FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(Mark One)
[X]            QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   September 30, 1997
-----------------------

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 number   0-10605
-----------

ODETICS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE                                        95-2588496  
- -------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

1515  SOUTH  MANCHESTER  AVE., ANAHEIM,    CA               92802
- --------------------------------------------------------------------------------
(Address of principal executive offices)               (Zip Code)

(714) 774-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

- --------------------------------------------------------------------------------
(Former name, former addressed and former fiscal year, 
if changed since last report)

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 [_]

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date

Number of shares of Common Stock outstanding as of November 12, 1997

Class A Common Stock  -   6,202,778 shares.
Class B Common Stock  -   1,062,041 shares.

1

INDEX
-----

PART I     FINANCIAL INFORMATION                         Page
--------------------------------                         ----

ITEM 1.   CONSOLIDATED STATEMENTS OF INCOME FOR            3
THE THREE MONTHS AND SIX MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)

CONSOLIDATED BALANCE SHEETS AT  MARCH 31, 1997   4
AND SEPTEMBER 30,1997 (UNAUDITED)

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR        6
THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND
1997 (UNAUDITED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS       7

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS             9
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

PART II OTHER INFORMATION
-------------------------

ITEM 1.   LEGAL PROCEEDINGS                               17

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS                                17

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                18

SIGNATURES                                                19

2

PART 1  FINANCIAL INFORMATION

ODETICS, INC.
CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share amounts)
(Unaudited)

Three Months Ended               Six Months Ended
September 30,                   September 30,
-----------------------         -----------------------
1996            1997            1996           1997
-------         -------         -------         -------

Net sales and contract revenues:
Net sales                                                     $16,556         $20,585         $32,083         $40,525
Contract revenues                                               2,774           1,521           5,273           3,053
-------         -------         -------         -------
Total net sales and contract revenues                       19,330          22,106          37,356          43,578

Costs and expenses:
Cost of sales                                                  11,910          14,337          22,265          27,550
Cost of contract revenues                                       1,405             784           2,677           1,681
Selling, general and administrative expense                     4,608           6,428           9,207          12,379
Research and development expense                                1,909           2,285           3,612           4,309
Interest expense, net                                              10             112               8             116
-------         -------         -------         -------
19,842          23,946          37,769          46,035
-------         -------         -------         -------

Loss from continuing operations before taxes                       (512)         (1,840)           (413)         (2,457)

Income taxes benefit                                               (222)           (736)           (199)           (983)
-------         -------         -------         -------

Net loss from continuing operations                                (290)         (1,104)           (214)         (1,474)

Income  from discontinued operations, net of income taxes         1,378           1,319           2,309           2,306
-------         -------         -------         -------
Net income                                                      $ 1,088         $   215         $ 2,095         $   832
=======         =======         =======         =======

Weighted average number of shares outstanding                     6,580           6,810           6,515           6,633

Earnings (loss) per share:
Continuing operations                $ (0.04)        $ (0.16)        $ (0.03)        $ (0.22)
Discontinued operations              $  0.21         $  0.19         $  0.35         $  0.35
-------         -------         -------         -------
Earnings per share                   $  0.17         $  0.03         $  0.32         $  0.12
=======         =======         =======         =======

See notes to consolidated financial statements.

-3-

ODETICS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands)

March 31,        Sept. 30,
1997             1997
ASSETS                                                               (unaudited)
---------       -----------

Current assets
Cash                                            $  1,865        $    489
Trade accounts receivable, net                    17,127          14,028
Current portion of ATL note receivable             3,249           3,249
Costs and estimated earnings in excess
of billings on uncompleted contracts              1,922           2,068

Inventories:
Finished goods                                  498             424
Work in process                               2,968           2,747
Materials and supplies                       12,184          13,235
--------        --------
Total inventories                            15,650          16,406

Prepaid expenses                                     978           1,179
Deferred income taxes                              2,056           2,057
--------        --------
Total current assets                                   42,847          39,476

Property, plant and equipment
Land                                               2,090           2,090
Buildings and improvements                        17,642          17,668
Equipment, furniture and fixtures                 25,202          27,364
--------        --------
44,934          47,122

Less accumulated depreciation                    (23,824)        (24,885)
--------        --------
Net property, plant and equipment                 21,110          22,237

Net assets of discontinued operations              8,865          11,642
Long term ATL note receivable less current 
portion                                           9,748           8,395
Other assets                                       2,738           9,209
--------        --------
Total assets                                         $ 85,308        $ 90,959
========        ========

See notes to consolidated financial statements.

-4-

ODETICS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands)

March 31,        Sept. 30,
1997             1997
LIABILITIES AND STOCKHOLDERS' EQUITY                               (unaudited)
--------         -----------

Current liabilities                                                          
Trade accounts payable                        $ 8,802           $ 8,189 
Accrued payroll and related                     5,306             3,749 
Accrued expenses                                1,788             6,992 
Income taxes payable                             (742)           (1,174)
Billings in excess of costs and estimated                               
earnings on uncompleted contracts         2,690             1,662 
Current portion of long-term debt               1,721             1,502 
-------           ------- 
Total current liabilities                           19,565            20,920  

Long-term debt, less current portion                11,860            14,567

Deferred income taxes                                  540               161

Stockholders' equity
Preferred stock, authorized 2,000,000 shares;
none issued                                       -                 -
Common Stock, authorized 10,000,000
shares of Class A and 2,600,000 shares
of Class B; 5,892,603 shares of
Class A and 1,064,241 shares of
Class B issued and outstanding at
September 30, 1997 - $.10 par value             638               696
Paid-in capital                                  40,442            45,158
Note receivable from employees                        0            (3,655)
Foreign currency translation                         52                69
Retained earnings                                12,211            13,043
-------           -------
Total stockholders' equity                          53,343            55,311
-------           -------

Total liabilities and stockholders' equity         $85,308           $90,959
=======           =======

See notes to consolidated financial statements.

-5-

ODETICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Six Months Ended
September 30,
-------------------
1996       1997
--------   --------

Operating activities
Net income from continuing operations                     $   (214)  $ (1,474)
Adjustments to reconcile net income to net cash
provided by (used) in continuing operating activities:
Depreciation and amortization                            1,368      1,504
Provision for inventory reserves                           587        754
Provision for losses on accounts receivable                  0         66
Provision (benefit) for deferred income taxes              271       (811)
Net proceeds from settlement of litigation               5,860          0
Gain (loss) on sale of assets                             (186)        13
Foreign currency translation gain                           72         17
Changes in operating assets and liabilities:            (5,283)    (2,216)
--------   --------
Net cash provided by (used) in continuing operating 
activities                                                    2,475     (2,147)

Investing activities
Purchases of property, plant, and equipment, net            (1,120)    (2,364)
Purchase of net assets of acquired business                      0     (2,249)
Repayment of long term note receivable                          25      1,357
--------   --------
Net cash used in investing activities                         (1,095)    (2,361)

Financing activities
Proceeds from revolving line of credit and
long-term borrowings                                      25,600     23,700
Principal payments on line of credit, long-term
debt and capital lease obligations                       (28,159)   (21,212)
Proceeds from sale of common stock                           1,795        644
--------   --------
Net cash provided by financing activities                       (764)     3,132
--------   --------
Increase (decrease) in cash                                      616     (1,376)

Cash at beginning of year                                   1,141      1,865
--------   --------
Cash at September 30                                        $  1,757   $    489
========   ========

See notes to consolidated financial statements.

-6-

ODETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - Basis of Presentation
- ------                         

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of normal
recurring accruals except for adjustments to present the Company's, ATL
Products, Inc. (ATL) as a discontinued operation (See Note 4) necessary
to present fairly the consolidated financial position of Odetics, Inc.
(the "Company") as of September 30, 1997 and the consolidated results
of operations and cash flows for the three month and six-month periods
ended September 30, 1996 and 1997. Certain information and footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. The results of operations for the
three month and six-month periods ended September 30, 1997 are not
necessarily indicative of those to be expected for the entire year. The
accompanying financial statements should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended March 31,
1997 filed with the Securities and Exchange Commission.

Note 2 - Income Taxes
- ------                

Income tax expense for the three month and six-month periods ended
September 30, 1996 and 1997 has been provided at the estimated
annualized effective tax rates based on the estimated income tax
liability or asset and change in deferred taxes for their respective
fiscal years. Deferred taxes result primarily from temporary
differences in the reporting of income for financial statement and
income tax purposes.  These differences relate principally to the use
of accelerated cost recovery depreciation methods for tax purposes,
capitalization of interest and taxes for tax purposes, capitalization
of computer software costs for financial statement purposes, deferred
compensation, other payroll accruals, and reserves for inventory and
accounts receivable for financial statement purposes and general
business tax credit and alternative minimum tax credit carryforwards
for tax purposes.

Note 3 - Long-Term Debt
- ------                  

(in thousands)
March 31,    September 30,
1997           1997
--------     -------------

Line of credit                        $ 2,100        $ 5,600
Mortgage note                          10,171          9,707
Contracts payable                       1,310            767
-------        -------
13,581         16,069

Less current portion                    1,721          1,502
-------        -------
$11,860        $14,567
=======        =======

Note 4 - On March 13, 1997, ATL Products, Inc. ("ATL"), a subsidiary of the
- ------                                                                  
Company, completed an initial public offering (the "Offering") of
1,650,000 shares of its Class A Common Stock, at an initial public
offering price of $11 per share. Following the Offering, the Company's
beneficial ownership interest in ATL was reduced to 82.9%. On October
31,1997, the Company completed a tax-free spin-off of its remaining
interest in ATL to the Company's stockholders, pursuant to which each
holder of the Company's Class A and Class B

7

Common Stock (collectively the "Common Stock") as of October 31, 1997
received approximately 1.1 shares of Class A Common Stock of ATL for
each share of the Company's Common Stock then held. In connection with
the spin-off, the financial statements of the Company have been
restated to reflect continuing operations and the discontinued
operations of ATL. The ATL net sales included in the discontinued
operations for the periods being reported are as follows:

(in thousands)
September 30,   September 30,
1996            1997
-------------   -------------

Quarter Ended            $14,263         $22,902
Six Months Ended         $27,040         $41,469

NOTE 5  Legal Proceedings
------                   

The Company brought an action against Storage Technology Corporation
("StorageTek") in the Eastern District Court of Virginia alleging that
StorageTek had infringed the Company's patent covering robotics tape
cassette handling systems (United States Patent No. 4,779,151).
StorageTek counterclaimed alleging that the Company infringed several
of StorageTek's patents. Prior to trial, the court dismissed two of the
infringement claims against the Company and the third claim was
resolved between the parties. In January 1996, the jury determined that
the patent claims were not infringed under the doctrines of equivalents
based upon a claim construction defined by the court prior to the
trial. The jury also concluded that the Company's patent was not
invalid. In June 1997, the United States Court of Appeals for the
Federal Circuit vacated the lower court's claim construction and
findings of noninfringement under a proper claim construction. In
August 1997, the appellate court denied a petition for rehearing
requested by StorageTek.

NOTE 6  Earnings per Share
------

Earnings per share is based on the weighted average number of shares
of Common Stock and the dilutive effects of Common Stock equivalents
(stock options), determined using the treasury stock method.

In February 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per
Share, effective for both interim and annual periods ending after
December 15, 1997.  At that time, the company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods.  The impact of this statement on the
calculation of primary and fully diluted earnings per share for the
three-months and six-months ended September 30, 1997 and 1996 is not 
expected to be material.

8

ODETICS, INC.

ITEM 2.          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 contained in this
Report and in the Annual Report on Form 10-K of the Company. When used in
this Report, the words "expect(s)," "feel(s)," "believe(s)," "will," "may,"
"anticipate(s)" and similar expressions are intended to identify forward-
looking statements. Such forward-looking statements include, among other
things, statements concerning projected revenues, funding and cash
requirements, supply issues and the Company's incubator strategy, and
involve a number of risks and uncertainties, including without limitation,
those set forth at the end of this Item 2 under the caption "Risk Factors."
The Company's actual results may differ materially from any forward-looking
statements discussed herein. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

Results of Operations

General
On October 31, 1997, the Company completed the spin-off of its 82.9%
interest in ATL by distributing 8,005,000 shares of Class A Common Stock of
ATL owned by the Company to the Company's stockholders of record on October
31,1997. In connection with the spin-off, the Company's financial
statements have been restated to reflect continuing operations and
discontinued operations. Discontinued operations reflect the Company's
interest in the operations of ATL for the periods presented.

Net Sales and Contract Revenues
Net sales and contract revenues consist of (i) sales of products and
services to commercial customers ("net sales") and (ii) revenues derived
from contracts with the agencies of the United States Government or its
prime contractors and long-term contracts with foreign entities related to
space recorders for geographical information systems ("contract revenues").
Total net sales and contract revenues increased 14.4% to $22.1 million for
the three month period ended September 30, 1997 as compared to $19.3
million in the corresponding period of the prior fiscal year, and increased
16.7% to $43.6 million for the six month period ended September 30, 1997 as
compared to $37.4 million in the corresponding period of the prior fiscal
year. The increase in both the three month and six month periods of fiscal
1998 reflected an increase in net sales which was offset by a significant
decrease in contract revenues primarily due to changes in government
spending patterns and a transition by the Company from certain government
markets to commercial activities.

The growth in net sales for the three month and six month period ended
September 30, 1997 fiscal 1998 was primarily due to an increase in sales of
its telecommunications products, largely due to increased unit sales of its
timing and sychronization products for cellular telephone systems. The
Company also experienced growth in its Intelligent Traffic Systems division
largely due to revenues generated from its transportation products acquired
from Rockwell, Inc. at the end of the first quarter of fiscal 1998. The
Company's wholly-owned subsidiary, GYYR, Inc., experienced moderate growth
for the three month and six month period ended September 30, 1997 as
compared to the same periods in the prior fiscal year. The increase in the
Company's net sales in these divisions was partially offset by a decrease
in net sales in the Company's Broadcast Division for the second quarter and
six month period as compared to the same period in the prior fiscal year.
The decrease in Broadcast sales
9

was primarily due to the timing of orders.

Gross Profit
Gross Profit as a percentage of net sales increased to 30.3% for the three
months ended September 30,1997 as compared to 28.1% in the comparable
period in the prior fiscal year, and increased to 32.0% for the six month
period ended September 30, 1997 as compared to 30.6% for the same period in
the prior fiscal year. These increases were primarily due to a shift in the
product mix in the current year that favored products that carried a higher
gross profit. Gross profit as a percentage of contract revenues decreased
to 48.5% in the second quarter of fiscal 1998 from 49.4% in the same period
in the prior fiscal year and decreased 49.4% for the six month period ended
September 30, 1997 as compared to 49.2% in the same period in the prior
fiscal year. The decrease in gross profit as a percentage of contract
revenues is mainly due to the lower absorption of fixed manufacturing 
overhead costs on a decreased sales volume.

Selling, General and Administrative Expense
Selling, general and administrative expense increased 39.5% to $6.4 million
(or 29.1% of total net sales and contract revenues) in the second quarter
of fiscal 1998 as compared to $4.6 million (or 23.8% of total net sales and
contract revenues) in the corresponding period of the prior fiscal year.
Selling, general and administrative expenses for the six month period ended
September 30, 1997 increased 34.5% to $12.4 million (or 28.4% of total net
sales and contract revenues) as compared to $9.2 million (or 24.6% of total
net sales and contract revenues) for the same period in the prior fiscal
year. The increase for the three month and six month periods ended
September 30, 1997 principally reflected the Company's efforts to expand
its sales and marketing capabilities through infrastructure growth which
included higher sales commissions associated with increased sales, as well
as increased expenditures for advertising, promotion and labor costs
associated with the Company's increased commercial sales and marketing
activities. Selling, general and administrative expense also reflected
increased expenses associated with additional contract administrative
support infrastructure acquired from Rockwell, Inc. at the end of the first
quarter of fiscal 1998.

Research and Development Expense
Research and development expense increased 19.7% to $2.3 million (or 10.3%
of total net sales and contract revenues) in the second quarter of fiscal
1998 as compared to $1.9 million ( or 9.9% of total net sales and contract
revenues) in the second quarter of fiscal 1997.  Research and development
expense for the six-month periods increased 19.3% to $4.3 million (or 9.9%
of total net sales and contract revenues) as compared to $3.6 million (or
9.7% of total net sales and contract revenues) in the corresponding period
of fiscal 1997. This increase primarily reflected additional engineering
and labor costs, consulting fees, prototype material costs and other costs
associated with the development, testing and preproduction costs related to
new product development in Gyyr, Inc., Broadcast Division and Communication
Division. The Company expects expenditures for research and development to
generally increase over time and to be higher during periods of new product
development when significant expenditures are incurred in preproduction
activities and increased testing. The expenditures may, therefore, continue
to fluctuate as a percentage of total net sales and contract revenues from
period to period.

Interest Expense

Interest Expense - net, reflects interest income and interest expense as 
follows:

(in thousands)
Three Months            Six Months
Ended                   Ended
------------            ----------
1996    1997            1996  1997
----    ----            ----  ----

Interest Expense                  $444    $371            $937  $651
Interest Income                    434     259             929   535
----    ----            ----  ----

Interest Expense - Net            $ 10    $112            $  8  $116
====    ====            ====  ====

Interest expense primarily reflects interest on the Company's line of credit 
borrowings and mortgage interest. The reduction in interest expense for the 
three month and six month periods of the current fiscal year reflects a 
reduction in the Company's borrowings on its line of credit facility. Interest 
income is derived primarily from the note receivable due to the Company from 
ATL, its previously owned subsidiary. The reduction in interest income in the 
three month and six month periods of the current fiscal year primarily reflects
the $6.75 million payment by ATL in March 1997 which reduced interest bearing 
advances from the Company and was used to reduce the Company's borrowings under 
its line of credit.

Income Taxes

10

The effective income tax rate for the six month period ended September 30,
1997 was 40% as compared to a 49% effective income tax rate for the same
period of the prior year. The decrease in the effective income tax rate
projected for fiscal 1998 was primarily due to a reduction in the effect of
general business tax credits on total income tax benefit. The Company
entered into a Tax Allocation Agreement with ATL effective April 1, 1996,
pursuant to which ATL will make a payment to the Company, or the Company
will make a payment to ATL, as appropriate, in an amount equal to the taxes
attributable to the operations of the Company on its consolidated federal
income tax returns and consolidated or combined state tax returns. In
addition, the Tax Allocation Agreement provides that members of the
Company's consolidated group generating tax losses after April 1,1996 will
be paid by other members of the group which utilize such tax losses to
reduce such other members' tax liability.

Liquidity and Capital Resources

For the first six months of fiscal 1998, the Company used $2.1 million of
cash in continuing operating activities, primarily due to a net loss from
continuing operations and changes in operating assets and liabilities. The
$2.4 million of cash used in investing activities, primarily reflecting the
$2.2 million purchase of the net assets for the Transportation Systems
Division of Rockwell, Inc.

The Company has a $17.0 million bank line of credit with Imperial Bank and
Comerica Bank-California which provides for borrowings generally at the
lessor of the bank's prime rate (8.5% at September 30, 1997) or the bank's
LIBOR rate plus 2.25%.  Borrowings are available for general working
capital purposes, and at September 30, 1997, approximately $11.1 million
was available for borrowing under the line.  The Company's borrowings under
the line of credit are secured by substantially all of the Company's
assets.  On September 30, 1997, $5.6 million was outstanding under this
line of credit.

In April 1997, ATL entered into a promissory note payable to the Company in
the original principal amount of $13.0 million representing the aggregate
balance of ATL's interest bearing advances from the Company.  This note
bears interest at a rate equal to the Company's cost of borrowing (8.5% at
September 30, 1997).  Principal and interest on this note are payable to
the Company in sixteen equal quarterly installments at the end of each
calendar quarter commencing June 30, 1997.

The Company anticipates that net cash flow generated by operating
activities and payments under the note receivable from ATL and funds
available under the Company's line of credit will be adequate to enable the
Company to execute its current operating plans and meet its obligations on
a timely basis for at least the next twelve months.

11

RISK FACTORS

The Company's business is subject to a number of risks, some of which are
discussed below. Other risks are presented elsewhere in this Report. The
following risks should be considered carefully in addition to the other
information contained in this Report in evaluating the Company and its
business before purchasing the shares of the Company's Common Stock.

Fluctuations in Quarterly Operating Results. The Company has experienced
wide fluctuations in quarterly and annual operating results in the past and
may continue to experience fluctuations in the future based on a number of
factors, not all of which are in the Company's control. These factors
include, without limitation, the size and timing of significant customer
orders; the introduction of new products by competitors; the availability
of components used in the manufacture of the Company's products; the
expenditure of substantial funds for research and development for its
subsidiaries and divisions; changes in pricing policies by the Company, its
suppliers or its competitors and increased price competition; the ability
of the Company to develop, introduce, market and gain market acceptance of
new products, applications and product enhancements in a timely manner and
to control costs; the Company's success in expanding and implementing its
sales and marketing programs; technological changes in the markets in which
the Company operates; the reduction in revenues from government programs;
the relatively thin level of backlog at any given time; the mix of sales
among the Company's channels; deferrals of customer orders in anticipation
of new products, applications or product enhancements; currency
fluctuations; and general economic and market conditions. Moreover, the
Company's sales in any quarter typically consist of a relatively small
number of large customer orders, and the timing of a small number of orders
can impact quarter to quarter results. The loss of or a substantial
reduction in orders from any significant customer could have a material
adverse effect on the Company's business, financial condition and results
of operations. The Company's growth in revenues in recent periods may not
be sustainable and may not be indicative of future operating results, and
there can be no assurance that the Company will continue to achieve
profitability on a quarterly or annual basis in the future. Due to all of
the foregoing factors and other risks discussed below, it is possible that
in some future period the Company's operating results may be below the
expectations of analysts and investors. In such event, the market price of
the Company's securities would probably be materially and adversely
affected.

Dependence on Sole Source Suppliers. The Company purchases numerous parts,
supplies and other components used in its products from various independent
suppliers, some of whom are the sole supplier for certain parts and
components.  In particular the Company currently relies on single supplier
for the principal component of the Gyyr's time-lapse videotape cassette
recorders. The Company has not been able to secure any guarantee of the
future supply of its sole sourced components. The disruption or termination
of the supply of any of the Company's source sourced components for any
reason would have a material adverse effect on the Company's business,
financial condition and results of operations.

Uncertainty of Incubator Strategy. The Company has initiated a strategy to
nurture its business divisions with the goal of conducting additional
initial public offerings. The Company's ability to complete an initial
public offering of any of its divisions will depend upon numerous factors,
including, without limitation, the overall performance of such division,
its growth potential, management team, market size, customer base, product
line and results of operations, as well as general economic and market
conditions. There can be no assurance that the Company will be able to
complete a successful initial public offering of any of its divisions in
the near future, if at all.

Rapid Technological Change; Effect of New Product Introductions. The
markets served by the Company are characterized by rapid technological
advances, downward price pressure in the marketplace as technologies
mature, changes in customer requirements, frequent new product
introductions and enhancements, and evolving industry standards. The
Company's business requires substantial ongoing research and development
efforts and expenditures, and its future success will depend on its ability
to enhance its current products, reduce product costs and develop and
introduce new products which incorporate the latest technological
advancements in hardware, storage media, operating system software and
applications software in response to evolving customer requirements. The
Company's failure to anticipate or respond adequately to technological
developments and 

12

changing customer requirements, the occurrence of significant delays in new
product development or introduction or the failure of any new products to
gain market acceptance could impair the Company's competitiveness and could
materially and adversely affect the Company's business, financial condition
and results of operations. There can be no assurance that the Company will
be able to introduce new products or enhancements to existing products on a
timely basis, if at all, or the effect to which such introductions will
have on sales of existing products. To the extent new products are
introduced, they may contain undetected design faults and software errors,
or "bugs," when first released by the Company that, despite testing by the
Company, are discovered only after a product has been installed and used by
customers. Although the Company has not experienced any material adverse
effect resulting from any such faults or errors to date, there can be no
assurance that faults or errors in the Company's existing products or in
new products introduced by the Company will not be discovered in the
future, causing delays in product introduction and shipments or requiring
design modifications that could adversely affect the Company's competitive
position and results of operations.

Competition. The Company competes in each of its markets with numerous
other companies, many of which have far greater name recognition and
financial, technological, marketing and customer service resources than the
Company and may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or devote greater
resources to the development, promotion, sale and support of their products
than the Company. The principal competitive factors in the markets in which
the Company participates are product quality and performance, price,
reliability, upgradeability, service and technical support. There can be no
assurance that the Company will be able to compete effectively in the
markets for its products. Increased competition is likely to result in
price reductions, reduced gross margins and loss of market share, any of
which could have a material adverse affect upon the Company's business,
operating results and financial condition.

Risks Associated with International Sales. International product sales
represented approximately 40% and 35% of the Company's total net sales and
contract revenues during the first six months of fiscal 1997 and 1998,
respectively. The Company believes that international sales will continue
to represent a significant portion of its revenues, and that continued
growth and profitability will require further expansion of its
international operations. The Company's international sales are currently
denominated primarily in U.S. dollars, and an increase in the relative
value of the dollar could make the Company's products more expensive and,
therefore, potentially less price competitive in international markets.
Additional risks inherent in international business activities generally
include unexpected changes in regulatory requirements, tariffs and other
trade barriers, longer accounts receivable payment cycles, difficulties in
managing and staffing international operations, potentially adverse tax
consequences including restrictions on the repatriation of earnings, the
burdens of compliance with a wide variety of foreign laws, currency
fluctuations and political and economical instability. The Company does not
engage in any transactions as a hedge against risks of loss due to foreign
currency fluctuations. There can be no assurance that such factors will not
have a material adverse effect on the Company's future international sales
and, consequently, the Company's business, operating results and financial
condition. Furthermore, as the Company increases its international sales,
its total revenues may also be affected to a greater extent by seasonal
fluctuations resulting from lower sales that typically occur during the
summer months in Europe and other parts of the world.

Dependence on Key Personnel. The Company's future performance depends to a
significant extent on its senior management and other key employees, in
particular Joel Slutzky, the Company's Chief Executive Officer.  The loss
of the services of Mr. Slutzky or certain key employees would have a
material adverse effect on the Company's development and marketing efforts.
The Company's future success will also depend in large part upon its
ability to attract, retain, and motivate highly skilled employees.
Competition for employees, particularly development engineers, is intense,
and there can be no assurance that the Company will be able to continue to
attract and retain sufficient numbers of such highly skilled

13

employees. The Company's inability to attract and retain additional key
employees or the loss of one or more of its current key employees could
have a material adverse effect upon the Company's business, financial
condition, and results of operations.

Dependence on Proprietary Technology; Risks of Infringement. The Company's
ability to compete effectively depends in part on its ability to develop
and maintain proprietary aspects of its technology which the Company
attempts to protect with a combination of patent, copyright, trademark, and
trade secret laws, employee and third party nondisclosure agreements and
similar means. Such rights may not preclude competitors from developing
substantially equivalent or superior products to the Company's products. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights as fully as do the laws of the United States. There can
be no assurance that the Company's means of protecting its proprietary
rights in the United States or abroad will be adequate, that future patents
will be issued, or that competitors will not independently develop
technologies that are similar or superior to the Company's technology,
duplicate the Company's technology, or design around any patent of the
Company. Moreover, litigation has been necessary in the past and may be
necessary in the future to enforce the Company's intellectual property
rights, to determine the validity and scope of the proprietary rights of
others, or to defend the Company against claims of infringement or
invalidity by others. An adverse outcome in such litigation or similar
proceedings could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from others or require the
Company to cease marketing or using certain products, any of which could
have a material adverse effect on the Company's business, financial
condition and results of operations. If the Company is required to obtain
licenses under patents or proprietary rights of others, there can be no
assurance that any required licenses would be made available on terms
acceptable to the Company, if at all. In addition, the cost of addressing
any intellectual property litigation claim, both in legal fees and expenses
and the diversion of management resources, regardless of whether the claim
is valid, could be significant and could have a material adverse effect on
the Company's results of operations.

Volatility of Stock Price. The trading price of the Company's Common Stock
could be subject to wide fluctuations in response to quarterly variations
in operating results, shortages announced by suppliers, announcements of
technological innovations or new products, applications or product
enhancements by the Company or its competitors, changes in financial
estimates by securities analysts and other events or factors. In addition,
the stock market has experienced volatility which has particularly affected
the market prices of equity securities of many high technology companies
and which often has been unrelated to the operating performance of such
companies. These broad market fluctuations may adversely affect the market
price of the Company's securities.

Concentration of Ownership. As of October 31, 1997, the Company's officers
and directors beneficially owned a majority of the total combined voting
power of the outstanding shares of Class A Common Stock and Class B Common
Stock. As a result of their stock ownership, management will be able to
significantly influence the election of the Company's directors and the
outcome of corporate actions requiring stockholder approval, such as
mergers and acquisitions, regardless of how other stockholders of the
Company may vote. This concentration of voting control may have a
significant effect in delaying, deferring or preventing a change in
management or change in control of the Company and may adversely affect the
voting or other rights of other holders of Common Stock.

Anti-Takeover Effect of Charter Provisions, Bylaws, and Stock Structure.
The Company has two classes of Common Stock which are substantially
identical other than with respect to voting power. The Company's Class A
Common Stock entitles the holder to 1/10th vote per share and Class B
Common Stock entitles the holder to one vote per share, with concentration
of ownership of the Class B Common Stock in the Company's officers and
directors and their affiliates. In addition, the

14

Company's Board of Directors is elected annually on a split vote basis,
with the holders of Class A Common Stock currently being entitled to elect
two of the directors and holders of the Class B Common Stock currently
being entitled to elect the remaining six directors. These provisions could
have the effect of discouraging a proxy contest or making it more difficult
for a third party acquiring a substantial block of the Company's Common
Stock to effect a change in management and control of the Company. Such
provisions also could limit the price that investors might be willing to
pay in the future for shares of the Company's Common Stock.

The Board of Directors of the Company is authorized to issue, without
stockholder approval, up to 2,000,000 shares of Preferred Stock with
voting, conversion and other rights and preferences, as well as additional
shares of Class B Common Stock, which could adversely affect the voting
power or other rights of the holders of Class A Common Stock. Although the
Company has no current plans to issue any shares of Preferred Stock or
additional shares of Class B Common Stock, the future issuance of Preferred
Stock or Common Stock or of rights to purchase Preferred Stock or Common
Stock could be used to discourage an unsolicited acquisition proposal.

Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date
code field. These date code fields will need to accept four digit entries
to distinguish 21st century dates from 20th century dates. As a result,
in less than three years, computer systems and/or software used by many
companies may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists in the hardware and software
industry concerning the potential effects associated with such compliance.
Although the Company's core products are designed to be Year 2000
compliant, there can be no assurance that such products contain all
necessary date code changes, or that the Company's existing information
systems will be Year 2000 compliant. As a result, the Company may be
required to expend additional resources to make such corrections to its
products and information systems, which corrections may not be able to be
made on a timely basis, if at all. The Company believes that the purchasing
patterns of customers and potential customers may be affected by Year 2000
issues in a variety of ways. Many companies are expending significant
resources to correct or patch their current systems for Year 2000
compliance. These expenditures may result in reduced funds available to
purchase products such as those offered by the Company. Many potential
customers may also choose to defer purchasing Year 2000 compliant products
until they believe it is absolutely necessary, thus resulting in
potentially stalled market sales within the industry. In addition, Year
2000 issues could cause a significant number of companies, including
current customers of the Company, to reevaluate their current system needs,
and as a result consider switching to other systems or suppliers. Any of
the foregoing could result in a material adverse effect on the Company's
business, financial condition and results of operations.

15

ODETICS, INC.

PART II OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

The Company brought an action against Storage Technology Corporation
("StorageTek") in the Eastern District Court of Virginia alleging that
StorageTek had infringed the Company's patent covering robotics tape
cassette handling systems (United States Patent No. 4,779,151).
StorageTek counterclaimed alleging that the Company infringed several
of StorageTek's patents. Prior to trial, the court dismissed two of
the infringement claims against the Company and the third claim was
resolved between the parties. In January 1996, the jury determined
that the patent claims were not infringed under the doctrine of
equivalents based upon a claim construction defined by the court prior
to the trial. The jury also concluded that the Company's patent was
not invalid. In June 1997, the United States Court of Appeals for the
Federal Circuit vacated the lower court's claim construction and
findings of noninfringement of the Company's patent. The appellate
court remanded the case for consideration of infringement under a
proper claim construction. In August 1997, the appellate court denied
a petition for rehearing requested by StorageTek.

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

In connection with the Company's Annual Meeting of the Stockholders of
Odetics, Inc. held on September 5, 1997, the following proxies were
tabulated representing 5,293,888 shares of Class A Common Stock or 99%,
and 999,913 of Class B Common Stock or 94% of the total outstanding
shares voted in the following manner:

Proposal I  -  Election of the Board of Directors

Total Vote for    Total Vote Withheld
Each Director     From Each Director
-------------     ------------------

Class A Common Stock
- --------------------

Crandall Gudmundson                 5,173,764          120,124
Leo Wexler                          5,149,949          143,939

Class B Common Stock
- --------------------

Joel Slutzky                        999,163            750
Jerry F. Muench                     999,163            750
Ralph R. Mickelson                  999,163            750
Stanley Molasky                     999,163            750
Paul E. Wright                      999,163            750
Kevin C. Daly                       999,163            750

16

Proposal II -  To Consider and Approve the Company's 1997 Stock-Incentive Plan

Class A        Class B                   
Common Stock   Common Stock                
(1/10 Vote      (1 Vote                   
per share)     per share)          TOTAL   
------------   ------------       --------- 

For                 217,623         792,817         1,010,440   
Against              59,294           7,075            66,369   
Abstain                 844             915             1,759   
No Vote             251,627         199,106           450,733    

Proposal III  -  To Ratify the Appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending March 31, 1998.

Class A        Class B                   
Common Stock   Common Stock                
(1/10 Vote      (1 Vote                   
per share)     per share)          TOTAL   
------------   ------------       --------- 

For                 528,023         999,588         1,527,611     
Against                 908              50               958     
Abstain                 458             275               733     
No Vote            N/A             N/A              N/A            

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

27.   Financial Data Schedule

(b)  Reports on Form 8-K

There were no reports on Form 8-K filed
for the six-month period ended
June 30, 1997.

17

ODETICS, INC.

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.

ODETICS, INC.
(Registrant)

By  /s/ Gregory A. Miner
----------------------------------------
Gregory A. Miner
Vice President, Chief Financial Officer

By  /s/ Gary Smith
----------------------------------------
Gary Smith
Vice President, Controller
(Principal Accounting Officer)

Date   November 13, 1997
--------------------

18

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