UNITED STATES
               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, 1996
                              or
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

COMMISSION FILE NUMBER 33-44510

                         CTA INCORPORATED
     (Exact name of registrant a specified in its charter)

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

6116 EXECUTIVE BOULEVARD, ROCKVILLE, MD     20852
(Address of principal executive offices) (Zip Code)

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, 1997,  there  were outstanding 4,547,781 shares of the
registrant's common stock, par value $.01,  which is the only class of common
or voting stock of the registrant. As of that date, the independent appraisal
used to determine the aggregate market value of the common stock held by non-
affiliates of the registrant had not been completed.


                              PART I

ITEM 1. BUSINESS

     CTA  designs,  manufactures  and  integrates  small  communications  and
earth-sensing satellites and provides advanced  information  technology  (IT)
services principally to government customers. The convergence of CTA's unique
strengths  in  space, information systems and communications technologies has
positioned the Company to address space-based telecommunications markets as a
turn-key provider  of complete satellite systems and has opened opportunities
for the Company as a wireless data service provider. In addition, the Company
is well-positioned for  continued  growth  in  the  civil  and  commercial IT
services markets.

     CTA  is  a  leading  supplier  of  small low-earth-orbit (LEO) satellite
systems and an emerging competitor in the  market  for  small  geosynchronous
orbit  (GEO)  satellite  systems.  CTA  has successfully designed, built  and
delivered  27 satellites over the past eleven  years  with  seven  additional
satellites currently  under  construction. During the next twelve months, the
Company is scheduled to deliver  three  commercial  satellites, one satellite
for the Air Force and one satellite for NASA.

     The Company's satellites perform a variety of commercial, scientific and
military missions, including communications, direct-broadcast and space-based
imaging. CTA satellites have a record of 100% mission  success after reaching
orbit. As a complete space systems manufacturer, the Company also designs and
manufactures environmental monitoring sensors, advanced  payloads  for  NASA,
real-time,  high-speed  processors  for  meteorological  satellite  data  and
mission control and other specialized ground data and communications systems.

     The  Company  provides  its  customers with a full range of IT services,
with emphasis on large-scale network  integration and management, information
systems security, mainframe to client/server  migration,  relational database
engineering,  electronic  data  interchange  (EDI),  and  real-time  embedded
computer systems. In addition to its strong technical and program  management
capabilities,   the   Company  has  established  a  reputation  for  customer
satisfaction,  as reflected  in  its  100%  win  rate  when  recompeting  for
contracts for which  it  is  the  incumbent  and  average award fee scores in
excess of 90%. To date, the Company has completed more  than  $1  billion  in
U.S. government IT contracts.

     Combining  its  strengths  in  space  systems  and  IT, CTA is currently
developing GEMtrak, an automated tracking and cargo status  data  system  for
unpowered  mobile  assets  such as truck trailers, railcars and containers. A
trucking industry source has  estimated  that  there  are  4.5  million truck
trailers  in  the  U.S. alone. The Company believes that GEMtrak will  reduce
trailer monitoring and  rental  costs  and  offer  fleet owners marketing and
revenue    enhancement    opportunities    by   providing   positive    cargo
track-and-trace, active manifest control, intrusion sensing and alert, remote
asset status monitoring and enhanced asset utilization.

COMPANY HISTORY

     The  Company  was  founded  in  1979 as Computer  Technology  Associates
Incorporated, 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.  The  Company  established  major  relationships  with  U.S.
military  operations  at  the DOD's Cheyenne Mountain Complex, the China Lake
facility of the U.S. Navy (the  "Navy"),  NASA's  Goddard Space Flight Center
(the  "GSFC") and the Air Force's Consolidated Space  Operations  Center.  In
1992, the  Company's  acquisition  of  CTA  Space  Systems  (CTASS) 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
programs with contracts  awarded under full and open competition, growing the
share of IT revenues derived  from competitive awards from 19% in 1992 to 97%
in 1996.

     In the 1990's, the Company  targeted  U.S.  government IT contracts that
have allowed it to broaden the Company's base of skills  to  include a number
of disciplines equally applicable to the civil federal and state  IT markets.
In 1995, the Company established strategic alliances with certain specialized
software  companies  that enabled it to enter the commercial IT business  and
win  contracts  with  commercial   customers  such  as  Reynolds  Metals  and
Allied-Signal.

     In 1992, the Company acquired a  79%  interest  in  CTASS  to expand its
business of 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  is  a  pioneer  of small satellite-based store-and-forward
technology,  which it originally developed  to  interrogate  dispersed  buoys
equipped with  acoustic  sensors. In 1993, 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  Indostar program is scheduled to begin service  in  1997.  The  contract
provides  for  the Company to build a small, three-axis stabilized commercial
communications satellite  and  a  complete  facility  in  Jakarta,  including
broadcast   and  subscriber  management  software,  communications  uplinking
systems and hardware/software  systems for spacecraft telemetry, tracking and
control. In addition, CTA is arranging  for launch and insurance services and
international telecommunications regulatory compliance.

     In 1995, the Company combined its skills  in  space-based communications
and  large-scale  systems  integration  to develop GEMnet,  a  system  to  be
comprised of the GEMstar satellite and the  GEMtrak  automatic  tracking  and
cargo  status  system.  Although  the  GEMnet project suffered the loss of an
experimental satellite due to a launch failure  in  1995, which was partially
covered  by  insurance,  the Company has responded by extending  the  GEMtrak
system  to  support multiple  wireless  data  systems,  permitting  immediate
service while retaining the flexibility to support the system at a later date
with other wireless media, including future LEO satellite constellations.

CORPORATE ORGANIZATION AND STRATEGY

     In 1994,  the Company established its three principal business segments:
Space and Telecommunications  Systems,  Information  Technology  Services and
Mobile    Information    and   Communications   Services.   The   Space   and
Telecommunications Systems  business  principally  designs  and  manufactures
small  LEO  and  GEO  satellites and related support systems. The Information
Technology Services business comprises the Company's historical business base
of providing IT services  for  a variety of customers. The Mobile Information
and  Communications  Services  business   unit  has  been  formed  to  pursue
commercial applications of the Company's proprietary technology in innovative
IT  and  space-based  or wireless solutions to  a  variety  of  applications,
including mobile asset tracking and remote fixed asset monitoring.

     CTA intends to become  a  vertically  integrated provider of space-based
communications services. By leveraging its unique  strengths in space, IT and
communications  technologies,  the  Company  seeks to serve  the  space-based
telecommunications  markets  as  a turn-key provider  of  complete  satellite
systems and pursue opportunities as a wireless data service provider.

SPACE AND TELECOMMUNICATIONS SYSTEMS

     CTA is a leading supplier of small LEO satellite systems and an emerging
competitor  in  the  market  for  small   GEO   satellite  systems.  CTA  has
successfully designed, built and delivered 27 satellites over the past eleven
years with seven additional satellites currently  under  construction. During
the next twelve months, the Company is scheduled to deliver  three commercial
satellites, one satellite for the Air Force and one satellite  for  NASA. CTA
satellites  have  a  record of 100% mission success upon reaching orbit.  The
Company believes that,  due  to  its  focus  on  small  space systems and its
streamlined  management  overhead,  its cost structure is relatively  low  as
compared to its competitors, and that it is able to deliver completed systems
faster than most of its competitors.  The  Company has unique small satellite
products and "on the shelf" designs, along with  a  hardware  inventory  that
allows  rapid  delivery, reduces schedule risk and reduces costs. The Company
seeks to continue  to  develop  and  prove  new  technologies as part of U.S.
government  satellite  systems and then transfer these  new  technologies  to
commercial satellite designs.  The  Company  was one of two prime contractors
selected  by  NASA for the SSTI and Indostar will  be  the  first  small  DTH
satellite. The  Company  designed  and  demonstrated  the  world's  first LEO
constellation  of communications satellites and Company-built satellites  for
EarthWatch are expected  to  be  the  first commercial high resolution remote
sensing satellites. Other significant space  technology innovations include a
low-cost  reaction  wheel,  the first use of the  Global  Positioning  System
("GPS")  for  small  satellite  attitude   determination,  implementation  of
commercial  battery  technology,  use  of  lightweight   composites  for  key
structural components, digital solid state memory and space-borne  encryption
technology.

     CTA   has   invested   significant   resources   developing  STARbus,  a
technologically advanced, multi-purpose satellite bus that  can be configured
to  support  DTH  television,  high-bandwidth  data  transmission  or   voice
communications payloads. Indostar, the first satellite in the STARbus family,
is  expected  to  be  launched  in  mid-1997  to  provide  DTH  television in
Indonesia.


 SPACE AND TELECOMMUNICATIONS SYSTEMS--INDUSTRY AND TECHNOLOGY OVERVIEW

     Improvements  in space technology have resulted in modern communications
satellites  with  power,   capacity,  switching  capabilities  and  longevity
significantly greater than those of their predecessors. These improvements in
performance,  together  with satellites'  inherent  geographic  coverage  and
technical advantages, have  made  satellite-based communications increasingly
competitive with other communications technologies, broadening the market for
satellite  services  such  as  telephony,   support  for  cable  and  network
television,   broadband   data   transmission,  paging,   DTH   broadcasting,
earth-sensing and position location.

     Large commercial communications  satellites  generate  six  to  thirteen
kilowatts of power, weigh 7,000 to 11,000 pounds and typically cost over $100
million. Small commercial communications satellites, in contrast, generate up
to  four  kilowatts  of  power,  weigh  3,000  pounds  or  less at launch and
typically  cost  less  than  $50  million. The Company believes that  smaller
satellites  will capture an increasing  share  of  both  the  commercial  and
government satellite  market  because  technological  and market changes have
made their advantages more compelling.



      COMMERCIAL

     Advanced  communications  technologies,  particularly   digital   signal
compression,  have  enabled  satellite  systems  to emerge as an economically
attractive  solution to the world's rapidly expanding  communications  needs.
The attractive  economics  of  space-based  communications systems, driven by
their expansive geographic coverage, have resulted  in  substantial growth in
demand for satellites. Via Satellite, a space-industry periodical,  forecasts
that  over  $54 billion will be invested in building and launching commercial
communications  satellite  systems  over  the  next  four  years. The Company
believes that demand for smaller satellites will increase even  more rapidly,
driven  by their lower cost, faster cycle time from contract award  to  orbit
and sharper  mission  focus.  U.S.  government  agencies  have  recently been
reorienting  their  satellite programs toward the use of small satellites  in
response to changing  mission requirements and budget pressures, while demand
for real-time information  continues  to  expand.  Moreover, a group of small
satellites can deliver the functionality of a single larger one at equivalent
overall cost, but with reduced launch and operational  risks,  and  the added
ability to adapt hardware functionality incrementally in response to changing
user  needs  by  changing  the designs of later satellites in the series.  In
addition, less developed countries and emerging communications businesses are
beginning to evaluate small  satellites  as  entry level systems that address
immediate  communications  needs quickly and inexpensively,  while  providing
flexibility to add capacity  and capabilities over time as demand evolves and
technology advances.

     GOVERNMENT

     Many  of the same technological  and  market  changes  that  make  small
satellites more  attractive to commercial customers also are occurring in the
government satellite  market.  The report of the Small Satellite Review Panel
to the Director of Central Intelligence  in  June  1996 called for a shift in
the architecture of the nation's space reconnaissance  assets  from one based
on very large-scale systems focused on the threat of the former  Soviet Union
across  the  northern  polar  region  to  an array of smaller, less expensive
spacecraft in larger numbers with equivalent  or superior total capacity that
can acquire relevant data anywhere in the world.  The  panel  recommended  an
array  of  satellites  20%  to  25%  of  the weight of current reconnaissance
satellites, with 40% to 50% of their capabilities.  In  addition  to lowering
costs,  such  an array would be more robust, with less operational capability
at risk for any  given  satellite,  and  more  flexible,  with a much greater
capability to rebalance the system from time to time to achieve  a  different
mix of capabilities.

     NASA  is also shifting its procurement priorities toward the development
of small satellites  that  permit  incorporation  of advanced technologies as
they  develop,  rather  than building a larger spacecraft  requiring  earlier
design commitments. As a  key  component  of NASA's announced plan to develop
"smaller, faster, cheaper" satellites, NASA's  SSTI  will  develop  and apply
advanced  miniaturization,  design  and  production technology for spacecraft
design and instrumentation to reduce the size  of  satellites and the cost of
space missions. The major goals of the SSTI are to increase  the capabilities
of  small  satellites  and to reduce the cost and development time  of  space
missions for science and commercial applications.

     As a result of this  broadening  of national intelligence priorities and
increasing  governmental  budgetary  constraints,   CTA   expects  that  U.S.
government expenditures on small satellites will grow from  $300  million  in
1995 to $900 million in 2000.

SPACE AND TELECOMMUNICATIONS SYSTEMS--BUSINESS STRATEGY

     The  principal  strategies that CTA is pursuing to grow its share of the
small space systems market include:

     OFFERING  TURN-KEY   SATELLITE  SYSTEMS.   To  enhance  its  competitive
position, CTA is combining  its  space,  communications  and  IT expertise to
provide   full  turn-key  satellite  systems  to  its  commercial  customers,
including delivery  of the satellite on orbit and the design, procurement and
installation  of all of  the  necessary  ground  control  and  communications
equipment. The  Company  believes  that  turn-key  satellite  systems will be
particularly    attractive   to   less-developed   countries   and   emerging
communications businesses  that  do  not  otherwise  have  the  experience or
resources to coordinate the launch and support of a satellite.

     MARKETING  SPACECRAFT BASED ON THE MULTI-PURPOSE STARBUS PLATFORM.   CTA
has developed STARbus,  a  technologically  advanced, multi-purpose satellite
bus  that  can be configured to support DTH television,  high-bandwidth  data
transmission  or  voice communications payloads. The Company expects that the
low cost and technical  superiority of this flexible design, which is capable
of generating up to 3.5 kilowatts  of power, will enable the Company to adapt
it to a variety of payloads and thereby  capture additional market share in a
growing segment of commercial communications satellite industry, supporting a
range of missions from both LEO and GEO and  supporting video, voice and data
services.

     FOCUSING  ON  "SMALLER,  FASTER,  CHEAPER" SATELLITE  SYSTEMS.   CTA  is
focused on lowering the cost, shortening  the cycle time from award to launch
and adding advanced technology to enable the  Company  to  win  an increasing
share  of  what  the  Company  believes  will be a growing market for smaller
satellites. The Company's strategy is to use "on-the-shelf" designs, maintain
inventory  of  long  lead-time,  critical components,  use  common  parts  in
multiple designs and build on its record of technical innovation.

     PARTICIPATING   IN   SATELLITE-BASED    SERVICES    BUSINESSES   THROUGH
PARTNERSHIPS WITH COMMERCIAL CUSTOMERS.  The Company is participating  in and
will  seek  to expand into space-based communications services in partnership
with commercial  satellite  service  customers such as PT MediaCitra Indostar
and EarthWatch.

SPACE AND TELECOMMUNICATIONS SYSTEMS--CONTRACTS AND PROGRAMS

     Some of the Company's key Space and  Telecommunications Systems programs
are  described  below.  Total  contract  values  include  both  realized  and
unrealized revenues.

     COMMERCIAL

     INDOSTAR.  In December 1993, the Company  was  awarded  a  turn-key $170
million  contract  by PT MediaCitra Indostar, a private Indonesian  firm,  to
design, develop, launch  and  support  Indostar, a complete DTH entertainment
and  educational,  satellite-based  television   system  for  Indonesia.  The
Indostar satellite will be the first implementation of STARbus, the Company's
three-axis  stabilized  small GEO platform. As a turn-key  provider  for  the
Indostar program, the Company is performing all systems engineering, handling
both domestic and international  regulatory compliance, delivering all ground
systems equipment, constructing the  spacecraft, arranging for the launch and
launch  insurance and providing continued  support  through  a  comprehensive
operations  and  maintenance  program.  Indostar  is  currently scheduled for
completion  in  early  1997  and  for  launch  in mid-1997. The  contract  is
fixed-price  for the satellite system and a cost-plus  contract  for  launch,
insurance and  other  services. In 1996, Indostar generated revenues of $45.4
million, or 25.3% of the Company's total revenues.

     EARTHWATCH.  In January 1995, the Company was awarded a contract for the
development of two satellites,  EarlyBird-1  and EarlyBird-2, for EarthWatch.
It  is  expected  that these two 700-pound satellites  will  form  the  first
commercial constellation  of satellites capable of collecting high-resolution
digital  imagery.  These  satellites  are  designed  to  provide  three-meter
resolution panchromatic imagery  and  fifteen-meter resolution multi-spectral
imagery  for  sale  to government and commercial  customers.  EarlyBird-1  is
scheduled for completion in early 1997 and for launch in mid-1997. EarlyBird-
2 is scheduled for completion  in  mid-1997.  As  part  of  this program, the
Company  also  is  delivering  three  telemetry, tracking and command  ground
stations to be deployed in 1997 in Alaska,  Colorado and Europe. The contract
is  fixed-price  for  the  satellite  system  and  has   a   total  value  of
approximately  $8  million,  of  which $4 million is payable in the  form  of
preferred equity in EarthWatch. There is also a cost-plus contract for launch
support and other services.

     GOVERNMENT

     NASA

     SSTI "CLARK."  In June 1994,  NASA  awarded  the  Company  a contract to
develop  the  SSTI  "Clark" satellite. The 690-pound Clark satellite  employs
technologies  not  currently  in  general  use  on  board  small  satellites,
including an advanced  attitude control system ("ACS") and solar arrays using
new designs and materials.  Key  missions of this satellite will include high
resolution imaging, mapping and monitoring  of  pollutants  in the atmosphere
and measuring the radiation of solar flares in space. The Clark  satellite is
scheduled  for  completion  in early 1997 and launch in late 1997. The  Clark
contract is a cost-plus-award-fee  contract  and  has  a  total  value of $51
million.

     NASA  CODE  740.   In  June  1995, NASA awarded the Company a multi-year
contract  to  support  the  GSFC  Code  740   with  hardware,  software,  ACS
development,  integration and launch support for  Small  Explorer  Satellites
("SMEX"), Get Away  Special ("GAS"), Hitchhiker and Spartan spacecraft. Under
this contract, CTA acts  as  the  prime  contractor providing overall program
management, electrical design and fabrication  and  ACS  design. For the SMEX
program, the Company is developing the design, fabrication,  ACS and software
for the Transition Region and Coronal Explorer ("TRACE"), which  will observe
the sun's corona. For the GAS and Hitchhiker programs, the Company's  central
activities  include  the development of the mechanical fabrication and launch
preparation for STS-77 and STS-78, which will deploy MightySat-1. For SPARTAN
missions, the Company's  major functions include the fabrication, integration
and  test support for mission  207,  post-launch  support  for  mission  206,
planning  support for the new mission 201-4 and system concept and design for
SPARTAN Lite  and SPARTAN 400. The Code 740 contract is a cost-plus-award-fee
contract, has a total value of $77 million and is scheduled for completion in
2000.

     AIR FORCE  SPACE  DIVISION SPACE TEST PROGRAM.  Under its Space Division
Space Test Program, the  Air  Force  procures experimental satellites for the
three main branches of the DOD. This program  has  resulted  in  several  key
opportunities for CTA, including:

     STEP.  In  May 1990, the Company received an award as a subcontractor to
TRW to produce up  to six satellite buses for the Air Force's STEP, a program
in which the Air Force  launches  and  operates  standardized  satellites  on
behalf  of  various  branches  of the DOD. The Company recently completed its
work on the fifth satellite in this  series,  a 900-pound satellite, that was
delivered  in July 1996 and is scheduled for launch  in  mid-1997.  The  STEP
contract is a fixed-price contract and has a total value of $36 million.

     TSX-5.  In  July 1996, following the final STEP satellite, the Air Force
recompeted STEP and the Company was awarded the prime contract to develop and
launch the TSX-5 satellite,  the  successor to the STEP series. The 735-pound
TSX-5 will perform a series of missions  in  orbit,  including the collection
and high-speed transmission of Earth imagingdata and radiation  measurements.
The TSX-5 satellite is scheduled for completion and for launch in  the second
half of 1998. The TSX-5 contract is a fixed-price-incentive-fee contract  and
has a total value of $25 million.

     MIGHTYSAT-1.   In  April 1995, the Air Force Phillips Laboratory awarded
the Company a contract to  build  MightySat-1, a 150-pound satellite designed
to  conduct  experiments.  Construction   of  MightySat-1  was  completed  in
September 1996 and the satellite is scheduled for launch on the Space Shuttle
in 1997. The MightySat-1 contract is a fixed-price  contract  and has a total
value of $3 million.

     REMOTE  SENSING  BUOYS.   The  Company  has  developed three classes  of
cost-effective, earth-based systems with remote sensing,  data  gathering and
dissemination capability: (i) an air-deployed geobuoy sensor system, which is
launched  from an aircraft, penetrates the surface of Arctic ice and  reports
seismic signals  detected  by  the  system's geophone to monitoring aircraft,
(ii) an advanced ocean meteorological  drifting  buoy with a state-of-the-art
sonic anemometer, improved temperature and barometric  sensors and simplified
buoy  flotation  for  reduced drag and (iii) a series of buoys  designed  for
deployment on the surface of fragmented Arctic ice.

SPACE AND TELECOMMUNICATIONS SYSTEMS--COMPETITION

     The space systems  manufacturing industry includes both foreign and U.S.
commercial  and  governmental   entities   and   is   becoming   increasingly
competitive.   The  Company's  satellites,  space  instruments  and  sensors,
advanced  electronics   products,  ground  systems  and  software  each  face
competition from at least  several  manufacturers.  The Company's competitors
include  Ball,  Hughes,  Lockheed  Martin,  Loral,  Matra  Marconi,   Orbital
Sciences,  Spectrum Astro, TRW and other international companies. The primary
competitive factors in the space systems manufacturing industry include price
and technology.  Additionally,  vendor  financing is emerging as an important
competitive factor in commercial customers'  selection of a satellite systems
manufacturer.   Further,   the  Company's  communications   satellites   face
competition  from  alternative  technologies,  including  fiber  optic  cable
technology, which could  reduce  demand  for  the  services  of the Company's
customers and thus for the Company's communications products.



INFORMATION TECHNOLOGY SERVICES

     The  Company  provides  its customers with a full range of IT  services,
with emphasis on large-scale network  integration and management, information
systems security, mainframe to client/server  migration,  relational database
engineering,  EDI and real-time embedded computer systems. CTA  continues  to
establish marketing  alliances  with  a number of small software providers to
combine software applications for specialized  areas  such  as  manufacturing
process   control   and   large-scale   electronic  document  management  and
composition with CTA's core competency in large-scale systems integration and
its  recognized  program management skills  enabling  it  to  offer  complete
turn-key systems solutions to commercial customers. The Company is one of the
industry  leaders in  the  rapidly  growing  market  for  federal  and  state
government  Year  2000  Conversions based on its unique combination of direct
Year  2000  Conversion experience  and  use  of  automated  tools.  To  date,
substantially  all  of  the  Company's  IT  revenues  have  been derived from
contracts with the U.S. government.

INFORMATION TECHNOLOGY SERVICES--INDUSTRY OVERVIEW

     GOVERNMENT

     The  U.S. government is the largest single buyer of IT services  in  the
world. Federal  Sources,  an independent market research firm, estimates that
the government IT support services market in 1996 will be $9 billion, growing
at a rate of 6% per annum.

     The Year 2000 Conversion  market  developed because billions of lines of
legacy computer code, some of it dating  from as early as the 1960s, were not
written to address the now-imminent century  date  change,  and still compute
the passage of time with reference only to the last two digits  of  the years
in question. A large proportion of mainframe computers rely on computer  code
that utilizes two-digit fields instead of four digit fields to distinguish  a
calendar  year. The Gartner Group, a market research firm, estimates that the
U.S. federal and state government market for Year 2000 Conversion will exceed
$30 billion over the next four years.

     COMMERCIAL

     Within  the  broad  market  for  IT  services,  the Company specifically
provides  professional  services  (including  consulting,   custom   software
development,  and software and database maintenance) and systems integration.
INPUT, a market  research  firm,  estimates  that  the  professional services
segment of the IT services market was $26 billion in the  U.S. in 1995, which
represents  an  increase  of 13% over 1994, and that the systems  integration
segment of the IT services  market  was $12 billion in 1995, which represents
an increase of 11% over 1994. INPUT estimates  that the overall commercial IT
services market will grow at an average annual rate of 14% over the next five
years.

INFORMATION TECHNOLOGY SERVICES--BUSINESS STRATEGY

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

     INCREASING  PENETRATION  OF  EXISTING  CUSTOMER BASE.   CTA's  focus  on
customer satisfaction and technical excellence  have  made  its  existing  IT
customer  base a promising field for future IT services expansion. Due to its
long-term incumbent  position  as  a  key  systems integrator for some of the
nation's most complex information networks,  the  Company has gained a unique
and profound understanding of those systems that the Company believes provide
it  with  a substantial advantage in terms of cost, technical  expertise  and
demonstrated  past  performance  in  competing for future awards. The Company
believes  that its Year 2000 Conversion  initiative  will  provide  CTA  with
similar competitive  advantages with respect to a wide range of new customers
as a result of the in-depth  knowledge  of  the architecture of its Year 2000
Conversion customers' legacy systems that the Company will gain in the course
of performing the necessary conversion work.

     TARGETING "NEAREST NEIGHBOR" MARKETS.  The  Company continually seeks to
transfer its IT technical and marketing expertise  developed  over many years
of  successful competition in the DOD market to the U.S. civil agencies  that
have  similar  IT  systems  needs,  such  as NASA, the FAA and the FBI and to
market  its  experience  supporting  federal government  functions  to  state
government and commercial customers.

     PENETRATING NEW MARKETS BY LEVERAGING  CORE COMPETENCIES.  CTA seeks out
and exploits opportunities to market the expertise  it  has gained in past IT
assignments  to  new  customers.  CTA's  experience  in  federal   and  state
government  Year  2000  Conversions  and its expertise in information systems
security measures have proven to be key  factors  differentiating the Company
in competitive bidding situations and could serve to establish a relationship
with  an  expanded  base  of  customers that can be used  for  marketing  the
Company's expertise in additional  areas  such  as  large-scale client/server
migration and electronic document management.

     ESTABLISHING  MARKETING  ALLIANCES  TO  OFFER COMPLETE  SOLUTIONS.   CTA
continues to establish marketing alliances with  a  number  of small software
providers  to  combine software applications for specialized areas,  such  as
manufacturing  process  control  and  large-scale  document  composition  and
management, with CTA's core competency in large-scale systems integration and
its recognized program  management skills to offer complete, turn-key systems
solutions to commercial customers.

     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 that enhance the Company's
penetration of the commercial IT services market.

INFORMATION TECHNOLOGY SERVICES--CONTRACTS AND PROGRAMS

     Some of the Company's key IT contracts and programs are described below.
Total contract values include both realized and unrealized revenues.

     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
Weapons  Center  (NAWC)  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 (with an average award fee  score  of in excess of 90%), has a total
value of $88 million and is scheduled for completion in October 1998.

     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 (with an  average  award  fee
score  in  excess  of 90%), has a total value of $33 million and is scheduled
for completion in March 2000.

     NETWORK MANAGEMENT.   In 1993, the Air Force's Electronic Systems Center
at Hanscom Air Force Base in Bedford, Massachusetts awarded CTA the Technical
Engineering and Management Support  IV ("TEMS IV") contract pursuant to which
the Company provides technical engineering  and management support to various
DOD command and control system procurement programs, including the Integrated
Tactical  Warning and Attack Assessment System,  during  all  phases  of  the
procurement cycle. The TEMS IV contract is a time-and-materials contract, has
a total value of $54 million and is scheduled for completion in June 1998.

     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 of $8 million and is scheduled
for completion in July 2000.

     AIR  FORCE  WARNING SYSTEM INTEGRATION.  Under  the  Air  Force  Warning
System Integration  contract, the Company provided engineering support at the
Air Force Electronic  Systems  Center  for  the procurement, installation and
testing of systems comprising the national attack  warning/attack  assessment
network. This contract was a sole source, three-year contract awarded in 1993
as  a follow-on to the Company's system design and analysis contract  awarded
in  1987.   The   Air   Force  Warning  System  Integration  contract  was  a
time-and-materials contract,  had  a  total  value  of  $22  million  and was
completed in 1996.

     DEIS.   In  1995, CTA won a subcontract from Unisys to provide a variety
of services, including  business  process re-engineering, systems development
and installation and support for the Defense Information System Agency of the
DOD. Under this program, called the  Defense  Enterprise Integration Services
("DEIS")  program,  CTA is currently performing engineering  and  integration
services to implement  the  Cheyenne Mountain Training and Simulation System,
assisting the Space and Warning  Systems  Center in the planning, scheduling,
conduct and reporting of software testing and  providing support to Air Force
Space Command for the Command, Control, Communications  and  Computer Upgrade
program.  The  DEIS  contract is a time-and-materials contract, has  a  total
value of $16 million and  is  scheduled  for  completion in November 2000. In
1996,  CTA  won  a  follow-on  DEIS contract as a subcontractor  to  Computer
Sciences  Corporation  (CSC). This  contract  is  also  a  time-and-materials
contract and is scheduled for completion in August 2001.




     U.S. GOVERNMENT--CIVILIAN AGENCIES

      NASA.  For NASA, the  Company provides services under several contracts
related to the design, development, integration and testing of space systems.

     (i)  Since 1988, the Company  has  provided  a  wide  range  of  systems
engineering  services to the GSFC as a subcontractor to CSC under the Systems
Engineering and  Analysis  ("SEAS")  contract. These services included Hubble
Space Telescope ground system testing,  communications standards development,
prototyping and business process re-engineering.  In 1992, NASA exercised its
option under the SEAS contract to have CTA continue to provide these services
to  GSFC. The SEAS contract is a time-and-materials  contract,  had  a  total
value of $17 million and is scheduled for completion in July 1997.

     (ii) In  1994,  NASA  awarded  two contracts, the Earth Observing System
Data  and  Information  ("EOS/DIS") and  the  Tropical  Rainfall  Measurement
Mission ("TRMM") contracts,  under which CTA acts as subcontractor to support
research, development andoperations  of  major  ground  systems.  The EOS/DIS
contract,  under  which  CTA is a subcontractor to Intermetrics, Inc.,  is  a
cost-plus-award-fee contract,  has  a  total  value  of  $14  million  and is
scheduled for completion in June 2004. The TRMM contract, under which CTA  is
a  subcontractor  to  General  Sciences Corporation, is a cost-plus-fixed-fee
contract, has a total value of $1.3  million  and is scheduled for completion
in 1998.

     (iii)     Since  1994,  the  Company has acted  as  subcontractor  on  a
McDonnell Douglas contract to provide  Space  Shuttle  payload  analysis  and
integration,  and  design,  development  and  testing of NASA-wide management
information systems. This contract is a cost-plus-award-fee  contract,  has a
total value of $4 million and is scheduled for completion in 1997.

     FEDERAL  AVIATION  ADMINISTRATION.   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 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  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  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 of $5 million
and is scheduled for completion in September 2000.

     DEPARTMENT OF JUSTICE.  In February 1994,  the 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,  CTA  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,  CTA 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.  CTA's support  functions  include
engineering  services and telecommunication and  security  services.  In  the
longer term, CTA  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  performs  under   two
contracts with the GSA.

     (i)  The  Company  provides  support  for  the  Federal Supply Service's
central  offices,  its  eleven  regional  offices  and its various  commodity
centers and depots. CTA's support implementations of electronic commerce. The
Federal  Supply  Service contract was atime-and-materials  contract,  with  a
total value of $27  million and was  completed in September 1996. The Company
was awarded the follow-on  contract  to  the  original Federal Supply Service
contract that was awarded to the Company in 1992.  This  contract has a total
value of $31 million and is scheduled for completion in September 2001.

     (ii) Under  a  contract  awarded in 1994, the Company provides  business
applications software support to  U.S.  government  agencies within the GSA's
Eastern Zone. Services provided by the Company under  this  contract  include
field  software  support,  softwaremaintenance,  software  testing,  software
independent  verification  and validation, software configuration management,
software  documentation development  and  user  training.  The  Eastern  Zone
contract is  a  time-and-materials contract, has a total value of $32 million
andis scheduled for  completion  in  September  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 for the year ended December  31,  1996 of $2.6 million, reflecting the
Company's  current  estimate  of the contract's  profit  at  completion.  The
$2.6 million reduction in revenues is net of  claims of $1.5 million filed by
the Company against the U.S. government related to this contract.

     STATE GOVERNMENT AND COMMERCIAL

      YEAR 2000 CONVERSION.  The  Company  is  one of the industry leaders in
federal and state government Year 2000 Conversions  with a completed contract
for the Department of Veterans Affairs Austin Automation  Center,  which  the
Company  believes  is  the  only  completed  U.S. government agency Year 2000
Conversion to date, and ongoing projects with  the GSA, the Air Force and the
Colorado River Authority. CTA has expanded its position  with  the award of a
$22  million contract from the State of Nebraska for Year 2000 Conversion  of
all of  the  State's  mainframe  application software and databases and a $25
million contract from the State of  Kansas.  CTA  has developed a partnership
with  Viasoft  Inc.,  a leading provider of date change  conversion  software
tools, and is applying  Viasoft's  state-of-the-art  tools  to  the Year 2000
Conversion  problem.  In  addition,  CTA's  existing contracts with GSA,  the
Department of Veterans Affairs and the Navy allow  other  federal agencies to
employ CTA for Year 2000 Conversions without lengthy competitions. To support
its  Year  2000  Conversion  efforts,  the  Company is planning to  establish
conversion centers that will enable the Company  to perform these conversions
in a manner that will minimize disruptions for its customers.

     SYSTEMS ENGINEERING.  In June 1996, the Company  was  awarded a contract
by  USAA,  a  San  Antonio,  Texas-based  insurer,  to provide technical  and
engineering  support  to  the  USAA  Information  Technology   Division.  The
Company's   functions   include   (i)  program  control,  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  PROGRAMS.   Through  alliances  with  specialized
software companies  such  as  Manugistics Group, Inc. and Xyvision, Inc., the
Company  has  initiated  the  development  of  its  commercial  IT  business.
Commercial contracts that have  been  awarded  to  the  Company through these
alliances include a contract with Reynolds Metals Corporation  to  provide  a
fully  integrated  automated  production  scheduling  system  to  be  used to
coordinate  production  activities  at  Reynolds Metals' Listerfield, Alabama
aluminum plant and a contract with Allied  Signal  Inc.  to produce documents
using   standard   generalized  mark-up  language  and  document  composition
technology.

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, 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 services  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 products. The
Company expects  to compete successfully based on the quality of its products
and services, its emphasis on client satisfaction, the technical expertise of
its staff and the  price  at  which  its products and services are delivered.
Such expectation is based on the judgment  and  experience  of  the Company's
senior management.

MOBILE INFORMATION AND COMMUNICATIONS SERVICES

     As part of its strategy to leverage its expertise in information systems
and small satellite technologies to enter into selected value-added  wireless
service  opportunities,  CTA  is  currently  developing GEMtrak, an automated
tracking and cargo status data system for unpowered  mobile  assets  such  as
truck trailers, railcars and containers.

     The  COMMERCIAL CARRIER JOURNAL's Census of the Professional Truck Fleet
Market estimates that there are 4.5 million truck trailers in the U.S. alone.
Carriers recently  have  turned  to  wireless  information systems to provide
better information about customer deliveries. However,  existing  systems  do
not  currently  enable  carriers  to  track their trailers or provide readily
available  information  to  customers  concerning  unpowered  mobile  assets.
GEMtrak,  in  contrast, has been designed  to  serve  as  an  automated  data
collection and cargo oversight system that reduces the errors and delays that
can  occur  through  a  system  dependent  on  physical  trailer  counts  and
communications  between  drivers  and operation centers. The Company believes
that by providing carriers with more  accurate  and  timely information about
trailer  location,  availability  and  status,  GEMtrak will  reduce  trailer
monitoring  and rental costs, and offer fleet owners  marketing  and  revenue
enhancement opportunities.

     The Company  has  completed the development of the hardware and software
required to operate the system and provide the information management reports
to  be  used by the trailer  fleet  operators,  and  the  GEMtrak  system  is
currently being beta tested by two different carriers. The Company expects to
initiate  several pilot programs over the next six to nine months under which
several hundred  units  will be placed in service in each of several national
trucking company fleets,  with  full  commercial  roll-out  scheduled for the
second half of 1997.

     The  Company  anticipates that the GEMtrak system will face  competition
from numerous existing  and potential alternative communications products and
services provided by various  companies  including American Mobile Satellite,
HighwayMaster, Orbcomm, Qualcomm and StarSys.

U.S. GOVERNMENT CONTRACTING

       TYPES  OF CONTRACTS.  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 during the indicated periods:


<TABLE>
<CAPTION>
                                 YEAR ENDED DECEMBER 31,
<S>                       <C>            <C>          <C>

TYPE OF CONTRACT          1994           1995         1996
  
  Fixed-price              10%            28%          31%
  Time-and-materials       54%            26%          29%
  Cost-reimbursable        36%            46%          40%

                          100%           100%         100%
   Total
</TABLE>

     The Company's fixed-price contracts include firm fixed-price ("FFP") and
fixed-price   incentive   ("FPI")  contracts.  The  Company  assumes  greater
financial risks and has potentially  greater  profit margins on FFP contracts
than on FPI contracts because full responsibility is placed on the Company in
FFP  contracts  to  provide stipulated services for  a  firm  price.  An  FPI
contract provides for  an adjustment to profit based upon how effectively the
Company controls costs.  Under  an FPI contract, the Company and the customer
agree  to share any overrun or underrun  realized  when  the  final  cost  is
different  than  the  established target cost. In the case of an overrun, the
Company and the customer  share  up to the established ceiling price at which
point the Company bears the total  risk.  Both  of  these  types of contracts
provide the incentive of higher profits when costs are controlled, along with
the  associated  risk  of  lower  profits  when target costs are exceeded  or
ultimately a loss when costs exceed the ceiling  price.  For  the  year ended
December  31,  1996,  6.7%   of the Company's contract revenues derived  from
fixed-price contracts were FPI and the remainder FFP.

      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 1991 without material adjustment.


RESEARCH AND DEVELOPMENT

     The  Company's research and development programs  seek  to  develop  new
products and  services  that  will  improve the Company's ability to meet the
current  and  future  needs  of  its  customers.  Through  its  research  and
development programs, CTA continues to  broaden its capability and skills, as
exemplified  by its innovations in small satellite  technologies  such  as  a
low-cost reaction  wheel,  the  use  of  GPS  for attitude determination, the
adaptation  of commercial battery technology, the  development  of  composite
structures, the  development  of  Digital  Solid  State Memory and the use of
space-borne encryption. Also in the satellite arena,  CTA has developed a new
generation  of  lightweight  satellites,  the  most  stable gravity  gradient
satellite,  the  first  LEO constellation of communications  satellites,  the
first commercial imaging  remote  sensing  satellites and the first small DBS
satellite.

     The Company's research and development  programs  are  funded  through a
combination  of  Independent  Research  and Development ("IRAD") and Contract
Research and Development ("Contract R&D"):

       IRAD.  IRAD refers to research and  development  costs  that  are  not
sponsored  by,  or  required  in  performance  of,  a contract or grant. IRAD
projects  are designed to enhance the performance and  effectiveness  of  the
Company's day-to-day  engineering operations. The Company has developed tools
and methodologies for efficient software development including automated code
generators that may have  future  commercial  applications.  To date, product
development related revenues have not been significant. No other party has an
interest  in  any  future revenues derived from potential IRAD products.  The
Company's selling, general  and  administrative expenses include IRAD of $1.0
million, $2.6 million and $0.9 million for 1996, 1995 and 1994, respectively.
The significant increase in 1995 stems  from  IRAD  work performed related to
the Company's Indostar contract.

     CONTRACT R&D.  Contract R&D projects are specifically contracted for and
funded  by  the  federal  government.  The primary purpose  of  Contract  R&D
programs is to advance scientific and technical  knowledge  and to apply that
knowledge to achieve specific goals of the agency providing the  funding. The
Company  is  currently  performing  Contract  R&D  for  the Advanced Research
Projects   Agency   ("ARPA"),  an  agency  of  the  DOD.  The  Company-funded
development of ProcessTOOLS is being augmented by ARPA for the application of
ProcessTOOLS to ARPA's Agile Manufacturing and Maritech Programs. The Company
expended $0.9 million  and  $3.0  million  in 1996 and 1995, respectively. No
expenditures  were made in 1994. The Company  intends  to  pursue  additional
funding sources  in  the  future.  Certain  future  Contract R&D programs may
provide  that the Company expend non-reimbursable funds  as  a  condition  of
sharing the  benefits of the research with the sponsoring agency or customer.
The Company expended no such funds in 1996, 1995 or 1994.

     Under the terms of most Contract R&D programs, the Company generally has
interests in any  future  revenues  derived  from products eventually arising
from  the  research, depending in part on the terms  and  conditions  of  the
individual Contract  R&D  program.  To  the extent that Contract R&D programs
with the U.S. government lead to a marketable product or process, the Company
generally  will own the right to such product  or  process  and  may  acquire
patent protection,  subject  to the government's right to use such product or
process on a royalty-free basis.  No  such  revenue  from any such product or
process has been realized to date.

BACKLOG

     The Company's total backlog was approximately $547 million, $511 million
and  $453  million  at  December 31, 1996, 1995 and 1994,  respectively.  The
Company's backlog is comprised  of  the  unrealized portions of the Company's
U.S. government contracts, U.S. government-related  contracts  and commercial
contracts.  Backlog for government and government-related contracts  consists
of either funded  or  unfunded backlog. Funded backlog consists of the dollar
portion of contracts that  is currently appropriated by the government client
or other clients and allocated  to  the contract by the purchasing government
agency or otherwise authorized for payment by the client upon completion of a
specified portion of work. Unfunded backlog  consists of the total unrealized
award value of the contract less the contract  value  funded by the customer,
and includes multi-year incrementally funded contracts,  delivery orders, and
task  orders  which  remain  at  the customers' discretion to fund.  Unfunded
government backlog comprised approximately  73%  of total backlog at December
31, 1996, as compared to approximately 79% of total  backlog  at December 31,
1995.  Commercial  and  other  backlog comprised approximately 13%  of  total
backlog at December 31, 1996 as compared to approximately 9% of total backlog
at December 31, 1995.

     The total backlog at December  31, 1994, 1995, and 1996, for the Company
and for each of the Space and Telecommunications Systems and IT businesses is
set forth below:

<TABLE>
<CAPTION>
                                    DECEMBER 31,
                          1994       1995     1996
  THE COMPANY
<S>                       <C>        <C>       <C>
  Government:
     Funded.............   $66        $61       $75
     Unfunded...........   367        406       399
  Commercial and Other..    20         44        73

   Total................  $453       $511      $547

 SPACE AND TELECOMMUNICATIONS SYSTEMS
  Government:
     Funded.............   $11        $9        $13
     Unfunded...........    25        80         75
  Commercial and Other..    20        44         29

   Total................   $56      $133       $117

  INFORMATION TECHNOLOGY SERVICES
  Government
     Funded.............   $55        $52       $62
     Unfunded...........   342        326       324
  Commercial and Other..     0          0        44

   Total................  $397       $378      $430


</TABLE>

     The   RID  contract  and  the  NASA  Code   740   contract   represented
approximately  10%  and  11%,  respectively, of total backlog at December 31,
1996. Approximately $28 million  or  5% of total backlog at December 31, 1996
was related to the Indostar contract.  The Company expects that approximately
30% of the Company's total backlog as of  December  31,  1996  will result in
revenues in the year ending December 31, 1997.

     Although  unfunded backlog can include up to the stated award  value  of
the contract including renewals or extensions that have been priced but still
remain at the discretion  of the customer whether to fund, the Company, to be
conservative, often recognizes  only  a  portion  of  stated  award values on
multi-year contracts into its backlog records. Because many of  the Company's
contracts  are  multi-year  contracts,  total  backlog  may  include revenues
expected  to be realized several years into the future. The unfunded  backlog
may not be an indicator of future contract revenues or earnings because there
is no assurance  that  the  unfunded portion of the Company's backlog will be
funded. In addition, most of the contracts included in backlog are subject to
termination for the convenience of the government customer.

INTERNATIONAL OPERATIONS

     The Company recognized revenues  from  PT  MediaCitra  Indostar of $45.4
million  (25.3% of total revenues) for the year ended December  31,  1996  as
compared to  $58.1 million (26.8% of total revenues) in 1995 and $7.9 million
(5.5% of total revenues) in 1994.

     The Company's  future  growth  is  dependent,  in part, on continuing to
increase  its  sales to foreign customers and its expansion  into  additional
foreign markets.  The Company expects that sales to foreign customers will be
an  increasing portion  of  the  Company's  business,  and  while  management
believes that the Company's experience serving the domestic market translates
into  an  ability  to serve foreign customers, no assurance can be given that
the Company's efforts will succeed.

ITEM 2. PROPERTIES

     The Company leases  its  corporate  headquarters  in Rockville, Maryland
under  a  lease expiring in 1999. The Company currently owns  a  6.75%  fixed
ownership interest  in  the  partnership that owns the corporate headquarters
building.  In  addition,  the Company  has  principal  leased  facilities  in
Ridgecrest, California; Colorado  Springs,  Colorado;  McLean,  Virginia  and
Bedford,  Massachusetts.  The  Company  believes  that  these  properties are
adequate  to  serve  the  Company's present business operations. The  Company
believes that if it were unable to renew the leases on any of its facilities,
other suitable facilities would be available to meet the Company's needs.

ITEM 3. LEGAL

     On October 10, 1996, Thomas van der Heyden ("Plaintiff"), an employee of
the Company, filed suit against  the Company in the Circuit Court of Maryland
for  Montgomery  County.  In  his  complaint,  Plaintiff  alleges  breach  of
contract, breach of fiduciary duty,  tortious  interference  with contractual
and business relationships, fraud, and breach of duty of good  faith and fair
dealing, all in connection with a Profit Sharing Agreement dated July 6, 1993
("Profit  Sharing  Agreement")  between  van  der  Heyden  and   the Company.
Specifically,  the  complaint alleges that the Company failed and refused  to
make payments purportedly  due  and  owing  to  him  under the Profit Sharing
Agreement with respect to the Indostar contract, failed  to reimburse him for
expenses  relating to his employment, and made certain misrepresentations  to
him which caused  him  to modify his then-existing profit sharing arrangement
with the Company to his  detriment and interfered with his ability to develop
new business. The Profit Sharing  Agreement  provides  for  the  Plaintiff to
receive 25% of the profit (as defined therein) on the Indostar contract.

     The  Company  intends  to  vigorously  defend itself against Plaintiff's
claims. However, as the litigation is in its  earliest stages, the Company is
unable  to  predict  the outcome or its potential  effect  on  the  Company's
financial condition or  results  of  operations.  On  October  18,  1996, the
Company  obtained  a  stay  of  the proceeding on the grounds that the Profit
Sharing Agreement provides that all  disputes  regarding  the  Profit Sharing
Agreement  are to be decided by arbitration. There can be no assurance,  that
such litigation,  if  adversely determined, would not have a material adverse
effect on the Company's financial condition or results of operations.

     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 1996, the Company has  conducted  five
trades in the Limited  Market,  one  each  in  1992, 1993 and 1995 and two in
1994. There were no trades conducted in 1996 as  the  Company   had  filed  a
Registration  Statement  for  an  initial  public  offering. The Registration
Statement was subsequently withdrawn.

     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 to  employees,  consultants and directors of the
Company who have been approved by the Board of  Directors or the Stock Option
Committee of the Board of Directors, pursuant to  the  1991  Plan,  as  being
entitled to purchase up to a specified number of shares of Common Stock.   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  all  of  the  proposed
sellers  up  to  the  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  Corporation  Code  which  limit  repurchases of Common Stock to the
Company's  available  surplus and restrictions  in  contracts,  currently  in
existence  or which may  be  entered  into,  such  as  the  Company's  credit
agreement, which  might  restrict  the  Company's  ability to buy back Common
Stock  in  the  future  under certain circumstances.  The  Company  does  not
currently have available  the  funds to purchase shares in the Limited Market
and  is  not currently making such  purchases  until  such  time  as  it  has
completed one or more financing alternatives it is currently pursuing.

     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.  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.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.

     All persons who purchase  shares  of  Common Stock in the Limited Market
will be required to enter into Stock Restriction Agreements with the Company.
Such agreements provide that, if the purchaser  is an employee, consultant or
director of the Company, upon the purchaser's termination  of  employment  or
affiliation  with  the Company, the Company will have the right to repurchase
all of the shares purchased pursuant to that agreement which such person owns
of record or beneficially  owns at the time of such termination, generally at
the prevailing Formula Price  at  the  time  of  such  termination; provided,
however, that to the extent such Formula Price is less than the price paid by
such  purchaser for any of his shares, the Company will not  repurchase  such
shares without the shareholder's consent.  Such repurchase, if elected by the
Company,  will  be  effected within one year following such termination.  The
Stock Restriction Agreements also afford the Company a right of first refusal
with respect to the shares  of  Common  Stock  in  the  event that the holder
desires  to  sell  or transfer his or her shares other than  in  the  Limited
Market.

THE FORMULA

     The purchase price  of  the  shares of  Common Stock, other than certain
shares issuable upon exercise of previously  granted  options, 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) the book value of the Company at the end
of  the applicable period ("BV") and (B) a number which is the product of (a)
5.08 ("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((BV+K(MI)(P)((CM+R)/2))/Wi)

     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  5.08 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.

     The latest available Formula Price was $9.49 as of December 31, 1995.

PROCEDURES FOR DETERMINING FORMULA PRICE

     The Formula  Price  is used to determine the Offering Price at which the
Common Stock will be sold  and will trade in the Limited Market.  The Formula
was adopted by the Board of  Directors  on November 15, 1991, with the advice
of the Company's independent appraiser.   The Board of Directors believes the
Formula will result in a fair market value  for  the  Common  Stock  within a
broad range of financial criteria.

     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 will determine  the  Formula  Price.   An  independent
appraisal is used by the Board of Directors to validate that the Formula  has
resulted  in  a  price  which  fairly and reasonably reflects the fair market
value of the Common Stock.

     Prior to the adoption of the  Formula,  the  Company established a price
for  the  Common  Stock  based  solely  on  an independent  appraisal.   Such
appraisal was 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 could 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 10 for 1 split of the Company's common stock in
April  1994)  at  which  the  Common  Stock  was  appraised  by the Company's
independent appraiser, Legg Mason Wood Walker, Inc., for the last nine years.
The 1992, 1993 and both 1994 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, 1995                 $9.490
             December 31, 1994                 $9.390
             June 30, 1994                     $8.970
             December 31, 1993                 $8.727
             December 31, 1992                 $7.165
             December 31, 1991                 $6.005
             December 31, 1990                 $4.176
             December 31, 1989                 $4.100
             December 31, 1988                 $4.030
             December 31, 1987                 $2.800
             December 31, 1986                 $1.775

</TABLE>
Report of Independent Appraiser

     Legg Mason Wood Walker, Inc.  ("Legg Mason") was engaged by  the Company
to act as an independent appraiser for  the Company.  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  1993, the Company paid Legg
Mason  a  placement agent fee of $525,000 in connection  with  the  Company's
issuance of $15 million in new subordinated debt in a private placement.

     In connection  with the Board's determination of the Formula Price, Legg
Mason was asked to recommend  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 and provide to the Board of Directors  an assessment as to whether
the Formula Price calculated was within a range which  Legg  Mason considered
reasonable.

     Legg  Mason  has not yet issued their current appraisal report,  pending
the outcome of the  various  financing  alternatives  being  pursued  by  the
Company.

DIVISION OF MARKET REGULATION

     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 Securities  Exchange  Act of 1934.  While the Commission has not formally
indicated to the Company any specific concerns regarding the operation of the
Limited Market, they may do so in the future.  If the Commission should raise
specific concerns with the  Company  in  the  future,  the  Company will take
requisite action to address the Commission's concerns.


HOLDERS OF COMMON STOCK

     As   of   February   28,  1997,  there  were  approximately  350  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.In  December
1993,  the  Company  entered  into  a  note  purchase agreement to secure $15
million in subordinated debt.  Under the provisions  of  this  agreement, the
Company  is  prohibited  from paying dividends.  The agreement expires  after
1998.  The Company's bank  credit  agreement  also  prohibits  the payment of
dividends.

<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

     The following selected consolidated financial data for each of the years
in the five year period ended December 31, 1996 and as of December  31, 1992,
1993,  1994,  1995 and 1996 have been derived from the consolidated financial
statements of the Company. The consolidated financial statements for the five
years ended December 31, 1992 through 1996 have been audited by Ernst & Young
LLP, independent  auditors.  The  data  (in  thousands)  should  be  read  in
conjunction  with  the  consolidated financial statements, related notes, and
other financial information included elsewhere in this document.

<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                              1992(1)        1993          1994          1995           1996
<S>                       <C>            <C>            <C>           <C>           <C>
  Income Statement Data:
  Contract revenues.       $115,109       $125,072       $143,071      $217,007      $179,703
  Cost of contract
  revenues.........          97,680        109,102        121,675       196,656       170,706
  Selling, general and
  administrative
  expenses.........
                              8,574          7,169          8,950         9,798         9,194
  Other expenses....          1,259          1,492            833           318        12,355

  Operating profit
  (loss)...........           7,596          7,309          11,613        10,235      (12,552)
  Interest expense..            461            992           3,627         4,116        4,235

  Income (loss) before
  income
  taxes............           7,135          6,317           7,986         6,119      (16,787)
  Provision (benefit) for
  income taxes.....
                              3,252          2,779          3,434          2,448       (5,750)

  Income (loss) from
  continuing
  operations.......           3,883          3,538          4,552          3,671      (11,037)
  Income (loss) from
  discontinued
  operations, net of
  income
  taxes(2).........             490          1,012            (93)        (1,725)           0

  Net income (loss).         $4,373         $4,550         $4,459         $1,946     $(11,037)


  Earnings (loss) per
  share:
   Continuing
   operations.....            $0.82          $0.75          $0.95         $0.78        $(2.49)
   Discontinued
   operations.....             0.10           0.22          (0.02)        (0.37)         0.00

  Earnings (loss) per
  share........               $0.92          $0.97         $0.93         $0.41         $(2.49)




  Weighted average number
  of shares
  outstanding......           4,750          4,689         4,783         4,709          4,438
</TABLE>

<TABLE>
<CAPTION>


                                              DECEMBER 31,
                            1992            1993          1994          1995           1996
<S>                       <C>            <C>            <C>           <C>           <C>
  Balance Sheet Data:
  Cash and cash
  equivalents......         $  269        $ 1,390        $ 3,902       $   235       $    16
  Working capital...        16,332         24,987         20,638        19,713        13,721
  Total assets......        60,015         74,346         89,816        91,530        92,690
  Short-term debt...        10,917          5,524         15,750        17,074        28,335
  Long-term debt....         7,670         20,418         17,765        17,431        18,510
  Total stockholders'
  equity...........
                            19,704         24,417         27,950        28,773        17,793
</TABLE>

(1)  In July 1992, the Company  acquired  a  79%  interest in CTASS for $10.3
million, $4.9 million of which was paid in cash with  the  remainder financed
by  the selling shareholders at an imputed interest rate of 8.5%  per  annum.
Principal  payments on the acquisition notes of $3.0 million and $2.4 million
were paid in July 1993 and July 1994, respectively. In July 1994, the Company
acquired the  remaining  CTASS  common stock for $2.5 million, payable 50% in
cash and 50% in Common Stock. The Company paid the cash portion with payments
of $500,000, $375,000 and $375,000  in 1994, 1995 and 1996, respectively, and
the Common Stock portion with issuances  of  57,293  shares  in  1994, 39,936
shares  in  1995  and  39,515 shares in 1996. The number of shares of  Common
Stock issued as payment  were  based on the then current fair market value of
the  Common  Stock. The consolidated  financial  statements  of  the  Company
reflect the results of operations of CTASS since July 1992.

 (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
for the sale of the Simulation Systems  Division.  See "Certain Transactions"
and   Note 13 to the Consolidated Financial Statements.  The  assets  of  the
division  consisted primarily of a cockpit flight simulator and various fixed
assets, which  together  had  an aggregate book value of $3.1 million, net of
accumulated depreciation.These  assets  were  sold  in September 1995 for two
notes  secured  by  the  assets with an aggregate principal  amount  of  $2.2
million, bearing interest  at the Company's borrowing rate and a 15% minority
interest in the entity acquiring  the  division,  which  has  been assigned a
value of $0.2 million.

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

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

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,
                                                       1994              1995          1996
<S>                                                  <C>              <C>             <C>
  Contract revenues...........................         100.0%           100.0%         100.0%
  Cost of contract revenues...................         85.0             90.6           95.0
  Selling, general and administrative expenses         6.3              4.5            5.1
  Other expenses..............................         0.6              0.2            6.9

  Operating profit (loss).....................         8.1              4.7           (7.0)
  Interest expense............................         2.5              1.9            2.3

  Income (loss) before income taxes...........         5.6              2.8           (9.3)
  Provision (benefit) for income taxes........         2.4              1.1           (3.2)

  Income (loss) from continuing operations....         3.2              1.7           (6.1)
  Income (loss) from discontinued operations, net of
  income taxes.......................                 (0.1)            (0.8)           0.0

  Net income (loss)...........................         3.1%             0.9%          (6.1)%


</TABLE>

     The following tables set forth certain items in the Company's Statements
of Operations by business segment:
<TABLE>
<CAPTION>
                                              YEAR  ENDED DECEMBER 31,
                                             1994               1995         1996
(In thousands of dollars)
  Contract revenues:
<S>                                          <C>              <C>          <C>
   Information Technology Services...         $107,450         $109,361     $99,963
   Space and Telecommunications
   Systems.........................             35,621           70,675      58,820
     Launch Support..................             _              36,971      20,920
   Mobile Information and Communications
   Services.........                           _                _                 _

                                              $143,071         $217,007    $179,703

  Operating profit (loss):
   Information Technology Services...          $10,600           $5,883      $3,057
   Space and Telecommunications
   Systems.........................              1,846            4,128      (3,719)
     Launch Support..................               _             1,559         109
   Mobile Information and Communications
   Services.........                                -            (1,017)     (8,616)
   Other expenses                                 (833)            (318)     (3,383)

                                               $11,613          $10,235    $(12,552)


</TABLE>
1996 COMPARED WITH 1995

     CONTRACT  REVENUES. Contract revenues decreased 20.8% to $179.7  million
in 1996 from $217.0  million  in 1995, as a result of a $9.4 million decrease
in IT revenues and a $27.9 million  decrease  in Space and Telecommunications
Systems revenues.

     IT  contract  revenues decreased 8.6% to $100.0  million  in  1996  from
$109.4 million in 1995.  An increase in IT revenue of $3.6 million on the RID
contract, $3.4 million on  the  Nebraska  contract  and  $1.3  million on the
Maritech  contract was more than offset by the decrease of $11.2  million  on
the NAWC and  NAWC  follow-on  contracts and $6.5 million on the Eastern Zone
contract.  Revenues from contracts  awarded  in  full  and  open  competition
increased to $96.9 million or 96.9% of IT revenues in 1996 from $89.1 million
or 81.4% in 1995.

     In the  first quarter of 1996, the Company completed its five-year prime
contract with  the  NAWC at China Lake, California, the last of the Company's
significant contracts  awarded  during  its  period  of eligibility for small
business awards, which ended in 1992. This contract represented $20.4 million
in revenues in 1995. 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 in
April 1996, from which the Company receives approximately 45% of the contract
revenues. In 1996, the Company received revenues of  $5.1  million  from  the
original  NAWC  contract  and  $4.1  million  in  revenues from the follow-on
contract.

       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  have not been sufficient to offset these  losses and the Company no
longer anticipates sufficient future contract value to  recover  its start-up
costs.  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.
Additionally,  the Company has implemented program controls to reduce  future
costs which it believes  will  serve  to minimize any potential cost overruns
during the remainder of the contract.

     Total Space and Telecommunications  Systems  contract  revenues  in 1996
decreased  25.9%  to  $79.7  million  from  $107.6 million in 1995. Space and
Telecommunications Systems contract revenues,  exclusive  of  Launch Support,
decreased  16.8%  to $58.8 million in 1996 from $70.7 million in  1995.  This
decrease in revenues is primarily due a decrease of $16.1 million on the SSTI
program and $3.3 million  on  the  Comet  contract,  which  was  offset by an
increase  of  $7.2  million  on  the  NASA  Code 740 contract. Launch Support
contract revenues decreased 43.4% to $20.9 million in 1996 from $37.0 million
in 1995, due to $14.2 million in lower revenue  on  the  Indostar program and
$2.6 million on the SSTI program, offset by an increase of  $0.8  million  on
the TSX-5 contract.
     The  Company  increased  reserves  for  estimates  of  costs  at program
completion  on the Indostar program that resulted in a $2.8 million reduction
in revenues and  operating  profit.   The Company increased these reserves to
reflect  the  risks  inherent in the integration  and  test  phases  of  this
program.  Indostar represents  the  Company's  first GEO satellite effort and
the  integration  and test phase are believed by management  to  represent  a
critical element in  the  remaining  portion of the program.  In establishing
these additional reserves, the Company  assessed  identifiable cost, schedule
and technical risk elements.  The Company believes  its reserves are adequate
to  cover  potential  risks  that could arise prior to the  expected  program
completion in mid-1997.  There  can  be  no  assurance,  however,  that these
reserves  will  be  adequate  to  cover  these  risks.  The addition of these
reserves  resulted  in the reversal of $2.8 million  of  previously  recorded
program profit, leaving  $0.8  million  in  program  profit from inception to
December 31, 1996.

     The  Mobile  Information  Communications Services business  recorded  no
revenues in 1996 or 1995.

      COST OF CONTRACT REVENUES.   Cost  of  contract  revenues  decreased to
$170.7  million, or 95.0% of contract revenues, in 1996 from $196.7  million,
or 90.6%  of  contract  revenues,  in 1995. This increase in cost of contract
revenues  as a percentage of contract  revenues  resulted  primarily  from  a
reduction in revenues related to reserves added to estimates at completion on
the Indostar  program  and  reduction  in  revenues related to changes in the
estimated  contract  value  on the Eastern Zone  contract,  as  well  as  the
replacement of expiring high-margin contracts with new contracts bid at lower
margins.  New  contracts  awarded   to  the  Company  reflect  lower  margins
consistent with the more highly competitive  environment in which the Company
now competes. As the Company has replaced its  older backlog of higher margin
contracts  previously  awarded  under various small  business  programs  with
federal contracts awarded in full  and open competition, the cost of contract
revenues as a percentage of contract  revenues  has increased. Without giving
effect  to  the reduction in revenues due to the Indostar  contract  and  the
Eastern Zone  contract,  the  cost  of  contract  revenues as a percentage of
contract revenues for 1996 was 92.2%.

     SG&A.  Selling, general and administrative expenses  ("SG&A")  for  1996
decreased 6.2%  to  $9.2  million,  or  5.1%  of contract revenues, from $9.8
million,  or  4.5%  of  contract  revenues,  in 1995.  Slightly  higher  than
anticipated costs in preparing and submitting  bids  in  the  1995 period and
improved cost control in 1996 accounted for the change.

     OTHER EXPENSES.  Other expenses increased to $12.4 million  in 1996 from
$0.3 million in 1995. The increase is due primarily to the write-off  in  the
fourth  quarter of 1996 of the Company's investment in GEMnet of $6.4 million
and $0.9  million  related  to  the  Company's  unsuccessful  initial  public
offering.  Lower expenses in 1995 resulted from a reversal of certain amounts
in reserves  in 1995 set aside in 1994 and from the allocation of the receipt
of insurance proceeds  related to the loss of the Company's GEMstar satellite
due to a launch failure in 1995.

     OPERATING PROFIT (LOSS).   The  Company  had  an operating loss of $12.6
million in 1996 compared to an operating profit of $10.2 million in 1995.

     INTEREST EXPENSE.  Interest expense increased to  $4.2  million  in 1996
from  $4.1  million  in  1995  due  to  higher average balances on the Credit
Facility  due  to  increased  capital expenditures  and  the  development  of
GEMtrak.

     PROVISION (BENEFIT) FOR INCOME  TAXES.   The  Company had a $5.8 million
tax benefit for 1996 compared to a $2.4 million tax provision for 1995.

     INCOME (LOSS) FROM CONTINUING OPERATIONS.  As a result of the foregoing,
the Company had a loss from continuing operations of  $11.0  million  in 1996
compared to income from continuing operations of $3.7 million in 1995.

     INCOME  (LOSS)  FROM  DISCONTINUED OPERATIONS.  During 1995, the Company
discontinued  the  operations  of  its  Simulation  Systems  Division,  which
manufactured aircraft  flight  simulators  for  sale  or lease. The loss from
discontinued operations in 1995 was $1.7 million, net of tax benefits of $1.2
million.

       NET INCOME (LOSS).  The Company had a net loss of  $11.0  million  for
1996 compared to net income $1.9 million for 1995.



1995 COMPARED WITH 1994

     CONTRACT  REVENUES.  Contract revenues increased 51.7% to $217.0 million
in 1995 from $143.1 million  in  1994, as a result of a $1.9 million increase
in IT revenues and a $72.0 million  increase  in Space and Telecommunications
Systems revenues.

     IT  contract  revenues increased 1.8% to $109.4  million  in  1995  from
$107.5 million in 1994.  Revenues  from  contracts  awarded  in full and open
competition increased to $89.1 million or 81.4% of IT revenues  in  1995 from
$66.3 million or 61.7% in 1994.

     Total  Space  and  Telecommunications Systems contract revenues in  1995
increased 202.2% to $107.6  million  from  $35.6  million  in 1994. Space and
Telecommunications  Systems  contract revenues, exclusive of Launch  Support,
increased 98.4% to $70.7 million  in  1995  from  $35.6 million in 1994. This
increase  in  revenues is primarily due to $19.7 million  from  the  Indostar
program, $16.6  million  from the NASA SSTI program and $4.3 million from the
EarthWatch satellite program.  Launch  Support  contract  revenues were $37.0
million  in  1995,  the  first year in which the Company recognized  revenues
related to launch activities.

     The Mobile Information  Communications  Services  business  recorded  no
revenues in 1995 or 1994.

     COST  OF  CONTRACT  REVENUES.   Cost  of  contract revenues increased to
$196.7 million, or 90.6% of contract revenues, in  1995  from $121.7 million,
or  85.0%  of contract revenues, in 1994. This increase in cost  of  contract
revenues as  a percentage of contract revenues resulted from approximately $1
million in start-up  costs  with  no  related revenues recorded by the Mobile
Information and Communications Services  business  and lower margins on $37.0
million  in  Launch Support for the Indostar and SSTI  programs  and  on  new
contracts awarded  in  1995.  Other  factors  contributing  to  a decrease in
contract  margin  include  higher  than  anticipated  start-up  costs on  the
Company's  Eastern Zone contract and the NASA Code 740 contract, as  well  as
the replacement  of  expiring high-margin contracts with new contracts bid at
lower margins.

     SG&A. SG&A increased  to  $9.8 million, or 4.5% of contract revenues, in
1995 from $9.0 million, or 6.3%  of  contract revenues, in 1994 due primarily
to increased bid and proposal expenditures.

     OTHER EXPENSES.  Other expenses decreased  to  $0.3 million in 1995 from
$0.8 million in 1994.

     OPERATING  PROFIT  (LOSS).   Operating profit declined  11.9%  to  $10.2
million in 1995 from $11.6 million in 1994.

     INTEREST EXPENSE.  Interest expense  increased  to  $4.1 million in 1995
from  $3.6  million  in  1994. This increase resulted primarily  from  higher
balances on the line of credit  under  the  Credit  Facility due to increased
investment in space-related technologies, including the  GEMnet  program, and
to higher average interest rates during 1995.

       PROVISION (BENEFIT) FOR INCOME TAXES.  The provision for income  taxes
declined  to  $2.4 million in 1995 from $3.4 million in 1994 as a result of a
reduction in the Company's effective tax rate.

     INCOME (LOSS) FROM CONTINUING OPERATIONS.  As a result of the foregoing,
income from continuing  operations  in  1995  decreased 19.4% to $3.7 million
from $4.6 million in 1994.

     INCOME (LOSS) FROM DISCONTINUED OPERATIONS.   During  1995,  the Company
discontinued  the  operations  of  its  Simulation  Systems  Division,  which
manufactured  aircraft  flight  simulators  for  sale  or  lease.  Loss  from
discontinued operations in 1995 was $1.7 million, net of tax benefits of $1.2
million, as compared to an operating loss for the Simulation Systems Division
of  $0.1  million  in  1994. The $1.7 million after-tax loss recorded in 1995
consisted of a loss from  operations of $1.2 million and a loss from disposal
of $0.5 million. The assets  of the division consisted primarily of a cockpit
flight simulator and various fixed  assets, which had an aggregate book value
of $3.1 million, net of accumulated depreciation.  These  assets were sold in
September  1995  for  two  notes  secured  by  the  assets with an  aggregate
principal amount of $2.2 million, bearing interest at the Company's borrowing
rate and a 15% minority interest in the entity acquiring  the division, which
has been assigned a value of $0.2 million.

      NET INCOME (LOSS).  Net income in 1995 decreased 56.4%  to $1.9 million
from $4.5 million in 1994.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's net income (loss) was ($11.0 million), $1.9  million,  and
$4.5 million  in 1996, 1995 and 1994, respectively. Its cash flow provided by
(used  in)  operating  activities  was  $(5.6 million), $2.4 million and $1.4
million  in  1996,  1995  and  1994,  respectively.   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. The principal factors accounting  for  the provision (use) of cash in
operating activities in 1995 were a $0.7 million  loss on the disposal of the
Simulation  Systems Division, $3.2 million of depreciation  and  amortization
expense, $1.0  million  provision  for receivable allowances, $1.1 million of
accrued interest and changes in working  capital  accounts using $4.0 million
of cash. The principal factors accounting for the provision  (use) of cash in
1994 were $2.2 million of depreciation and amortization expense, $1.0 million
accrued interest, $0.7 million other non-cash expenses and changes in working
capital accounts using $6.8 million of cash.

     Cash used in investing activities totaled $6.2 million, $5.2 million and
$6.4 million in 1996, 1995 and 1994, respectively. The changes from period to
period primarily relate to fluctuations in the acquisition of  furniture  and
equipment  and costs incurred for software development for sale to commercial
customers. Additions  to  furniture  and  equipment  were  $6.5 million, $4.3
million  and  $5.1  million  in  1996, 1995 and 1994, respectively.  Software
development expenditures were $0.1  million  in 1996 and $0.8 million in each
of the years 1995 and 1994.

     Cash provided by (used in) financing activities was $11.5 million, $(0.9
million) and $7.5 million in 1996, 1995 and 1994, respectively. Financing was
primarily provided by borrowings under the Credit Facility and  offset by the
repayment of acquisition notes and the purchase  of  treasury  stock  for the
employee  stock  purchase plan. The Company's net borrowings under the Credit
Facility were $12.0  million,  $1.3  million and $12.1 million for 1996, 1995
and 1994, respectively. Net purchases  of  treasury  stock were $0.5 million,
$2.0 million and $3.8 million in 1996, 1995 and 1994, respectively.

     In  December  1993,  the Company and its subsidiaries  entered  into  an
agreement  with  a  bank  for  a  revolving  credit  facility  providing  the
availability  to  borrow up to $30,000,000  which  includes  a  facility  for
letters of credit up  to $10,000,000. The revolving line of credit expired on
December 9, 1996 but has  been  extended  until  June  9,  1997.  The current
arrangement  provides  an  additional  credit facility of $4,500,000 that  is
reduced or eliminated upon collection of  certain  amounts  on  the  Indostar
contract, completion of one or more private equity placements or at specified
dates through June 9, 1997.

     The   average  daily  loan  balances  under  the  Credit  Facility  were
$22.1 million,  $14.2  million,  and  $13.6  million for 1996, 1995 and 1994,
respectively. The weighted average interest rate was 6.8%, 7.6%, and 6.1% for
1996, 1995 and 1994, respectively. At December  31,  1996,  $28.3 million was
outstanding  under  the  Credit Facility and there was one letter  of  credit
outstanding totaling $0.1 million.

     The Company's cash flow  during  1996  and the first quarter of 1997 has
been  adversely  impacted  by  a  combination  of  operating   losses  and  a
significant  increase  in  accounts  receivable  not  billable  until certain
contract milestones are reached. The Company expects its liquidity to improve
substantially  in  the second quarter of 1997 upon completion of testing  and
customer acceptance  of  its  Indostar-1  direct  broadcast  satellite  for a
commercial  customer  in  Indonesia.  A  delay  in  satisfaction  of contract
milestones  or  approval  for  payment  by the customer could have a material
adverse effect on the Company's liquidity.

     The  Company has been unable to comply  with  certain  of  the  original
financial covenants  of  its  bank  credit  facility  and  subordinated  debt
agreements  since  March  31,  1996,  due  to  operating losses incurred. The
Company and its bank have agreed to modifications  of  the  covenants through
the  original  maturity of the credit facility on December 9, 1996  and  have
since agreed to  extensions  of  the  credit facility through June 9, 1997 at
negotiated terms that include, among other  things, a waiver of the financial
covenants  at December 31, 1996, relaxed covenants  for  the  quarter  ending
March 31, 1997  and  a  higher  effective  interest rate. The Company and the
holders of its subordinated debt have agreed  to  waivers  of  the  financial
covenants  through December 31, 1997 in exchange for a higher interest  rate,
the extent of which is based on whether the Company raises new equity by June
30, 1997. The Company believes it has good relationships with its lenders and
that the lenders  will  continue  to  work  with  the  Company as it seeks to
improve its financial condition. While the Company anticipates  that  it will
be  able  to  enter  into  a  new  credit  facility that includes a long term
revolving  credit  commitment, the inability of  the  Company  to  renew  its
existing credit facility  or  to  obtain a replacement credit facility on the
same or similar terms could have a  material  adverse effect on the Company's
liquidity, financial condition and results of operations.

     The  Company  is  pursuing  various  financing  alternatives,  including
raising additional equity capital, and, if  necessary,  would  consider other
alternatives  such  as  disposal  of  assets.  The  Company's future business
requirements  and growth plans will require significant  additional  capital.
While the Company  believes  that working capital, cash flow from operations,
and available bank borrowings  will  provide  adequate  funds  for  continued
operations  and  any  increased  interest  costs  with  respect to borrowings
through the end of 1997, additional sources of capital will  be  required  to
continue to fund the Company's future business requirements and growth plans,
including   its   strategic   initiatives   of   expanding   its   Space  and
Telecommunications  Systems  and  its  Mobile  Information and Communications
Services businesses. Accordingly, the Company expects  that  it  will need to
incur indebtedness or raise additional equity capital to fund its anticipated
growth.  There  can  be no assurance that the Company will be able to  obtain
such financing on favorable terms or at all.




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, 1996:

<TABLE>
<CAPTION>
  NAME                            AGE              POSITION
<S>                              <C>              <C>
  C.E. Velez                      56               President, Chief Executive Officer and Chairman
                                                   of the Board
  Ricardo de Bastos               59               President-Space and Telecommunications Systems
                                                   and Director
  Raymond V. McMillan             63               President- Information Technology Services and
                                                   Director
  George S. Sebestyen(3)          65               President-CTASS
  Gregory H. Wagner               48               Executive Vice President, Chief Financial Officer
                                                   and Treasurer
  Terry J. Piddington             53               Executive Vice President
  Emanuel J. Fthenakis(1)(3)
                                  68               Director
  Harvey D. Kushner(1)
                                  66               Director
  George W. Morgenthaler(2)
                                  69               Director
  James M. Papada, III(2)
                                  48               Director
  Arturo Silvestrini(2)
                                  66               Director
  John L. Slack(2)                58               Director
  John W. Townsend, Jr.(1)(3)
                                  73               Director
</TABLE>
___________

(1)  Member of the Compensation Committee of the Board of Directors.

(2)  Member of the Audit Committee of the Board of Directors.

(3)  Resigned subsequent to December 31, 1996.
___________

     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. Dr. Velez is also a director of Constellation and EarthWatch.

     Ricardo de Bastos has been Executive Vice President of the Company since
April 1996 and as a Director  of  the  Company  since  August  1996. Prior to
joining CTA, he was employed for more than 36 years by Astro Space  which has
been a division of RCA, General Electric and Martin Marietta and is currently
a  division  of  Lockheed  Martin. From 1991 through 1993, Mr. de Bastos  was
Director of Commercial Business  Development  at General Electric AstroSpace.
From 1994 to 1995, he was Vice President, Business  Development  and Advanced
Programs at Martin Marietta AstroSpace. From 1996 until joining CTA,  he  was
Executive  Vice  President  with  the  Lockheed  Martin AstroSpace Commercial
Company.

     Raymond V. McMillan has been a Director of the Company since August 1996
and President of Information Technology Services since  April 1996 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 S. Sebestyen was President  of  CTASS,  a  company  he founded in
1978. Prior to 1978, Dr. Sebestyen was Vice President and General  Manager of
the  Navy  Systems  and  Advanced  Projects  Division of the Boeing Aerospace
Company.

     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  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.

     Emanuel J. Fthenakis  was  a  Director  of  the Company from August 1992
until  January  1997.  From  1971  to  1991,  he  was employed  by  Fairchild
Industries, serving as CEO from 1985 to 1991 and Chairman  of  the Board from
1986 to 1991. Mr. Fthenakis has been President of CEF Corporation  since  its
inception  in  August  1977.  Since  1991,  the  Company has had a consulting
agreement with CEF Corporation.

     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.

     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
department 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. 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.
Since  November  1991  he  has  been  President  and CEO of Earth Observation
Satellite  Corporation.  From  1965  to 1991, he was with  Computer  Sciences
Corporation, most recently as Senior Vice President for European operations.

     John L. Slack has been a Director of the Company since August 1991. From
1977  to  1980, he was Vice President, Command  and  Information  Systems  of
Martin Marietta.  In  1985,  he  began a systems engineering and professional
services firm. Mr. Slack is currently  a  Director,  President and CEO of DBA
Systems, Inc.

     John  W. Townsend, Jr. was a Director of the Company  from  August  1991
until January  1997.  From  1987  to  1990,  he  was Director of the National
Aeronautics and Space Administration's Goddard Space  Flight  Center.  He was
formerly a member of the advisory board of Loral Corporation. Since 1990, Mr.
Townsend has acted as a self-employed consultant.

     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 1996, 1995 and 1994 of the Company's Chief Executive Officer and the four
other most highly compensated executive  officers  in  1996  (the  "Executive
Officer Group") for services rendered in all capacities to the Company:

                         SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                         LONG-TERM
                                        ANNUAL COMPENSATION            COMPENSATION

                                                               Other        
                                                               Annual       Restricted            All Other
   NAME AND PRINCIPAL                                          Compensation Stock Awards Option   Compensation
POSITION(S)               YEAR       Salary ($)   Bonus ($)    ($)(2)         ($)       Awards(#)     ($)(3)

<S>                     <C>        <C>          <C>          <C>          <C>          <C>          <C>
C.E. Velez                1996       276,743      --           1,870        --           29,505       5,700
(1)President, Chief       1995       253,454      --           1,691        --           --           6,300
Executive Officer and     1994       243,600      93,200       926          --           --           4,500
Chairman of the Board
Ricardo de Bastos(4)      1996       134,616      --           1,441        125,000      51,342       338,960(5)
President-Space and       1995       --           --           --           --           --           --
Telecommunications        1994       --           --           --           --           --           --
Systems and Director
  George S. Sebestyen     1996       198,846      --           3,227        --           21,075       5,700
  President-CTASS         1995       191,219      --           3,008        --           --           169,300(6)
                          1994       181,002      31,500       --           --           --           24,583
  Raymond V. McMillan     1996       182,779      --           2,815        --           89,494       12,180
  President-Informa-      1995       166,385      --           2,616        --           --           16,915
tion Technology           1994       157,500      41,504       599          --           20,000       14,207
Services
  Gregory H. Wagner       1996       167,900      --           856          --           42,914       5,700
  Executive Vice          1995       150,007      --           768          --           --           27,085
President, Chief          1994       147,000      62,595       558          --           --           8,864
Financial Officer and
Treasurer
</TABLE>

___________

(1)  Dr. Velez currently has outstanding certain loans from the Company.  See
Item 13. "Certain Relationships and Related Transactions."

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

(3)  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.

(4)  Mr. de Bastos joined the Company in April 1996 at an annual salary of
$200,000.

(5)  Includes $125,000 (after tax) and relocation expense of $131,003 paid in
connection with hiring.

(6)  Includes payment of $160,000 pursuant to the award of a commercial
contract.

OPTION GRANTS DURING 1996

     The following table sets forth information concerning options granted in
fiscal 1996 to each member of the Executive Officer Group.

<TABLE>
<CAPTION>

                                               % OF TOTAL
                                            OPTIONS GRANTED                   
                            OPTIONS         TO EMPLOYEES IN EXERCISE PRICE    EXPIRATION        GRANT DATE
NAME                        GRANTED           FISCAL YEAR      ($/SH)            DATE           VALUE($)(1)
<S>                            <C>             <C>              <C>           <C>                <C>
  C.E. Velez                    29,505          11.62%           9.49           3/31/01           112,709
  Ricardo de Bastos             25,000           9.84%           9.49          12/31/06           95,500
                                26,342          10.37%           9.49           6/30/06           100,626
  George S. Sebestyen           21,075           8.30%           9.49           3/31/01           80,506
  Raymond V. McMillan           20,000           7.87%           9.49          12/31/06           76,400
                                25,000           9.84%           9.49           3/31/00           95,500
                                25,000           9.84%           9.49           1/31/01           95,500
                                19,494           7.67%           9.49           3/31/01           74,467
  Gregory H. Wagner             25,000           9.84%           9.49          12/31/06           95,500
                                17,914           7.05%           9.49           3/31/01           68,431
</TABLE>

____________

(1)  The  Company  uses the Black-Scholes model to estimate the fair value of
options, assuming a risk-free interest rate equal to the 90 day U.S. Treasury
Bill rate, expected  lives of 5 to 10 years, an expected volatility factor of
 .23 and no expected dividends.

FISCAL YEAR-END OPTION VALUES

     The following table  sets  forth  information concerning the exercise of
stock options during fiscal 1996 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 Securities
                                                    Underlying             Value of Unexercised
                                                    Unexercised            In-the-Money Options
                                                    Options at FY-End           at
                     Shares                             (#)                FY-End ($)(1)
                    Acquired on     Value           Exercisable/           Exercisable/
  NAME              Exercise(#)   Realized($)        UNEXERCISABLE         UNEXERCISABLE
<S>                <C>             <C>              <C>                    <C>
  C.E. Velez         --              --              0/29,505               0/0
  Ricardo de         --              --              8,781/42,561           0/0
  Bastos
  George S.          --              --              0/21,075               0/0
  Sebestyen
  Raymond V.         --              --              5,000/106,494          14,120/2,824
  McMillan
  Gregory H.         73,000          457,122         0/42,914               0/0
  Wagner
</TABLE>

___________

(1)  There was no public trading market for the Common Stock on December  31,
1996.  Accordingly,  solely  for  purposes  of this table, the values in this
column  have been calculated on the basis of an  estimated  market  price  of
$7.00 per share, less the aggregate exercise price of the options.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets forth certain information with regard to the
beneficial ownership of the Common  Stock as of December 31, 1996 by (i) each
person  known  by  the  Company  to own beneficially  more  than  5%  of  the
outstanding  shares  of Common Stock,  (ii)  each  director,  each  executive
officer and each member  of the Executive Officer Group and (iii) all current
directors and executive officers of the Company as a group:


<TABLE>
<CAPTION>
                                       Shares Beneficially    Percent Beneficially
   NAME OF BENEFICIAL OWNER            OWNED (1)              OWNED(2)
<S>                                   <C>                    <C>
  5% Stockholders:
  C.E. Velez                           2,550,000              56.0%
  ESOP                                 514,720                11.3
  B.A. Claussen                        499,796(3)             11.0
  Terry J. Piddington                  241,707                5.3
  Directors and executive officers:
  C.E. Velez                           2,550,000              56.0
  Terry J. Piddington                  241,707                5.3
  George S. Sebestyen                  136,744                3.0
  Gregory H. Wagner                    74,400                 1.6
  Raymond V. McMillan                  22,918(4)              *
  John W. Townsend, Jr.                14,225(5)              *
  George W. Morgenthaler               10,028(6)              *
  John L. Slack                        4,435                  *
  Harvey D. Kushner                    4,073(7)               *
  Ricardo de Bastos                    8,781(8)               *
  Emanuel J. Fthenakis                 0                      *
  James M. Papada, III                 737                    *
  Arturo Silvestrini                   526                    *
  All current directors   and
  executive
    officers as a group (13 persons
    as of December 31, 1996)
                                       3,068,574              67.4%
</TABLE>

___________


*    Less than 1%.


(1)  Except as otherwise indicated,  the  persons  in  this  table  have sole
voting and investment power with respect to all shares of Common Stock  shown
as  beneficially  owned  by  them,  subject  to community property laws where
applicable andsubject to the information contained  in  the footnotes to this
table. Shares not outstanding but deemed beneficially owned  by virtue of the
right  of  a  person  or  group to acquire them as of December 31,  1996  are
treated as outstanding only  for  purposes  of  determining the number of and
percent owned by such person or group. All share  amounts  are  exclusive  of
shares beneficially owned through the ESOP.

(2)  The  number  of shares of Common Stock deemed outstanding as of December
31, 1996 was 4,552,648 shares.

(3)  Includes non-qualified  options  to  purchase  100,000  shares of Common
Stock  granted  under  the 1991 Plan, which are currently exercisable  as  of
December 31, 1996.

(4)  Includes non-qualified  options to purchase 6,000 shares of Common Stock
granted  under  the  1991  Plan  which   are   currently  exercisable  as  of
December 31, 1996.

(5)  Includes non-qualified options to purchase  3,508 shares of Common Stock
granted  under  the  1991  Plan  which  are  currently  exercisable   as   of
December 31, 1996.

(6)  Includes  non-qualified options to purchase 3,935 shares of Common Stock
granted  under  the   1991   Plan  which  are  currently  exercisable  as  of
December 31, 1996.

(7)  Includes non-qualified options  to  purchase  822 shares of Common Stock
granted under the 1991 Plan which are currently exercisable  as  of  December
31, 1996.

(8)  Includes non-qualified options to purchase 8,781 shares of Common  Stock
granted  under  the  1991 Plan which are currently exercisable as of December
31, 1996.

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  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.

     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, which
have  ranged  between  6.00%  and 7.75% per annum. Interest on this  loan  is
payable annually in July of each year and has been paid in cash and, in 1996,
with the consent of the Company, in the form of a $43,000 promissory note due
February  19, 1997, bearing interest  at  the  same  rate  as  the  revolving
promissory note. Both notes are secured by a pledge of shares of Common Stock
owned by Dr.  Velez.  At the direction of the Board of Directors on March 10,
1997, both notes were consolidated  into  one  note, payable on demand, on or
before  August 2000, with interest payable in annual  installments  from  the
date of the note at the same rates paid by the Company.

<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

     Consolidated Statements of Operations              F-3

     Consolidated Statements of Stockholders' Equity    F-4

     Consolidated Statements of Cash Flows              F-5

     Notes to Consolidated Financial Statements         F-6

     Financial Statement Schedules:

          Schedule II - Valuation and Qualifying
                         Accounts and Reserves          F-28

     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:

          (23a) Consent of Ernst & Young LLP            F-29


14(B) REPORTS ON FORM 8-K.

     There were no reports on Form 8-K filed during the
     fourth quarter of 1996.

14(C) FINANCIAL DATA SCHEDULE

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
CTA INCORPORATED

     We have  audited  the  accompanying  consolidated  balance sheets of CTA
INCORPORATED  and  subsidiaries  as of December 31, 1996 and  1995,  and  the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years  in the period ended December 31, 1996. 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  financial  statements  referred to above present
fairly, in all material respects, the consolidated financial  position of CTA
INCORPORATED  and  subsidiaries  at  December  31,  1996  and  1995, and  the
consolidated results of their operations and their cash flows for each of the
three  years  in  the  period  ended  December  31, 1996, in conformity  with
generally accepted accounting principles. 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.
March 26, 1997


                              F-1
<PAGE>

                    CTA INCORPORATED
               CONSOLIDATED BALANCE SHEETS
          (IN THOUSANDS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
                                       DECEMBER 31,
                                   ----------------------
                                      1995        1996
                                  ----------  -----------
                    ASSETS

<S>                               <C>         <C>
Current assets:
  Cash and cash equivalents....    $     235   $       16
  Accounts receivable (Notes 1
   and 3)......................       58,586       62,327
  Other current assets
     (Note 4).................         3,697        4,228
  Recoverable income taxes
  (Note 10)....................        2,521        3,537
                                   ----------     ---------
Total current assets...........       65,039       70,108
                                   ----------     ---------
Furniture and equipment (Notes 1
 and 4).........................      21,301      26,148
  Accumulated depreciation and
   amortization.................     (14,517)    (16,073)
                                   ----------   ---------
                                       6,784      10,075
                                   ----------   ---------
Costs in excess of net assets
acquired (Note 1)...............       5,633       5,048
Other assets (Notes 1, 4, 6
 and 10)........................       6,812       7,459
GEMnet investment (Note 5)......       7,262        --
                                   ----------    --------
Total assets....................  $   91,530  $   92,690
                                   ----------    --------
                                   ----------    --------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                               <C>          <C>
Current liabilities:
  Notes payable--line of credit
 (Note 7).......................   $  16,324    $   28,335
  Accounts payable..............      13,910        15,718
  Accrued expenses (Note 4).....       4,804         4,041
  Excess of billings over costs
  and contract prepayments......       4,603         6,159
  Other current liabilities.....         293           757
  Acquisition notes payable--
  current (Note 2)..............         750          --
  Deferred income taxes (Note 10)      4,642         1,377
                                   ----------    ----------
Total current liabilities.......      45,326        56,387
                                   ----------    ----------
Subordinated notes payable
  (Note 7)......................      15,000        15,000
Other long-term liabilities.....       2,431         3,510

Commitments and contingencies
  (Notes 7 and 12)..............       --             --

Stockholders' equity (Note 9):
  Preferred stock, $1.00 par value,
     1,000,000 shares authorized
     and none  issued...........       --             --
  Common stock, $.01 par value,
     20,000,000 shares authorized
     and 5,000,000 issued.......          50            50
  Capital in excess of par value       9,023         7,993
  Retained earnings.............      25,587        14,550
                                   ----------    -----------
                                      34,660        22,593
  Notes receivable from employees      --             (698)
  Treasury stock, at cost
     (660,554 shares in 1995 and
      447,352 shares in 1996)...      (5,887)       (4,102)
                                   ----------    -----------
Total stockholders' equity......      28,773        17,793
                                   ----------    -----------
Total liabilities and
  stockholders' equity..........  $   91,530      $ 92,690
                                   ----------    -----------
                                   ----------    -----------
</TABLE>
              See accompanying notes.
                              F-2
<PAGE>

                           CTA INCORPORATED
                CONSOLIDATED STATEMENTS OF OPERATIONS                       
                (IN THOUSANDS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>

                                    YEAR ENDED DECEMBER 31,
                                    -----------------------
                                     1994     1995     1996
                                   -------  -------  -------

<S>                               <C>      <C>      <C>
Contract revenues................ $143,071 $217,007 $179,703
Cost of contract revenues........  121,675  196,656  170,706
Selling, general and
  administrative expenses........    8,950    9,798    9,194
Other expenses...................      833      318   12,355
                                   -------  -------  -------
Operating profit (loss)..........   11,613   10,235  (12,552)
Interest expense.................    3,627    4,116    4,235
                                   -------  -------  -------
Income (loss) before income taxes    7,986    6,119   (6,787)
Income taxes (benefit) (Note 10).    3,434    2,448   (5,750)
                                   -------  -------  -------
Income (loss) from continuing
  operations.....................    4,552    3,671  (11,037)
Loss from discontinued operations,
 net of income taxes (Note 13)...      (93)  (1,725)   --
                                   -------  -------- -------
Net income (loss)................ $  4,459 $  1,946 $(11,037)
                                   -------  -------- -------
                                   -------  -------- -------
Earnings (loss) per share:
  Continuing operations.......... $   .95  $   .78  $ (2.49)
  Discontinued operations........    (.02)    (.37)     --
                                   -------  -------- -------
Earnings (loss) per share........ $   .93  $   .41  $ (2.49)
                                   -------  -------- -------
                                   -------  -------- -------

Weighted average shares
  outstanding...................4,783,333 4,709,268 4,437,543
                                --------- --------- --------
                                --------- --------- --------

</TABLE>
                     See accompanying notes.

                               F-3
<PAGE>


                               CTA INCORPORATED
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    (IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>

             COMMON STOCK                      NOTES
             ------------ CAPITAL IN        RECEIVABLE TREASURY STOCK
                     PAR  EXCESS OF RETAINED   FROM    --------------
             SHARES VALUE PAR VALUE EARNINGS EMPLOYEES SHARES   COST
             ------ ----- --------- -------- --------- ------  -----
<S>        <C>       <C>   <C>      <C>       <C>     <C>     <C>
Balance,
 January 1,
 1994..... 5,000,000 $ 50  $ 8,098  $ 19,182  $  --   474,190 $2,913
Purchase of
 treasury
 stock....     --      --     --       --        --   397,573  3,486
Sale of
 treasury
 stock....     --      --      121     --        --   (74,304)  (528)
Issuance of
 stock for
 acquisition
 (Note 2)...   --      --      156     --        --   (57,293)  (344)
Exercise of
 stock
 options       --      --       18     --        --   (31,800)  (142)
Sale of
 treasury
 stock to ESOP
 (Note 8)....  --      --      109     --        --   (40,000)  (240)
Sale of
 treasury
 stock to
 401(k) plan
 (Note 8)....  --      --      218     --        --   (70,000)  (306)
Purchase of
 treasury
 stock from
 ESOP (Note 8) --      --     --       --        --    30,000    269
Compensatory
 issuance
 of common
 stock to
 employees/
 directors..   --      --      202     --        --   (74,181)  (445)
Net income..   --      --     --      4,459      --     --      --
             ------ -----     -----   -----   ------   ------   ------
Balance at
 December 31,
 1994.....  5,000,000  50    8,922   23,641      --   554,185   4,663

Purchase of
 treasury
 stock.....    --     --     --       --        --      73,842  684
Exercise of
 stock
 options...   --       --      (46)    --        --  (39,500)   (283)
Issuance of
stock for
 acquisition
 notes
 payable
 (Note 2)...  --       --       89     --        --  (39,936)   (286)
Purchase of
 treasury
 stock from
 ESOP(Note 8) --       --       --     --        --  138,100   1,296
Compensatory
 issuance
 of common
 stock to
 employees/
 directors..  --       --       58     --        --  (26,137)   (187)
Net income..  --       --       --   1,946       --    --        --
           -------   -----   -----   -----     -----  ------   ------
Balance at
 December 31,
 1995...... 5,000,000   50   9,023  25,587       --  660,554   5,887

Purchase of
 treasury
 stock.....    --       --    --     --          --   62,684     590
Sale of
 treasury
 stock.....    --       --       8   --          --   (3,913)    (28)
Exercise of
 stock
 options...    --       --  (1,452)  --          -- (224,670) (1,935)
Tax benefit of
 non-qualified
 stock options
 exercised...  --       --     377   --          --    --      --
Issuance of
 stock for
 acquisition
 notes
 payable
 (Note 2)...   --       --      30   --          --  (39,515)  (345)
Issuance of
 stock to
 employees
 for notes
 receivable.   --    --      --        --        698     --      --
Compensatory
 issuance
 of common
 stock to
 employees/
 directors..   --    --          7     --        --   (7,788)   (67)
Net (loss)..   --    --      --     (11,037)     --      --      --
            ------- ----- --------- -------- ------- -------  ------
Balance at
 December 31,
 1996..... 5,000,000 $ 50 $ 7,993   $14,550    $ 698 447,352 $4,102
           --------- ---- --------- -------- ------- ------- -------
           --------- ---- --------- -------- ------- ------- -------
</TABLE>

                            See accompanying notes.


                              F-4
<PAGE>

                    CTA INCORPORATED
           CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (IN THOUSANDS)
<TABLE>
<CAPTION>
                                        YEAR ENDED DECEMBER 31,
                                       ------------------------
                                        1994     1995     1996
                                       ------   ------   ------
<S>                                   <C>      <C>      <C>
OPERATING ACTIVITIES
Net income (loss).................... $ 4,459  $ 1,946  $(11,037)
 Adjustments to reconcile net income
 (loss) to net cash provided by
 (used in) operating activities:
Loss on disposal of SIM..............    --        718      --
 Depreciation and amortization:
 Furniture and equipment.............   2,418    2,877     3,734
 Capitalized software development
  costs..............................    --        131     1,108
 Other non-current assets............     605      610     1,018
 Deferred lease incentives...........    (832)    (382)     (292)
Provision for receivable allowances..    (236)    (990)      300
Accrued interest on subordinated debt   1,005    1,063     1,034
Other non cash expenses..............     738      432        (8)
Changes in assets and liabilities:
 Accounts receivable.................  (8,181)    (233)   (4,106)
 Recoverable income taxes............     808   (2,707)     (639)
 Other assets........................    (449)     933    (2,353)
 GEMnet investment...................  (6,251)  (1,011)    6,437
 Accounts payable and accrued expenses    973    5,089     1,595
 Excess of billings over costs and
  contract prepayments...............   7,990   (4,816)    1,556
  Deferred income taxes, net.........  (1,660)  (1,299)   (3,900)
                                       -------  -------   -------
Net cash provided by (used in)
 operating activities................   1,387    2,361    (5,553)
                                       -------  -------   -------
INVESTING ACTIVITIES
Investments in furniture and equipment (5,072)  (4,327)   (6,469)
Capitalized computer software........    (846)    (832)      (87)
Acquisition of subsidiaries..........    (500)    --        --
Other................................    --       --         351
                                       -------  -------   -------
Net cash used in investing activities  (6,418)  (5,159)   (6,205)
                                       -------  -------   -------
FINANCING ACTIVITIES
Net borrowings under bank line of
 credit agreement....................  12,109    1,324    12,011
Repayment of acquisition notes.......  (2,643)    (375)     (375)
Proceeds from deferred lease
 incentives..........................     150      150       315
Purchase of treasury stock...........  (3,755)  (1,980)    (458)
Proceeds from exercise of stock
 options.............................     160       12       10
Sale of treasury stock to ESOP and
 401(k) plan.........................     873     --        --
Other treasury stock sales...........     649     --         36
                                       ------   ------   ------
Net cash provided by (used in)
 financing activities................   7,543     (869)  11,539
                                       ------   ------   ------
Net increase (decrease) in cash and
 cash equivalents....................   2,512   (3,667)    (219)
Cash and cash equivalents at beginning
 of period...........................   1,390    3,902      235
                                       ------   -------  ------
Cash and cash equivalents at end of
 period.............................. $ 3,902  $   235   $   16
                                       ------   -------  ------
                                       ------   -------  ------
SUPPLEMENTAL INFORMATION
Cash paid during the year for:
  Income taxes....................... $ 3,698  $ 5,115  $   226
                                       ------   -------  ------
                                       ------   -------  ------
  Interest........................... $ 2,638  $ 2,863  $ 2,836
                                       ------   -------  ------
                                       ------   -------  ------
Noncash investing and financing activities:
  Investment in EarthWatch........... $  --    $  --    $ 2,038
                                       ------   -------  ------
                                       ------   -------  ------
  Conversion of note to common stock. $  --    $    375 $   375
                                       ------   -------  ------
                                       ------   -------  ------
  Common stock issued for notes...... $  --    $    225 $   473
                                       ------   -------  ------
                                       ------   -------  ------
  Purchase of minority interest of
   CTA Space Systems (Note 2):
    Common stock acquired............ $ 2,500  $  --    $  --
    Payment in CTA common stock......    (500)    --       --
    Cash payments....................    (500)    --       --
                                       ------   -------  ------
    Acquisition financing provided by
     seller.......................... $ 1,500  $  --    $  --
                                       ------   -------  ------
                                       ------   -------  ------
</TABLE>

                   See accompanying notes.

                              F-5
<PAGE>
                     CTA INCORPORATED

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    DECEMBER 31, 1996

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

     CTA INCORPORATED (the "Company")  provides  diversified professional and
technical  services  to  the  aerospace  and  defense communities  and  other
governmental  customers  in  the  areas  of  systems   engineering,  software
development, and high-performance embedded systems development.  The  Company
also  develops and manufactures satellites, satellite ground     systems  and
sensor  systems. During 1995, the Company disposed of its aircraft simulation
systems business.

LIQUIDITY

     The  Company's  cash  flow during 1996 and the first quarter of 1997 has
been  adversely  impacted  by  a   combination  of  operating  losses  and  a
significant  increase  in  accounts receivable  not  billable  until  certain
contract milestones are reached. The Company expects its liquidity to improve
substantially in the second  quarter  of  1997 upon completion of testing and
customer  acceptance  of  its Indostar-1 direct  broadcast  satellite  for  a
commercial  customer  in Indonesia.  A  delay  in  satisfaction  of  contract
milestones or approval  for  payment  by  the  customer could have a material
adverse effect on the Company's liquidity.

     The  Company  has been unable to comply with  certain  of  the  original
financial covenants  of  its  bank  credit  facility  and  subordinated  debt
agreements  since  March  31,  1996,  due  to  operating losses incurred. The
Company and its bank have agreed to modifications  of  the  covenants through
the  original  maturity of the credit facility on December 9, 1996  and  have
since agreed to  extensions  of  the  credit facility through June 9, 1997 at
negotiated terms that include, among other  things, a waiver of the financial
covenants  at December 31, 1996, relaxed covenants  for  the  quarter  ending
March 31, 1997  and  a  higher  effective  interest rate. The Company and the
holders of its subordinated debt have agreed  to  waivers  of  certain of the
financial  covenants  through  December  31,  1997, in exchange for a  higher
interest rate, the extent of which is based on whether the Company raises new
equity  capital  by  June  30,  1997.  The  Company  believes   it  has  good
relationships  with  its lenders and that the lenders will continue  to  work
with the Company. While the Company anticipates that it will be able to enter
into a new credit facility that includes a long term revolving credit

                              F-6
<PAGE>

                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

commitment, the inability  of  the  Company  to  renew  its  existing  credit
facility  or  to  obtain a replacement credit facility on the same or similar
terms could have a  material  adverse  effect  on  the  Company's  liquidity,
financial condition and results of operations.

     The  Company  is  pursuing  various  financing  alternatives,  including
raising  additional  equity capital, and, if necessary, would consider  other
alternatives  such as disposal  of  assets.  Management  believes  additional
capital is needed  to  fund  its  planned  strategic  initiatives  and growth
objectives.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the
Company and its subsidiaries. Significant intercompany 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.

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 ten
years. Leasehold improvements are amortized on a straight-line basis over the
terms of the leases, which range from  one  to  ten years. Purchased computer
software  used by the Company is amortized on a straight-line  basis  over  a
three-year period.

                              F-7
<PAGE>

                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COSTS IN EXCESS OF NET ASSETS ACQUIRED

     Costs  in  excess  of  net assets are amortized on a straight-line basis
over periods of 5 to 15 years.  Accumulated amortization at December 31, 1995
and 1996 was $2,205,000 and $2,790,000, respectively.

CAPITALIZED COMPUTER SOFTWARE COSTS

     Included in other assets at  December  31,  1995  and  1996 are costs to
develop software to be marketed to third parties of  $1,547,000 and $525,000,
respectively,  net  of  accumulated  amortization.  The  amount  of  software
development  costs capitalized in 1994, 1995 and 1996 was $846,000,  $832,000
and $87,000, respectively.  Amortization  of  capitalized  software  costs is
provided  on a product-by-product basis at the greater of the amount computed
using the ratio  of  current  gross  revenues  for a product to the total  of
current  and anticipated future gross revenues or  the  straight-line  method
over the estimated economic life of the product. An original economic life of
five  years  is  assigned to capitalized computer software development costs.
Amortization expense  was  $  0,  $131,000 and $1,108,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.

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,  primarily based on contract costs incurred to date compared with
total estimated costs at completion. 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. Costs are  recognized
on  the  percentage-of-completion  method  of  accounting  based on the total
estimated cost at completion.

                              F-8

<PAGE>
                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     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. A cumulative effect adjustment for refinements  in
profit  estimates  on  contracts  in  process  at  the  beginning of the year
favorably  impacted  fourth  quarter  1994  profitability  on  contracts   by
approximately  $1.0  million.  During  the first quarter of 1996, the Company
recorded adjustments to the profitability  of  the  Indostar and Eastern Zone
contracts  that reduced operating profit by $5.0 million.  These  adjustments
resulted from  the  Company's  periodic  reviews of contract financial status
performed in the ordinary course of business.

     Contract costs, including indirect costs  for  cost-type  contracts, are
subject  to  audit  by  government  representatives.  Such  audits have  been
completed  through  1991. 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.

RESEARCH AND DEVELOPMENT COSTS

     The Company has included in selling, general and administrative expenses
total independent research and development  costs  of approximately $890,000,
$2,587,000 and $1,014,000 for the years ended December  31,  1994,  1995, and
1996, respectively.

STOCK-BASED  COMPENSATION

     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.


                              F-9
<PAGE>

                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


EARNINGS PER SHARE

     Earnings per share is computed based on the weighted average number of
common and common equivalent shares outstanding, including shares owned by
the Company's employee stock ownership plan. Stock options are considered to
be common equivalent shares when dilutive.

NEW ACCOUNTING PRONOUNCEMENTS

     The Company adopted Statement of Financial  Accounting  Standards (SFAS)
No.  121, "Accounting for the Impairment of Long-Lived Assets and  for  Long-
Lived  Assets  to  be  Disposed  of," effective January 1, 1996. SFAS No. 121
requires that certain long-lived assets  to  be held and used be reviewed for
impairment  whenever  events or changes in circumstances  indicate  that  the
carrying amount of an asset  may  not  be recoverable. Additionally, SFAS No.
121 requires that certain long-lived assets  to be disposed of be reported at
the lower of carrying amount or fair value less  cost  to sell. The effect of
adopting SFAS No. 121 was not significant.

     The   Company   adopted   SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation" in 1996. While SFAS  No.  123  established financial accounting
and reporting standards for stock-based employee  compensation  plans using a
fair value method of accounting, it allows companies to continue  to  measure
compensation  cost  for  those  plans  using  the  intrinsic  value method of
accounting as prescribed in Accounting Principles Board (APB) Opinion No. 25,
"Accounting  for Stock Issued to Employees." Should a company choose  not  to
change its accounting  method,  it  must disclose the pro forma effect on net
earnings and earnings per share as if the fair value method had been adopted.
The Company will continue its present APB Opinion No. 25 accounting treatment
for stock-based compensation.

RECLASSIFICATIONS

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


                              F-10
<PAGE>


                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

2. ACQUISITION

     In July 1992, the Company acquired a 79%  interest  in CTA Space Systems
(CTASS) for $10.3 million, $4.9 million of which was paid  in  cash  with the
remainder financed by the selling shareholders at an imputed interest rate of
8.5%  per  annum. Principal payments on the acquisition notes of $3.0 million
and $2.4 million  were paid in July 1993 and July 1994, respectively. In July
1994, the Company acquired the remaining CTASS common stock for $2.5 million,
payable 50% in cash  and  50% in the Company's common stock. The Company paid
the cash portion with payments  of  $500,000,  $375,000 and $375,000 in 1994,
1995 and 1996, respectively, and the common stock  portion  with issuances of
57,293 shares in 1994, 39,936 shares in 1995 and 39,515 shares  in  1996. The
number  of  shares  of common stock issued as payment were based on the  then
current fair market value of the common stock.

3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
                                            DECEMBER 31,
                                            -----------
                                           1995     1996
                                          ------   ------
                                           (IN THOUSANDS)
<S>                                     <C>       <C>
Accounts receivable:
  U.S. Government:
     Billed.......................      $ 41,624  $ 33,578
     Unbilled:
      Contracts in progress.......        10,373     8,474
      Amounts awaiting contractual
       coverage...................         5,823     4,717
      Revenue awaiting government
       approval of final indirect
        rates or contract close-
        out.......................         1,138     1,360
  Commercial customers:
     Billed.......................          --       2,202
     Unbilled:
      Contracts in progress.......         2,328    15,104
                                         --------  --------
                                          61,286    65,435
Less allowances...................        (2,700)   (3,108)
                                         --------  --------
                                        $ 58,586  $ 62,327
                                         --------  --------
                                         --------  --------
</TABLE>
                              F-11

<PAGE>
                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

3. ACCOUNTS RECEIVABLE (CONTINUED)

     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, 1995 and 1996, approximately $1.6 million
and  $2.9  million  respectively,  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.


4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT BALANCES
<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                            -------------
                                            1995     1996
                                           ------   ------
                                            (IN THOUSANDS)
<S>                                      <C>       <C>
Other current assets:
  Receivables from employees and
   stockholders (Note 11)............... $   849   $ 1,175
  Other.................................   2,848     3,053
                                          ------   -------
                                         $ 3,697   $ 4,228
                                          ------   -------
                                          ------   -------
</TABLE>

                              F-12
<PAGE>


                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT
    BALANCES (CONTINUED)
<TABLE>
<CAPTION>

                                             DECEMBER 31,
                                            -------------
                                            1995     1996
                                           ------   ------
                                            (IN THOUSANDS)
<S>                                      <C>       <C>
Furniture and equipment:
  Data processing equipment............. $ 9,764   $ 9,433
  Office furniture and equipment........   8,586     8,431
  Manufacturing and test equipment......   1,654     6,048
  Other equipment.......................     207       959
  Leasehold improvements................   1,090     1,277
                                          ------   -------
                                          21,301    26,148
  Accumulated depreciation and
   amortization......................... (14,517)  (16,073)
                                          ------   --------
                                         $ 6,784  $ 10,075
                                          ------   --------
                                          ------   --------
Other assets:
  Investment in and notes receivable
   from SIM (Note 13)................... $ 2,370  $  2,138
  Investment in EarthWatch (Note 6).....    --       2,038
  Capitalized software costs, net.......   1,547       525
  Deferred tax asset (Note 10)..........     750     1,385
  Other.................................   2,145     1,373
                                          ------   --------
                                         $ 6,812  $  7,459
                                          ------   --------
                                          ------   --------
Accrued expenses:
  Salaries and incentives............... $ 3,664  $  3,608
  Employee benefit plans................     492       147
  Other.................................     648       286
                                          ------   --------
                                         $ 4,804  $  4,041
                                          ------   --------
                                          ------   --------
</TABLE>

                              F-13
<PAGE>

                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

5. GEMnet INVESTMENT

     In 1994, the Company began an initiative  to  enter  the wireless global
data communications market through development and construction  of  its  low
earth  orbit  (LEO)  satellite,  GEMnet.  Construction  of this satellite was
completed in 1995 but the satellite was destroyed because of a failure of the
launch  vehicle.  The  Company  recovered $6.1 million of insurance  proceeds
related  to  the launch failure which  were  applied  against  program  costs
incurred. The  remaining  GEMnet  assets  consisted  primarily  of  satellite
software  and  ground  station  and other equipment. The Company intended  to
utilize  these  assets  in  the  future   development   of  a  LEO  satellite
constellation or to invest them in a joint venture which  would  continue  to
pursue the Company's global data communications initiatives.

     The  development  of  the GEMnet satellite and the full satellite system
requires capital in excess of  that  committed  or currently available to the
Company. During 1996, the Company was unable to raise  the additional capital
necessary  to  proceed  with the program at this time. Due  to  technological
advances, it is not certain  at  this  time that the same technology would be
utilized  in  the program. The ultimate recoverability  of  the  expenditures
incurred to date  and  any  future  investments  in GEMnet depends on various
factors, including the success of the Company's efforts  to  obtain  licenses
needed to operate the satellite system, the ability to finance development of
the  satellite  system,  and  the  ability  to develop sufficient business to
support profitable operations. Based on these  uncertainties, the Company, in
the fourth quarter of 1996, wrote off $6.4 million of its previous investment
in GEMnet, which is included in other expenses in the accompanying statements
of  operations,  and  transferred  the  remaining  assets  to  furniture  and
equipment for use in other programs.

6. INVESTMENT IN EarthWatch

     In May 1994, the Company entered into an agreement with EarthWatch, Inc.
("EarthWatch")  pursuant  to  which it is manufacturing  two  remote  sensing
satellites.  Total  consideration  under  the  fixed-price  portion  of  this
contract consists of  $4.0 million in cash and 1,018,750 shares of EarthWatch
preferred  stock  valued  at  $4.00  per  share  which  is  convertible  into
approximately 4.7 percent of EarthWatch's fully diluted equity
as of December 31, 1996. Other assets at December 31, 1996

                              F-14
<PAGE>
                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

6. INVESTMENT IN EarthWatch (CONTINUED)

include 509,374 shares  of  such  stock,  carried  at  a  cost  basis of $2.0
million,  received  in  1996  as a milestone payment under the contract  with
EarthWatch. The remaining milestone  payments payable in EarthWatch preferred
stock are 254,687 shares to be issued  upon  delivery  of the first satellite
and 254,689 shares to be issued upon delivery of the second satellite.

7. NOTES PAYABLE AND SUBORDINATED DEBT

BANK DEBT

     In  December  1993,  the Company and its subsidiaries  entered  into  an
agreement  with  a  bank  for  a  revolving  credit  facility  providing  the
availability  to borrow up to $30,000,000,  which  includes  a  facility  for
letters of credit  up to $10,000,000. The revolving line of credit expired on
December 9, 1996 but  has  been  extended  until  June  9,  1997. The current
arrangement  provides  an  additional credit facility of $4,500,000  that  is
reduced or eliminated upon collection  of  certain  amounts  on  the Indostar
contract, completion of one or more private equity placements or at specified
dates through June 9, 1997.

     At  December  31,  1995 and 1996, there was $16,324,000 and $28,335,000,
respectively, outstanding  under  the  credit  facility. 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 1.25%, at the
Company's  discretion.  The  weighted  average rate in effect for  short-term
borrowings at December 31, 1995 and 1996  was  approximately  7.6%, and 6.8%,
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. See additional discussion in Note 1 under "Liquidity."

SUBORDINATED DEBT

     In December 1993, the Company entered  into  a  note  purchase agreement
(the "Notes Agreement") providing for $15,000,000 aggregate  principal amount
of  unsecured,  senior  subordinated  notes  (the  "Notes").  The Notes  bear
interest  at  12.0%  per  annum  (13.0%  effective  April  1,  1996), payable
quarterly. The Notes may be prepaid at any time beginning in 1997, subject to a

                              F-15
<PAGE>

                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

7. NOTES PAYABLE AND SUBORDINATED DEBT(CONTINUED)

premium starting at 6.86% and declining annually to zero at maturity  of  the
Notes  in 2001. These premiums are subject to reduction to 50% of the premium
otherwise  payable if made after the occurrence of a "Qualifying Sale" of the
Company's common  stock  as  defined  by  the Notes Agreement. The Company is
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  results  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 provide for payment of contingent interest over and above
the  13.0% fixed rate upon the occurrence of a change of control in ownership
of the  Company,  sales  of  the Company's common stock by the Company or its
shareholders as defined in the  Notes  Agreement  as a "Qualifying Sale" or a
"Secondary Sale to the public," or at December 31,  1998,  at the election of
the  holders  of  the Notes. If no Qualifying Sale or change of  control  has
occurred, the ultimate  amount  of  the  contingent  interest is based on the
greater of amounts resulting from several calculations  as  specified  in the
Notes Agreement, some of which are based on the market value of the Company's
common  stock  as  determined  in  annual  valuations  by  an  appraisal. The
contingent  interest  is  intended  to approximate 10% of the Company's  fair
market. The Company recognizes interest  expense  annually  for  the pro rata
amount of contingent interest estimated to be payable at December 31, 1998.

     Minimum scheduled principal repayments of the Notes commence in 1998 and
are  as  follows:  $3,000,000  in 1998 through 1999, $4,000,000 in 2000,  and
$5,000,000 in 2001.

     The loan agreements require  advance  approval by the lenders of payment
of dividends. The agreements also include financial  covenants  which require
the Company and subsidiaries to maintain certain financial ratios and provide
restrictions  on  capital expenditures. See additional discussion in  Note  1
under "Liquidity."

8. EMPLOYEE BENEFIT PLANS

     Substantially all of the Company's employees are eligible to participate
in the Company's employee stock ownership plan

                              F-16
<PAGE>

                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

("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. The ESOP allows only
Company contributions, in cash or in common stock, as determined by the Board
of Directors. 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, 1996, no shares of the Company's common
stock have been distributed by the  ESOP.  At December 31, 1995 and 1996, the
ESOP owned  514,720 shares of the Company's  common  stock, all of which have
been allocated to plan participants.

     The  Company and its subsidiaries maintain 401(k)  savings  plans  which
allow for Company  and  employee contributions based upon a percentage of the
participating employee's  salary.  Employee  vesting in Company contributions
ranges from one to four years. Beginning in 1994,  participants  could choose
to  invest  their  contributions  in  Company common stock. During 1994,  the
Company's 401(k) plan acquired 70,000 shares  of the Company's treasury stock
on behalf of the plan participants. The Company's  401(k)  plan  owned 70,000
shares of the Company's common stock at December 31, 1995 and 1996.

     Amounts  charged  to  expense  under  the  above  plans were $2,077,000,
$2,089,000  and $2,024,000 for the years ended December 31,  1994,  1995  and
1996, respectively.  The Company currently provides no significant other post
retirement benefits.

9. COMMON STOCK AND STOCK OPTIONS

     All  of  the  Company's   outstanding  shares  contain  restrictions  on
transferability.  Shares  of common  stock  held  by  two  of  the  Company's
principal stockholders are subject to a buy-sell arrangement with the Company
which contains repurchase features under specified circumstances. At December
31,  1996,  none  of  the  specified   circumstances  exist.  Certain  former
participants in a terminated benefit plan hold approximately

                         F-17
<PAGE>

                    CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

9. COMMON STOCK AND STOCK OPTIONS (CONTINUED)

28,510 shares of the Company's common stock which contain provisions for
repurchase by the Company, at the  option of those stockholders.

     In December 1991, the Company adopted the 1991 Stock Option and Purchase
Plan which reserves 1,300,000 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 5 to 10 years and
provide for vesting periods of 3 years. As of December 31, 1996, options for
580,187 shares are available for grant under this plan. 

<TABLE>
<CAPTION>
                                         NUMBER OF SHARES
                                   ----------------------------
                                      YEAR ENDED DECEMBER 31,
                                   ----------------------------
                                    1994       1995        1996
                                   ------     ------      -----
<S>                                <C>       <C>        <C>
Options outstanding at beginning
 of year (weighted average
 exercise price of $3.95 in 1994,
 $4.16 in 1995 and $3.80 in 1996)  568,190   587,975    467,225
Granted(weighted average exercise
 price of  $8.45 in 1994, $9.36
 in 1995 and $9.49 in 1996).......  56,135    15,250    399,508
Canceled(weighted average exercise
 price $7.17 in 1994, $6.08 in 1995
 and $4.18 in 1996)................ (4,550)  (96,500)    (1,000)
Exercised(weighted average exercise
 price of $5.03 in 1994, $6.01 in
 1995 and $2.15 in 1996)...........(31,800)  (39,500)  (224,670)
                                   -------   -------    -------
Options outstanding at end of year
 (weighted average exercise price
  of $4.16 in 1994, $3.80 in 1995
  and $7.92 in 1996).............. 587,975   467,225    641,063
                                   -------   -------    -------
                                   -------   -------    -------
Options exercisable at end of year
 (weighted average exercise price
  of $3.67 in 1994, $3.33 in 1995
  and $4.96 in 1996).............. 487,093   412,122    195,511
                                   -------   -------    -------
                                   -------   -------    -------
</TABLE>
                                F-18
<PAGE>

                    CTA INCORPORATED

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                    DECEMBER 31, 1996

9. COMMON STOCK AND STOCK OPTIONS (CONTINUED)

     The weighted average grant date fair value of an option granted during
the years ended December 31, 1995 and 1996 was $4.06 and $3.82, respectively.
The Company uses the Black-Scholes model to estimate the fair values of
options, assuming a risk-free interest rate equal to the 90 day U.S. Treasury
Bill rate,  expected lives of 5 to 10 years, an expected volatility factor of
 .23 and no expected dividends. The Company recognized no compensation expense
for stock option grants during the three years in the period ended December
31, 1996.

<TABLE>
<CAPTION>
                   
     RANGE OF EXERCISE PRICES                DECEMBER 31, 1996
     ------------------------                -----------------
      <S>                                         <C> 
      $4.03-$6.01:
       Options outstanding:
          Number of shares.................       179,450
          Weighted average exercise price..         $4.30
          Weighted average remaining
           contractual life (in years).....           2.4
       Options exercisable:
          Number of shares.................       165,450
          Weighted average exercise price..         $4.31
     $7.17-$9.49:
       Options outstanding:
          Number of shares.................       461,613
          Weighted average exercise price..         $9.33
          Weighted average remaining
           contractual life (in years).....           6.4
       Options exercisable:
          Number of shares.................        30,061
          Weighted average exercise price..         $8.50
</TABLE>


     Statement of Financial Accounting Standards  No.  123,  "Accounting  for
Stock-Based  Compensation,"  is  applicable  only  to  stock  options granted
subsequent  to December 31, 1994. The pro-forma impact of applying  SFAS  No.
123 to net income  (loss)  and related per share amounts was not material for
1995 and 1996. However, the  pro  forma  compensation expense associated with
options granted subsequent to December 31, 1994 would generally be recognized
over a three year vesting period; therefore,  the  initial impact of applying
SFAS  No. 123 on pro forma net income (loss) is not   representative  of  the
potential  impact on pro forma net income in future years, when the pro forma
effect would be fully reflected.

                              F-19
<PAGE>

                      CTA INCORPORATED

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

10. INCOME TAXES

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

                                    YEAR ENDED DECEMBER 31,
                                   ------------------------
                                    1994     1995     1996
                                   ------   ------   ------
                                        (IN THOUSANDS)
<S>                              <C>       <C>      <C>
Current:
  Federal....................... $ 4,254   $ 3,346  $(1,950)
  State.........................     838       640      100
                                   ------   ------   ------
                                   5,092     3,986   (1,850)
                                   ------   ------   ------
Deferred:
  Federal.......................  (1,531)   (1,345)  (3,400)
  State.........................    (127)     (193)    (500)
                                   ------   ------   ------
                                  (1,658)   (1,538)  (3,900)
                                   ------   ------   ------
                                 $ 3,434   $ 2,448  $(5,750)
                                   ------   ------   ------
                                   ------   ------   ------
</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.
Significant components  of  the Company's deferred tax assets and liabilities
are as follows:

                              F-20
<PAGE>


                      CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

10. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>

                                              DECEMBER 31,
                                             -------------
                                             1995     1996
                                             ----     ----
                                             (IN THOUSANDS)
<S>                                       <C>       <C>
Current deferred tax liabilities:
  Unbilled receivables................... $ 4,832   $ 5,820
  Change in accounting for tax reporting.     985       --
  Other..................................   2,755       185
                                            -----     -----
                                            8,572     6,005
                                            -----     -----
Current deferred tax assets:
  Contract provisions and allowances.....   2,746     3,707
  Accrued vacation.......................     693       704
  Other .................................     491       217
                                            -----     -----
                                            3,930     4,628
                                            -----     -----
Net current deferred tax liabilities..... $ 4,642  $  1,377
                                            -----     -----
                                            -----     -----
Long-term deferred tax assets (liabilities):
  Accrued interest on subordinated debt   $   818   $ 1,240
  Net operating loss carryforward........     --        504
  Other .................................     (68)      145
                                            -----     -----
                                              750     1,889
   Less: valuation allowance.............     --       (504)
                                            -----     -----
Net long-term deferred tax assets........ $   750  $  1,385
                                            -----     -----
                                            -----     -----
</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:


                              F-21
<PAGE>

                      CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

10. INCOME TAXES (CONTINUED)

<TABLE>
<CAPTION>
                                   YEAR ENDED DECEMBER 31,
                                  ------------------------
                                  1994      1995      1996
                                  ----      ----      ----
                                       (IN THOUSANDS)
<S>                            <C>        <C>      <C>
Federal income taxes at
 statutory rate............... $ 2,795    $ 2,142  $(5,875)
State income taxes, net of
 Federal tax benefit..........     444        290     (309)
Goodwill amortization.........     212        252      235
Foreign sales corporation (FSC)
 benefit......................     --        (243)     --
Other.........................     (17)         7      199
                                 -----      -----    -----
                               $ 3,434    $ 2,448  $(5,750)
                                 -----      -----    -----
                                 -----      -----    -----
</TABLE>

11. TRANSACTIONS WITH RELATED PARTIES

     The Company has made loans 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 are secured by deeds of trust on
residential property. The loans bear 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 January 1996. At
December  31,  1995  and 1996, $631,000 and $556,000, respectively,  remained
outstanding  under these  loans.  The  remaining  outstanding  loan is due on
demand.

     The  Company  has  made loans totaling $884,000 to certain officers  and
employees related to the  exercise  of   options  to  acquire  common  stock.
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.

12. 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 require the
Company to pay maintenance and

                              F-22
<PAGE>

                      CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)

operating expenses such as taxes, insurance  and  utilities  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  for the years ended December 31, 1994, 1995 and 1996 was $5,045,000,
$4,602,000 and $4,391,000, respectively.

     At December 31, 1996, total future minimum rental commitments under non-
cancelable leases are summarized as follows (in thousands):
<TABLE>
               <S>                        <C>
               1997.....................  $ 3,650
               1998.....................    3,475
               1999.....................    2,620
               2000.....................    1,125
               2001.....................      275
                                          -------
                                          $11,145
                                          -------
                                          -------
</TABLE>

     At December  31,  1996,  the  Company  had  a  6.75% limited partnership
interest in its corporate headquarters building in Rockville,  Maryland  that
vests up to 9.5% over the life of the lease.

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  Company  intends to vigorously defend
itself against the claims. However, as the arbitration  is  in  its  earliest
stages, the Company is unable to predict the outcome or its potential  effect
on  the Company's financial condition or results of operations. There can  be
no assurance that such arbitration, if adversely determined, would not have a
material  adverse  effect  on the Company's financial condition or results of
operations.

                              F-23
<PAGE>

                     CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)

     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.

13. SALE OF SIMULATION SYSTEMS DIVISION

     In  September  1995,  the  Company  entered  into  an  agreement to sell
substantially all of the assets of 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.  The  assets  of  the division  consisted
primarily of a cockpit flight simulator and various fixed  assets,  which had
an aggregate book value of $3.1 million, net of accumulated depreciation. SIM
is  currently  seeking  Federal Aviation Administration certification of  the
simulator to enhance its  value.  Realization  of  the  investment  and notes
receivable totaling $570,000 are dependent primarily on the future success of
the  business  and/or the collateral securing the note, while the realization
of a note totaling  $1,800,000  is  dependent on the proceeds from the use or
sale of the simulator. The investment  and  notes receivable are periodically
reviewed by management for impairment considering,  among  other factors, the
estimated fair value of the collateral.

DISCONTINUED OPERATIONS

     The consolidated statements of operations exclude sales  and expenses of
discontinued  operations  from captions applicable to continuing  operations.
Net  sales of SIM prior to its  disposition  were   $9,720,000  in  1994  and
$470,000 in 1995. The loss from operations of the SIM business was $93,000 in
1994 and  $1,260,000  in 1995, net of income tax. The 1995 loss from disposal
of the business was $465,000,  net  of  income  tax.  The  income tax benefit
related  to  discontinued  operations  was $72,000 in 1994 and $1,149,000  in
1995.

                              F-24
<PAGE>

                     CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

14. OTHER INFORMATION

MAJOR CUSTOMERS

     The percentage of contract revenues  from U.S. Government customers that
comprise 10% or more of total revenues were as follows:
<TABLE>
<CAPTION>


                                        YEAR ENDED DECEMBER 31,
                                        -----------------------
                                        1994     1995     1996
                                        ----     ----     ----
<S>                                      <C>      <C>      <C>
Department of Defense................    36%      31%      35%
National Aeronautics and Space
 Administration......................    --       19%      20%
Department of Transportation.........    16%      --       --
General Services Administration......    11%      --       --
</TABLE>

     In addition, 27% and 25% of the Company's  total  revenues  were  from a
single  commercial  customer  of  its  space  and  telecommunications systems
segment for the years ended December 31, 1995 and 1996, respectively.

     Revenues recognized from foreign sales were $58,233,000  and $45,465,000,
payable in U.S. dollars, during the years ended December 31, 1995 and 1996, 
respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying value of cash and cash equivalents and notes  payable under
the  Company's  line  of  credit  approximate  their fair market values.  The
Company's subordinated notes payable (see Note 7) are not readily marketable.
In addition to the fixed 13% interest rate, the  Notes  provide  for the one-
time  payment  of  contingent  interest  based  on  the  market  value of the
Company's common stock. Management estimates the fair value of the  Notes  to
be  approximately  $20,000,000  at  December  31, 1996, which compares to the
approximately  $18,000,000  recorded  value of the  Notes  plus  the  accrued
contingent interest to date.

FORMULA FOR DETERMINING FAIR MARKET VALUE OF COMMON STOCK

     In 1991, the Board of Directors of  the  Company  approved  the use of a
formula  for  assessing the fair market value of the Company's common  stock.
Net  book  value,  contract  revenues,  income  from  continuing  operations,
contract margin  and  weighted  average shares outstanding constitute some of
the financial statement factors considered in this formula.

                              F-25
<PAGE>

                     CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

15. BUSINESS SEGMENTS

     The Company operates in three  principal  business  segments:  Space and
Telecommunications  Systems, Information Technology (IT) Services and  Mobile
Information and Communications  Services.  The  Space  and Telecommunications
Systems  business  principally designs and manufactures small  low-earth  and
geosynchronous orbit  satellites and related support systems. The Information
Technology Services business comprises the Company's historical business base
of providing IT services  for  a variety of customers. The Mobile Information
and Communications Services business  has  been  formed  to pursue commercial
applications  of  the Company's proprietary technology in innovative  IT  and
space-based or wireless  solutions  to  a  variety of applications, including
mobile asset tracking and remote fixed asset  monitoring.  Segment  data  has
been  adjusted  from  previously reported amounts to reflect treatment of the
Simulation Systems Division as a discontinued operation and to conform to the
current income statement  presentation.  The following table provides certain
financial information for each business segment:
<TABLE>
<CAPTION>

                                        YEAR ENDED DECEMBER 31,
                                        -----------------------
                                        1994     1995     1996
                                        ----     ----     ----
                                            (IN MILLIONS)
<S>                                   <C>       <C>      <C>
Contract revenues:
  Information Technology Services...  $107.5    $109.4   $100.0
  Space and Telecommunications Systems  35.6     107.6     79.7
  Mobile Information and Communications
   Services............................  --        --       --
                                       -----     -----    -----
                                      $143.1    $217.0   $179.7
                                       -----     -----    -----
                                       -----     -----    -----
Operating profit (loss):
  Information Technology Services...  $ 10.6    $  5.9   $  3.1
  Space and Telecommunications Systems   1.8       5.6     (3.6)
  Mobile Information and Communications
   Services............................  --       (1.0)    (8.6)
  Other expenses.......................  (.8)      (.3)    (3.5)
                                       -----     -----    -----
                                      $ 11.6    $ 10.2   $(12.6)
                                       -----     -----    -----
                                       -----     -----    -----
</TABLE>
                              F-26
<PAGE>
                     CTA INCORPORATED

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     DECEMBER 31, 1996

15. BUSINESS SEGMENTS(CONTINUED)
<TABLE>
<CAPTION>

                                        YEAR ENDED DECEMBER 31,
                                        -----------------------
                                        1994     1995     1996
                                        ----     ----     ----
                                            (IN MILLIONS)
<S>                                    <C>      <C>      <C>
Depreciation and amortization expense:
  Information Technology Services..... $ 1.9    $ 1.6    $ 2.4
  Space and Telecommunications Systems   0.5      1.4      2.0
  Mobile Information and Communications
   Services............................  --       --       0.4

Capital expenditures:
  Information Technology Services..... $ 2.1    $ 1.4    $ 1.0
  Space and Telecommunications Systems   3.0      2.8      5.4
  Mobile Information and Communications
   Services............................  --       0.1      0.1

Identifiable assets:
  Information Technology Services......$29.6    $42.4    $32.8
  Space and Telecommunications Systems  46.2     32.1     51.6
  Mobile Information and Communications
   Services............................  6.3      7.3      0.5
  General corporate assets.............  7.7      9.7      7.8
                                       -----     -----    -----
                                       $89.8    $91.5    $92.7
                                       -----     -----    -----
                                       -----     -----    -----
</TABLE>

     The  operating profit in 1996 for the  Information  Technology  Services
segment  was   adversely  impacted  by  a  $2.6  million  adjustment  to  the
profitability of  the  Eastern  Zone contract. The operating loss in 1996 for
the Space and Telecommunications  Systems  segment  includes  a  $2.8 million
reduction  to the profitability of the Indostar contract. The operating  loss
in 1996 for  the  Mobile  Information  and  Communications  Services  segment
includes the write-off of the investment in GEMnet of $6.4 million (see  Note
5).  Other  expenses  in 1996 include $0.9 million related to an unsuccessful
initial public offering.

                              F-27

<PAGE>

                               Schedule II


                             CTA INCORPORATED
                Valuation and Qualifying Accounts and Reserves
                                 ($000)

                     ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
                   Balance,         Charged to Costs   Charged to                         Balance, End of
                   Beginning OF     and EXPENSES       Other ACCOUNTS                     PERIOD
DESCRIPTION        PERIOD                                              DEDUCTIONS
<S>                <C>              <C>                <C>             <C>                <C>
For the year ended
December 31, 1994

                        $3,926             $520              $0               $756             $3,690
For the year ended
December 31, 1995

                        $3,690             $200             $292             $1,482            $2,700
For the year ended
December 31, 1996

                        $2,700             $300             $108               $0              $3,108
</TABLE>
                              F-28
<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 CTA INCORPORATED and in the  related  prospectus of
our  report dated March 26, 1997, with respect to the consolidated  financial
statements  of CTA INCORPORATED included in the Annual Report (Form 10-K) for
the year ended December 31, 1996.

                                   /s/Ernst & Young LLP

Washington, D.C.
March 26, 1997
                           F-29
<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.


                                   CTA INCORPORATED


Date: March 31, 1997               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,
 Chief Executive Officer and Director   Date: March 31, 1997


By:/S/ RICARDO DE BASTOS
Ricardo de Bastos
President - Space and
 Telecommunications Systems
 and Director                           Date: March 31, 1997


By:/S/ RAYMOND V. MCMILLAN
Raymond V. McMillan
President - Information Technology
 Services
 and Director                           Date: March 31, 1997


By:/S/ GREGORY H. WAGNER
Gregory H. Wagner
Executive Vice President, Chief
 Financial Officer, Principal
 Accounting Officer and Treasurer       Date: March 31, 1997




By:/S/ HARVEY D. KUSHNER
Harvey D. Kushner
Director                           Date: March 31, 1997


By:/S/ GEORGE W. MORGENTHALER
George W. Morgenthaler
Director                           Date: March 31, 1997


By:/S/ JAMES M. PAPADA, III
James M. Papada, III
Director                           Date: March 31, 1997


By:/S/ ARTURO SILVESTRINI
Arturo Silvestrini
Director                           Date: March 31, 1997


By:/S/ JOHN L. SLACK
John L. Slack
Director                           Date: March 31, 1997


By:/S/ GREGORY H. WAGNER
Gregory H. Wagner
As Attorney-in-Fact                   Date: March 31, 1997