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 period ended                 SEPTEMBER 30, 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 number     1-8403

                        ENERGY CONVERSION DEVICES, INC.
            (Exact name of registrant as specified in its charter)

        DELAWARE                                      38-1749884
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

    1675 WEST MAPLE ROAD, TROY, MICHIGAN                       48084
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code        (810) 280-1900
                                                  ----------------------------


     (Former name,  former address 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

    As of October 31, 1996,  there were  219,913  shares of Class A Common Stock
and 10,495,539 shares of Common Stock outstanding.

                              Page 1 of 21 pages




                                 1

<PAGE>



                     PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

             ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                  CONSOLIDATED STATEMENTS OF OPERATIONS

                               (Unaudited)

                                               Three Months Ended September 30,
                                                      1996            1995
REVENUES

    Product sales                                 $  4,474,450    $  3,613,880
    Royalties                                          401,338         272,000
    Revenues from research and development
      agreements                                       713,438       2,350,659
    Revenues from license and other agreements       1,368,645       3,700,000
    Other                                              219,990         334,517

      TOTAL REVENUES                                 7,177,861      10,271,056

EXPENSES

    Cost of product sales                            4,990,729       3,690,920
    Cost of revenues from research and development
      agreements                                       586,287       2,743,554
    Product development and research                 3,582,942       1,918,604
    Patent defense                                     439,746
    Patents                                            119,508         214,787
    Operating, general and administrative            1,631,044       1,430,364
                                                  ------------   -------------

      TOTAL EXPENSES                                11,350,256       9,998,229
                                                  ------------   -------------

          (LOSS) INCOME FROM OPERATIONS             (4,172,395)        272,827

OTHER INCOME (EXPENSE):

    Interest expense                                    06,540)       (111,835)
    Interest income                                    322,723         102,449
    Other nonoperating income - net                     58,179          49,793
                                                  ------------   -------------

      TOTAL OTHER INCOME                               274,362          40,407
                                                  ------------   -------------

    NET (LOSS) INCOME                             $ (3,898,033)  $     313,234
                                                  ============   =============

    NET (LOSS) INCOME PER COMMON SHARE AND
      COMMON EQUIVALENT SHARE                     $       (.36)  $         .04
                                                  ============   =============

    NET (LOSS) INCOME PER COMMON SHARE
      ASSUMING FULL DILUTION                      $       (.36)  $         .04
                                                  ============   =============

See notes to consolidated financial statements.

                                   2

<PAGE>




            ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                      CONSOLIDATED BALANCE SHEETS

                                ASSETS

                                                    September 30,   June 30,
                                                       1996           1996
                                                    (Unaudited)     (Audited)
CURRENT ASSETS
      Cash, including cash equivalents of
         $28,910,000 as of September 30, 1996 and
         $23,769,000 as of June 30, 1996            $ 29,806,065  $ 23,773,742
      Investments                                         --        10,327,352
      Accounts receivable (net of allowance for
         uncollectible accounts of approximately
         $25,000 at September 30, 1996 and
         $29,000 at June 30, 1996)                     9,569,905     9,985,722
      Amounts due from related parties                 1,795,178     2,901,509
      Inventories                                      3,702,049     3,275,135
      Prepaid expenses and other current assets          631,385       362,558

             TOTAL CURRENT ASSETS                     45,504,582    50,626,018

PROPERTY, PLANT AND EQUIPMENT
      Land and land improvements                         312,588       312,588
      Buildings and improvements                       3,643,137     3,595,009
      Machinery and other equipment                   17,840,589    17,249,435
      Capitalized lease equipment                      5,736,416     5,802,806
                                                  --------------  ------------
                                                      27,532,730    26,959,838

      Less accumulated depreciation and amortization (21,471,094)  (21,260,424)

         TOTAL PROPERTY, PLANT AND EQUIPMENT           6,061,636     5,699,414

JOINT VENTURES
      United Solar Systems                                 --           --
      GM Ovonic                                            --           --
      Sovlux                                               --           --

OTHER ASSETS                                             786,356       804,007
                                                    ------------  ------------

         TOTAL ASSETS                               $ 52,352,574  $ 57,129,439
                                                    ============  ============

See notes to consolidated financial statements.

                                  3

<PAGE>



              ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                        CONSOLIDATED BALANCE SHEETS

                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                   September 30,     June 30,
                                                       1996            1996
                                                    (Unaudited)      (Audited)
CURRENT LIABILITIES
  Accounts payable and accrued expenses           $   4,025,114     $ 3,911,122
  Salaries, wages and amounts withheld
     from employees                                   1,353,882       1,175,102
  Deferred revenues under business agreements           336,250         711,894
  Current installments on capitalized lease
     obligations and short-term debt                  1,283,788       1,302,973
                                                ---------------     -----------

     TOTAL CURRENT LIABILITIES                        6,999,034       7,101,091

CAPITALIZED LEASE OBLIGATIONS                         1,472,613       1,853,728

DEFERRED GAIN                                           570,686         686,351

NON-REFUNDABLE ADVANCE ROYALTIES                      3,684,385       3,754,229
                                                  -------------     -----------

     TOTAL LIABILITIES                               12,726,718      13,395,399

STOCKHOLDERS' EQUITY
  Capital Stock
     Class A Convertible Common Stock, par value
         $.01 per share:
         Authorized - 500,000 shares
         Issued & outstanding - 219,913 shares            2,199           2,199
     Common Stock, par value $0.01 per share:
         Authorized - 15,000,000 shares
         Issued and outstanding - 10,495,139
         shares at September 30, 1996 and
         10,489,591 shares at June 30, 1996             104,951         104,896
      Additional paid-in capital                    200,964,491     200,757,697
      Accumulated deficit                          (161,028,785)   (157,130,752)
      Treasury stock at cost - 23,000 shares           (417,000)

         TOTAL STOCKHOLDERS' EQUITY                  39,625,856      43,734,040
                                                  -------------    ------------

             TOTAL LIABILITIES & STOCKHOLDERS'
                  EQUITY                         $   52,352,574  $   57,129,439
                                                 ==============  ==============

See notes to consolidated financial statements.

                                     4

<PAGE>



              ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                        Three Months Ended
                                                           September 30,
                                                          1996        1995
OPERATING ACTIVITIES:
  Net (loss) income                                 $ (3,898,033)  $    313,234
  Adjustments to reconcile net income (loss) to net
   cash used in operating activities:
     Depreciation and amortization                       432,999        292,599
     Creditable Royalties                                (69,844)
     Warrants and options issued to consultants
       and employees for services rendered and
       employee stock options                            113,250        113,250
     Stock issued for services rendered                   52,562          3,383
     Amortization of deferred gain                       (11,499)       (13,599)
  Changes in working capital:
     Accounts receivable and amounts due from
       related parties                                 1,522,148     (1,020,671)
     Inventories                                        (426,914)         1,994
     Prepaid expenses and other current assets          (251,176)        10,111
     Accounts payable and accrued expenses               292,772       (900,195)
     Deferred revenues under business agreements        (375,644)       699,792
    NET CASH (USED IN) OPERATIONS                     (2,619,379)      (500,102)

INVESTING ACTIVITIES:
  Purchases of capital equipment (net)                  (899,387)      (538,603)
  Sales of investments                                10,327,352          --
                                                    ------------    -----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES    9,427,965       (538,603)

FINANCING ACTIVITIES:
  Purchase of Treasury Stock                            (417,000)
  Principal payments under current debt and
    capitalized lease obligations                       (400,300)      (368,187)
  Proceeds from exercise of stock options and
    warrants                                              41,037      1,041,244

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES     (776,263)       673,057
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                          6,032,323       (365,648)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD      23,773,742      6,259,451
                                                     -----------   ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD           $29,806,065   $  5,893,803
                                                     ===========   ============

See notes to consolidated financial statements.

                                     5

<PAGE>



          ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

               CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Unaudited)


                                                 Three Months Ended
                                                    September 30,
                                                  1996         1995

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
    INFORMATION:

    Cash paid for interest                     $ 95,238       $111,835




                                 6

<PAGE>



  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SEPTEMBER 30, 1996

NOTE A - Basis of Presentation

      Information  for the three  months  ended  September  30, 1996 and 1995 is
unaudited but includes all adjustments  which Energy  Conversion  Devices,  Inc.
("ECD") considers necessary for a fair presentation of financial condition, cash
flows and results of operations.

      In accordance  with the  instructions  for the completion of the Quarterly
Report on Form 10-Q, certain  information and footnotes necessary to comply with
Generally  Accepted  Accounting  Principles  ("GAAP")  have  been  condensed  or
omitted.  These financial  statements  should be read in conjunction  with ECD's
1996 Annual Report on Form 10-K,  which  contains a summary of ECD's  accounting
principles and other footnote information.

      The consolidated  financial statements include the accounts of ECD and its
93.5%- owned  subsidiary  Ovonic Battery Company,  Inc.  ("Ovonic  Battery"),  a
company  formed to develop and  commercialize  ECD's Ovonic nickel metal hydride
("NiMH")  battery  technology  (collectively  the "Company").  Due to cumulative
losses  incurred  by Ovonic  Battery,  no  minority  interest is recorded in the
consolidated financial statements.

     ECD also has three  investments  accounted  for by the equity  method:  (i)
United Solar Systems Corp. ("United Solar") (49.98%),  ECD's photovoltaic (solar
energy) joint venture with Canon Inc. of Japan  ("Canon");  (ii) Sovlux Co. Ltd.
("Sovlux") (50%), ECD's Russian joint venture with State Research and Production
Enterprise  Kvant  ("Kvant");  and (iii) GM Ovonic L.L.C.  ("GM Ovonic")  (40%),
Ovonic  Battery's  joint  venture  with  General  Motors  Corporation  ("General
Motors") to manufacture  and sell the Company's  proprietary  NiMH batteries for
electric vehicle applications worldwide.

      The Company's investments in its joint ventures,  United Solar, Sovlux and
GM  Ovonic,  are  recorded  at zero.  The  Company  will  continue  to carry its
investment  in each of these joint  ventures  at zero until the venture  becomes
profitable,  at which time the Company will start to recognize  over a period of
years its share,  if any, of the then equity of each of the  ventures,  and will
recognize its share of each venture's  profits or losses on the equity method of
accounting.

      Upon  consolidation,   all  intercompany  accounts  and  transactions  are
eliminated.

      Certain  items for the three  months  ended  September  30, 1995 have been
reclassified  to be  consistent  with the  classification  of items in the three
months ended September 30, 1996.


                                 7

<PAGE>



      In preparing financial  statements in conformity with GAAP,  management is
required to make estimates and  assumptions  that affect the reported  amount of
assets and liabilities  and the disclosure of contingent  assets and liabilities
at the date of the  financial  statements  and revenues and expenses  during the
reported period.  Actual results could differ from those estimates.  The Company
is impacted by other factors such as the continued receipt of contracts from the
U.S.  government,  its ability to protect and maintain the proprietary nature of
its  technology,  its  continued  product  and  technological  advances  and the
strength and ability of the Company's  licensees  and joint venture  partners to
commercialize the Company's products and technologies.

      In March 1995, the Financial  Accounting  Standards Board issued Statement
of Financial  Accounting  Standards No. 121,  "Accounting  for the Impairment of
Long-Lived  Assets,"  which requires  adoption of the  disclosure  provisions no
later than fiscal years  beginning  after  December  15, 1995.  The new standard
requires the impairment of property and  intangibles  to be considered  whenever
evidence suggests a lack of recoverability.  In the three months ended September
30, 1996,  the Company  adopted this new standard.  Adoption of the new standard
had no effect on the Company's financial statements.

      In October 1995, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards  No. 123 ("SFAS No. 123"),  "Accounting  for
Stock-Based  Compensation," which requires adoption of the disclosure provisions
no later than fiscal  years  beginning  December  15,  1995 and  adoption of the
recognition  and measurement  provisions for  nonemployee  transactions no later
than after  December 15, 1995.  The new standard  defines a fair value method of
accounting for stock options and other equity instruments.  Under the fair value
method,  compensation cost is measured at the grant date based on the fair value
of the award and is  recognized  over the service  period,  which is usually the
vesting period.

      Pursuant to SFAS No. 123, companies are encouraged,  but are not required,
to  adopt  the  fair  value  method  of  accounting  for  employee   stock-based
transactions.  Companies  are also  permitted  to  continue  to account for such
transactions   under  Accounting   Principles  Board  ("APB")  Opinion  No.  25,
"Accounting for Stock Issued to Employees," but would be required to disclose in
a note to the  financial  statements  pro forma net income  and,  if  presented,
earnings per share as if the Company had applied the new method of accounting.

      The accounting requirements of SFAS No. 123 are effective for all employee
awards granted after the beginning of the fiscal year of adoption.  In the three
months ended September 30, 1996, the Company determined that it will continue to
apply APB Opinion No. 25 to its stock-based compensation awards to employees and
will  disclose  the  required  pro forma  effect on net income and  earnings per
share. This determination had no effect on the Company's financial statements.


                                 8

<PAGE>



United Solar

      In 1990,  ECD and Canon  entered into a joint  venture  agreement  for the
formation of United  Solar.  The  agreement  provided that United Solar would be
owned  49.98% by ECD,  49.98%  by  Canon,  with the  balance  held by Mrs.  Haru
Reischauer,  a member of the Board of Directors of ECD. ECD's principal
contributions to United Solar was a license in the field of  photovoltaics.  In
return for its contributions, ECD received 49.98% equity interest in United
Solar.  In return for its 49.98%  equity  interest  in United  Solar,  Canon has
invested over $50,000,000.

      In 1992, a memorandum of understanding was signed by Canon and ECD stating
that  should  United  Solar  require  additional  funding  beyond what Canon has
already  agreed to invest,  Canon would assist  United Solar in finding means of
raising  funds to  continue  the  expansion  of  United  Solar's  operations  to
profitability which would not result in the dilution of ECD's interest in United
Solar.

      The following sets forth certain selected  financial data regarding United
Solar that are derived from United Solar's unaudited financial statements:

               UNITED SOLAR STATEMENTS OF OPERATIONS

                                   Three Months Ended   Three Months Ended
                                      September 30,         September 30,
                                          1996                 1995
                                       (Unaudited)          (Unaudited)

      Revenues*                       $  1,073,043           $ 1,547,373
                                      ------------           -----------
      Operating Expenses
        Cost of product sales            1,518,346             1,572,999
        Research and development           666,563               484,500
        General and administrative         478,919               660,835
        Sales and marketing                349,449               341,786
                                      ------------           -----------
           Total                         3,013,277             3,060,120
      Other Income (Expense)                11,916                 9,269
      Net (Loss)                      $ (1,928,318)         $ (1,503,478)
                                      ============          ============

      * Includes product sales and revenues earned under research contracts.


                                 9

<PAGE>




                    UNITED SOLAR BALANCE SHEETS

                                                 September 30,      June 30,
                                                     1996             1996
                                                  (Unaudited)      (Unaudited)
     Current Assets:
        Cash and Cash Equivalents                $   9,252,780     $  1,481,480
        Accounts Receivable - Trade                    402,998          395,551
        Accounts Receivable - National Renewable
           Energy Laboratory ("NREL")                  188,556          217,810
        Accounts Receivable - Stockholders             128,891           70,190
        Inventory                                    2,676,667        2,257,458
        Other Current Assets                           305,315          332,002
                                                  ------------     ------------
           Total Current Assets                     12,955,207        4,754,491
     Property, Plant and Equipment (Net)            13,119,853       11,276,455
     Other Assets                                      224,806          216,730
                                                  ------------     ------------
           Total Assets                           $ 26,299,866     $ 16,247,676
                                                  ============     ============

     Current Liabilities:
        Short-term Bank Debt                      $ 17,000,000     $ 14,375,565
        Accounts Payable - Trade and Stockholders      709,425        1,363,044
        Accrued Expenses and Other                     306,879          297,186
                                                  ------------     ------------
           Total Current Liabilities                18,016,304       16,035,795
           Total Stockholders' Equity                8,283,562          211,881
                                                  ------------     ------------
              Total Liabilities and Stockholders'
                Equity                            $ 26,299,866     $ 16,247,676
                                                  ============     ============
Sovlux

      In 1990, ECD established  Sovlux,  a joint venture with State Research and
Production  Enterprise  ("Kvant") in Russia,  to  manufacture  photovoltaic  and
battery products and systems in the countries comprising the former U.S.S.R. and
sell them worldwide (except for Japan and India). Sovlux is owned 50% by ECD and
50% by Kvant. In 1990,  Kvant entered into  machine-building  contracts with ECD
for  the  construction  of  photovoltaic  manufacturing  equipment  and  battery
equipment.  Kvant  paid ECD a total of  $10,450,000  for these  machine-building
contracts.  At June 30, 1993, ECD had completed  these machines and shipped them
to Kvant.

      The  joint  venture   arrangements  provide  that  Kvant  contribute  such
equipment  in an installed  and  operational  condition to the joint  venture in
exchange for its 50% interest. ECD's contribution to the venture consists solely
of the technology necessary to support Sovlux's  operations.  No tangible assets
have  been  contributed  to Sovlux  by ECD.  Through  September  30,  1996,  the
activities  related to Sovlux  have been  limited  to  facility  preparation  at
certain Kvant facilities from which Sovlux will operate, the cost of which Kvant
has also  assumed as part of its  commitment  to the  venture,  the  training of
employees and other preproduction activities.


                                10

<PAGE>



      There are no financial  statements available for Sovlux since the December
31, 1993 financial  statements set forth in ECD's Annual Report on Form 10-K for
the year ended June 30, 1995, as amended.

GM Ovonic

      In June 1994, Ovonic Battery and General Motors formed a joint venture for
the manufacture and marketing of Ovonic NiMH batteries for electric vehicles.
General Motors has a 60% interest and Ovonic Battery  has a 40% interest in
this joint  venture.  Ovonic  Battery has  contributed  intellectual property,
licenses,  production processes,  know-how, personnel and engineering services
pertaining  to Ovonic NiMH battery  technology  to the joint  venture.
General Motors' contribution consists of operating capital, plant, equipment and
management personnel necessary for the volume production of batteries.

      GM Ovonic  is  currently  manufacturing  production-intent  batteries,  is
conducting production scale-up  engineering  activities and is installing the
equipment necessary for the  initial low  volume production of battery packs
at a manufacturing plant in Troy, Michigan.

      The  following  sets forth  certain  financial  data  regarding  GM Ovonic
derived from GM Ovonic's unaudited financial statements:

                GM OVONIC STATEMENTS OF OPERATIONS
                              (000's)
                                                     Three Months Ended
                                                        September 30,
                                                      1996          1995
                                                   (Unaudited)   (Unaudited)
      Revenues:
        Sales                                        $  340       $  238
      Operating expenses
        Cost of sales/Experimental testing              293          186
        Outside engineering support                     373          252
        General and administrative expenses             573          254
                                                     ------       ------
           Total                                      1,239          692
                                                     ------       ------
      Net (Loss)                                     $ (899)      $ (454)
                                                     =======      =======


                      GM OVONIC BALANCE SHEET
                              (000's)
                                                   September 30,    June 30,
                                                       1996           1996
                                                    (Unaudited)   (Unaudited)
      Current Assets:
        Accounts receivable                          $  1,908       $  1,500
        Property, plant and equipment                   6,034          4,342
                                                     --------       --------
           Total Assets                              $  7,942       $  5,842
                                                     ========       ========

      Current Liabilities:
        Accounts payable                             $  2,790       $  2,300
                                                     --------       --------
           Total Current Liabilities                    2,790          2,300
      Notes Payable - Stockholders                     16,802         12,915
      Total Stockholders'(Deficit)                    (11,650)        (9,373)
                                                     ---------      ---------
           Total Liabilities and Stockholders'
                (Deficit)                            $  7,942       $  5,842
                                                     ========       ========
                                11

<PAGE>



Accounts Receivable

      The  following   tabulation  shows  the  component  elements  of  accounts
receivable from long-term contracts and other programs:

                                           September 30,       June 30,
                                               1996              1996
      U.S. Government:
        Amounts billed                     $   226,492      $   743,482
        Unbilled                               745,440          453,394
                                           -----------      -----------
             Total                             971,932        1,196,876
                                           -----------      -----------

      Commercial Customers:
        Amounts billed                       4,067,196*       2,768,736*
        Unbilled
           - due per contracts               5,326,709**      7,062,239**
           - other                             690,618        1,222,173
                                           -----------      -----------
             Total                          10,084,523       11,053,148
                                           -----------      -----------

      Other                                    334,973          666,412
      Allowance for Uncollectible Accounts     (26,345)         (29,205)
                                           -----------      -----------
             TOTAL                         $11,365,083      $12,887,231
                                           ===========      ===========

  *  Includes  related-party  (United Solar and GM Ovonic) amounts of $1,554,060
     and $1,041,445,  respectively.  Includes related-party (United Solar and GM
     Ovonic) amounts of $241,118 and $1,860,064, respectively.

      Unbilled   receivables  from  commercial   customers   represent  revenues
recognized  for the present  value of license  payments to be received in future
periods.  They also include revenues recognized on the  percentage-of-completion
method of accounting  related to  machine-building  contracts and amounts earned
under certain contracts, which amounts were billed in subsequent months.

      Certain  contracts  with the U.S.  government  require a retention that is
paid upon  completion of audit of the  Company's  indirect  rates.  There are no
material  retentions  at  September  30, 1996 and June 30,  1996.  Certain  U.S.
government  contracts remain subject to audit.  Management does not believe that
adjustments  which may result from an audit  would be material to the  financial
position or results of operations of the Company.

Inventories

      Inventories of raw  materials,  work in process and finished goods for the
manufacture of negative electrodes,  battery packs and other products,  together
with supplies,  are valued at the lower of cost (moving average) or market. Cost
elements  included in inventory are  materials,  direct labor and  manufacturing
overhead.  Cost of sales are removed  from  inventory  based on actual  costs of
items shipped to customers.


                                12

<PAGE>



      Inventories (principally those of Ovonic Battery) are as follows:

                                    September 30, 1996      June 30, 1996

             Finished products          $   387,422          $   263,525
             Work in process              1,945,365            1,902,396
             Raw materials                1,331,278            1,075,401
             Supplies                        37,984               33,813
                                        -----------          -----------
                                        $ 3,702,049          $ 3,275,135
                                        ===========          ===========
  
Product Sales

      Product   sales   include   negative   electrodes,   battery   packs   and
machine-building.  Revenues related to machine-building contracts are recognized
on the  percentage-of-  completion method of accounting using the costs incurred
to date as a percentage of the total expected costs. All other product sales are
recognized when the product is shipped.

Royalties

      Most license  agreements provide for the Company to receive royalties from
the sale of products  which  utilize the  licensed  technology.  Typically,  the
royalties  are  incremental  to and  distinct  from  the  license  fee  and  are
recognized  as revenue  upon the sale of the  respective  licensed  product.  In
several  instances,  the Company has received cash  payments for  non-refundable
advance royalty payments which are creditable against future royalties under the
licenses.  Advance  royalty  payments are deferred and recognized in revenues as
the  creditable  sales occur,  the  underlying  agreement  expires,  or when the
Company  has  demonstrable   evidence  that  no  additional  royalties  will  be
creditable and, accordingly, the earnings process is completed.

Business Agreements

      A substantial  portion of revenues are derived through business agreements
to  develop  and/or  commercialize  products  based  upon the  Company's
proprietary technologies. Such agreements are of two types.

      The first type of business  agreement  relates to licensing  the Company's
proprietary  technology.  Licensing  activities  are  tailored  to provide  each
licensee  with  the  right  to use the  Company's  technology,  most of which is
patented, for a specific product application or, in some instances,  for further
exploration of new product applications of such technologies.  The terms of such
licenses,  accordingly,  are  tailored  to  address  a number  of  circumstances
relating to the use of such technology  which have been  negotiated  between the
Company and the licensee.  Such terms generally address whether the license will
be exclusive or  nonexclusive,  whether the licensee is limited to very narrowly
defined applications or to broader-based product manufacture or sale of products
using such technologies, whether the license will provide royalties for products
sold which employ

                                13

<PAGE>



such licensed  technology and how such  royalties  will be measured,  as well as
other factors specific to each negotiated  arrangement.  In some cases, licenses
relate  directly to research  and  development  that the Company has  undertaken
pursuant to research and development agreements;  in other cases, they relate to
product  development  and  commercialization  efforts of the  licensee and other
agreements combine the efforts of the Company with those of the licensee.

      License agreement fees are generally recognized as revenue at the time the
agreements are  consummated,  which is the  completion-of-the-earnings  process.
Typically,  such fees are  non-refundable,  do not obligate the Company to incur
any future  costs or  require  future  performance  by the  Company  and are not
related to future  production or earnings of the licensee.  License fees payable
in installments  are recorded at the present value of the amounts to be received
taking into account the collectibility of the license fee. In some instances,  a
portion of such license fees is contingent  upon the  commencement of production
or other uncertainties.  In these cases, license fee revenues are not recognized
until commencement of production or the resolution of uncertainties.

      In the second type of business  agreement,  the Company conducts specified
research and  development  projects  related to one of its principal  technology
specializations  for an  agreed-upon  fee  ("R&D  agreements").  Some  of  these
projects have stipulated  performance  criteria and deliverables  whereas others
require "best efforts" with no specified performance criteria. Revenues from R&D
agreements  that  contain  specific  performance  criteria are  recognized  on a
percentage-of-completion  basis which matches the contract revenues to the costs
incurred on a project based on the  relationship  of costs incurred to estimated
total project costs.  Revenue from R&D  agreements,  where there are no specific
performance  terms,  are recognized in amounts equal to the amounts  expended on
the programs.  Generally,  the agreed-upon  fees for R&D agreements  contemplate
reimbursing the Company for costs considered  associated with project activities
including  expenses  for  direct  product  development  and  research,  patents,
operating,  general and administrative  expenses and depreciation.  Accordingly,
expenses  related to R&D  agreements  are recorded as cost of revenues  from R&D
agreements.

Other Operating Revenues

      Other  operating  revenues  consist  principally  of  third-party  service
revenue realized by certain of the Company's service departments,  including the
Production  Technology  and Machine  Building  Division  and Central  Analytical
Laboratory.

Other Nonoperating Income

      Other  nonoperating  income-net  consists  of rental  income and gains and
losses on sale of fixed assets.

                                14

<PAGE>



NOTE B - Royalties, Revenues from R&D Agreements and License and Other
         Agreements

      The Company has business agreements with third parties for which royalties
and  revenues are  included in the  consolidated  statements  of  operations.  A
summary of the royalties and revenue from such agreements follows:

                                                Three Months Ended September 30,
                                                       1996            1995
Royalties:
   Battery Technology                              $     303,338   $    272,000
   Optical Memory                                         98,000         
                                                   -------------   ------------
                                                   $     401,338   $    272,000
                                                   =============   ============

 Revenues from research and development agreements:
   Photovoltaics                                   $     280,433   $   557,733
   Battery Technology                                     95,139     1,401,779
   Microelectronics                                      234,458       215,673
   Hydrogen                                              100,666        84,421
   Other                                                   2,742        91,053
                                                   -------------   ------------
                                                   $     713,438   $ 2,350,659
                                                   =============   ============

License and Other Agreements:
   Battery                                         $  1,288,000    $ 3,325,000
   Microelectronics                                      80,645        375,000
                                                   -------------   ------------
                                                   $   1,368,645   $  3,700,000
                                                   =============   ============


                                15

<PAGE>



NOTE C - Non-Refundable Advance Royalties

      At September 30 and June 30, 1996,  the Company  deferred  recognition  of
revenues  relating to non-refundable  advance royalty  payments.  Non-refundable
advance royalties consist of the following:

                                                    September 30,     June 30,
                                                        1996            1996
       Battery:
         Matsushita Battery Industrial Co., Ltd.     $1,125,000      $1,125,000
         Hitachi Maxell, Ltd.                           355,189         355,189
         Daido Steel Co. Ltd. Of Japan                  224,802         224,802
       Optical Memory:
         Matsushita Electric Ind'l Co. Ltd.             866,818         933,818
         Hitachi, Ltd.                                  685,700         685,700
         Sony Corporation                               360,000         360,000
         Polaroid Corporation                            50,000          50,000
         Plasmon PLC                                      --              2,844
         Toshiba Corporation                             16,876          16,876
                                                     ----------      ----------
                                                     $3,684,385      $3,754,229
                                                     ==========      ==========

NOTE D - Net Income (Loss) Per Share

      The  Company  uses the  treasury  stock  method to  calculate  primary and
fully-diluted  earnings  per share.  Common stock  equivalents  consist of stock
options and warrants.  Weighted average number of shares outstanding and primary
earnings per share for the three months  ended  September  30, 1996 and 1995 are
computed as follows:

                                                         1996          1995

   Weighted average number of shares outstanding     10,698,496       8,376,595
   Pro Forma weighted average shares for Common
      Stock Equivalents                                  --           1,606,059
                                                   ------------     -----------

      AVERAGE NUMBER OF SHARES
        OUTSTANDING AND EQUIVALENTS                  10,698,496       9,982,654


   Net income (loss) as reported                    $(3,898,033)    $   313,234
   Effect of application of modified treasury stock
      method                                             --              92,093
                                                    -----------     -----------
   Adjusted net (loss) income                       $(3,898,033)    $   405,327
                                                    ===========     ===========
      NET (LOSS) INCOME PER SHARE                   $      (.36)    $       .04
                                                    ===========     ===========

      Primary and fully-diluted net (loss) income per share are the same for
each of these periods.


                                16

<PAGE>



Item 2.Management's Discussion and Analysis of Financial Condition and Results
       of Operations

                       Results of Operations

Three Months Ended September 30, 1996 Compared to Three Months Ended
September 30, 1995

      The Company had a net loss for the three months ended  September  30, 1996
of  approximately  $3,898,000 compared to a net income of approximately $313,000
for the three months ended September 30, 1995.  The loss is  primarily due
to: (i) startup and expansion of negative electrode production equipment and
battery pack production; (ii) additional technical, manufacturing and
engineering support for GM Ovonic; (iii) ongoing electric  vehicle battery
research and development with reduced revenues from funded programs; and (iv)
ongoing defense of the Company's battery technology patents.

      Product sales, consisting of battery electrodes, battery packs and machine
building,  increased 24% in the quarter ended September 30, 1996 compared to the
same quarter in the previous year due to increased  sales of battery  electrodes
and battery packs.  Battery electrode and battery pack sales increased 154% from
$1,340,000  in the September  1995 quarter to  $3,409,000 in the September  1996
quarter.  Revenues from  machine-building  were $1,066,000 in the September 1996
quarter down from  $2,274,000 in the same period last year,  principally  due to
the  completion  of  photovoltaic  manufacturing  equipment  purchased by United
Solar.

      Royalties  increased 47% from $272,000 in the three months ended September
30, 1996 to $401,000 in the three months ended September 30, 1996 primarily
due to higher levels of royalties from ECD's optical memory technology in 1996.

      The 70% decrease in revenues from  business  agreements to $713,000 in the
three months ended  September 30, 1996 from $2,351,000 in the three months ended
September 30, 1995 was due to  substantially  reduced  revenues  ($95,000 in the
September quarter compared to $1,100,000 in the September 1995 quarter) from the
United States Advanced Battery Consortium pending award of a follow-on contract
and the completion of a contract in the microelectronics field in the prior
year.


                                17

<PAGE>


      Revenues from license and other agreements decreased 63% from $3,700,000
in the three months ended September 30, 1995 to $1,369,000 in the three months
ended September 30, 1996.  1995 revenues from license and other agreements
included license fees from Sanoh Industrial Co., Ltd. and Furukawa Battery Co.,
Ltd.  In the three months ended September 30, 1996, ECD and Ovonic Battery
entered into a Battery License Agreement with Canon granting Canon
nonexclusive rights to manufacture and market Ovonic NiMH batteries for
certain applications.  The Company recognized license fee revenue of $1,246,000
in connection with this agreement and will receive running royalties.    

      The  decrease  in other  revenues  was due to  decreased  billings  in the
quarter ended  September 30, 1996 for  miscellaneous  work  performed for Ovonic
Battery licensees.

      The decrease in cost of revenues from business agreements and the increase
in product  development and research expense in the three months ended September
30, 1996 compared to the three months ended  September 30, 1995 was  principally
due to ongoing  electric vehicle battery and other research and development with
reduced revenues from funded research and development programs.

      The increase in cost of product sales from  $3,691,000 in the three months
ended  September 30, 1995 to $4,991,000 in the three months ended  September 30,
1996 was  principally  due to the startup and  expansion  of negative  electrode
production equipment and battery pack production.

      The decrease in patent  expenses  from  $215,000 in the three months ended
September 30, 1995 to $120,000 in the three months ended  September 30, 1996 was
primarily  due to lower patent and  maintenance  costs in 1996.  Patent  defense
expenses for 1996 were incurred in connection  with the defense and  prosecution
of litigation  involving Matsushita Battery Industrial Co., Ltd. with respect to
Ovonic Battery's  United States patents covering its proprietary  technology for
NiMH batteries.

      The  increase in  operating,  general  and  administrative  expenses  from
$1,430,000  in the three months ended  September  30, 1995 to  $1,631,000 in the
three  months  ended   September   30,  1996  was  primarily  due  to  increased
depreciation expenses in 1996.

      The  change  from  other  income  of  $40,000  in the three  months  ended
September  30,  1995  compared to other  income of $274,000 in the three  months
ended  September 30, 1996 was due  principally to increased  interest  income in
1996.

                  Liquidity and Capital Resources

      As of September 30, 1996, the Company had unrestricted  consolidated  cash
and cash equivalents, which consist of investments maturing in three months or
less, of approximately $29,806,000, an increase of approximately $6,032,000
from June 30, 1996.  As of September 30, 1996, the Company had consolidated
working capital of approximately $38,506,000, compared with a consolidated


                                18

<PAGE>



working capital of $43,525,000 as of June 30, 1996. Investments, which consist
of commercial paper maturing in four to six months, decreased $10,327,000 in
the three months ended September 30, 1996.

      During the three months ended September 30, 1996, approximately $2,619,000
cash was used in operations.  The difference between the net loss of
approximately $3,898,000 and the net cash used in operations was principally due
to  revenues  from  agreements  in the three  months  ended  September  30, 1996
pursuant  to  which  certain  payments  will be  received  at a later  date.  In
addition,  during this period approximately  $899,000 of machinery and equipment
were purchased or constructed for the Company's  operations.  During the next 12
months, Ovonic Battery plans to purchase  approximately  $7,000,000 of machinery
and  equipment.  The machinery and  equipment are  principally  for expansion of
Ovonic Battery's manufacturing capacity which will be financed with a portion of
the proceeds from the January 1996 registered public offering or from third-
party leasing arrangements.

      Some business  agreements related to R&D agreements have been entered into
by the Company with U.S.  government  agencies and with  industry to develop the
Company's products and production technology. The technology developed, together
with the applicable patents, are generally owned by the Company.  Generally, the
agreed-upon  fees for these R&D agreements  reimburse the Company for its direct
costs associated with these projects,  together with a portion of indirect costs
(patents, operating, general and administrative expenses and depreciation).

      The  Company has  entered into a third-party  leasing  arrangement  with
Financing for Science  International  ("FSI") which provides lease financing for
certain equipment used by the Company. As of September 30, 1996, the Company had
financed   equipment  having  an  acquisition  cost  of  $8,600,000  under  this
arrangement. The Company's leases with FSI provide for a term of five years. The
required  lease  payments  over this period  equal the  acquisition  cost of the
leased  equipment  plus an interest  factor.  The Company has agreed to purchase
certain  equipment leased from FSI upon the expiration of the applicable  leases
for 10% of its acquisition cost. For other equipment,  the Company has an option
to purchase  the  equipment  for its then market value (but no less than 10% nor
more than 20% of its  acquisition  cost).  The Company has an option to purchase
certain other leased equipment upon the expiration of the applicable  leases for
its then fair market value.

      While certain  programs have limited terms,  the equipment  being utilized
for these programs has  alternative  future uses for other programs if, in fact,
the programs are not continued beyond their respective terms.


                                19

<PAGE>



                    PART II - OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K.

      A.   Exhibits

           Exhibit 27.  Financial Data Schedule

      B.   Reports on Form 8-K

           None


                                20

<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.


                             Energy Conversion Devices, Inc.
                             (Registrant)



                     By:     /s/ Nancy M. Bacon
                             -------------------------
                             Nancy M. Bacon
                             Senior Vice President--
                             Government Contracts and
Date: November 14, 1996          International Projects



                     By:     /s/ Kenneth A. Pullis
                             -------------------------
                             Kenneth A. Pullis
                             Acting Chief Financial Officer
Date: November 14, 1996          and Treasurer



                     By:     /s/ Stanford R. Ovshinsky
                             -------------------------
                             Stanford R. Ovshinsky
Date:  November 14, 1996     President and Chief Executive Officer
 
       



                                21