disclosures  in  the financial statements.  An audit
also  includes  assessing  the  accounting  principles   used  and  significant
estimates  made  by  management,  as  well as evaluating the overall  financial
statement presentation.  We believe that  our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects, the consolidated  financial  position  of
Computer Technology Associates,  Inc. and subsidiaries at December 31, 1998 and
1997, and the consolidated results of their operations and their cash flows for
each of the three years in the period  ended  December  31, 1998, in conformity
with  generally  accepted  accounting  principles.  Also, in our  opinion,  the
related financial statement schedule, when considered  in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.


                                           /s/ Ernst & Young LLP

Washington, D.C.
February 12, 1999











                                         F-1




<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                          Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                 DECEMBER 31
                                               1997       1998
             
                                               (IN THOUSANDS,
                                              EXCEPT FOR SHARE
                                                    DATA)
<S>                                         <C>        <C>
Assets
Current assets:
   Cash and cash equivalents                       $          $
                                            -          -
   Accounts receivable (NOTES 1 AND 3)        33,300     48,909
   Other current assets (NOTE 4)               1,222      1,145
Recoverable income taxes (NOTE 8)              3,576           -
Total current assets                          38,098     50,054
Furniture and equipment (NOTES 1 AND 4)       11,110      8,940
   Accumulated depreciation and              (8,066)    (5,192)
   amortization
                                               3,044      3,748
Other assets (NOTES 1, 4, AND 8)               4,146      3,546







Total assets                                 $45,288    $57,348
</TABLE>





SEE ACCOMPANYING NOTES.
                                      F-2




<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                          Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                 DECEMBER 31
                                               1997       1998
                                               (IN THOUSANDS,
                                              EXCEPT FOR SHARE
                                                    DATA)
Liabilities and stockholders' equity
<S>                                          <C>        <C>
Current liabilities:
   Notes payable - line of credit (NOTE 5)    $ 7,445    $16,223
   Current portion of long-term debt (NOTE      1,667      1,667
   5)
   Accounts payable                             5,788     10,576
   Accrued expenses (NOTE 4)                    3,156      4,156
   Excess of billings over costs and            2,738      1,109
   contract prepayments
   Other current liabilities                      270        290
   Income taxes payable (NOTE 8)                    -         19
   Accrued tender offer (NOTE 7)                2,019          -
   Deferred income taxes (NOTE 8)               2,427      3,822
Total current liabilities                      25,510     37,812
Long-term debt, less current portion            3,333      1,667
  (NOTE 5)
Other long-term liabilities (NOTE 6)              635      2,135
Commitments and contingencies (NOTE 11)             -          -
Stockholders' equity (NOTE 7):
   Preferred stock, $.01 par value,
   1,000,000 shares
    authorized and none issued                      -          -
   Common stock, $.01 par value, 20,000,000
   shares
    authorized and 10,000,000 issued              100        100
   Capital in excess of par value               7,869      7,855
   Retained earnings                           14,528     15,438
                                               22,497     23,393
   Notes receivable from employees               (698)      (698)
     (NOTE 10)
   Treasury stock, at cost (1,248,980
shares in 1997
      and 1,415,905 shares in 1998)            (5,989)    (6,961)
Total stockholders' equity                     15,810     15,734
Total liabilities and stockholders' equity    $45,288    $57,348
</TABLE>


SEE ACCOMPANYING NOTES.

                                      F-3




<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                     Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                              DECEMBER 31
                                      1996       1997       1998
                                    (IN THOUSANDS, EXCEPT FOR SHARE
                                                 DATA)
Contract revenues
<S>                                 <C>        <C>        <C>
                                    $ 96,246   $ 92,239   $117,184
 Cost of contract revenues            87,644     78,530     91,747
Selling, general and                   5,431      9,622     15,585
administrative expenses
Supplemental ESOP contribution             -      2,958      1,087
(NOTE 6)
Other expenses                         2,447        710      1,953
Operating profit                         724        419      6,812
Interest expense                         969      1,589      1,195
Income (loss) before income taxes      (245)    (1,170)      5,617
Income taxes (benefit) (NOTE 8)         (80)      (500)      2,225
Income (loss) from continuing          (165)      (670)      3,392
operations
 Discontinued operations (NOTE 2):
   Loss from discontinued
   operations,                      (10,872)    (3,272)    (1,094)
    net of income taxes
   Gain (loss) on disposal of
   segments,                               -      3,920    (1,388)
    net of income taxes
 Income (loss) from discontinued    (10,872)        648    (2,482)
 operations
Net income (loss)                  $(11,037)     $  (22)  $   910
                                                  
Earnings (loss) per share
(NOTE 9):
   Continuing operations                 $          $          $
                                    (.02)      (.07)      .39
   Discontinued operations                      .07
                                   (1.22)                (.29)
Earnings (loss) per share
                               $   (1.24)   $  .00  $     .10
 Earnings (loss) per share -
 assuming dilution
   (NOTE 9):
   Continuing operations          $ (.02)  $  (.07)    $  .38
                                
   Discontinued operations                     .07
                                   (1.22)                (.28)
Earnings (loss) per share -            
Asssuming dilution                $(1.24)  $   .00        .10
</TABLE>

SEE ACCOMPANYING NOTES.

                                      F-4


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                Consolidated Statements of Stockholders' Equity


<TABLE>
<CAPTION>
                                          CAPITAL
                            COMMON          IN            NOTE
                             STOCK   PAR  EXCESS          RCV
                            SHARES  VALUE    PAR  RETAIN  FROM  TREASURY STOCK
                                            VALUE EARNING EMPL  SHARES     COST
                                    (IN THOUSANDS, EXCEPT FOR SHARE DATA)
<S>                        <C>      <C>   <C>      <C>     <C>      <C>     <C>
Balance at January 1, 1996 10,000,000 $100 $8,973 $25,587 $-   1,321,108 $ 5,887
   Purchase of treasury         -     -        -        -  -
   stock                                                         125,368     590
   Sale of treasury stock       -     -        8        -  -      (7,826)    (28)
   Exercise of stock            -     -  (1,452)        -  -    (449,340) (1,935)
   options
   Compensatory issuance
   of common stock to           -     -        7        -  -     (15,576)    (67)
   employees/directors
   Issuance of stock for
   acquisition notes            -     -       30        -  -     (79,030)   (345)
   payable
   Tax benefit of non-
   qualified stock options      -     -      377        -  -         -       -
   exercised
   Issuance of stock to
   employees for notes          -     -        -        - 698         -       -
   receivable
   Net loss                     -     -        - (11,037)  -         -       -
Balance at December 31, 10,000,000  100    7,943  17,550  698     894,704    4,102
1996

   Purchase of treasury         -     -        -        -      -   466,500   2,381
   stock (NOTE 7)
   Exercise of stock            -     -    (191)        -      -  (89,870)   (392)
   options
   Compensatory issuance
   of common stock to           -     -       12        -      -  (22,354)   (102)
   employees/directors
   Tax benefit of non-
   qualified stock options      -     -      105        -      -         -       -
   exercised
   Net loss                     -     -        -     (22)      -         -       -
Balance at December 31, 10,000,000  100    7,869   14,528    698 1,248,980   5,989
1997
   Purchase of treasury        -      -        -        -      -    214,860  1,196
   stock
   Sale of treasury stock      -      -        -        -      -    (17,141)  (100)
   to employees
   Exercise of stock           -      -     (32)        -      -    (14,000)   (61)
   options
   Compensatory issuance
   of common stock to          -      -       18        -      -    (16,794)   (63)
   employees/directors
   Net income                  -      -        -      910      -         -       -
Balance at December 31, 10,000,000   $100  $7,855   $15,438  $698  1,415,905 $6,961
1998
</TABLE>


SEE ACCOMPANYING NOTES.


                                      F-5


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                     Consolidated Statements of Cash Flows



<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31
                                               1996       1997       1998
                                                     (IN THOUSANDS)
Operating activities
<S>                                         <C>        <C>        <C>
Net income (loss)                          $(11,037)  $    (22)    $   910
 Adjustments to reconcile net income (loss)
 to net cash provided by (used in)
 operating activities:
   (Gain) loss on disposal of segments              -    (3,920)      2,100
    Loss on sale of assets                          -          -        238
   Depreciation and amortization:
    Furniture and equipment                     3,734      2,612      1,911
    Capitalized software development costs      1,108         76          -
    Other noncurrent assets                     1,018        390          -
    Deferred lease incentives                   (292)      (271)      (405)
   Provision for receivable allowances            300        360      1,019
   Accrued interest on debt                     1,034    (3,590)          -
   Other noncash expenses                         (8)      (224)         81
   Changes in assets and liabilities:
    Accounts receivable                       (4,106)        901   (16,628)
    Recoverable income taxes                    (639)      (906)      3,595
    Other assets                              (2,353)        463      (126)
    GEMnet investment                           6,437          -          -
    Accounts payable and accrued expenses       1,595    (5,017)      5,644
     Excess of billings over costs and          1,556    (3,180)    (1,629)
     contract prepayments
    Deferred income taxes, net                (3,900)     2,100      1,495
 Net cash (used in) operating activities      (5,553)   (10,228)    (1,795)
 INVESTING ACTIVITIES
 Investments in furniture and equipment       (6,469)    (3,584)    (2,391)
 Proceeds from (adjustments to) sale of             -     18,000    (2,100)
 segments
 Proceeds from sale of assets                       -          -         38
 Capitalized computer software                   (87)          -          -
 Other                                            351          -          -
 Net cash provided by (used in) investing   $ (6,205)   $ 14,416  $ (4,453)
 activities
</TABLE>




                                      F-6


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

               Consolidated Statements of Cash Flows (continued)


<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31
                                               1996       1997       1998
                                                     (IN THOUSANDS)
 Financing activities
<S>                                         <C>        <C>        <C>
 Net borrowings (payments) under
    bank line of credit agreement            $ 12,011 $  (8,684)   $  8,778
 Proceeds from term loan                            -     5,000           -
 Repayment of long-term debt                        -     (450)     (1,666)
 Repayment of acquisition notes                 (375)         -           -
 Proceeds from deferred lease incentives          315         -           -
 Purchase of treasury stock                     (458)     (104)       (993)
 Sale of treasury stock                            -           -        100
 Proceeds from exercise of stock options           10        34          29
 Other                                             36         -           -
 Net cash provided by (used in) financing      11,539   (4,204)       6,248
 activities
 Net decrease in cash and cash equivalents      (219)      (16)           -
 Cash and cash equivalents at beginning of       235        16            -
 period
 Cash and cash equivalents at end of period $     16      $  -      $     -
                                                       
 SUPPLEMENTAL INFORMATION
 Cash paid during the year for:
   Income taxes                             $     226 $     117   $      309
   Interest                                 $   2,836 $   8,807   $    1,037
 Noncash investing and financing
 activities:
   Debt assumed by purchaser (NOTE 2)       $      -  $  27,000   $       -

   Purchase of treasury stock (NOTE 7)      $      -  $   2,019   $       -
   Settlement of note receivable for common $      -  $       -   $     203
   stock
   Investment in EarthWatch                 $   2,038 $       -   $       -
   Conversion of note to common stock       $     375 $           $       -
   Common stock issued for notes            $     473 $       -   $       -
</TABLE>

SEE ACCOMPANYING NOTES.

                                      F-7


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                  Notes to Consolidated Financial Statements

                               December 31, 1998

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Computer Technology Associates, Inc. (the Company, formerly  CTA  INCORPORATED)
provides  rapid  development  and deployment of advanced information technology
("IT")  to complex enterprise applications.  The  Company's  offerings  include
government  systems,  engineering support, network development and integration,
embedded  IT systems engineering,  object  oriented  applications  development,
Enterprise   Resource  Planning  ("ERP")  installation  and  integration,  data
warehousing and  data  base migrations, electronic commerce and other web based
applications development and legacy system modernization. The Company's mission
is to provide for the rapid,  on  budget, low risk installation and integration
of complex information technology.  The  Company's  current  business  strategy
includes developing an international client base which is balanced across  both
government and commercial sectors of the IT services market.

PRINCIPLES OF CONSOLIDATION

The  consolidated  financial statements include the accounts of the Company and
its subsidiaries.  Significant  inter-company  accounts  and  transactions have
been eliminated in consolidation.

USE OF ESTIMATES

The  preparation of financial statements in conformity with generally  accepted
accounting  principles  requires  management  to make estimates and assumptions
that affect the amounts reported in the financial  statements  and accompanying
notes,  in  particular,  estimates  of contract cost and revenues used  in  the
earnings  recognition  process.   Actual   results   could  differ  from  those
estimates.

An important focus of the Company's efforts to pursue  commercial markets is to
assist state and local governments and commercial companies  address  the  Year
2000  Issue  with their information systems. The Year 2000 Issue arises because
many electronic  data  processing  systems  will be unable to process year-date
data accurately beyond the year 1999. The Company  believes  it  has instituted
reasonable  contract  management  practices  to control the financial  risk  of
performance on these contracts.

CASH AND CASH EQUIVALENTS

The Company considers highly liquid investments  with  original  maturities  of
three months or less to be cash equivalents.

FURNITURE AND EQUIPMENT

Furniture  and  equipment  are carried at cost.  Depreciation is computed based
upon accelerated methods using  estimated useful lives of three to seven years.
Leasehold improvements are amortized on a straight-line basis over the terms of
the leases, which range from one  to  seven years.  Purchased computer software
used by the Company is amortized on a straight-line  basis  over  a  three-year
period.

                                      F-8


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

            Notes to Consolidated Financial Statements (continued)


1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CONTRACT REVENUES AND RELATED CONTRACT COSTS

Revenues  result from services performed for the U.S. government and commercial
customers under  a  variety  of  long-term  contracts and subcontracts, some of
which provide for reimbursement of costs plus fixed fees and/or award fees, and
others  which  are  fixed-price  type.  Revenues  on  cost-type  contracts  are
recognized as costs are incurred on  the  basis  of direct costs plus allowable
indirect expenses and an allocable portion of a fixed fee.  Award fees on cost-
type  contracts  are  recognized  as  earned.   Revenues  on  fixed-price  type
contracts   are  recognized  using  the  percentage-of-completion   method   of
accounting, based  on  contract  costs  incurred  to  date  compared with total
estimated  costs at completion or other measures of progress on  the  contract.
Estimated contract  revenue  at  completion includes contract incentive fees at
estimated realizable amounts.  Revenues  from  time and materials contracts are
recognized  based  on hours worked at amounts represented  by  the  agreed-upon
billing amounts.

When adjustments in  contract  value  or  estimated  costs  are determined, any
changes from prior estimates are reflected in earnings in the  current  period.
The  effect  of  these  adjustments  could  be  material  to  interim or annual
operating  results.  The Company provides for anticipated losses,  if  any,  on
contracts and  allowances  for  receivables during the period in which they are
first identified.

Contract costs, including indirect  costs  for cost-type contracts, are subject
to audit by government representatives. Such audits have been completed through
1996.  Management believes that any adjustments  resulting  from determinations
for  subsequent  periods  and contract close-outs will not have  a  significant
impact  on  the  Company's  consolidated   financial  position  or  results  of
operations.

STOCK-BASED COMPENSATION

The  Company has elected to continue accounting  for  stock-based  compensation
under  Accounting Principles Board Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES." In addition, the Company has adopted the provisions of Statement
of  Financial   Accounting  Standards  No.  123,  "ACCOUNTING  FOR  STOCK-BASED
COMPENSATION," regarding  the  required  disclosure provisions of the pro forma
effect  on  net  earnings  and  earnings  per share.  Compensation  expense  is
recognized for stock options and other stock  grants to the extent the exercise
price is less than the fair market value of the  Company's  common stock at the
date of grant.

NEW ACCOUNTING PRONOUNCEMENTS

In  1998,  the  Financial  Accounting  Standards  Board  issued SFAS  No.  133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which establishes
accounting  and  reporting  standards  for  derivative  instruments,  including
certain  derivative  instruments embedded in other contracts  and  for  hedging
activities. It requires  recognition  of  all  derivatives  as either assets or
liabilities  in the statement of financial position at their fair  value.  SFAS
No. 133 is applicable to the Company beginning with its first quarter of fiscal
2000. The impact  of  this  statement  on  the Company's statement of financial
position is not expected to be significant.
                                      F-9


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

            Notes to Consolidated Financial Statements (continued)

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECLASSIFICATIONS

Certain prior year balances have been reclassified  to conform with the current
period presentation.

2. DISPOSAL OF SEGMENTS

In August 1997, the Company sold its Space and Telecommunications  Systems  and
its  Mobile  Information  and  Communications  Services  businesses  to Orbital
Sciences  Corporation  in  exchange  for $18 million in cash and assumption  by
Orbital of certain liabilities of the  Company.  In  addition,  Orbital paid to
certain  lenders  of  the  Company  an  aggregate  of  $27  million  in partial
satisfaction  of  the Company's obligations to such lenders. The final purchase
price was subject to  certain  adjustments and was subsequently reduced by $2.1
million in 1998.

The  consolidated  statements  of operations  exclude  sales  and  expenses  of
discontinued operations from captions  applicable to continuing operations. The
discontinued operations include an allocation  of interest expense based on the
proportion of debt paid by Orbital to the Company's  total  debt outstanding at
the time of the sale. Interest expense allocated to discontinued operations was
$2.1  million  in  1997  and $3.3 million in 1996. Net sales of the  Space  and
Telecommunications Systems business prior to its disposition were $66.8 million
in  1997 and $83.5 million  in  1996.  There  were  no  sales  for  the  Mobile
Information  and Communications Services business prior to its disposition. The
income (loss)  from operations of the disposed businesses was $(3.3) million in
1997 and $(10.9)  million  in  1996,  net of income tax.  The operating loss in
1996 includes charges totaling $9.2 million related to lower profitability on a
contract and the write-off of the investment  in  GEMnet.  The  1997  gain from
disposal of the businesses was $3.9 million, net of income tax.  The income tax
provision  (benefit)  related to these discontinued segments was $(1.4) million
in 1997 and $(5.6) million in 1996.

The loss from discontinued  operations  for 1998 reflects an adjustment of $2.1
million on the disposal of segments for the final settlement of the sales price
to Orbital and a binding arbitration award of $2.0 million to a former employee
of that business. The amounts are presented  net  of  income tax benefit in the
consolidated statements of operations.

During  1997,  the  Company  also sold its Advanced Information  Systems  (AIS)
division for approximately $0.4 million. The net contract revenues of AIS prior
to its disposition were $0.9 million  in  1997 and $2.9 million in 1996 and are
included in continuing operations.

In 1995, the Company sold its Simulation Systems  Division  (SIM)  to  a former
director  and  a  principal  stockholder of the Company and other investors  in
exchange for two notes secured  by the assets of the division with an aggregate
principal amount of $2.2 million,  bearing  interest at the Company's borrowing
rate  and  a 15% minority interest in the purchasing  entity,  valued  at  $0.2
million. In 1998, the Company received $0.2 million in cash on the $1.8 million
note and forgave the balance (which was charged against the Company's allowance
for doubtful  accounts).  The  other  note was repaid from the Company's common
stock held by the former director. In connection  with  these transactions, the
Company's minority interest was reduced to 10.6%.
                                        F-10


<PAGE>
                        COMPUTER TECHNOLOGY ASSOCIATES, INC.

                      Notes to Consolidated Financial Statements (continued)


3. ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                  DECEMBER 31
                                                1997      1998
Accounts receivable:                            (IN THOUSANDS)
 U.S. Government:
<S>                                          <C>        <C>
   Billed                                    $17,556    $20,746
   Unbilled:
     Contracts in progress                     4,659      1,012
     Amounts awaiting contractual coverage     4,192      3,505
     Revenue awaiting government approval of
     final indirect rates or contract close-     242        286
     out
  Commercial Customers:
   Billed                                      5,646     15,555
   Unbilled:
    Contracts in progress                      4,473     10,071
                                              36,768     51,175
   Less allowances                           (3,468)    (2,266)
                                              $33,300   $48,909
</TABLE>

Contracts in progress consist primarily of revenues on long-term contracts that
have been recognized under the percentage-of-completion method  for  accounting
purposes but not billed to customers.  These amounts generally will be billable
upon product delivery or satisfaction of other contract requirements.

Amounts  awaiting  contractual  coverage  include amounts for which the Company
expects to obtain the necessary contract modifications  in the normal course of
business.  At December 31, 1997 and 1998, approximately $2.2 million is related
to situations where disputes regarding the extent of contractual  coverage have
resulted  in  legal  actions  or  formal  claims.   The  Company  has  provided
allowances that it believes adequately provide for the resolution of these  and
other  matters.   The  Company  expects to realize substantially all billed and
unbilled receivables within one year.













                           F-11


<PAGE>
                           COMPUTER TECHNOLOGY ASSOCIATES, INC.

                  Notes to Consolidated Financial Statements (continued)


4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT BALANCES

<TABLE>
<CAPTION>
                                                  DECEMBER 31
                                                1997       1998
                                                (IN THOUSANDS)
Other current assets:
<S>                                          <C>        <C>
   Receivables from employees and          $       76  $      46
   stockholders (NOTE 10)
   Prepaid expenses                               495        584
   Other                                          651        515
                                              $  1,222   $ 1,145
Furniture and equipment:
 Data processing equipment                   $  7,513    $ 6,545
 Office furniture and equipment                 2,920      1,848
 Leasehold improvements                           677        547
                                               11,110      8,940
 Accumulated depreciation and amortization    (8,066)    (5,192)
                                              $  3,044   $ 3,748
Other assets:
 Intangible pension asset (NOTE 6)                $      $ 1,900
                                             -
 Investment in and notes receivable from SIM    2,218        200
 (NOTE 2)
   Deferred tax asset (NOTE 8)                    935        835
   Other                                          993        611
                                              $  4,146   $ 3,546
Accrued expenses:
 Salaries and incentives                     $  3,106    $ 3,735
 Employee benefit plans                             -        357
 Other                                             50         64
                                              $  3,156   $ 4,156
</TABLE>













                                        F-12


<PAGE>
                      COMPUTER TECHNOLOGY ASSOCIATES, INC.

                Notes to Consolidated Financial Statements (continued)


5. NOTES PAYABLE AND SUBORDINATED DEBT

BANK DEBT

In November 1997, the Company entered  into  a three-year agreement with a bank
for  a  revolving credit facility, which was amended  in  1998,  providing  the
availability to borrow up to $18 million, which includes a facility for letters
of credit up to $4 million, and which also provides a $5 million term facility.
At December  31,  1998  and  1997,  there  was  $16.2 million and $7.4 million,
respectively, outstanding under the revolving credit  facility and $3.3 million
and  $5.0  million, respectively, outstanding under the term  facility,  to  be
repaid in equal quarterly payments.

Borrowings under  the  credit  facility are secured by substantially all of the
Company's assets and bear interest  at  either the lender's prime rate or LIBOR
plus  1.5% to 2.25% (based on the Company's  ratio  of  total  funded  debt  to
earnings   before  interest,  taxes,  depreciation  and  amortization)  at  the
Company's discretion.   The  weighted  average  rate  in  effect for short-term
borrowings  at  December  31, 1998 and 1997 was approximately  7.5%  and  7.7%,
respectively.  Under the agreement,  the  Company pays an annual commitment fee
on  the  unused  credit  line and an annual administration  fee  on  the  total
revolving credit line. The  credit  facility  requires  advance approval by the
bank for the Company to pay dividends.  The agreement also  includes  financial
covenants  which  require the Company to maintain certain financial ratios  and
restricts capital expenditures.

SUBORDINATED DEBT

In December 1993, the  Company  entered  into  a  note  purchase agreement (the
"Notes  Agreement")  providing  for $15 million aggregate principal  amount  of
unsecured, senior subordinated notes (the "Notes").  The Notes bore interest at
12.0% per annum (13.0% effective April 1, 1996), payable quarterly. The Company
was required at the election of the  holder  to  repurchase  the  Notes  at the
unpaid  principal  amount,  plus  accrued  interest,  at  the  occurrence  of a
transaction  which  resulted in a change in control of ownership of the Company
or a "Qualifying Sale"  of  the  Company's common stock as defined by the Notes
Agreement. The Notes also provided  for payment of contingent interest over and
above the 13.0% fixed rate upon the occurrence of a "Qualifying Sale." The sale
of the Space and Telecommunications Systems business as described in Note 2 was
a "Qualifying Sale." As a result, the  subordinated debt was repaid during 1997
along with accrued interest and contingent interest of $5.8 million.









                                        F-13


<PAGE>
                        COMPUTER TECHNOLOGY ASSOCIATES, INC.

                  Notes to Consolidated Financial Statements (continued)


6. EMPLOYEE BENEFIT PLANS

Substantially all of the Company's employees are eligible to participate in the
Company's employee stock ownership plan  (ESOP). The ESOP is designed to enable
participating employees to share in the growth  and  prosperity  of the Company
while  providing  them  with  the  opportunity to accumulate capital for  their
future retirement.  The ESOP allows  only  Company contributions, in cash or in
common stock, as determined by the Board of  Directors,  which  are recorded as
compensation  expense.   During  1998  and  1997,  the  Board  elected to  make
supplemental  contributions  of  approximately  $1.1 million and $2.9  million,
respectively. Contributions are proportionately allocated  on the basis of each
eligible participant's compensation.  Employee vesting in benefits  ranges from
40%  at the end of two years to 100% at the end of four years.  Shares  of  the
Company's  common  stock  which  may  ultimately  be distributed by the ESOP to
participants carry certain limited provisions for repurchase  by  the  Company.
Through  December  31, 1998, no shares of the Company's common stock have  been
distributed by the ESOP.  At  December  31,  1997  and  1998,  the  ESOP  owned
1,615,318  shares  of  the  Company's  common  stock,  all  of  which have been
allocated to plan participants.

The  Company  and its subsidiaries maintain a 401(k) savings plan which  allows
for Company and  employee  contributions.  Employees  vest  in Company matching
contributions  immediately. The Company's 401(k) plan owned 140,000  shares  of
the Company's common stock at December 31, 1997 and 1998.

In August 1998,  the  Company  adopted a Supplemental Executive Retirement Plan
("SERP").  Eligibility for participation  is  determined  by  the  Compensation
Committee of  the  Board of Directors. The SERP will provide normal benefits of
sixty percent of average  final  compensation upon retirement at age sixty-two.
The plan is unfunded, however, the  Company  has purchased corporate owned life
insurance to provide for partial funding of the obligations under the Plan.

The net periodic cost of the Plan for the period  August 1 to December 31, 1998
was comprised of the following (in thousands):

<TABLE>
<CAPTION>
<S>                        <C>
Service cost               $   43
Interest cost                  95
Amortization of prior          97
  service cost
Net periodic benefit        $ 235
  cost
</TABLE>










                                     F-14


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                  Notes to Consolidated Financial Statements (continued)


6. EMPLOYEE BENEFIT PLANS (CONTINUED)

Plan   activity   affecting   the   benefit  obligation  during  1998  and  the
reconciliation of the benefit obligation  to  accrued  pension cost at December
31, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
<S>                           <C>
Benefit obligation at Plan    $3,270
inception
Service cost                      43
Interest cost                     95
Actuarial gain                   (13)
Benefit obligation at year
end                            3,395
Unrecognized net actuarial
gain                              13
Unrecognized prior service
cost                          (3,173)
Minimum  pension liability
recorded                       1,900
Accrued pension cost          $2,135
</TABLE>

Accrued  pension  cost is equal to the Company's accumulated benefit obligation
under the Plan. An  intangible  asset  of $1.9 million was recorded during 1998
equal to the minimum pension liability, which represents the difference between
the accumulated benefit obligation at December  31,  1998  and the net periodic
benefit cost charged to operations. The assumptions used to measure the benefit
obligation  are  a 7% discount rate and a 5% average increase  in  compensation
levels.

Amounts charged to  expense  under  the  above  plans  were  approximately $2.0
million,   $4.2   million   and   $3.3   million  (including  the  supplemental
contributions)  for  the  years  ended  December   31,  1996,  1997  and  1998,
respectively.   The  Company  currently  provides  no  significant  other  post
retirement benefits.

 7. COMMON STOCK AND STOCK OPTIONS

All of the Company's outstanding shares, except for those  held  by C.E. Velez,
the  Company's  Chairman  and Chief Executive Officer, contain restrictions  on
transferability.

The Company completed a tender  offer  for 399,946 shares at $5.05 per share on
December 31, 1997 which resulted in a corresponding increase of treasury stock.
The  Board  of Directors declared a two-for-one  stock  split  for  all  shares
outstanding on January 15, 1998 which is reflected for all periods presented in
these financial statements.









                                     F-15


<PAGE>

                       COMPUTER TECHNOLOGY ASSOCIATES, INC.

                  Notes to Consolidated Financial Statements (continued)


7. COMMON STOCK AND STOCK OPTIONS (CONTINUED)

In December 1991,  the  Company adopted the 1991 Stock Option and Purchase Plan
which reserves 2,600,000  common  shares  for the granting of incentive or non-
qualified  stock  options  or  stock  purchase  rights   through   2001.    The
Compensation Committee of the Board of Directors is authorized to grant options
and  purchase  rights and to establish the respective terms, subject to certain
restrictions.  Options generally are for terms of five to ten years and provide
for vesting periods  of  three  years.   As  of  December 31, 1998, options for
908,282 shares are available for grant under this plan.

The  weighted  average grant date fair value of an option  granted  during  the
years ended December  31,  1996,  1997  and  1998  was  $1.91, $1.60 and $2.38,
respectively.  The Company uses the Black-Scholes model to  estimate  the  fair
values  of  options, assuming a risk-free interest rate equal to the ninety-day
U.S. Treasury  Bill  rate,  expected  lives  of  five to ten years, an expected
volatility factor of .197 and no expected dividends.  The Company recognized no
compensation expense for stock option grants during  the  three  years  in  the
period ended December 31, 1998.

<TABLE>
<CAPTION>
                                              NUMBER OF SHARES
                                           YEAR ENDED DECEMBER 31,
                                          1996      1997      1998
<S>                                     <C>       <C>       <C>
 Options outstanding at beginning of
 year (weighted average exercise price
 of $1.90 in 1996, $3.96 in 1997 and       934,450 1,282,126   847,880
 $4.08 in 1998)
 Granted (weighted average exercise
 price of $4.74 in 1996, $5.05 in 1997     799,016    13,574   906,768
 and $5.49 in 1998)
 Canceled (weighted average exercise
 price of $2.09 in 1996, $4.61 in 1997     (2,000) (357,950)   (48,930)
 and $4.70 in 1998)
 Exercised (weighted average exercise
 price of $1.07 in 1996, $2.24 in 1997   (449,340)  (89,870)   (14,000)
 and $2.09 in 1998)
 Options outstanding at end of year
 (weighted average exercise price of
 $3.96 in 1996, $4.08 in 1997 and $4.59 1,282,126  847,880   1,691,718
 in 1998)
 Options exercisable at end of year
 (weighted average exercise price of
 $2.48 in 1996, $3.16 in 1997 and $3.76    391,022   462,648   705,035
 in 1998)
</TABLE>







                           F-16


<PAGE>
                      COMPUTER TECHNOLOGY ASSOCIATES, INC.

                Notes to Consolidated Financial Statements (continued)


7. COMMON STOCK AND STOCK OPTIONS (CONTINUED)


<TABLE>
<CAPTION>
RANGE OF EXERCISE PRICES                        DECEMBER    31,
                                                1998
<S>                                                    <C>
$2.01-$3.58:
 Options outstanding:
   Number of shares                                     276,000
   Weighted average exercise price                        $2.30
   Weighted average remaining contractual life              3.7
   (in years)
 Options exercisable:
   Number of shares                                     276,000
   Weighted average exercise price                        $2.30
$4.36-$5.84:
 Options outstanding:
   Number of shares                                   1,415,718
   Weighted average exercise price                        $5.03
   Weighted average remaining contractual life              5.1
   (in years)
 Options exercisable:
   Number of shares                                     429,035
   Weighted average exercise price                        $4.71
</TABLE>

Pro forma compensation expense associated with options  granted  subsequent  to
December  31,  1994  generally  is recognized over a three year vesting period;
therefore, the initial impact of  applying SFAS No. 123 on pro forma net income
(loss) for 1996 and 1997 is not representative  of  the impact on pro forma net
income in 1998 and future years, when the pro forma effect  is fully reflected.
The Company's pro forma information follows:

<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31
                                         1996     1997      1998
                                        (IN THOUSANDS, EXCEPT FOR
                                               SHARE DATA)

<S>                                   <C>      <C>       <C>  
 Pro forma income (loss) from         $(327)    $(964)    $2,964
 continuing operations
Pro forma earnings (loss) per share
 Basic                                 $(.04)   $(.10)     $ .34
 Diluted                               $(.04)   $(.10)     $ .34
</TABLE>







                                     F-17



<PAGE>
                      COMPUTER TECHNOLOGY ASSOCIATES, INC.

                Notes to Consolidated Financial Statements (continued)


8. INCOME TAXES

The  provision (benefit) for income taxes attributable to continuing operations
consisted of the following components:

<TABLE>
<CAPTION>
                                    YEAR ENDED DECEMBER 31
                                    1996       1997     1998
                                           (IN THOUSANDS)
Current:
<S>                                <C>       <C>       <C>
 Federal                           $(20)    $(2,400)    $600
 State                              -          (200)     130
                                    (20)     (2,600)     730
Deferred:
 Federal                            (50)      2,000    1,225
 State                              (10)        100      270
                                    (60)      2,100    1,495
                                   $(80)    $  (500)  $2,225
</TABLE>

Deferred  income  taxes  reflect  the  net tax effects of temporary differences
between the carrying amounts of assets and  liabilities for financial reporting
purposes and the amounts used for income tax purposes.
























                           F-18


<PAGE>
                      COMPUTER TECHNOLOGY ASSOCIATES, INC.

            Notes to Consolidated Financial Statements (continued)


8. INCOME TAXES (CONTINUED)

Significant components of the Company's deferred tax assets and liabilities are
as follows:

<TABLE>
<CAPTION>
                                                   DECEMBER 31
                                                 1997      1998
                                                 (IN THOUSANDS)
Current deferred tax liabilities:
<S>                                             <C>       <C>
 Unbilled receivables                           $5,425    $5,843
 Other                                             135       118
                                                 5,560     5,961
Current deferred tax assets:
 Contract provisions and                         2,482     1,350
 allowances
 Accrued vacation                                  510       762
 Other accruals                                    141        27
                                                 3,133     2,139
Net current deferred tax                        $2,427    $3,822
liabilities
Long-term deferred tax assets:
 Depreciation                                  $   400    $  480
 Net operating loss carryforward                   350       350
 Other                                             535       355
                                                 1,285     1,185
 Less: valuation allowance                       (350)     (350)
Net long-term deferred tax assets               $  935    $  835
</TABLE>

A reconciliation of income tax expense at the  statutory Federal rate to income
tax expense related to continuing operations at  the Company's effective income
tax rate is as follows:

<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31
                                        1996     1997      1998
                                             (IN THOUSANDS)
<S>                                   <C>      <C>       <C>
Federal income taxes at statutory        $(83)    $(398)    $1,910
rate
State income taxes, net of Federal        (31)      (60)       255
tax benefit
Other                                       34      (42)        60
                                         $(80)    $(500)    $2,225
</TABLE>





                                     F-19


<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

            Notes to Consolidated Financial Statements (continued)


9. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share:

<TABLE>
<CAPTION>
                                        YEAR ENDED DECEMBER 31
                                       1996      1997      1998
                                        (IN THOUSANDS, EXCEPT FOR
                                              SHARE DATA)
Numerator:
<S>                                  <C>       <C>         <C>
 Income (loss) from continuing    $    (165)  $   (670)    $3,392
 operations                         
 Income (loss) from discontinued    (10,872)       648     (2,482)
 operations
    Net income (loss) for both basic
    and diluted earnings per share $(11,037)    $  (22)    $  910
Denominator:
 Denominator for basic earnings per
 share-                           8,875,086  9,092,214  8,694,133
   Weighted average shares
   outstanding
 Dilutive potential common shares:
   Employee stock options                -         -      121,333
 Denominator for diluted earnings
 per share-
   Adjusted weighted average      8,875,086  9,092,214  8,815,466
    shares and assumed conversions
</TABLE>

Due  to  a  loss from continuing operations in 1996 and  1997,  employee  stock
options are considered  anti-dilutive  and  not included in the denominator for
diluted earnings per share.

10. TRANSACTIONS WITH RELATED PARTIES

The Company made loans in prior years to certain officers and employees related
to the exercise of options to acquire common  stock.  Unpaid amounts related to
the stock exercise price are presented as a reduction  of stockholders' equity.
The notes are for five years and bear interest at the same  rates  paid  by the
Company.

The Company made loans in prior years to two of its principal stockholders  for
relocation  costs  that include the purchase of new residences.  The loans were
made in exchange for  promissory  notes  and  were secured by deeds of trust on
residential property.  The loans bore interest  at the same rates applicable to
the  Company's  revolving  line  of  credit.   The  remaining  indebtedness  of
approximately $111,000 on one of these loans was paid  in  1996.  The remaining
outstanding loan of approximately $600,000 was repaid in 1997.





                                     F-20


                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

            Notes to Consolidated Financial Statements (continued)


11. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The  Company  has  operating  leases  for  all  of its office space and various
computer and office equipment.  Most of the office  space  leases are on a full
service  rental  basis,  but  do  require  the  Company  to  pay increases  for
maintenance and operating expenses such as taxes, insurance and  utilities over
a base year, and also include provisions for renewal.

Certain  of  the  leases  contain  provisions for periodic rate escalations  to
reflect  changes  in  the  consumer  price  index.   Total  rent  expense  from
continuing operations for the years ended  December 31, 1996, 1997 and 1998 was
$2.7 million, $2.4 million and $2.2 million, respectively.

At  December  31,  1998,  total future minimum rental  commitments  under  non-
cancelable leases are summarized as follows (in thousands):

<TABLE>
<CAPTION>
<S>           <C>
1999          $1,918
2000           1,713
2001           1,728
2002           1,190
2003           1,042
2004 and         692
after
              $8,283
</TABLE>

LITIGATION

In October 1996, a former employee  of  the  Company  filed  suit  against  the
Company  alleging,  among other things, breach of contract in connection with a
profit sharing agreement.  Subsequently, the litigation was stayed by agreement
of the parties because  the  profit  sharing agreement called for mandatory and
binding arbitration.  The arbitration was settled in June 1998 with an award of
$2.0 million, which is included in the loss from discontinued operations.

The Company is involved in certain other litigation incidental to its business.
Management of the Company, after reviewing  developments with legal counsel, is
of  the  opinion that the outcome of such matters  will  not  have  a  material
adverse effect on the financial position or future operations of the Company.





                                     F-21



<PAGE>
                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

            Notes to Consolidated Financial Statements (continued)



12. OPERATING SEGMENTS

The Company has two principal operating segments: the Systems Engineering Group
and the Software  Engineering  Group.  The Systems Engineering Group focuses on
information security and complex embedded  computer  systems  and  the Software
Engineering  Group  focuses  on  Year  2000  services and the installation  and
integration  of ERP software. The following table  provides  certain  financial
information for each operating segment:

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31
                                           1996     1997     1998
                                                (IN MILLIONS)
Contract revenues:
<S>                                      <C>      <C>      <C>
 Systems Engineering                       $91.9    $73.4    $73.6
 Software Engineering                        4.3     18.8     43.6
                                           $96.2    $92.2   $117.2
Operating profit:
 Systems Engineering                      $  2.4   $  3.0     $5.2
 Software Engineering                        0.7      1.1      4.6
 Other expense                              (2.4)    (3.7)    (3.0)
                                          $  0.7   $  0.4     $6.8
Depreciation and amortization expense:
 Systems Engineering                      $  2.4  $   0.8    $ 0.6
 Software Engineering                         -       0.4      0.9
   Discontinued operations                   3.2      1.6       -
Capital expenditures:
 Systems Engineering                      $  1.0  $   0.4    $ 1.5
 Software Engineering                         -       1.4      0.9
   Discontinued operations                   5.5      1.8       -
Identifiable assets:
 Systems Engineering                      $ 29.8   $ 27.4   $ 27.4
 Software Engineering                        3.0     12.0     23.8
 Discontinued operations                    42.8       -        -
 General corporate assets                    7.8      5.9      6.2
                                          $ 83.4   $ 45.3   $ 57.4
</TABLE>




                                     F-22


<PAGE>

                      COMPUTER TECHNOLOGY ASSOCIATES, INC.

            Notes to Consolidated Financial Statements (continued)

12. OPERATING SEGMENTS (CONTINUED)


The percentage  of  Systems  Engineering contract revenues from U.S. Government
customers that comprise 10% or more of total revenues were as follows:

<TABLE>
<CAPTION>
                                          YEAR ENDED DECEMBER 31
                                          1996     1997     1998
<S>                                     <C>      <C>       <C>
    Department of Defense                63%       47%       26%
    General Services Administration      14%       16%       19%
</TABLE>

The operating profit in 1996 for the Systems Engineering Group was adversely
impacted by a $2.6 million adjustment to the profitability of the General
Services Administration - Eastern Zone contract. Other expenses in 1996 include
$0.9 million related to an unsuccessful initial public offering. Other expenses
in 1998 and 1997 include $1.1 million and  $2.9 million, respectively, for
supplemental ESOP contributions




























                                 F-23


<PAGE>
                                 SCHEDULE II


                     COMPUTER TECHNOLOGY ASSOCIATES, INC.

                   VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                    ($000)

                        ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
                Balance, Charged   Charged            Balance,
                Beginning to Costs to Other           End of
DESCRIPTION     OF       and       ACCOUNTS DEDUCTIONS PERIOD
                PERIOD   EXPENSES
<S>             <C>      <C>       <C>      <C>       <C>
For the year
ended December   $2,700    $300      $108      $0     $3,108
31, 1996
For the year
ended December   $3,108    $600       $94     $334    $3,468
31, 1997
For the year
ended December   $3,468   $1,019     $325    $2,546   $2,266
31, 1998
</TABLE>























                                     F-24


<PAGE>


              CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS





We  consent to
the incorporation by reference in the Registration Statement (Form S-8  No. 33-
71128)  pertaining  to  the  Defined  Contribution  401(k)  Retirement  Plan of
Computer  Technology  Associates,  Inc.  (formerly CTA INCORPORATED) and in the
related prospectus of our report dated February  12,  1999, with respect to the
consolidated   financial   statements  and  schedule  of  Computer   Technology
Associates, Inc. included in  the  Annual Report (Form 10-K) for the year ended
December 31, 1998.

                              /s/ Ernst & Young LLP

Washington, D.C.
March 26, 1999































                                     F-25



        CONSENT OF LEGG MASON WOOD WALKER, INC., INDEPENDENT APPRAISERS





We  consent to
the incorporation by reference in the Registration Statement (Form S-8  No. 33-
71128)  pertaining  to  the  Defined  Contribution  401(k)  Retirement  Plan of
Computer  Technology  Associates,  Inc.  and  in  the related prospectus of our
report  dated  February  18, 1999, with respect to the  fair  market  value  of
minority holdings of Common Stock of Computer Technology Associates, Inc. as of
December 31, 1998 included  in the Annual Report (Form 10-K) for the year ended
December 31, 1998.

                                /s/ Legg Mason Wood Walker, Inc.

Baltimore, MD
March 26, 1999




























                                     F-26


<PAGE>
        REPORT OF LEGG MASON WOOD WALKER, INC., INDEPENDENT APPRAISERS





Board of Directors
Computer Technology Associates, Inc.
6903 Rockledge Drive, Suite 800
Bethesda, Maryland  20817


Members of the Board:

You have
requested our advice with regard to certain factors impacting the formula price
of  the  Common  Stock  of  Computer  Technology Associates, Inc. ("CTA" or the
"Company") as of December 31, 1998.  Specifically,  you asked us to provide you
with (i) a discount factor to reflect the limited liquidity of CTA Common Stock
(the  "Discount  Factor") (ii) a market index  to reflect  existing  securities
market conditions,  including  their  relationship  to public companies we have
deemed comparable to CTA (the "Market Index") and (iii)  our  assessment  as to
whether  or  not  the  price produced by the formula for CTA Common Stock as of
December 31, 1998 falls  within  a  range we consider reasonable (together, our
"Opinion"). In that regard, and pursuant  to  the  terms  and conditions of our
letter agreement dated February 12, 1999, we are pleased to  respond  with this
letter and related exhibits.

In   rendering
our  Opinion  we  have, among other things: (i) reviewed the Annual Reports  to
Shareholders and the  Annual  Reports  on  Form  10-K for the three years ended
December 31, 1998; (ii) reviewed certain interim reports  to  shareholders  and
Quarterly  Reports  on  Form  10-Q;  (iii)  reviewed  certain other information
relating  to  the business, earnings, cash flow, assets and  prospects  of  the
Company; (iv) reviewed  contract backlog data and contract profiles prepared by
management; (v) reviewed  certain  data regarding the financial performance and
market valuation of selected public  companies  we  deemed  to  be  engaged  in
operations  similar  to  those  of  CTA;  (vi) reviewed data relating to recent
merger and acquisition activity in relevant industry classifications; and (vii)
met  with senior management of CTA to discuss  the  operating  performance  and
future prospects of the Company.

We have relied without independent verification on information supplied to
us by CTA and its employees, representatives and independent public accountants
as well  as information available from generally recognized public sources and,
accordingly, do not assume responsibility for the accuracy or


                                      F-27


<PAGE>

completeness  of such information.  Additionally, we have not made an appraisal
of any assets of  CTA.  Our Opinion herein is necessarily based upon conditions
and circumstances as they exist, have been disclosed to us and can be evaluated
as of the date hereof.

In recommending  a  17.5% Discount Factor for the minority holdings of CTA
Common Stock we note that  while  there  is  no  active  trading market for the
Common Stock, there have been limited treasury stock purchases  by the Company,
its Employee Stock Option Plan and employees of CTA.

     Regarding  a Market Index, we note that the Company has decided  to  reset
the Market Index  to 1.000 as of September 10, 1998. On this date, we note that
the Dow Jones Industrial  Average  closed  at  7,615.54  and  the S&P 500 Index
closed at 980.19. Since September 10, 1998 the Dow Jones Industrial Average has
increased  to  9,195.47,  as  of  February 17, 1999 and the S&P 500  Index  has
increased  to  1,224.03.  Of  greater  relevance,  a  composite  of  commercial
information technology stocks increased in value by 11.9% over the same period.
Accordingly, we believe the appropriate Market Index is 1.10.

     Based upon our analyses of the foregoing  and  upon  such other data as we
have  considered  relevant  to  our analysis, it is our Opinion  that  (i)  the
appropriate Discount Factor is 17.5%  (ii)  the  appropriate  Market  Index  is
1.100,  and  (iii) the formula produced price for CTA Common Stock of $7.80 per
share does fall within the range we believe represents fair market value.


                           Very truly yours,

                           LEGG MASON WOOD WALKER, INCORPORATED

Baltimore, MD
February 18, 1999

                           By:
                                 /S/ SCOTT R.COUSINO
                                     Scott R. Cousino
                                     Managing Director


















                                     F-28


<PAGE>
                                     SIGNATURES


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


                                 Computer Technology Associates, Inc.


Date: March 31, 1999
                                        By:/S/ C.E. VELEZ
                                        C.E. Velez
                                        Chairman of the Board
                                        and Chief Executive Officer


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



By:/S/ C.E. VELEZ
C.E. Velez
Chairman of the Board, President,
                                                Date: March 31, 1999


By:/S/ GREGORY H. WAGNER
Gregory H. Wagner
Executive Vice President, Chief
 Financial Officer, Principal
 Accounting Officer and Treasurer               Date: March 31, 1999


By:/S/ HARVEY D. KUSHNER
Harvey D. Kushner
Director                                        Date: March 31, 1999


By:/S/ DAVID R. MACKIE
David R. Mackie
Director                                        Date: March 31, 1999


By:
Raymond V. McMillan
Director                                        Date: March 31, 1999



By:/S/ GEORGE W. MORGENTHALER
George W. Morgenthaler
Director                                        Date: March 31, 1999


By:
James M. Papada, III
Director                                        Date: March 31, 1999


By:/S/ ARTURO SILVESTRINI
Arturo Silvestrini
Director                                        Date: March 31, 1999


By:/S/ GREGORY H. WAGNER
Gregory H. Wagner
As Attorney-in-Fact                             Date: March 31, 1999