content: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
  
                                      FORM 10-Q
  
  (Mark One)
  
  [X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934
  
                  for the quarterly period ended December 31, 1996
  
                                         OR
  
  [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934
  
             For the transition period from ____________ to ____________
                             Commission file No. 0-9613
  
                            NUCLEAR RESEARCH CORPORATION
               (Exact name of Registrant as specified in its charter)
  
          Pennsylvania                                      1343870
  (State or other jurisdiction                         (I.R.S. Employer
  of organization)                                     Identification No.)
  
  125 Titus Avenue, Warrington, Pennsylvania                 18976
     (Address of Principal Executive Offices)             (Zip Code)
  
                                   (215) 343-5900
                (Registrant's telephone number, including area code)
  
       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. Yes X No
  
       As of February 14, 1997, the Registrant had 28,175 shares of its common
  stock outstanding.
  
  
  
  
  <PAGE>
  
  
  
                                        INDEX
  
  Number                                                                     Page
  
  PART I.   Financial Information.
  
  Item 1.   Consolidated Financial Statements.
  
            Consolidated Balance Sheets - December 31, 1996 and June 30,
                 1996...........................................................1
  
            Consolidated Statements of Operations - Three Months Ended
                 December 31, 1996 and 1995.....................................3
  
            Consolidated Statements of Operations - Six Months Ended
                 December 31, 1996 and 1995.....................................4
  
            Consolidated Statements of Shareholders' Equity - Six Months
                 Ended December 31, 1996 and the Year Ended June 30,
                 1996...........................................................5
  
            Consolidated Statements of Cash Flows - Six Months Ended
                 December 31, 1996 and 1995.....................................6
  
            Notes to Consolidated Financial
                 Statements.....................................................7
  
  Item 2.   Management's Discussion and Analysis of Financial Condition 
                 and Results of Operations.....................................10
  
  PART II.  Other Information.
  
  Item 1.   Legal Proceedings..................................................13
  
  Item 2.   Change in Securities...............................................13
  
  Item 3.   Defaults Upon Senior Securities....................................13
  
  Item 4.   Submission of Matters to a Vote of Security
                 Holders.......................................................13
  
  Item 5.   Other Information..................................................13
  
  Item 6.   Exhibits and Reports on Form 8-K...................................13
  
  
                                         ii
  
  <PAGE>
  
  
  
       The Private Securities Litigation Reform Act of 1995 provides a "safe
  harbor" for forward-looking statements. Certain information included in this
  Quarterly Report contains information that is forward looking, such as
  information relating to cash available from the Company's operations and credit
  facilities, the effect of reduced backlog on sales and earnings over one or more
  succeeding quarters and the impact on the Company of the outcome of certain
  litigation described herein. Such forward looking information involves important
  risks and uncertainties that could significantly affect expected results in the
  future from those expressed in any forward-looking statements made by, or on
  behalf of, the Company. These risks and uncertainties include, but are not
  limited to, uncertainties relating to economic conditions, acquisitions and
  divestitures, government and regulatory policies, the pricing and availability
  of equipment, materials and programming, technological developments and changes
  in the competitive environment in which the Company operates.
  
  
  
  
                                         iii
  
  <PAGE>
  
  
  
                           PART I - FINANCIAL INFORMATION
  
  Item 1.   Consolidated Financial Statements
  
                    NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                     (UNAUDITED)
  
                                       ASSETS
  <TABLE>
  <CAPTION>
                                               December 31, 1996  June 30, 1996
  <S>                                             <C>             <C>        
  CURRENT ASSETS
         Cash                                     $    64,104     $   174,737
         Accounts receivable                        1,796,976       2,872,304
         Inventory (Note 3)                         4,283,109       4,613,074
         Costs and estimated
            earnings in excess
            of billings
            on uncompleted contracts                1,684,388       3,170,206
            (Note 4)
         Prepaid expenses and
            other current assets                      366,196         260,259
         Prepaid taxes on income                      431,100              --
         Deferred Income Taxes                         46,500          46,500
                                                  -----------     -----------
  
            Total Current Assets                    8,672,373      11,137,080
  
  
  PROPERTY, PLANT AND EQUIPMENT
         (net of accumulated depreciation and
         amortization of $3,009,115 at
         December 31, 1996 and
         $2,801,885 at June 30, 1996)               2,204,990       2,067,531
  
  
  OTHER ASSETS
         Intangible assets (net of
         accumulated amortization of
         $31,332 at December 31, 1996
         and $20,283 at June 30, 1996)                384,668         393,617
  
         Patents (net of accumulated
         amortization of $81,723
         at December 31, 1996 and
         $75,311 at June 30, 1996)                    161,565         146,300
  
         Other                                         57,677          65,412
                                                  -----------     -----------
  
            Total Other Assets                        603,910         605,329
                                                  -----------     -----------
  
  TOTAL ASSETS                                    $11,481,273     $13,809,940
                                                  ===========     ===========
  </TABLE>
  
  
  
                   See Notes to Consolidated Financial Statements
  
  
                                          1
  
  <PAGE>
  
  
  
                    NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                     (UNAUDITED)
  
                        LIABILITIES AND SHAREHOLDERS' EQUITY
  
  <TABLE>
  <CAPTION>
                                                     December 31, 1996   June 30, 1996
  <S>                                                 <C>               <C>         
  CURRENT LIABILITIES
         Short-term borrowings                        $  2,125,000      $  3,325,000
         Current portion of
           long-term debt                                  243,336           484,474
         Accounts payable                                1,011,351           893,314
         Accrued expenses                                  549,934         1,001,480
         Accrued payroll and
           payroll taxes                                   255,947           235,967
         Taxes payable on income                                --           114,145
                                                      ------------      ------------
  
         Total Current Liabilities                       4,185,568         6,054,380
  
  LONG-TERM DEBT                                           108,333           141,666
  
  DEFERRED INCOME TAXES                                     27,734            27,734
  
  MINORITY INTEREST IN EQUITY OF
  CONSOLIDATED SUBSIDIARY                                       --            84,956
  
  COMMITMENTS AND CONTINGENCY
  (Note 5)
  
  SHAREHOLDERS' EQUITY
         Common Stock Stated value $5 per share,
           with 60,000 shares authorized,
           31,873 shares issued and 28,175 shares
           outstanding                                     159,365           159,365
           Additional paid in
           capital                                         517,010           517,010
           Retained Earnings                             6,545,616         6,887,172
           Less: treasury stock,
            3,698 shares at cost                           (62,353)          (62,353)
                                                      ------------      ------------
  
         Total Shareholders' Equity                      7,159,638         7,501,204
                                                      ------------      ------------
  
  TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                                $ 11,481,273      $ 13,809,940
                                                      ============      ============
  </TABLE>
  
  
  
  
                   See Notes to Consolidated Financial Statements
  
  
                                          2
  
  <PAGE>
  
                     NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (UNAUDITED)
  
  <TABLE>
  <CAPTION>
                                               Three Months Ended
                                                   December 31,
                                               1996             1995
  <S>                                      <C>              <C>        
  NET SALES                                $ 2,750,329      $ 6,132,531
  
  COST OF SALES                              2,445,437        4,689,591
                                           -----------      -----------
  
  GROSS PROFIT                                 304,892        1,442,940
  
  SELLING AND ADMINISTRATIVE
     EXPENSES                                  777,073          760,642
  
  RESEARCH AND DEVELOPMENT
     EXPENSES                                  257,174          296,996
  
  INTEREST EXPENSE                              40,783           76,766
                                           -----------      -----------
  
  INCOME (LOSS) FROM OPERATIONS               (770,138)         308,536
  
  OTHER INCOME (LOSS)                           (5,024)           4,336
                                           -----------      -----------
  
  INCOME (LOSS) BEFORE MINORITY
  INTEREST                                    (775,162)         312,872
  
  MINORITY INTEREST IN LOSS OF
  CONSOLIDATED SUBSIDIARY                       12,682          117,631
                                           -----------      -----------
  
       INCOME (LOSS) BEFORE INCOME
       TAXES                                  (762,480)         430,503
  
       LESS: NET TAX EXPENSE (BENEFIT)        (294,352)         166,614
                                           -----------      -----------
  
  NET INCOME (LOSS)                        $  (468,128)     $   263,889
                                           ===========      ===========
  
  PRIMARY EARNINGS (LOSS) PER SHARE        $    (13.27)     $      7.71
                                           ===========      ===========
  
  WEIGHTED AVERAGE COMMON SHARES                35,265           34,236
                                           ===========      ===========
  </TABLE>
  
  
                   See Notes to Consolidated Financial Statements
  
  
                                          3
  
  <PAGE>
  
                     NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (UNAUDITED)
  
  <TABLE>
  <CAPTION>
                                                Six Months Ended
                                                  December 31,
                                             1996             1995
  
  <S>                                    <C>              <C>        
  NET SALES                              $ 7,163,248      $12,343,174
  
  COST OF SALES                            5,803,711        9,591,873
                                         -----------      -----------
  
  GROSS PROFIT                             1,359,535        2,751,301
  
  SELLING AND ADMINISTRATIVE
     EXPENSES                              1,457,251        1,320,681
  
  RESEARCH AND DEVELOPMENT
     EXPENSES                                473,425          488,701
  
  INTEREST EXPENSE                            94,446          150,414
                                         -----------      -----------
  
  INCOME (LOSS) FROM OPERATIONS             (665,587)         791,505
  
  OTHER INCOME                                 7,632            7,126
                                         -----------      -----------
  
  INCOME (LOSS) BEFORE MINORITY
  INTEREST                                  (657,955)         798,631
  
  MINORITY INTEREST IN LOSS
  OF CONSOLIDATED SUBSIDIARY                  84,956          156,798
                                         -----------      -----------
  
  INCOME (LOSS) BEFORE INCOME TAXES         (572,999)         955,429
  
     LESS: NET TAX EXPENSE (BENEFIT)        (231,433)         378,939
                                         -----------      -----------
  
  NET INCOME (LOSS)                      $  (341,566)     $   576,490
                                         ===========      ===========
  
  PRIMARY EARNINGS (LOSS) PER SHARE      $     (9.68)     $     16.84
                                         ===========      ===========
  
  WEIGHTED AVERAGE COMMON SHARES              35,265           34,236
                                         ===========      ===========
  </TABLE>
  
  
                   See Notes to Consolidated Financial Statements
  
  
                                          4
  <PAGE>
  
  
  
                    NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
       FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND YEAR ENDED JUNE 30, 1996
                                     (UNAUDITED)
  
  
  
  <TABLE>
  <CAPTION>
  
                                                    Additional                                   Total
                                                     Paid In      Retained      Treasury     Shareholders'
                                 Common Stock        Capital      Earnings        Stock          Equity
                              Shares    Amount
  <S>                        <C>       <C>          <C>          <C>            <C>            <C>       
  Balance at
    June 30, 1995             28,175    $159,365     $517,010     $5,180,215     $(62,353)      $5,794,237
  
  Net Income for
    the year ended
    June 30, 1996                 --          --           --      1,706,967           --        1,706,967
                              ------    --------     --------     ----------     --------       ----------
  
  
  Balance at
    June 30, 1996             28,175     159,365      517,010      6,887,182      (62,353)       7,501,204
  
  Net loss for
   the six months
   ended December 31,
   1996                           --          --           --       (341,566)          --        (341,566)
                              ------    --------     --------     ----------     --------       ----------
  
  
  Balance at
    December 31, 1996         28,175    $159,365     $517,010     $6,545,616     $(62,353)      $7,159,638
                              ======    ========     ========     ==========     ========       ==========
  </TABLE>
  
  
  
                                          5
  
  <PAGE>
  
                     NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)
  
  <TABLE>
  <CAPTION>
                                                                Six Months Ended
                                                                   December 31,
                                                             1996              1995
  <S>                                                     <C>              <C>        
  CASH FLOWS FROM OPERATING ACTIVITIES
       Net income (loss)                                  $  (341,566)     $   576,490
       Adjustments to reconcile net income (net loss)
         to net cash provided by (used by) operating
         activities:
       Depreciation and amortization                          224,691          188,858
       Minority interest in loss of
         consolidated subsidiary                              (84,956)        (156,798)
       (Increase) decrease in:
         Accounts receivable                                1,075,328          898,177
         Inventory                                            329,965          (30,443)
         Prepaid expenses and other assets                   (105,937)        (408,545)
         Prepaid taxes or income                             (431,100)              --
         Costs and estimated earnings in
           excess of billings on
           uncompleted contracts                            1,485,818         (968,511)
       Increase (decrease) in:
         Accounts payable                                     118,037          (28,352)
         Accrued expenses and payroll taxes                  (431,566)         111,527
         Taxes payable - on income                           (114,145)        (445,867)
                                                          -----------      -----------
  
  NET CASH PROVIDED BY (USED BY) OPERATING
       ACTIVITIES                                           1,724,569         (263,464)
                                                          -----------      -----------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
       Capital expenditures                                  (368,466)        (526,536)
       (Increase) decrease in other assets                      7,735          (37,342)
                                                          -----------      -----------
  
  NET CASH USED BY INVESTING ACTIVITIES                      (360,731)        (563,878)
                                                          -----------      -----------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
       Net (payments) proceeds on line of credit           (1,200,000)         775,000
       Net (payments) proceeds of long-term debt             (274,471)          92,055
       Other                                                       --          (16,546)
                                                          -----------      -----------
  
  NET CASH (USED BY) PROVIDED BY FINANCING ACTIVITIES      (1,474,471)         850,509
                                                          -----------      -----------
  
  NET DECREASE (INCREASE) IN CASH                            (110,633)          23,167
                                                          -----------      -----------
  
  CASH - beginning                                            174,737           66,905
                                                          -----------      -----------
  
  CASH - ending                                           $    64,104      $    90,072
                                                          -----------      -----------
  
       SUPPLEMENTARY INFORMATION REGARDING
            NON-CASH INVESTING ACTIVITIES
                 Acquisition of intangible assets         $        --      $   414,000
                                                          ===========      ===========
  </TABLE>
  
  
  
                                          6
  
  <PAGE>
  
                     NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)
                       December 31, 1996 and December 31, 1995
  
  Note 1. The Consolidated Financial Statements of Nuclear Research Corporation
  have been prepared in accordance with the rules and regulations of the
  Securities and Exchange Commission ("SEC"). In the opinion of management, the
  accompanying Consolidated Financial Statements contain all adjustments
  (consisting of only normal recurring adjustments) necessary to present fairly
  the consolidated financial position as of December 31, 1996 and June 30, 1996
  and the consolidated results of operations and cash flows for the three months
  and six months ended December 31, 1996 and 1995. Certain information and
  footnote disclosures prepared in accordance with generally accepted accounting
  principles have either been condensed or omitted pursuant to SEC rules and
  regulations. These financial statements should be read in conjunction with the
  financial statements and the notes included in the Company's latest Annual
  Report on Form 10-K.
  
  The consolidated results of operations for the six months ended December 31,
  1996 and 1995 are not necessarily indicative of the results for the full year.
  
  Note 2.  Principles of Consolidation.
  
  The Consolidated Financial Statements include the accounts of Nuclear Research
  Corporation, NRC Acquisition Corporation and Northeast Nuclear, Ltd.,
  wholly-owned subsidiaries hereafter referred to collectively as the "Company."
  Also included in the Consolidated Financial Statements are the accounts of
  Measurement Dynamics LLC ("MDLLC").
  
  In July, 1995 the Company entered into an operating agreement to form MDLLC, a
  New Jersey limited liability company, the purpose of which is to develop,
  manufacture, produce and sell temperature measurement devices and other related
  products or services. Pursuant to the operating agreement, the Company
  contributed property, in the form of cash, inventory and other business assets
  having a fair market value of $300,000, in exchange for 42% of MDLLC. The
  Company will produce temperature measurement devices to be sold by MDLLC under a
  manufacturing agreement and will provide administrative services to MDLLC.
  
  In connection with the formation of MDLLC, the Company recorded an intangible
  asset of $414,000 which represents certain rights, proprietary information and
  intellectual property contributed by the minority interest in MDLLC. The
  intangible asset is being amortized over its estimated useful life of twenty
  years.
  
  MDLLC now has a deficit in its equity account. Therefore, according to generally
  accepted accounting principles, the liability in Minority Interest in Equity of
  Consolidated Subsidiary has been reduced to zero on the Consolidated Balance
  Sheet at December 31, 1996.
  
  All significant inter-company accounts and transactions have been eliminated in
  consolidation.
  
  
                                          7
  
  <PAGE>
  
                     NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  Note 3.   Inventory.
  
  
  
                                               (Unaudited)
                                        December 31,     June 30,
                                            1996           1996
  
  Inventory consists of:
  Work-In-Process
    United States Government
     contracts                           $2,363,509     $3,226,042
    Commercial contracts                  1,634,358        865,157
  Purchased and manufactured
     parts                                  582,175        521,875
                                         ----------     ----------
  
                                          4,580,042      4,613,074
  Less:  Progress payments on United
  States Government contracts               296,933             --
                                         ----------     ----------
  
  
  Total                                  $4,283,109     $4,613,074
                                         ==========     ==========
  
  
  The Company uses the last-in, first-out (LIFO) method to determine its material
  inventory costs. The following information will facilitate comparison with
  operating results of companies using the FIFO method. If the Company's inventory
  had been determined using the FIFO method at December 31, 1996, reported
  inventories would have been $979,896 higher and reported net loss would have
  increased by $27,741 (.78 per share). The pro forma effect relating to the use
  of the FIFO method would have resulted in the following balances for the
  statement of operations presentation for the six months ended December 31, 1996:
  
  
  Gross Profit                          $ 1,313,203
                                        =========== 
  Loss from Operations                  $  (711,919)
                                        =========== 
  Net Loss                              $  (369,307)
                                        =========== 
  
  
                                          8
  
  <PAGE>
  
  
  
                     NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  
  Note 4.  Costs and Estimated Earnings in Excess of Billings on
           Uncompleted Contracts.
  
  The Company recognizes revenues on several fixed-price contracts using the
  percentage-of- completion method, measured by the percentage of cost incurred to
  date compared to the estimated total cost for the contracts. That method is used
  because management considers total cost to be the best available measure of
  progress on the contracts. Because of inherent uncertainties in estimating
  costs, it is at least reasonably possible that the estimates used will change
  within the near term.
  
  Contract costs include all direct material, direct labor and indirect costs
  related to contract performance. Provisions for estimated losses on the
  uncompleted contracts are made in the period in which such losses are
  determined. Changes in estimated job profitability resulting from job
  performance, job conditions, claims, change orders, and settlements, are
  accounted for in the period in which the changes occur.
  
  The asset, "Costs and estimated earnings in excess of billings on uncompleted
  contracts," represents revenues recognized in excess of amounts billed.
  
  Costs, estimated earnings, and billings on uncompleted contracts are summarized
  as follows:
  
  
            Costs incurred and estimated
             earnings on uncompleted
             contracts                                          $8,377,242
            Billings to date                                     6,692,854
                                                                ----------
                                                                $1,684,388
                                                                ==========
            Included in accompanying balance sheet under
            the following caption:
            Costs and estimated earnings
             in excess of billings on
             uncompleted contracts                              $1,684,388
                                                                ==========
  
  
  
                                          9
  
  <PAGE>
  
                     NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  
  Note 5.   Commitments and Contingency.
  
       In September 1995, the Company's management ("Management") was notified
  that MDLLC, Mark A. Sitcoske and a company controlled by Mr. Sitcoske,
  Measurement Dynamics, Inc., had been named as co-defendants in a suit filed on
  September 7, 1995 in Superior Court of the State of Rhode Island by Hanna
  Manufacturing, Inc. ("Hanna"), a Rhode Island Company that previously employed
  Mr. Sitcoske. The suit alleges that the defendants acted in violation of an
  existing employment and non-compete agreement between Hanna and Mr. Sitcoske and
  seeks to enjoin Mr. Sitcoske from his continued employment with MDLLC and to
  obtain damages; however, Hanna has not yet sought a hearing to obtain injunctive
  relief. The matter is now in discovery. Management expects that the resolution
  of this matter will have no material impact on the Company
  
  
  Item 2.   Management's Discussion and Analysis of Financial Condition and 
            Results Operations
  
  Liquidity and Capital Resources
  
       During the six months ended December 31, 1996, reductions in accounts
  receivable of $1,075,328, inventory of $329,965, and costs and estimated
  earnings in excess of billings on uncompleted contracts of $1,485,818 were the
  factors that affected the cash provided by operating activities. The reduction
  in accounts receivable occurred due to the Company's ability to collect year end
  receivables (typically the highest during the year) during the six months ended
  December 31, 1996. The Company was able to reduce inventory due to government
  shipments which occurred during the six months ended December 31, 1996.
  Decreases in accrued expenses and payroll taxes of $431,566 combined with an
  increase in prepaid taxes on income of $431,100 partially offset cash provided
  by operating activities. The decrease in accrued expenses is primarily a result
  of the reduction of accrued commission expenses and the repayment of an
  outstanding liability. The increase in prepaid taxes on income results from the
  payment of estimated income taxes combined with the tax benefit associated with
  the net loss for the six months ended December 31, 1996. The costs and estimated
  earnings in excess of billings on uncompleted contracts resulted from the
  Company's use of the percentage of completion method for income recognition of
  several multi-year contracts.
  
       During the six months ended December 31, 1996, the Company made capital
  expenditures in the aggregate amount of $117,514 to purchase manufacturing and
  computer equipment and to make certain expenditures associated with patents.
  Additionally, $250,952 was expended on the 20,000 square foot addition to the
  Company's Warrington facility. Cash used by financing activities was a result of
  payments on the line of credit of $1,200,000 and on long-term debt of $274,471.
  
  
  
                                         10
  
  <PAGE>
  
  
  
       The Company's backlog of orders as of January 31, 1997 was $15,838,000 as
  compared to $15,410,000 as of January 31, 1996. The recent completion of several
  government contracts may reduce sales and earnings over one or more succeeding
  quarters and until existing backlog and new orders are sufficient to reverse the
  trend.
  
       Subsequent to December 31, 1996, the Company increased its working capital
  line of credit to $5,500,000. The interest rate of this facility is payable at
  the bank's prime rate. Additionally, a $1,800,000 term loan was negotiated with
  an interest rate of 7.85% with a repayment based on a five year term. Both the
  working capital line of credit and the term loan are secured by accounts
  receivable, inventory and certain real property and assignments of government
  contracts and a letter of credit confirmed and negotiated by the bank.
  
       The Company believes that funds from operations and amounts available under
  its credit facilities continue to be sufficient to satisfy the Company's cash
  requirements.
  
       The Company believes that inflation has had no material impact on its
  operations.
  
  Results of Operations
  
       Three Months Ended December 31, 1996 Compared to Three Months Ended
       December 31, 1995.
  
       Sales for the three months ended December 31, 1996 decreased to $2,750,329
  from $6,132,531 for the three months ended December 31, 1995 primarily due to
  the completion of several government contracts.
  
       Income (loss) from operations decreased to a loss of $770,138 for the three
  months ended December 31, 1996 as compared to income of $308,536 for the three
  months ended December 31, 1995, because of reduced sales. Due to reduced sales,
  gross profit as a percentage of sales decreased to 11.09% as compared to 23.53%
  for the three months ended December 31, 1995.
  
       Selling and administrative expenses increased to $770,073 for the three
  months ended December 31, 1996 compared to $760,642 for thee months ended
  December 31, 1995. Due to reduced sales, as a percentage of sales, selling and
  administrative expenses increased to 28.25% for the three months ended December
  31, 1996 as compared to 12.40% for the three months ended December 31, 1995.
  
       Research and development expenses decreased to $257,174 for the three
  months ended December 31, 1996 as compared to $296,996 for the three months
  ended December 31, 1995. Due to reduced sales, as a percentage of sales,
  research and development expenses increased to 9.35% as compared to 4.84% for
  the three months ended December 31, 1995.
  
       Interest expense decreased $35,983 to $40,783 for the three months ended
  December 31, 1996. The decrease can be accounted for by decreased borrowings and
  a reduction in related costs associated with letters of credit for several
  multi-year contracts.
  
  
                                         11
  <PAGE>
  
  
       Six Months Ended December 31, 1996 Compared to Six Months Ended 
       December 31, 1995.
  
       Sales for the six months ended December 31, 1996 decreased to $7,163,248
  from $12,343,174 for the six months ended December 31, 1995 primarily due to the
  completion of several government contracts.
  
       Income (loss) from operations decreased to a loss of $665,587 for the six
  months ended December 31, 1996 from income of $791,505 for the six months ended
  December 31, 1995 because of reduced sales. Due to reduced sales, gross profit
  as a percentage of sales decreased to 18.98% as compared to 22.29% for the six
  months ended December 31, 1995.
  
       Selling and administrative expenses increased $136,570 to $1,457,251 for
  the six months ended December 31, 1996 compared to the six months ended December
  31, 1995 primarily due to increased commission expenses. Due to reduced sales,
  as a percentage of sales, selling and administrative expenses increased to
  20.34% for the three months ended December 31, 1996 as compared to 10.70% for
  the six months ended December 31, 1995.
  
       Research and development expenses decreased to $473,425 from $488,701 for
  the six months ended December 31, 1995. Due to reduced sales, as a percentage of
  sales, research and development expenses increased to 6.61% for the six months
  ended December 31, 1996 as compared to 3.96% for the three months ended December
  31, 1995.
  
       Interest expense decreased to $94,446 for the six months ended December 31,
  1996 as compared to $150,414 for the six months ended December 31, 1995. The
  decrease can be accounted for by decreased borrowings and a reduction in related
  costs associated with letter of credit for several multi-year contracts.
  
                             PART II - OTHER INFORMATION
  
  Item 1.   Legal Proceedings.
  
       In September 1995, the Company's management was notified that MDLLC, Mark
  A. Sitcoske and a company controlled by Mr. Sitcoske, Measurement Dynamics,
  Inc., had been named as co-defendants in a suit filed on September 7, 1995 in
  the Superior Court of the State of Rhode Island by Hanna Manufacturing, Inc.
  ("Hanna"), a Rhode Island company that previously employed Mr. Sitcoske. The
  suit alleges that the defendants acted in violation of an existing employment
  and non-compete agreement between Hanna and Mr. Sitcoske and seeks to enjoin Mr.
  Sitcoske from his continued employment with MDLLC and to obtain damages;
  however, Hanna has not yet sought a hearing to obtain injunctive relief. The
  matter is now in discovery. Management expects that the resolution of this
  matter will have no material impact on the Company.
  
  Item 2.   Changes in Securities.
  
  
                                         12
  
  <PAGE>
  
            Not Applicable.
  
  Item 3.   Defaults upon Senior Securities.
  
            Not Applicable.
  
  Item 4.   Submission of Matters to a Vote of Security Holders.
  
                 The Company held its 1996 Annual Meeting of Stockholders on
            December 11, 1996. At the Meeting, Earl M. Pollock, Dorothy S. Pollock
            and Charles H. Sulzberger were re-elected to the Company's Board of
            Directors. Shareholders cast 22,543 votes for the election of each
            director; 16 votes were withheld with respect to the election of each
            director.
  
  Item 5.   Other Information.
  
            Not Applicable.
  
  Item 6.   Exhibits and Reports on Form 8-K.
  
              (a)   Exhibits.
  
              10(a) Amended and Restated Lease Agreement, dated December 31, 1996,
                    by and between Cadillac Plastic Group, Inc. and the Company.
  
              11    Computation of earnings per share.
  
              27    Financial Data Schedules
  
              (b)   Reports on Form 8-K.
  
                    No reports on Form 8-K were filed during the quarter ended
                    December 31, 1996.
  
  
  
  
                                         13
  
  <PAGE>
  
  
  
                                     SIGNATURES
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
                                            NUCLEAR RESEARCH CORPORATION
                                            (Registrant)
  
  Date: February 14, 1997                   /s/ Earl M. Pollock
                                            -------------------
                                            Earl M. Pollock
                                            Chairman of the Board and President
                                            (Principal Executive Officer)
  
  Date: February 14, 1997                   /s/ Mark S. Pollock
                                            -------------------
                                            Mark S. Pollock
                                            Treasurer and Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)
  
  
  
                                         14
  
  <PAGE>
  
  
                                   EXHIBIT INDEX
  
  
      Exhibit                                                   Method of Filing
  
       10(a)     Amended and Restated Lease                   Filed electronically
                 Agreement, dated December 31, 1996,          herewith
                 by and between Cadillac Plastic
                 Group, Inc. and the Company
  
       11        Computation of Earnings per share            Filed electronically
                                                              herewith
  
       27        Financial Data Schedule                      Filed electronically
                                                              herewith
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 38940}]
metadata_filer: {"company-data": {"conformed-name": "NUCLEAR RESEARCH CORP", "cik": "0000073296", "assigned-sic": "3827", "irs-number": "231343870", "state-of-incorporation": "PA", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-09613", "film-number": "97535230"}, "business-address": {"street1": "125 TITUS AVE", "city": "WARRINGTON", "state": "PA", "zip": "18976", "phone": "2153435900"}, "mail-address": {"street1": "P O BOX H", "city": "WARRINGTON", "state": "PA", "zip": "18976"}}
text: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  
  (Mark One)
  
  [X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934
  
                  for the quarterly period ended December 31, 1996
  
                                         OR
  
  [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934
  
             For the transition period from ____________ to ____________
                             Commission file No. 0-9613
  
                            NUCLEAR RESEARCH CORPORATION
               (Exact name of Registrant as specified in its charter)
  
          Pennsylvania                                      1343870
  (State or other jurisdiction                         (I.R.S. Employer
  of organization)                                     Identification No.)
  
  125 Titus Avenue, Warrington, Pennsylvania                 18976
     (Address of Principal Executive Offices)             (Zip Code)
  
                                   (215) 343-5900
                (Registrant's telephone number, including area code)
  
       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. Yes X No
  
       As of February 14, 1997, the Registrant had 28,175 shares of its common
  stock outstanding.
  INDEX
  
  Number                                                                     Page
  
  PART I.   Financial Information.
  
  Item 1.   Consolidated Financial Statements.
  
            Consolidated Balance Sheets - December 31, 1996 and June 30,
                 1996...........................................................1
  
            Consolidated Statements of Operations - Three Months Ended
                 December 31, 1996 and 1995.....................................3
  
            Consolidated Statements of Operations - Six Months Ended
                 December 31, 1996 and 1995.....................................4
  
            Consolidated Statements of Shareholders' Equity - Six Months
                 Ended December 31, 1996 and the Year Ended June 30,
                 1996...........................................................5
  
            Consolidated Statements of Cash Flows - Six Months Ended
                 December 31, 1996 and 1995.....................................6
  
            Notes to Consolidated Financial
                 Statements.....................................................7
  
  Item 2.   Management's Discussion and Analysis of Financial Condition 
                 and Results of Operations.....................................10
  
  PART II.  Other Information.
  
  Item 1.   Legal Proceedings..................................................13
  
  Item 2.   Change in Securities...............................................13
  
  Item 3.   Defaults Upon Senior Securities....................................13
  
  Item 4.   Submission of Matters to a Vote of Security
                 Holders.......................................................13
  
  Item 5.   Other Information..................................................13
  
  Item 6.   Exhibits and Reports on Form 8-K...................................13
  
                                         ii
  The Private Securities Litigation Reform Act of 1995 provides a "safe
  harbor" for forward-looking statements. Certain information included in this
  Quarterly Report contains information that is forward looking, such as
  information relating to cash available from the Company's operations and credit
  facilities, the effect of reduced backlog on sales and earnings over one or more
  succeeding quarters and the impact on the Company of the outcome of certain
  litigation described herein. Such forward looking information involves important
  risks and uncertainties that could significantly affect expected results in the
  future from those expressed in any forward-looking statements made by, or on
  behalf of, the Company. These risks and uncertainties include, but are not
  limited to, uncertainties relating to economic conditions, acquisitions and
  divestitures, government and regulatory policies, the pricing and availability
  of equipment, materials and programming, technological developments and changes
  in the competitive environment in which the Company operates.
  
                                         iii
  PART I - FINANCIAL INFORMATION
  
  Item 1.   Consolidated Financial Statements
  
                    NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                     (UNAUDITED)
  
                                       ASSETS
  December 31, 1996  June 30, 1996
  CURRENT ASSETS
         Cash                                     $    64,104     $   174,737
         Accounts receivable                        1,796,976       2,872,304
         Inventory (Note 3)                         4,283,109       4,613,074
         Costs and estimated
            earnings in excess
            of billings
            on uncompleted contracts                1,684,388       3,170,206
            (Note 4)
         Prepaid expenses and
            other current assets                      366,196         260,259
         Prepaid taxes on income                      431,100              --
         Deferred Income Taxes                         46,500          46,500
                                                  -----------     -----------
  
            Total Current Assets                    8,672,373      11,137,080
  
  PROPERTY, PLANT AND EQUIPMENT
         (net of accumulated depreciation and
         amortization of $3,009,115 at
         December 31, 1996 and
         $2,801,885 at June 30, 1996)               2,204,990       2,067,531
  
  OTHER ASSETS
         Intangible assets (net of
         accumulated amortization of
         $31,332 at December 31, 1996
         and $20,283 at June 30, 1996)                384,668         393,617
  
         Patents (net of accumulated
         amortization of $81,723
         at December 31, 1996 and
         $75,311 at June 30, 1996)                    161,565         146,300
  
         Other                                         57,677          65,412
                                                  -----------     -----------
  
            Total Other Assets                        603,910         605,329
                                                  -----------     -----------
  
  TOTAL ASSETS                                    $11,481,273     $13,809,940
                                                  ===========     ===========
  See Notes to Consolidated Financial Statements
  
                                          1
  NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                     (UNAUDITED)
  
                        LIABILITIES AND SHAREHOLDERS' EQUITY
  December 31, 1996   June 30, 1996
  CURRENT LIABILITIES
         Short-term borrowings                        $  2,125,000      $  3,325,000
         Current portion of
           long-term debt                                  243,336           484,474
         Accounts payable                                1,011,351           893,314
         Accrued expenses                                  549,934         1,001,480
         Accrued payroll and
           payroll taxes                                   255,947           235,967
         Taxes payable on income                                --           114,145
                                                      ------------      ------------
  
         Total Current Liabilities                       4,185,568         6,054,380
  
  LONG-TERM DEBT                                           108,333           141,666
  
  DEFERRED INCOME TAXES                                     27,734            27,734
  
  MINORITY INTEREST IN EQUITY OF
  CONSOLIDATED SUBSIDIARY                                       --            84,956
  
  COMMITMENTS AND CONTINGENCY
  (Note 5)
  
  SHAREHOLDERS' EQUITY
         Common Stock Stated value $5 per share,
           with 60,000 shares authorized,
           31,873 shares issued and 28,175 shares
           outstanding                                     159,365           159,365
           Additional paid in
           capital                                         517,010           517,010
           Retained Earnings                             6,545,616         6,887,172
           Less: treasury stock,
            3,698 shares at cost                           (62,353)          (62,353)
                                                      ------------      ------------
  
         Total Shareholders' Equity                      7,159,638         7,501,204
                                                      ------------      ------------
  
  TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                                $ 11,481,273      $ 13,809,940
                                                      ============      ============
  See Notes to Consolidated Financial Statements
  
                                          2
  NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (UNAUDITED)
  Three Months Ended
                                                   December 31,
                                               1996             1995
  NET SALES                                $ 2,750,329      $ 6,132,531
  
  COST OF SALES                              2,445,437        4,689,591
                                           -----------      -----------
  
  GROSS PROFIT                                 304,892        1,442,940
  
  SELLING AND ADMINISTRATIVE
     EXPENSES                                  777,073          760,642
  
  RESEARCH AND DEVELOPMENT
     EXPENSES                                  257,174          296,996
  
  INTEREST EXPENSE                              40,783           76,766
                                           -----------      -----------
  
  INCOME (LOSS) FROM OPERATIONS               (770,138)         308,536
  
  OTHER INCOME (LOSS)                           (5,024)           4,336
                                           -----------      -----------
  
  INCOME (LOSS) BEFORE MINORITY
  INTEREST                                    (775,162)         312,872
  
  MINORITY INTEREST IN LOSS OF
  CONSOLIDATED SUBSIDIARY                       12,682          117,631
                                           -----------      -----------
  
       INCOME (LOSS) BEFORE INCOME
       TAXES                                  (762,480)         430,503
  
       LESS: NET TAX EXPENSE (BENEFIT)        (294,352)         166,614
                                           -----------      -----------
  
  NET INCOME (LOSS)                        $  (468,128)     $   263,889
                                           ===========      ===========
  
  PRIMARY EARNINGS (LOSS) PER SHARE        $    (13.27)     $      7.71
                                           ===========      ===========
  
  WEIGHTED AVERAGE COMMON SHARES                35,265           34,236
                                           ===========      ===========
  See Notes to Consolidated Financial Statements
  
                                          3
  NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (UNAUDITED)
  Six Months Ended
                                                  December 31,
                                             1996             1995
  NET SALES                              $ 7,163,248      $12,343,174
  
  COST OF SALES                            5,803,711        9,591,873
                                         -----------      -----------
  
  GROSS PROFIT                             1,359,535        2,751,301
  
  SELLING AND ADMINISTRATIVE
     EXPENSES                              1,457,251        1,320,681
  
  RESEARCH AND DEVELOPMENT
     EXPENSES                                473,425          488,701
  
  INTEREST EXPENSE                            94,446          150,414
                                         -----------      -----------
  
  INCOME (LOSS) FROM OPERATIONS             (665,587)         791,505
  
  OTHER INCOME                                 7,632            7,126
                                         -----------      -----------
  
  INCOME (LOSS) BEFORE MINORITY
  INTEREST                                  (657,955)         798,631
  
  MINORITY INTEREST IN LOSS
  OF CONSOLIDATED SUBSIDIARY                  84,956          156,798
                                         -----------      -----------
  
  INCOME (LOSS) BEFORE INCOME TAXES         (572,999)         955,429
  
     LESS: NET TAX EXPENSE (BENEFIT)        (231,433)         378,939
                                         -----------      -----------
  
  NET INCOME (LOSS)                      $  (341,566)     $   576,490
                                         ===========      ===========
  
  PRIMARY EARNINGS (LOSS) PER SHARE      $     (9.68)     $     16.84
                                         ===========      ===========
  
  WEIGHTED AVERAGE COMMON SHARES              35,265           34,236
                                         ===========      ===========
  See Notes to Consolidated Financial Statements
  
                                          4
  NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
       FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND YEAR ENDED JUNE 30, 1996
                                     (UNAUDITED)
  Additional                                   Total
                                                     Paid In      Retained      Treasury     Shareholders'
                                 Common Stock        Capital      Earnings        Stock          Equity
                              Shares    Amount
  Balance at
    June 30, 1995             28,175    $159,365     $517,010     $5,180,215     $(62,353)      $5,794,237
  
  Net Income for
    the year ended
    June 30, 1996                 --          --           --      1,706,967           --        1,706,967
                              ------    --------     --------     ----------     --------       ----------
  
  Balance at
    June 30, 1996             28,175     159,365      517,010      6,887,182      (62,353)       7,501,204
  
  Net loss for
   the six months
   ended December 31,
   1996                           --          --           --       (341,566)          --        (341,566)
                              ------    --------     --------     ----------     --------       ----------
  
  Balance at
    December 31, 1996         28,175    $159,365     $517,010     $6,545,616     $(62,353)      $7,159,638
                              ======    ========     ========     ==========     ========       ==========
  5
  NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)
  Six Months Ended
                                                                   December 31,
                                                             1996              1995
  CASH FLOWS FROM OPERATING ACTIVITIES
       Net income (loss)                                  $  (341,566)     $   576,490
       Adjustments to reconcile net income (net loss)
         to net cash provided by (used by) operating
         activities:
       Depreciation and amortization                          224,691          188,858
       Minority interest in loss of
         consolidated subsidiary                              (84,956)        (156,798)
       (Increase) decrease in:
         Accounts receivable                                1,075,328          898,177
         Inventory                                            329,965          (30,443)
         Prepaid expenses and other assets                   (105,937)        (408,545)
         Prepaid taxes or income                             (431,100)              --
         Costs and estimated earnings in
           excess of billings on
           uncompleted contracts                            1,485,818         (968,511)
       Increase (decrease) in:
         Accounts payable                                     118,037          (28,352)
         Accrued expenses and payroll taxes                  (431,566)         111,527
         Taxes payable - on income                           (114,145)        (445,867)
                                                          -----------      -----------
  
  NET CASH PROVIDED BY (USED BY) OPERATING
       ACTIVITIES                                           1,724,569         (263,464)
                                                          -----------      -----------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
       Capital expenditures                                  (368,466)        (526,536)
       (Increase) decrease in other assets                      7,735          (37,342)
                                                          -----------      -----------
  
  NET CASH USED BY INVESTING ACTIVITIES                      (360,731)        (563,878)
                                                          -----------      -----------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
       Net (payments) proceeds on line of credit           (1,200,000)         775,000
       Net (payments) proceeds of long-term debt             (274,471)          92,055
       Other                                                       --          (16,546)
                                                          -----------      -----------
  
  NET CASH (USED BY) PROVIDED BY FINANCING ACTIVITIES      (1,474,471)         850,509
                                                          -----------      -----------
  
  NET DECREASE (INCREASE) IN CASH                            (110,633)          23,167
                                                          -----------      -----------
  
  CASH - beginning                                            174,737           66,905
                                                          -----------      -----------
  
  CASH - ending                                           $    64,104      $    90,072
                                                          -----------      -----------
  
       SUPPLEMENTARY INFORMATION REGARDING
            NON-CASH INVESTING ACTIVITIES
                 Acquisition of intangible assets         $        --      $   414,000
                                                          ===========      ===========
  6
  NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)
                       December 31, 1996 and December 31, 1995
  
  Note 1. The Consolidated Financial Statements of Nuclear Research Corporation
  have been prepared in accordance with the rules and regulations of the
  Securities and Exchange Commission ("SEC"). In the opinion of management, the
  accompanying Consolidated Financial Statements contain all adjustments
  (consisting of only normal recurring adjustments) necessary to present fairly
  the consolidated financial position as of December 31, 1996 and June 30, 1996
  and the consolidated results of operations and cash flows for the three months
  and six months ended December 31, 1996 and 1995. Certain information and
  footnote disclosures prepared in accordance with generally accepted accounting
  principles have either been condensed or omitted pursuant to SEC rules and
  regulations. These financial statements should be read in conjunction with the
  financial statements and the notes included in the Company's latest Annual
  Report on Form 10-K.
  
  The consolidated results of operations for the six months ended December 31,
  1996 and 1995 are not necessarily indicative of the results for the full year.
  
  Note 2.  Principles of Consolidation.
  
  The Consolidated Financial Statements include the accounts of Nuclear Research
  Corporation, NRC Acquisition Corporation and Northeast Nuclear, Ltd.,
  wholly-owned subsidiaries hereafter referred to collectively as the "Company."
  Also included in the Consolidated Financial Statements are the accounts of
  Measurement Dynamics LLC ("MDLLC").
  
  In July, 1995 the Company entered into an operating agreement to form MDLLC, a
  New Jersey limited liability company, the purpose of which is to develop,
  manufacture, produce and sell temperature measurement devices and other related
  products or services. Pursuant to the operating agreement, the Company
  contributed property, in the form of cash, inventory and other business assets
  having a fair market value of $300,000, in exchange for 42% of MDLLC. The
  Company will produce temperature measurement devices to be sold by MDLLC under a
  manufacturing agreement and will provide administrative services to MDLLC.
  
  In connection with the formation of MDLLC, the Company recorded an intangible
  asset of $414,000 which represents certain rights, proprietary information and
  intellectual property contributed by the minority interest in MDLLC. The
  intangible asset is being amortized over its estimated useful life of twenty
  years.
  
  MDLLC now has a deficit in its equity account. Therefore, according to generally
  accepted accounting principles, the liability in Minority Interest in Equity of
  Consolidated Subsidiary has been reduced to zero on the Consolidated Balance
  Sheet at December 31, 1996.
  
  All significant inter-company accounts and transactions have been eliminated in
  consolidation.
  
                                          7
  NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  Note 3.   Inventory.
  
                                               (Unaudited)
                                        December 31,     June 30,
                                            1996           1996
  
  Inventory consists of:
  Work-In-Process
    United States Government
     contracts                           $2,363,509     $3,226,042
    Commercial contracts                  1,634,358        865,157
  Purchased and manufactured
     parts                                  582,175        521,875
                                         ----------     ----------
  
                                          4,580,042      4,613,074
  Less:  Progress payments on United
  States Government contracts               296,933             --
                                         ----------     ----------
  
  Total                                  $4,283,109     $4,613,074
                                         ==========     ==========
  
  The Company uses the last-in, first-out (LIFO) method to determine its material
  inventory costs. The following information will facilitate comparison with
  operating results of companies using the FIFO method. If the Company's inventory
  had been determined using the FIFO method at December 31, 1996, reported
  inventories would have been $979,896 higher and reported net loss would have
  increased by $27,741 (.78 per share). The pro forma effect relating to the use
  of the FIFO method would have resulted in the following balances for the
  statement of operations presentation for the six months ended December 31, 1996:
  
  Gross Profit                          $ 1,313,203
                                        =========== 
  Loss from Operations                  $  (711,919)
                                        =========== 
  Net Loss                              $  (369,307)
                                        =========== 
  
                                          8
  NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  Note 4.  Costs and Estimated Earnings in Excess of Billings on
           Uncompleted Contracts.
  
  The Company recognizes revenues on several fixed-price contracts using the
  percentage-of- completion method, measured by the percentage of cost incurred to
  date compared to the estimated total cost for the contracts. That method is used
  because management considers total cost to be the best available measure of
  progress on the contracts. Because of inherent uncertainties in estimating
  costs, it is at least reasonably possible that the estimates used will change
  within the near term.
  
  Contract costs include all direct material, direct labor and indirect costs
  related to contract performance. Provisions for estimated losses on the
  uncompleted contracts are made in the period in which such losses are
  determined. Changes in estimated job profitability resulting from job
  performance, job conditions, claims, change orders, and settlements, are
  accounted for in the period in which the changes occur.
  
  The asset, "Costs and estimated earnings in excess of billings on uncompleted
  contracts," represents revenues recognized in excess of amounts billed.
  
  Costs, estimated earnings, and billings on uncompleted contracts are summarized
  as follows:
  
            Costs incurred and estimated
             earnings on uncompleted
             contracts                                          $8,377,242
            Billings to date                                     6,692,854
                                                                ----------
                                                                $1,684,388
                                                                ==========
            Included in accompanying balance sheet under
            the following caption:
            Costs and estimated earnings
             in excess of billings on
             uncompleted contracts                              $1,684,388
                                                                ==========
  
                                          9
  NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  Note 5.   Commitments and Contingency.
  
       In September 1995, the Company's management ("Management") was notified
  that MDLLC, Mark A. Sitcoske and a company controlled by Mr. Sitcoske,
  Measurement Dynamics, Inc., had been named as co-defendants in a suit filed on
  September 7, 1995 in Superior Court of the State of Rhode Island by Hanna
  Manufacturing, Inc. ("Hanna"), a Rhode Island Company that previously employed
  Mr. Sitcoske. The suit alleges that the defendants acted in violation of an
  existing employment and non-compete agreement between Hanna and Mr. Sitcoske and
  seeks to enjoin Mr. Sitcoske from his continued employment with MDLLC and to
  obtain damages; however, Hanna has not yet sought a hearing to obtain injunctive
  relief. The matter is now in discovery. Management expects that the resolution
  of this matter will have no material impact on the Company
  
  Item 2.   Management's Discussion and Analysis of Financial Condition and 
            Results Operations
  
  Liquidity and Capital Resources
  
       During the six months ended December 31, 1996, reductions in accounts
  receivable of $1,075,328, inventory of $329,965, and costs and estimated
  earnings in excess of billings on uncompleted contracts of $1,485,818 were the
  factors that affected the cash provided by operating activities. The reduction
  in accounts receivable occurred due to the Company's ability to collect year end
  receivables (typically the highest during the year) during the six months ended
  December 31, 1996. The Company was able to reduce inventory due to government
  shipments which occurred during the six months ended December 31, 1996.
  Decreases in accrued expenses and payroll taxes of $431,566 combined with an
  increase in prepaid taxes on income of $431,100 partially offset cash provided
  by operating activities. The decrease in accrued expenses is primarily a result
  of the reduction of accrued commission expenses and the repayment of an
  outstanding liability. The increase in prepaid taxes on income results from the
  payment of estimated income taxes combined with the tax benefit associated with
  the net loss for the six months ended December 31, 1996. The costs and estimated
  earnings in excess of billings on uncompleted contracts resulted from the
  Company's use of the percentage of completion method for income recognition of
  several multi-year contracts.
  
       During the six months ended December 31, 1996, the Company made capital
  expenditures in the aggregate amount of $117,514 to purchase manufacturing and
  computer equipment and to make certain expenditures associated with patents.
  Additionally, $250,952 was expended on the 20,000 square foot addition to the
  Company's Warrington facility. Cash used by financing activities was a result of
  payments on the line of credit of $1,200,000 and on long-term debt of $274,471.
  
                                         10
  The Company's backlog of orders as of January 31, 1997 was $15,838,000 as
  compared to $15,410,000 as of January 31, 1996. The recent completion of several
  government contracts may reduce sales and earnings over one or more succeeding
  quarters and until existing backlog and new orders are sufficient to reverse the
  trend.
  
       Subsequent to December 31, 1996, the Company increased its working capital
  line of credit to $5,500,000. The interest rate of this facility is payable at
  the bank's prime rate. Additionally, a $1,800,000 term loan was negotiated with
  an interest rate of 7.85% with a repayment based on a five year term. Both the
  working capital line of credit and the term loan are secured by accounts
  receivable, inventory and certain real property and assignments of government
  contracts and a letter of credit confirmed and negotiated by the bank.
  
       The Company believes that funds from operations and amounts available under
  its credit facilities continue to be sufficient to satisfy the Company's cash
  requirements.
  
       The Company believes that inflation has had no material impact on its
  operations.
  
  Results of Operations
  
       Three Months Ended December 31, 1996 Compared to Three Months Ended
       December 31, 1995.
  
       Sales for the three months ended December 31, 1996 decreased to $2,750,329
  from $6,132,531 for the three months ended December 31, 1995 primarily due to
  the completion of several government contracts.
  
       Income (loss) from operations decreased to a loss of $770,138 for the three
  months ended December 31, 1996 as compared to income of $308,536 for the three
  months ended December 31, 1995, because of reduced sales. Due to reduced sales,
  gross profit as a percentage of sales decreased to 11.09% as compared to 23.53%
  for the three months ended December 31, 1995.
  
       Selling and administrative expenses increased to $770,073 for the three
  months ended December 31, 1996 compared to $760,642 for thee months ended
  December 31, 1995. Due to reduced sales, as a percentage of sales, selling and
  administrative expenses increased to 28.25% for the three months ended December
  31, 1996 as compared to 12.40% for the three months ended December 31, 1995.
  
       Research and development expenses decreased to $257,174 for the three
  months ended December 31, 1996 as compared to $296,996 for the three months
  ended December 31, 1995. Due to reduced sales, as a percentage of sales,
  research and development expenses increased to 9.35% as compared to 4.84% for
  the three months ended December 31, 1995.
  
       Interest expense decreased $35,983 to $40,783 for the three months ended
  December 31, 1996. The decrease can be accounted for by decreased borrowings and
  a reduction in related costs associated with letters of credit for several
  multi-year contracts.
  
                                         11
  Six Months Ended December 31, 1996 Compared to Six Months Ended 
       December 31, 1995.
  
       Sales for the six months ended December 31, 1996 decreased to $7,163,248
  from $12,343,174 for the six months ended December 31, 1995 primarily due to the
  completion of several government contracts.
  
       Income (loss) from operations decreased to a loss of $665,587 for the six
  months ended December 31, 1996 from income of $791,505 for the six months ended
  December 31, 1995 because of reduced sales. Due to reduced sales, gross profit
  as a percentage of sales decreased to 18.98% as compared to 22.29% for the six
  months ended December 31, 1995.
  
       Selling and administrative expenses increased $136,570 to $1,457,251 for
  the six months ended December 31, 1996 compared to the six months ended December
  31, 1995 primarily due to increased commission expenses. Due to reduced sales,
  as a percentage of sales, selling and administrative expenses increased to
  20.34% for the three months ended December 31, 1996 as compared to 10.70% for
  the six months ended December 31, 1995.
  
       Research and development expenses decreased to $473,425 from $488,701 for
  the six months ended December 31, 1995. Due to reduced sales, as a percentage of
  sales, research and development expenses increased to 6.61% for the six months
  ended December 31, 1996 as compared to 3.96% for the three months ended December
  31, 1995.
  
       Interest expense decreased to $94,446 for the six months ended December 31,
  1996 as compared to $150,414 for the six months ended December 31, 1995. The
  decrease can be accounted for by decreased borrowings and a reduction in related
  costs associated with letter of credit for several multi-year contracts.
  
                             PART II - OTHER INFORMATION
  
  Item 1.   Legal Proceedings.
  
       In September 1995, the Company's management was notified that MDLLC, Mark
  A. Sitcoske and a company controlled by Mr. Sitcoske, Measurement Dynamics,
  Inc., had been named as co-defendants in a suit filed on September 7, 1995 in
  the Superior Court of the State of Rhode Island by Hanna Manufacturing, Inc.
  ("Hanna"), a Rhode Island company that previously employed Mr. Sitcoske. The
  suit alleges that the defendants acted in violation of an existing employment
  and non-compete agreement between Hanna and Mr. Sitcoske and seeks to enjoin Mr.
  Sitcoske from his continued employment with MDLLC and to obtain damages;
  however, Hanna has not yet sought a hearing to obtain injunctive relief. The
  matter is now in discovery. Management expects that the resolution of this
  matter will have no material impact on the Company.
  
  Item 2.   Changes in Securities.
  
                                         12
  Not Applicable.
  
  Item 3.   Defaults upon Senior Securities.
  
            Not Applicable.
  
  Item 4.   Submission of Matters to a Vote of Security Holders.
  
                 The Company held its 1996 Annual Meeting of Stockholders on
            December 11, 1996. At the Meeting, Earl M. Pollock, Dorothy S. Pollock
            and Charles H. Sulzberger were re-elected to the Company's Board of
            Directors. Shareholders cast 22,543 votes for the election of each
            director; 16 votes were withheld with respect to the election of each
            director.
  
  Item 5.   Other Information.
  
            Not Applicable.
  
  Item 6.   Exhibits and Reports on Form 8-K.
  
              (a)   Exhibits.
  
              10(a) Amended and Restated Lease Agreement, dated December 31, 1996,
                    by and between Cadillac Plastic Group, Inc. and the Company.
  
              11    Computation of earnings per share.
  
              27    Financial Data Schedules
  
              (b)   Reports on Form 8-K.
  
                    No reports on Form 8-K were filed during the quarter ended
                    December 31, 1996.
  
                                         13
  SIGNATURES
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
                                            NUCLEAR RESEARCH CORPORATION
                                            (Registrant)
  
  Date: February 14, 1997                   /s/ Earl M. Pollock
                                            -------------------
                                            Earl M. Pollock
                                            Chairman of the Board and President
                                            (Principal Executive Officer)
  
  Date: February 14, 1997                   /s/ Mark S. Pollock
                                            -------------------
                                            Mark S. Pollock
                                            Treasurer and Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)
  
                                         14
  EXHIBIT INDEX
  
      Exhibit                                                   Method of Filing
  
       10(a)     Amended and Restated Lease                   Filed electronically
                 Agreement, dated December 31, 1996,          herewith
                 by and between Cadillac Plastic
                 Group, Inc. and the Company
  
       11        Computation of Earnings per share            Filed electronically
                                                              herewith
  
       27        Financial Data Schedule                      Filed electronically
                                                              herewith