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           DECEMBER 31, 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        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         (248) 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 February 9, 1998 there were  219,913  shares of Class A Common Stock
and 10,754,661 shares of Common Stock outstanding.

                              Page 1 of 21 Pages


                                      1

<PAGE>
<TABLE>
<CAPTION>



                              PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                      ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (Unaudited)

                                                 Three Months EndedSix Months Ended
                                              December 31,                 December 31,
                                            1997        1996            1997         1996
<S>                                     <C>          <C>            <C>          <C>
REVENUES
  Product sales                         $ 2,668,711  $ 4,378,846    $ 5,243,208  $ 8,853,296
  Royalties                                 757,000      415,094      1,095,000      816,432
  Revenues from research and development
     agreements                           4,164,685    1,354,112      7,013,255    2,109,550
  Revenues from license and other
     agreements                             300,000    3,000,000        300,000    4,326,645
  Other                                     858,075      430,540      1,557,453      650,530
                                        -----------  -----------    -----------  -----------
     TOTAL REVENUES                       8,748,471    9,578,592     15,208,916   16,756,453

EXPENSES
  Cost of product sales                   3,381,712    4,691,175      5,958,979    9,681,904
  Cost of revenues from research and
     development agreements               4,144,091    1,404,838      6,912,927    1,991,125
  Product research and development        3,406,259    3,465,999      6,752,188    7,048,941
  Patent defense                            130,552      716,799        201,947    1,156,545
  Patent                                    253,507      104,799        470,081      224,307
  Operating, general and administrative   1,061,480    1,604,999      3,014,478    3,236,043
                                        -----------  -----------    -----------  -----------
     TOTAL EXPENSES                      12,377,601   11,988,609     23,310,600   23,338,865
                                        -----------  -----------    -----------  -----------

LOSS FROM OPERATIONS                     (3,629,130)  (2,410,017)    (8,101,684)  (6,582,412)

OTHER INCOME (EXPENSE)
  Interest expense                          (37,118)     (77,454)       (82,114)    (183,994)
  Interest income                           121,644      367,363        311,340      690,086
  Other nonoperating income (net)            37,785      100,527         68,573      158,706
                                        -----------  -----------    -----------  -----------
     TOTAL OTHER INCOME                     122,311      390,436        297,799      664,798
                                        -----------  -----------    -----------  -----------
NET LOSS                                $(3,506,819) $(2,019,581)   $(7,803,885) $(5,917,614)
                                        ===========  ===========    ===========  ===========

BASIC NET LOSS PER COMMON SHARE         $      (.32) $      (.19)   $      (.72) $      (.55)
                                        ===========  ===========    ============ ===========
DILUTED NET LOSS PER
  COMMON SHARE                          $      (.32) $      (.19)   $      (.72) $      (.55)
                                        ===========  ===========    ============ ===========


</TABLE>


See notes to consolidated financial statements.



                                            2

<PAGE>



                ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

                                    ASSETS


                                                    December 31,    June 30,
                                                       1997           1997
CURRENT ASSETS                                      (Unaudited)    (Audited)
  Cash, including cash equivalents of
    $5,341,000 as of December 31, 1997 and
    $14,265,000 as of June 30, 1997                $  5,346,537  $ 14,270,145
  Investments (including restricted investments
    of $290,000 at December 31, 1997 and
    June 30, 1997)                                    1,561,502     1,059,933
  Accounts receivable (net of allowance for
    uncollectible accounts of
    $140,000 at December 31, 1997 and
    June 30, 1997)                                   10,486,096    10,800,813
  Amounts due from related parties                    1,902,061     1,809,414
  Inventories                                         1,910,330     1,626,065
  Prepaid expenses and other current assets             400,860       404,204
                                                   ------------  ------------

       TOTAL CURRENT ASSETS                          21,607,386    29,970,574

PROPERTY, PLANT AND EQUIPMENT
  Land and land improvements                            312,588       312,588
  Buildings and improvements                          3,787,527     3,785,827
  Machinery and other equipment (including
    construction in progress of approximately
    $659,000 at December 31, 1997 and
    $1,647,000 at June 30, 1997)                     20,057,280    19,517,585
  Capitalized lease equipment                         4,200,364     5,699,048
                                                   ------------  ------------
                                                     28,357,759    29,315,048

  Less accumulated depreciation and amortization    (22,079,106)  (22,346,615)

    TOTAL PROPERTY, PLANT AND EQUIPMENT               6,278,653     6,968,433

JOINT VENTURES
  United Solar                                           --            --
  GM Ovonic                                              --            --

OTHER ASSETS                                          1,491,227       790,090
                                                   ------------  ------------

    TOTAL ASSETS                                   $ 29,377,266  $ 37,729,097
                                                   ============  ============




See notes to consolidated financial statements.


                                         3

<PAGE>



                   ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                             CONSOLIDATED BALANCE SHEETS

                        LIABILITIES AND STOCKHOLDERS' EQUITY

                                                  December 31,       June 30,
                                                      1997             1997
                                                  (Unaudited)       (Audited)
CURRENT LIABILITIES
  Accounts payable and accrued expenses          $   3,615,430    $   3,669,167
  Salaries, wages and amounts withheld
    from employees                                   1,285,834        1,144,446
  Deferred revenues under business agreements          450,922          671,531
  Current installments on capitalized lease
    obligations                                        840,824        1,324,322

    TOTAL CURRENT LIABILITIES                        6,193,010        6,809,466

CAPITALIZED LEASE OBLIGATIONS                          391,000          585,795

DEFERRED GAIN                                                0          223,691

NON-REFUNDABLE ADVANCE ROYALTIES                     3,654,402        3,691,486
                                                 -------------    -------------

    TOTAL LIABILITIES                               10,238,412       11,310,438

STOCKHOLDERS' EQUITY
  Capital Stock
    Class A Convertible Common Stock, par
    value $0.01 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 - 10,646,173
       shares at December 31, 1997 and
       10,603,251 shares at June 30, 1997              106,462          106,033
  Additional paid-in capital                       202,528,250      202,004,599
  Accumulated deficit                             (182,889,249)    (175,085,364)
  Treasury stock at cost - 42,000 shares              (608,808)        (608,808)
                                                 -------------    -------------
    TOTAL STOCKHOLDERS' EQUITY                      19,138,854       26,418,659
                                                 -------------    -------------

       TOTAL LIABILITIES & STOCKHOLDERS'
            EQUITY                               $  29,377,266    $  37,729,097
                                                 =============    =============

See notes to consolidated financial statements.

                                         4

<PAGE>

<TABLE>
<CAPTION>


                   ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)
                                                       Six Months Ended December 31,
                                                           1997              1996
<S>                                                  <C>                <C> 
OPERATING ACTIVITIES:
   Net loss                                          $ (7,803,885)      $ (5,917,614)
   Adjustments to reconcile net (loss) to net cash
     used in operating activities:
       Depreciation and amortization                    1,004,152            865,998
       Creditable royalties                               (37,084)          (136,844)
       Employee stock options                             226,500            226,500
       Stock issued for services rendered                  --                 77,719
       Amortization of deferred gain                      (15,352)           (22,998)
   Changes in assets and liabilities other than
     property, plant and equipment:
       Accounts receivable and amounts due
         from related parties                            (483,192)        (1,884,114)
       Inventories                                       (284,265)          (413,888)
       Prepaid expenses and other current assets            7,469           (631,437)
       Accounts payable and accrued expenses               87,651           (424,926)
       Deferred revenues under business agreements       (220,608)          (418,894)
                                                     ------------       ------------
     NET CASH USED IN OPERATIONS                       (7,518,614)        (8,680,498)

INVESTING ACTIVITIES:
   Purchases of capital equipment (net)                  (522,711)        (1,619,201)
   Purchase of investments                             (3,085,435)        (1,957,453)
   Sales of investments                                 2,583,865         10,327,352
                                                     ------------       ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES    (1,024,281)         6,750,698

FINANCING ACTIVITIES:
   Purchase of treasury stock                             --                (480,938)
   Proceeds from exercise of stock options
     and warrants                                         297,580            216,587
   Principal payments under current debt and
     capitalized lease obligations                       (678,293)          (717,627)
                                                     ------------       ------------

NET CASH USED IN FINANCING ACTIVITIES                    (380,713)          (981,978)

NET DECREASE IN CASH AND CASH EQUIVALENTS              (8,923,608)        (2,911,778)

CASH AND CASH EQUIVALENTS AT BEGINNING OF
   PERIOD                                              14,270,145         23,773,742
                                                     ------------       ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD           $  5,346,537       $ 20,861,964
                                                     ============       ============
</TABLE>


See notes to consolidated financial statements.



                                         5

<PAGE>



                   ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)

                                                          Six Months Ended
                                                            December 31,
                                                          1997         1996

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

     Cash paid for interest                             $82,114     $ 183,994





                                         6

<PAGE>



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - DECEMBER 31, 1997

NOTE A - Basis of Presentation

      Information  for the six  months  ended  December  31,  1997  and  1996 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
1997 Annual Report on Form 10-K, as amended,  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.

     The  Company  also has two major  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");
and (ii) 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.  Additionally,  the Company has  investments in: (i) Sovlux Co., Ltd.
("Sovlux")  (50%) ECD's joint  venture in Russia ; and (ii) Sanoh  Ovonic  Power
Systems  Corporation  (45%) Ovonic Battery's joint venture with Sanoh Industrial
Co.  Ltd.  ("Sanoh")  to  manufacture  and  sell  NiMH  batteries  for  two- and
three-wheeled electric vehicles in Europe.

      The Company's  investments in its joint ventures 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  (based upon the venture's history of
sustainable  profits),  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 and six months ended  December 31, 1996
have been reclassified to be consistent with the  classification of items in the
three months and six months ended December 31, 1997.

      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

                                         7

<PAGE>



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  and  industrial  partners,  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 in the  manufacture of products
based upon the Company's technologies.

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
contribution  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 $55,000,000.

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


<TABLE>
<CAPTION>
                        UNITED SOLAR STATEMENTS OF OPERATIONS

                                      Three Months Ended        Six Months Ended
                                         December 31,              December 31,
                                       1997        1996         1997          1996
                                    (Unaudited) (Unaudited)  (Unaudited)  (Unaudited)

      <S>                          <C>          <C>          <C>          <C> 
      Revenues*                    $ 3,278,188  $ 1,528,946  $ 6,023,491  $ 2,601,989
      Operating Expenses
         Cost of product sales       4,521,387    1,771,038    8,833,694    3,289,384
         Research and development      759,152      792,388    1,385,595    1,458,951
         General and administrative    257,236      367,389      438,392      908,764
         Sales and marketing           574,159      438,537      963,934      787,986
                                   -----------  -----------  -----------  -----------
            Total                    6,111,934    3,369,352   11,621,615    6,445,085
      Other Income (Expense)          (455,929)      15,391     (497,016)      89,763
                                   -----------  -----------  -----------  -----------
     Net Loss                      $(3,289,675) $(1,825,015) $(6,095,140) $(3,753,333)
                                   ===========  ===========  ===========  ===========
</TABLE>


      *  Includes product sales and revenues earned under research contracts.


                                         8

<PAGE>



                             UNITED SOLAR BALANCE SHEETS

                                                     December 31,    June 30,
                                                         1997          1997
                                                      (Unaudited)   (Unaudited)
      Current Assets:
         Cash and cash equivalents                   $   716,461   $ 2,342,628
         Accounts receivable - trade                   1,805,369       738,378
         Accounts receivable - National Renewable
            Energy Laboratory ("NREL")                   560,929       242,938
         Accounts receivable - stockholders               36,261     4,633,757
         Inventory                                     2,633,131     4,015,379
         Other current assets                            475,145       322,232
                                                     -----------   -----------
            Total Current Assets                       6,227,296    12,295,312
      Property, plant and equipment (net)             12,595,857    13,676,080
      Other assets                                       216,794       225,913
                                                     -----------   -----------
            Total Assets                             $19,039,947   $26,197,305
                                                     ===========   ===========

      Current Liabilities:
         Short-term bank debt                        $    --       $10,000,000
         Current maturities of capitalized lease
            obligation                                 1,445,703
         Accounts payable - trade and stockholders     2,140,908     3,001,352
         Accrued expenses and other                      674,966       376,743
                                                     -----------   -----------
            Total Current Liabilities                  4,261,577    13,378,095
         Lease Payable                                 8,089,416         --
            Total Stockholders' Equity                 6,688,954    12,819,210
                                                     -----------   -----------
              Total Liabilities and Stockholders'
                 Equity                              $19,039,947   $26,197,305
                                                     ===========   ===========

GM Ovonic

      In June 1994, Ovonic Battery and General Motors formed a joint venture for
the  manufacture  and  commercialization  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.  The
contribution by General Motors consists of operating capital,  plant,  equipment
and management personnel necessary for the volume production of batteries.

      GM  Ovonic  is  currently  engaged  in  low-volume  manufacturing  of NiMH
batteries at its facility in Troy,  Michigan.  Production  volume is expected to
increase in 1998 at a larger facility.

      There are no financial  statements  currently  available for GM Ovonic. GM
Ovonic is in the early stages of  commercialization  and, as such, has a history
of operating losses.


                                         9

<PAGE>



Accounts Receivable

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

                                                 December 31,     June 30,
                                                     1997           1997
      U.S. Government:
         Amounts billed                           $   910,907    $   572,193
         Unbilled                                     600,396        797,558
                                                  -----------    -----------
            Total                                   1,511,303      1,369,751
                                                  -----------    -----------

      Commercial Customers:
         Amounts billed                             5,054,181      1,701,006
         Related party billed
            - United Solar                            117,169         19,840
            - GM Ovonic                             1,305,695      1,072,546
         Due per contracts                          4,596,744      7,480,792
         Related party unbilled
            - GM Ovonic                               479,197        717,028
         Other unbilled                                15,293        281,580
                                                  -----------    -----------
            Total                                  11,568,279     11,272,792
                                                  -----------    -----------

      Other                                           153,837        107,684
      Allowance for Uncollectible Accounts           (140,000)      (140,000)
                                                  -----------    -----------
               TOTAL                              $13,093,419    $12,610,227
                                                  ===========    ===========


      Amounts due per contracts,  related party unbilled and other unbilled 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   commercial
contracts, which are billed in subsequent months.

      Certain  contracts  with the U.S.  government  require a retention that is
paid upon completion of an audit of the Company's  indirect rates.  There are no
material  retentions  at  December  31,  1997 and June 30,  1997.  Certain  U.S.
government   contracts  remain  subject  to  audit.   Management  believes  that
adjustments, if any, which may result from an audit would not 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 is removed from inventory based on actual costs of items
shipped to customers.


                                         10

<PAGE>



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

                                   December 31, 1997     June 30, 1997

         Finished products             $   91,278          $   --
         Work in process                1,136,057           1,010,989
         Raw materials                    682,995             615,076
                                       ----------          ----------
                                       $1,910,330          $1,626,065
                                       ==========          ==========

Product Sales

      Product sales include battery electrodes,  revenues related to building of
battery   packs   and   machine-building   contracts.    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.  In  certain  cases,  cost  of  sales  exceeds  product  sales  due  to
significant changes in products and manufacturing methods.

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.

      For both ECD and Ovonic  Battery  royalties,  there are  royalty  trust or
contingent  fee  arrangements  whereby  ECD is  obligated  to pay a trust 25% of
optical memory royalties received and a law firm 25% of Ovonic Battery royalties
received  relative  to  consumer  battery  licenses  entered  into  in  1995  in
settlement of an International Trade Commission action.

Business Agreements

      A substantial  portion of revenue is derived through  business  agreements
for  the  development  and/or  commercialization  of  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  technologies.  Licensing  activities  are  tailored to provide each
licensee  with the right to use the  Company's  technologies,  most of which are
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 technologies  which have been negotiated between the
Company and the licensee.  Such terms generally address whether the license will
be exclusive or nonexclusive,

                                         11

<PAGE>



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 such
licensed  technologies 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  ("R&D")  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.  There are
no current or future direct costs associated with license fees.

      In the second type of  agreement,  R&D  Agreements,  the Company  conducts
specified  research and  development  projects  related to one of its  principal
technology  specializations  for an agreed-upon fee. 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, is 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.

Overhead Allocations

      The  Company  allocates  overhead  to  product  development  and  research
expenses and to cost of revenues  from R&D  Agreements  based on a percentage of
direct labor costs.  For cost of revenues from R&D Agreements this allocation is
limited to the amount of revenues,  after direct expenses,  under the applicable
agreements.  Overhead  is  allocated  to  cost  of  product  sales  through  the
application of overhead to inventory costs.

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.


                                         12

<PAGE>



Other Nonoperating Income

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

NOTE B - Product Sales, 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 revenues from such agreements follows:

                                             Six Months Ended December 31,
                                                  1997            1996
      Product Sales:
        Negative and positive electrodes       $4,892,405     $5,459,371
        Battery packs                             202,503      2,080,856
        Machine building                          148,300      1,313,069
                                               ----------     ----------
                                               $5,243,208     $8,853,296
                                               ==========     ==========

      Royalties:
        Battery Technology                     $1,020,000     $  612,359
        Optical Memory                             75,000        204,073
                                               ----------     ----------
                                               $1,095,000     $  816,432
                                               ==========     ==========

      Revenues from R&D Agreements:
        Photovoltaics                          $  728,401     $  544,031
        Battery technology                      4,996,198        653,648
        Optical memory                            675,358        463,406
        Hydrogen                                  392,928        340,721
        Other                                     220,370        107,744
                                               ----------     ----------
                                               $7,013,255     $2,109,550
                                               ==========     ==========

      License and Other Agreements:
        Battery                                $  300,000     $4,246,000
        Microelectronics                           --             80,645
                                               ----------     ----------
                                               $  300,000     $4,326,645
                                               ==========     ==========

NOTE C - Non-Refundable Advance Royalties

      At December 31 and June 30,  1997,  the Company  deferred  recognition  of
revenues  relating to non-refundable  advance royalty  payments.  Non-refundable
advance royalties consist of the following:
                                                   December 31,    June 30,
                                                       1997          1997

        Battery                                     $1,647,592     $1,647,592
        Optical Memory                               2,006,810      2,043,894
                                                    ----------     ----------
                                                    $3,654,402     $3,691,486
                                                    ==========     ==========


                                         13

<PAGE>



NOTE D - Net Loss Per Share

      In the three  months and six months ended  December 31, 1997,  the Company
adopted  FASB  Statement  of  Financial  Accounting  Standards  (SFAS) No.  128,
Earnings  per Share.  The  Statement  simplifies  the  standards  for  computing
earnings  per share (for years in which there is net  income).  The  adoption of
this  Statement  did not have any  impact on the  Company  since  there were net
losses  in all  of the  current  periods.  Weighted  average  number  of  shares
outstanding  and basic  earnings  per share for the three  months and six months
ended December 31, 1997 and 1996 are computed as follows:

<TABLE>
<CAPTION>
                                     Three Months Ended             Six Months Ended
                                         December 31,                  December 31,
                                       1997        1996             1997         1996
                                         (Unaudited)                   (Unaudited)
  <S>                             <C>          <C>              <C>          <C> 
  AVERAGE NUMBER OF SHARES
    OUTSTANDING                    10,796,122   10,696,383       10,790,923   10,697,399
                                  ===========  ===========      ===========  ===========

      NET LOSS                    $(3,506,819) $(2,019,581)     $(7,803,885) $(5,917,614)
                                  ===========  ===========      ===========  =========== 

      NET LOSS PER SHARE          $      (.32) $      (.19)     $      (.72) $      (.55)
                                  ===========  ===========      ===========  ===========
</TABLE>


      Basic  and  diluted  net  loss  per  share  are the same for each of these
periods. There are no common stock equivalents for any of the above periods.

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

                                Results of Operations

Three months ended December 31, 1997 Compared to Three Months Ended
December 31, 1996

      The Company had a net loss for the three months ended December 31, 1997 of
$3,507,000  compared  to a net loss of  $2,020,000  for the three  months  ended
December 31, 1996. The loss is primarily due to (i) ongoing battery research and
development;  (ii) losses  related to electrode  production;  and (iii)  ongoing
protection of the Company's technologies.

      Product sales, consisting of battery electrodes, battery packs and machine
building,  decreased 39% in the quarter ended  December 31, 1997 compared to the
same quarter in the previous  year.  Battery  electrode  sales  decreased 13% to
$2,576,000  in the December  1997 quarter from  $2,978,000  in the December 1996
quarter,  primarily due to lower sales prices.  Battery pack sales  decreased to
$38,000 in the  December  1997  quarter from  $1,155,000  in the  December  1996
quarter because GM Ovonic (Ovonic Battery's principal customer of battery packs)
is now in  production  of battery  packs.  Revenues  from machine  building were
$55,000 in the December 1997 quarter, down from $246,000 in the same period last
year,  principally  due to the  completion of  machine-building  projects for GM
Ovonic.


                                         14

<PAGE>



      Royalties increased 82% to $757,000 in the three months ended December 31,
1997 from $415,000 in the three months ended  December 31, 1996 primarily due to
higher battery  royalties because of the  recently-issued  basic patent in Japan
recognizing the fundamentals that make NiMH batteries commercially feasible. The
volume  of NiMH  batteries  being  sold  is  increasing  substantially,  but the
royalties the Company receives are adversely  affected by lower sales prices and
unfavorable exchange rates with the Japanese yen. Lower levels of royalties from
ECD's optical memory technology also adversely  affected  royalties in 1997. The
Company has audit rights to verify the amounts of royalties  being  reported and
paid by licensees.  The Company plans to enforce these audit rights.  The amount
of additional  royalty  payments,  if any, that will result from these audits is
undeterminable.

      The 208% increase in revenues from research and development  agreements to
$4,165,000  in the three months ended  December 31, 1997 from  $1,354,000 in the
three months ended December 31, 1996 was due to substantially increased revenues
from a new  multi-year,  multi-task  program  with  General  Motors  to  develop
batteries for electric and hybrid electric vehicle  applications  ($1,719,000 in
the quarter  ended  December  1997) and from a contract  with the United  States
Advanced Battery  Consortium  ("USABC")  ($681,000 in the quarter ended December
31, 1997).  Revenues from research and development  agreements for ECD's optical
memory and photovoltaic technologies were also significantly higher.

      The Company has $13,580,000 in unrecognized revenues outstanding under R&D
agreements  with  U.S.  government  or other  agencies  or  companies,  of which
$6,300,000 is subject to the normal  availability  of funding by the  applicable
agency. Based on these R&D Agreements, and on scheduled funding and performance,
without giving effect to any new R&D agreements which may be entered into during
the remainder of the year ended June 30, 1998,  $4,199,000 additional revenue is
expected to be recorded in Revenues from R&D Agreements for the remainder of the
year ending June 30, 1998.

      Revenues from license and other  agreements  decreased from  $3,000,000 in
the three months  ended  December 31, 1996 to $300,000 in the three months ended
December 31, 1997. 1996 revenues  included license fees of $2,000,000 from Sanoh
and $1,000,000 from LG Chemical, Ltd. ("LG Chemical") in connection with license
agreements  with  those  companies.  1997  revenues  of  $300,000  relate  to  a
technology  transfer agreement with Sovlux and the Chepetsk  Mechanical Plant in
Russia.

      The Company spent a total of $7,550,000 in the quarter ended  December 31,
1997 for research and development  (funded and unfunded)  compared to $4,871,000
in the same quarter in the prior year. This planned increase in expenditures was
primarily for continued  development of the Company's  family of batteries.  The
increased  spending  of  $2,679,000  for  research  and  development  was funded
entirely by the  $2,811,000  increase in revenues from research and  development
agreements.

      The decrease in cost of product sales from  $4,691,000 in the three months
ended  December 31, 1996 to  $3,382,000  in the three months ended  December 31,
1997 was principally due to the reduced level of machine  building for GM Ovonic
and reduced sales of battery packs as GM Ovonic  ramped-up its  production.  The
Company is focusing its efforts to reduce  product costs by:  improving  quality
control  through  increased  automation,   on-line  gauging,   improved  process
monitoring and control,  early  identification  of  non-conforming  material and
operator

                                         15

<PAGE>



training; investing in equipment and equipment upgrades to minimize downtime and
increase capability;  and improving the preventive maintenance program to reduce
unplanned downtime.

      Patent defense expenses for 1997 and 1996 were incurred in connection with
the defense and  prosecution  of  litigation  with  respect to Ovonic  Battery's
United States patents  covering its  proprietary  NiMH battery  technology.  The
reduction  in  expense  relates  to  the  successful  conclusion  of  litigation
involving Matsushita Battery Industrial Co., Ltd. ("MBI") in December 1997.

      The  decrease in  operating,  general  and  administrative  expenses  from
$1,605,000  in the three months ended  December  31, 1996 to  $1,061,000  in the
three months ended December 31, 1997 was primarily due to increased  allocations
in 1997 to cost of revenues from business agreements.

      The  decrease in other  income from  $390,000  in the three  months  ended
December 31, 1996 to other income of $122,000 in the three months ended December
31, 1997 was due principally to decreased interest income in 1997.

Six Months Ended December 31, 1997 Compared to Six Months Ended
December 31, 1996

      The Company had a net loss for the six months  ended  December 31, 1997 of
$7,804,000  compared  to a net  loss of  $5,918,000  for the  six  months  ended
December 31, 1996. The loss is primarily due to (i) ongoing battery research and
development;  (ii) losses  related to electrode  production;  and (iii)  ongoing
protection of the Company's technologies.

      Product sales, consisting of battery electrodes, battery packs and machine
building,  decreased  41% in the six months ended  December 31, 1997 compared to
the six months ended December 31, 1996.  Battery  electrode  sales  decreased to
$4,892,000 in the six months ended December 31, 1997 from  $5,459,000 in the six
months ended  December 31, 1996,  primarily  due to lower  prices.  Battery pack
sales  decreased 90% to $203,000 from $2,081,000 due to reduced level of battery
pack sales to GM Ovonic. Revenues from machine building were $148,000 in the six
months  ended  December  31, 1997 down from  $1,313,000  in the six months ended
December  31,  1996,  principally  due to reduced  machine-building  sales to GM
Ovonic.

      Royalties increased 34% to $1,095,000 in the six months ended December 31,
1997 from  $816,000 in the six months ended  December 31, 1996  primarily due to
higher battery royalties  resulting because of a recently issued basic patent in
Japan. The volume of NiMH batteries being sold is increasing substantially,  but
the  royalties the Company  receives are adversely  affected by lower prices and
unfavorable exchange rates with the Japanese yen. Lower levels of royalties from
ECD's optical memory  technology in 1997. The Company has audit rights to verify
the amounts of royalties being reported and paid by licensees. The Company plans
to enforce these audit rights.  The amount of additional  royalty  payments,  if
any, that will result from these audits is undeterminable.

      The 232% increase in revenues from research and development  agreements to
$7,013,000 in the six months ended December 31, 1997 from  $2,110,000 in the six
months ended December 31, 1996 was due to substantially  increased revenues from
a new multi-year,  multi-task  program with General Motors to develop  batteries
for electric and hybrid electric vehicle

                                         16

<PAGE>



applications  ($2,754,000  in the six  months  ended  December  1997) and from a
contract with the USABC  ($1,411,000 in the six months ended December 31, 1997).
Revenues from research and development agreements were also significantly higher
for ECD's optical memory and photovoltaic technologies.

      Revenues from license and other  agreements  decreased from  $4,327,000 in
the six months  ended  December  31, 1996 to  $300,000  in the six months  ended
December 31, 1997. 1996 revenues included license fees of $2,000,000 from Sanoh,
$1,000,000 from LG Chemical and $1,246,000 from Canon in connection with license
agreements  with these  companies.  1997  license  fees of $300,000  relate to a
technology  transfer agreement with Sovlux and the Chepetsk  Mechanical Plant in
Russia.

      The Company spent a total of  $13,665,000 in the six months ended December
31,  1997 for  research  and  development  (funded  and  unfunded)  compared  to
$9,040,000 in the six months ended December 31, 1996. The increased  spending of
$4,625,000 for research and  development  was funded  entirely by the $4,903,000
increase in revenues from research and development agreements.

      The increase in other  revenues  was due to increased  billings in the six
months ended December 31, 1997 for work performed for Ovonic Battery licensees.

      The  decrease  in cost of product  sales to  $5,959,000  in the six months
ended  December 31, 1997 from  $9,682,000  in the six months ended  December 31,
1996 was principally due to the reduced level of machine  building for GM Ovonic
and reduced sales of battery packs as GM Ovonic  ramped-up  its  production.  To
reduce  product  costs,  the  Company  is:  improving  quality  control  through
increased automation,  on-line gauging, improved process monitoring and control,
early identification of non-conforming material and operator training; investing
in  equipment  and  equipment   upgrades  to  minimize   downtime  and  increase
capability; and improving the preventive maintenance program to reduce unplanned
downtime.

      Patent defense expenses for 1997 and 1996 were incurred in connection with
the defense and  prosecution  of  litigation  with  respect to Ovonic  Battery's
United States patents  covering its  proprietary  technology for NiMH batteries.
The  reduction in expense  relates to the  successful  conclusion  of litigation
involving MBI in December 1997.

      Operating,  general and administrative expenses decreased to $3,014,000 in
the six months ended  December 31, 1997 from  $3,236,000 in the six months ended
December 31, 1996 was primarily due to increased  allocations in 1997 to cost of
revenues from business agreements.

      The change from other income of $665,000 in the six months ended  December
31, 1996  compared to other income of $298,000 in the six months ended  December
31, 1997 was due principally to decreased interest income in 1997.

                                         17

<PAGE>



                           Liquidity and Capital Resources

      As of December 31, 1997, the Company had  unrestricted  consolidated  cash
and cash equivalents and investments, consisting of commercial paper maturing in
four to six months, of $6,908,000,  a decrease of $8,422,000 from June 30, 1997.
In addition, the Company had current accounts receivable at December 31, 1997 of
$12,388,000  compared to  $12,610,000 at June 30, 1997. As of December 31, 1997,
the Company had  consolidated  working capital of  $15,414,000,  compared with a
consolidated working capital of $23,161,000 as of June 30, 1997.

      The Company continues its strategies to commercialize its products through
strategic  alliances by forming joint ventures or license  agreements with third
parties who can provide  financial  resources  and  marketing  expertise for the
Company's  technologies  and products.  The Company is also  developing  its own
capabilities for volume manufacturing of battery electrodes.

      During the six months ended December 31, 1997, $7,519,000 of cash was used
in  operations.  The  difference  between the net loss of $7,804,000 and the net
cash used in operations was principally due to depreciation  expense,  partially
offset by increases in accounts receivable and inventories.  In addition, during
this period $523,000 of machinery and equipment was purchased or constructed for
the Company's operations.

      During the next 12 months,  Ovonic Battery is considering  the purchase of
up to $1,900,000 of machinery and equipment.  The machinery and equipment  would
be utilized principally for Ovonic Battery's manufacturing operation.

      The Company  expects  significant  revenues and cash flows  related to R&D
agreements,  many of which already  exist,  that are entered into by the Company
with  U.S.  government  agencies  and with  industry  partners  to  develop  the
Company's products and production  technology.  Contracts with industry partners
include  a  multi-year,  multi-task  program  with  General  Motors  to  develop
batteries for electric and hybrid electric vehicle  applications.  This program,
which is currently  funded on a monthly basis,  is of  significant  value to the
Company and builds upon the Company's earlier investments to develop a family of
batteries,  is intended to provide next- and  future-generation  NiMH  batteries
that will be manufactured by GM Ovonic.  Three contracts  awarded to the Company
by the National  Institute  of Standards  and  Technology  ("NIST")  under three
Advanced Technology Programs ("ATP") will also provide significant cashflow. One
contract  is to Ovonic  Battery to develop  the next  generation  of high energy
density  NiMH  batteries  using  low-cost   magnesium-based   hydrogen   storage
materials.  The other two NIST contracts are to ECD to support  development of a
new, low-cost  manufacturing  system for DVD (digital  versatile disks) based on
the ECD's proprietary phase-change technology and for further development of the
aforementioned optical memory phase-change products.  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 is actively pursuing its strategy to form strategic  alliances
to further commercialize its products. While the Company is in negotiations with
a number of companies which could provide  additional  revenue under license and
other agreements for the Company in the coming year, it is unable to predict the
amount of such revenue.


                                         18

<PAGE>



      The Company  recently has been issued a basic  patent in Japan  specifying
the fundamentals that make NiMH batteries commercially feasible. The issuance of
this patent is expected to result in the payment of higher running  royalties in
the future.  Other than the foregoing,  the Company is not aware of other events
or circumstances that would allow it to forecast royalty revenues  significantly
higher or lower for the coming year.

      The  Company  is also  actively  negotiating  additional  machine-building
contracts  that could  provide  revenues in the coming year and beyond.  Machine
building is cyclical  but an important  part of the  Company's  business.  As of
December 31, 1997, the Company had no backlog of machine-building contracts.

      The Company  has entered  into a leasing  arrangement  with a  third-party
leasing company for the financing of certain  equipment used by the Company.  As
of December  31,  1997,  the  Company  had  remaining  lease  payments  totaling
$1,110,000. The Company has agreed to purchase certain leased equipment upon the
expiration of the applicable  leases for 10% of the lessor's  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.  If the
Company  exercises  the  option to  purchase  all of the  equipment  for  leases
expiring during the next 12 months, the capital requirement ranges from $268,000
to $537,000.

      While certain  programs have a limited term, 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.

      Based upon the above information,  the amount of cash to be received under
existing R&D  Agreements  for the  remainder of the year ending June 30, 1998 is
anticipated to be approximately $4,000,000.  The amount of cash for royalties to
be received  for the  remainder  of the year ending June 30, 1998 is expected to
be, based on historical trends, approximately $900,000.

      License  fees are  non-recurring,  and while the  Company  is  engaged  in
negotiations  with a number of companies,  the outcome of these  negotiations is
difficult to predict.  Therefore, the Company is unable to predict the amount of
cash to be received for the remainder of the year.

      Management believes that funds generated from operations and existing cash
and investment balances, along with agreements currently under negotiation, will
be adequate to support and finance  planned  growth,  capital  expenditures  and
company-sponsored  research and development programs over the coming year. It is
the Company's  intent to use its cash and  investments  to fund its  operations.
Additional sources of cash are, however, required to sustain the Company for the
long term and to build the business in the future.




                                         19

<PAGE>





                             PART II - OTHER INFORMATION



Item 6. Exhibits and Reports on Form 8-K

      A.    Exhibits

            Exhibit 27.    Financial Data Schedule (Edgar version)

      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/ Stephan W. Zumsteg
                                   Stephan W. Zumsteg
Date:  February 17, 1998           Treasurer





                               By: /s/ Stanford R. Ovshinsky
                                   Stanford R. Ovshinsky
Date:  February 17, 1998           President and Chief Executive Officer




                                         21


<PAGE>