<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

[Mark One]

            [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended December 31, 1997

                                       OR
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                        For the Transition Period from to


                         Commission File Number: 0-6377


                         DREXLER TECHNOLOGY CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


         Delaware                                        77-0176309
  -------------------------------                     -------  --------
  (State or other jurisdiction of                     (I.R.S.  Employer
   incorporation or organization)                     Identification No.)


1077 Independence Avenue, Mountain View, CA                94043-1601
-------------------------------------------           -------------------
 (Address of principal executive offices)                  (Zip Code)


                                 (650) 969-7277
              ----------------------------------------------------
              (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No


  Number of outstanding shares of Common Stock, $.01 par value, at February 2,
                                1998: 9,561,651


<PAGE>   2
PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                 DREXLER TECHNOLOGY CORPORATION AND SUBSIDIARIES
             CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

     The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes the
disclosures which are made are adequate to make the information presented not
misleading. Further, the condensed consolidated financial statements reflect, in
the opinion of management, all adjustments (which included only normal recurring
adjustments) necessary to present fairly the financial position and results of
operations as of and for the periods indicated.

     It is suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and the notes thereto for the
year ended March 31, 1997 included in the Company's Form 10-K Annual Report.

     The results of operations for the three months ended December 31, 1997 are
not necessarily indicative of results to be expected for the entire year ending
March 31, 1998.

     NET INCOME (LOSS) PER SHARE: The Company adopted Statement of Financial
Accounting Standard (SFAS) No. 128, "Earnings Per Share," in the quarter ended
December 31, 1997. SFAS 128 requires the computation of basic and diluted
earnings per share. Basic earnings (loss) per share is computed using the
weighted average number of common shares outstanding. Diluted earnings per share
for the three- and nine-month periods ended December 31, 1997 is computed using
the weighted average number of shares of common stock outstanding and the
dilutive common stock equivalents (using the treasury stock method). Diluted
loss per share for the three- and nine-month periods ended December 31, 1996
equals basic loss per share, as the common stock equivalents were anti-dilutive.
Fiscal 1997 amounts have been restated in accordance with the provisions of SFAS
128.

     RECENT ACCOUNTING PRONOUNCEMENTS: In February 1997, the Financial
Accounting Standards Board (FASB) issued SFAS 128, "Earnings Per Share," which
simplifies the standards for computing earnings per share previously found in
Accounting Principles Board Opinion (APBO) No. 15. SFAS 128 replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share, which excludes dilution. SFAS 128 also requires dual presentation of
basic and diluted earnings per share on the face of the income statement for all
entitles with complex capital structures and requires a reconciliation. Diluted
earnings per share is computed similarly to fully diluted earnings per share
pursuant to APBO No. 15. SFAS 128 must be adopted for financial statements
issued for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. SFAS 128 requires restatement of all
prior-period earnings per share data presented. The Company has adopted SFAS 128
for the period ended December 31, 1997. The adoption of SFAS 128 has not had a
material impact on the Company's financial statements.

     In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income,"
which becomes effective for fiscal years beginning after December 15, 1997. The
adoption of SFAS 130 is not expected to impact the Company's consolidated
financial position or results of operations.

     Also in June 1997, the FASB issued SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information," which becomes effective for fiscal years
beginning after December 15, 1997. The Company has yet to determine the impact,
if any, of adoption of this new pronouncement.

     FISCAL PERIOD: For purposes of presentation, the Company has indicated its
accounting period as ending on March 31 and its interim quarterly periods as
ending on the corresponding month end. The Company, in fact, operates and
reports quarterly periods ending on the Friday closest to month end. The 13-week
period presented as December 31, 1997 ended on January 2, 1998 and the 13-week
period presented as December 31, 1996 ended on December 27, 1996.


                                       -2-


<PAGE>   3
                 DREXLER TECHNOLOGY CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

               (In thousands, except share and per share amounts)



<TABLE>
<CAPTION>
                                                                 March 31,    December 31,
                                                                   1997           1997
                                                                 --------        --------
<S>                                                              <C>             <C>     
                                                                               (Unaudited)
                                     Assets
Current assets:
    Cash and cash equivalents ............................       $  2,916        $  4,191
    Accounts receivable ..................................            615           1,186
    Inventories ..........................................            852           1,416
    Other current assets .................................            205             249
                                                                 --------        --------
       Total current assets ..............................          4,588           7,042
                                                                 --------        --------

Property and equipment, at cost ..........................         13,404          14,493
    Less--accumulated depreciation and amortization ......        (11,790)        (12,115)
                                                                 --------        --------
       Property and equipment, net .......................          1,614           2,378

Patents, net .............................................            887             822
                                                                 --------        --------

          Total assets ...................................       $  7,089        $ 10,242
                                                                 ========        ========


                      Liabilities and Stockholders' Equity

Current liabilities:
    Accounts payable .....................................       $    501        $    811
    Accrued payroll costs ................................            230             251
    Advance payments from customers ......................          2,183             976
    Other accrued liabilities ............................            116             137
                                                                 --------        --------
       Total current liabilities .........................          3,030           2,175
                                                                 --------        --------

Stockholders' equity:
    Preferred stock, $.01 par value:
       Authorized--2,000,000 shares
       Outstanding--none .................................             --              --
    Common stock, $.01 par value:
       Authorized--15,000,000 shares
       Outstanding--9,150,416 shares at March 31, 1997 and
           9,530,551 shares at December 31, 1997 .........             91              95
Additional paid-in capital ...............................         31,516          34,542
Accumulated deficit ......................................        (27,548)        (26,570)
                                                                 --------        --------
       Total stockholders' equity ........................          4,059           8,067
                                                                 --------        --------

          Total liabilities and stockholders' equity .....       $  7,089        $ 10,242
                                                                 ========        ========
</TABLE>


                                       -3-


<PAGE>   4
                 DREXLER TECHNOLOGY CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                       Three Months Ended             Nine Months Ended
                                                                           December 31,                  December 31,
                                                                      ----------------------        ----------------------
                                                                       1996           1997           1996           1997
                                                                      -------        -------        -------        -------
<S>                                                                   <C>            <C>            <C>            <C>    
Revenues ......................................................       $   815        $ 3,229        $ 2,451        $ 7,620
                                                                      -------        -------        -------        -------

Costs and expenses:
    Cost of sales .............................................           558          1,709          1,656          4,214
    Selling, general, and administrative expenses .............           673            801          1,885          2,193
    Research and engineering expenses .........................           289             92            736            315
                                                                      -------        -------        -------        -------
       Total costs and expenses ...............................         1,520          2,602          4,277          6,722
                                                                      -------        -------        -------        -------

          Operating income (loss) .............................          (705)           627         (1,826)           898

Other income and expense:
    Other income, net .........................................             2             31             22             26
    Interest income ...........................................            11             43             32             94
    Interest expense ..........................................            (2)            (2)            (5)            (5)
                                                                      -------        -------        -------        -------
       Total other income, net ................................            11             72             49            115
                                                                      -------        -------        -------        -------

          Income (loss) before income taxes ...................          (694)           699         (1,777)         1,013

Provision for income taxes ....................................            --             23             --             35
                                                                      -------        -------        -------        -------

          Net income (loss) ...................................       $  (694)       $   676        $(1,777)       $   978
                                                                      =======        =======        =======        ======= 
        
Net income (loss) per share:
    Basic .....................................................       $ (0.08)       $  0.07        $ (0.20)       $  0.10
    Diluted ...................................................       $ (0.08)       $  0.07        $ (0.20)       $  0.10

Weighted average number of common and common equivalent shares:
    Basic .....................................................         9,109          9,525          8,967          9,324
    Diluted ...................................................         9,109          9,780          8,967          9,579
</TABLE>


                                       -4-


<PAGE>   5
                 DREXLER TECHNOLOGY CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                             Nine Months Ended
                                                                               December 31,
                                                                          ----------------------
                                                                           1996           1997
                                                                          -------        -------
<S>                                                                       <C>            <C>    
Cash flows from operating activities:
   Net income (loss) ..............................................       $(1,777)       $   978
   Adjustments to reconcile net income (loss) to net cash used
          for operating activities:
       Depreciation and amortization ..............................           375            467
       Compensation on stock plan activity ........................             7             14
   Changes in operating assets and liabilities:
       (Increase) decrease in accounts receivable .................           384           (571)
       Increase in inventories ....................................          (145)          (564)
       Increase in other assets ...................................           (16)           (44)
       (Decrease) increase in accounts payable and accrued expenses        (1,315)           352
       Decrease in advance payments from customers
          and deferred revenue ....................................           (55)        (1,207)
                                                                          -------        -------

          Net cash used for operating activities ..................        (2,542)          (575)
                                                                          -------        -------

Cash flows from investing activities:
   Purchases of property and equipment ............................          (269)        (1,105)
   Increase in patents ............................................           (50)           (61)
                                                                          -------        -------

          Net cash used for investing activities ..................          (319)        (1,166)
                                                                          -------        -------

Cash flows from financing activities:
   Proceeds from sale of common stock .............................         1,857          3,016
                                                                          -------        -------

          Net cash provided by financing activities ...............         1,857          3,016
                                                                          -------        -------

          Net increase (decrease) in cash and cash equivalents ....        (1,004)         1,275

Cash and cash equivalents:
   Beginning of period ............................................         2,094          2,916
                                                                          -------        -------
   End of period ..................................................       $ 1,090        $ 4,191
                                                                          =======        =======
</TABLE>


                                       -5-


<PAGE>   6
ITEM 2.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS--FISCAL 1998 THIRD QUARTER AND FIRST NINE MONTHS
COMPARED WITH FISCAL 1997 THIRD QUARTER AND FIRST NINE MONTHS

Revenues

     For the fiscal 1998 third quarter ended December 31, 1997, the Company's
total revenues were $3,229,000 compared with $815,000 for last year's third
quarter. Total revenues for the current nine-month period were $7,620,000
compared with $2,451,000 for the same period last year.

     PRODUCT SALES. Sales of LaserCard(R) optical memory cards and related
products to value-added resellers (VARs), licensees, and end-user customers were
$6,961,000 for the first nine months of fiscal 1998 compared with $2,435,000 for
last year's comparable period. The Company sold 288 reader/writer units for the
fiscal 1998 first nine months compared with 266 reader/writer units for the
first nine months of fiscal 1997.

     For the fiscal 1998 first nine months, the Company sold nearly 1.6 million
optical memory cards compared with about 300,000 cards for last year's first
nine months. The increase in sales of optical memory cards resulted primarily
from U.S. government orders totalling 4 million optical memory cards. Of these,
approximately 1.2 million cards were delivered during the first nine months of
fiscal 1998 to the U.S. Immigration and Naturalization Service (INS). Deliveries
under U.S. government orders are expected to average approximately 200,000 cards
per month through January 1999.

     Applications for the Company's optical memory card products include:
medical data applications in the United States; various programs in Europe and
Asia; two programs in the Philippines--an admission pass/retail purchase log at
a duty-free shopping zone and a vehicle warranty and maintenance records card;
and United States government- related programs, including the U.S. Department of
Defense "automated manifest card" and the U.S. Immigration and Naturalization
Service "border crossing card" and "green card."

     The Company utilizes VAR companies for the development of commercial
markets and applications for LaserCard products. Product sales to VARs include
the Company's optical memory cards, the Company's system software, and optical
card reader/writers made by a licensee of the Company, and may include add-on
peripherals made by other companies (such as equipment for adding a digitized
photo, fingerprint, hand template, or signature to the cards). The VARs may add
application software, personal computers, and other peripherals, and then resell
these products, integrated into data systems, for end-user customers.

     There can be no assurances that any new or existing VAR company in any
country will be successful in its markets or field trials or that it will place
follow-on orders with the Company for additional quantities of cards and
systems. In order to upgrade its VAR customer base to increase the probability
of success, the Company continues its efforts to recruit new VARs and eliminate
nonproductive ones. The Company provides marketing leads, customer technical
support, and system software to assist VARs.

     Software is an important factor in developing the commercial markets for
optical memory cards. The Company's system software consists of optical card
interface software/device drivers, file systems, software development tools, and
demonstration software. The Company does not provide software for specific
applications, but instead depends on its VARs to integrate optical card products
into existing software products, write new application software for specific
optical card programs, or license software from other VARs. Several VARs have
written optical card software programs for applications such as automobile
warranty and maintenance records, cargo manifesting, digital optical key
systems, admissions/ID, data logging systems, and various medical-related
applications such as medical image storage and health history cards. Other
application software development is underway by VARs and their customers.


                                       -6-


<PAGE>   7
     Optical memory cards are used in conjunction with card reader/writer
equipment connected to personal computers and accessed in the same manner as
floppy disk drives. Such reader/writers are sold to VARs and other customers of
the Company. The price, performance, and availability of such reader/writers are
factors in the commercialization of optical cards. The Company sells
reader/writers for a few thousand dollars per unit, and these units generally
include the Company's interface software/device drivers.

     The Company does not manufacture card reader/writers but instead continues
to purchase such equipment from a Japanese licensee, Nippon Conlux Co., Ltd.,
currently the Company's sole supplier of reader/writers. The Company's inventory
level for reader/writers fluctuates based on the timing of purchases and sales
and currently is approximately 300 units. The Company can give no assurance that
increased production of card reader/writers will occur in the near term or that
high-volume sales and correspondingly lower prices will result. If market demand
increases sharply over a short period of time, an initial shortage of
reader/writers could result. Also, an interruption or change in the supply of
reader/writers could cause a delay in product shipments and a possible loss of
sales, which would adversely affect operating results.

     DEVELOPMENT CONTRACT. Under a customer-funded development contract for a
multi-technology workstation, development contract revenues were $225,000 for
the third quarter of fiscal 1998 and $645,000 for the fiscal 1998 first nine
months versus no revenue of this type in the previous fiscal year. Upon
completion of the development program, revenues of approximately $800,000 will
have been recorded on this contract, and the Company does not anticipate
material ongoing revenues of this type in the future. Costs under this contract
are charged to cost of sales.

     LICENSES. There were no licenses sold in the first nine months of fiscal
1998 or fiscal 1997. The Company no longer relies on license fees to finance
operations.

     ROYALTIES. Royalty revenues were $14,000 for the first nine months of
fiscal 1998 compared with $16,000 for the same period last year. The Company
cannot predict whether or when equipment or card sales by its licensees will
result in material royalties to the Company. Therefore, the Company is not
relying on royalty income and does not expect it to be a significant factor in
the near term.

Backlog

     As of December 31, 1997, the backlog for LaserCard(R) optical memory cards
was approximately $10 million. Deliveries are estimated to be at the rate of
approximately 225,000 cards per month through about January 1999. About 90% of
the backlog is for U.S. government orders; as is the case in all U.S. government
procurement, the government reserves the right to change specifications, delay
deliveries, and cancel all or part of the orders.

Margins

     The gross margin on product sales and development contract revenues for the
first nine months of fiscal 1998 was 45% compared with 32% for the prior-year
period. The Company believes that gross margins for the remainder of fiscal 1998
will continue at levels above fiscal 1997, due to anticipated higher production
volumes. The gross margin on optical memory card sales will fluctuate based upon
type and volume of cards sold. With the increase in card manufacturing for
customer orders, the Company's optical memory card manufacturing facility is
used less for the purposes of research and engineering. Therefore, more of the
manufacturing facility costs (depreciation expense, building lease payments, and
other costs) are allocated to cost of card manufacturing, and less of these
costs are charged to research and engineering. For the first nine months of
fiscal 1998, the Company allocated substantially all of the facility expenses to
card manufacturing versus approximately 40% of these expenses for last year's
first nine months.

Income and Expenses

     SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (SG&A). For the fiscal 1998
third quarter and first nine months, SG&A expenses were $801,000 and $2,193,000,
respectively, compared with $673,000 and $1,885,000, respectively,


                                       -7-


<PAGE>   8
for the third quarter and first nine months of fiscal 1997. The $308,000
increase in expenses for the first nine months of fiscal 1998 is due mainly to a
$178,000 increase in payroll expenses and a $38,000 bad-debt reserve.

     RESEARCH AND ENGINEERING EXPENSES. Research and engineering expenses were
$92,000 and $315,000, respectively, for the third quarter and first nine months
of fiscal 1998 compared with $289,000 and $736,000, respectively, for the
year-earlier periods. The expense reduction is due primarily to accounting for
facility costs rather than an actual reduction in research and engineering. The
optical memory card facility is used for both engineering and manufacturing.
Therefore, the facility costs (depreciation expense, building lease payments,
and other costs) are allocated between manufacturing and engineering based upon
the level of activity in the respective areas. Substantially all of these
expenses were allocated to card production during the first nine months of
fiscal 1998 because of the substantial increase in card production against
orders. During the first nine months of fiscal 1997, approximately 40% of these
expenses were allocated to research and engineering.

     The Company continues to undertake ongoing research and engineering project
activities. However, research and engineering expenses for fiscal year 1998 are
expected to be less than for fiscal year 1997, as optical card production
increases and card manufacturing resources are allocated to card production to a
greater degree than last fiscal year. Future projects will require increased
spending as the optical card industry grows.

     OTHER INCOME AND EXPENSE. Net other income for the first nine months of
fiscal 1998 was $115,000 compared with $49,000 for the first nine months of
fiscal 1997. The Company purchases Japanese yen for payment of reader/writers
purchased from a Japanese supplier. Thus, the Company's normal operations are
subject to gains or losses on fluctuations in the yen/dollar exchange rate. Net
other income for the fiscal 1998 first nine months included a $26,000 gain on
foreign currency exchange versus a $22,000 gain on foreign currency exchange
during the comparable period last year.

     Interest income for the first nine months of fiscal 1998 was $94,000
compared with $32,000 for the year-earlier period, due to changes in average
invested funds. The Company's interest expense on short-term loans was $5,000
for the first nine months of fiscal 1998 and fiscal 1997.

LIQUIDITY

     As of December 31, 1997, the Company had cash and cash equivalents of
$4,191,000, a current ratio of 3.2 to 1, and no long-term debt. Net cash used
for operating activities was $575,000 for the fiscal 1998 first nine months
compared with $2,542,000 for the first nine months of fiscal 1997. The net cash
used for operating activities during the first nine months of fiscal 1998
consisted of $1,459,000 provided by revenues less expenses, minus $2,034,000
used for changes in operating assets and liabilities. The cash used for changes
in operating assets and liabilities consisted of a $571,000 increase in accounts
receivable, a $564,000 increase in inventories, and a $1,207,000 decrease in
advance payments from customers, partially offset by a $308,000 change in other
items.

     The current level of revenues is sufficient to generate cash from
operations after expenses, primarily due to U.S. government orders. Fluctuations
in operating assets and liabilities will use cash in some quarters and provide
cash in other quarters. If U.S. government orders decrease and there are delays
in other customers' development of optical-card based programs and corresponding
commercialization of the Company's optical cards and related products, losses
could recur.

     The Company has not established a line of credit. Generally, the Company's
customers make advance payments at the time of order placement because the
Company's optical memory cards are usually made to custom specifications that
are specific to each customer, end user, or application. The Company believes
that although working capital requirements should grow in proportion to product
shipment levels, the advance payments will reduce the need for working capital
financing. The Company may negotiate a line of credit if and when it becomes
appropriate, although no assurance can be made that such financing would be
available, if needed.


                                       -8-


<PAGE>   9
     At December 31, 1997, the Company's accumulated deficit was reduced to
$26,570,000 as a result of the profit recorded for the first nine months of
fiscal 1998. Stockholders' equity increased by $4,008,000, to $8,067,000, during
the first nine months of fiscal 1998 due to the $978,000 profit, the $1,886,000
(net of expenses) received by the Company from the sale of 200,000 shares of
common stock in private-placement transactions in October of 1997, and
$1,144,000 received by the Company for stock issued under the Employee Stock
Purchase Plan and the 1991 Stock Option Plan.

     The Company's total deferred income tax asset was $16,114,000 at March 31,
1997. If utilized, the total deferred income tax asset would reduce future tax
expense and payments. Included are amounts derived from federal income tax net
operating losses that will expire at various dates from 2001 through 2012,
amounts from state income tax net operating losses that will expire at various
dates from 1998 through 2002, and amounts from tax credits that will expire from
2000 through 2004. The ability of the Company to utilize this deferred tax asset
is contingent upon generating sufficient income within the stated time periods.
In view of the uncertain value of this asset, the Company has recorded a full
valuation allowance against it; therefore, no part of the total deferred tax
asset of $16,114,000 has been added to stockholders' equity on the Company's
balance sheet.

     The Company is planning to install an additional $3 million of capital
equipment and leasehold improvements in its card production facility by the end
of July 1998. These assets are for the production of advanced optical cards with
new features and for manufacturing-process improvements and will result in a
production capacity of 8 million cards annually. The Company believes that an
additional investment of about $7 million to $10 million in production equipment
and automatic inspection equipment may be required to produce the more advanced
optical cards at rates approximating 25 million cards per year. Currently, the
Company intends to purchase such equipment incrementally as commercial orders
for optical memory cards justify increased production capacity. The Company will
make additional capital expenditures for cost savings and other purposes.

     During the fiscal 1998 first nine months, Company employees and consultants
purchased from the Company 176,450 shares of registered common stock, at an
average price of $6.24 per share, through the exercise of stock options under
the Company's 1991 Stock Option Plan, which resulted in additional cash receipts
to the Company of $1,101,000. As of December 31, 1997, Company employees and
consultants held unexercised, vested, in-the-money options to purchase 575,517
shares of common stock at exercise prices ranging from $4.56 to $10.75 per
share, for a weighted average of $7.31 per share. These stock options, if
exercised, would provide the Company with cash in the amount of $4,207,000.

                           FORWARD-LOOKING STATEMENTS

     Certain statements made above relating to plans, objectives, and economic
performance go beyond historical information and may provide an indication of
future results. To that extent, they are forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
each is subject to factors that could cause actual results to differ from those
in the forward-looking statement. In particular, the ability of the Company to
maintain a profitable level of optical memory card sales is subject to risks and
uncertainties with respect to customer diversification, customer expansion, the
economic availability of reader/writers, the implementation of ongoing
commercial applications by customers, and the economic configuration and
operation of the Company's card manufacturing facility for increased output
levels. Such factors are described in the Company's Report on Form 10-K and
other documents filed by the Company from time to time with the Securities and
Exchange Commission.


PART II.         OTHER INFORMATION

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

     There were no matters submitted to a vote of security holders during the
period for which this report is filed.


                                       -9-


<PAGE>   10
ITEM 6.          EXHIBITS AND REPORTS ON FORM 8-K

       (a)       Exhibit No.                Exhibit Description

                   27                       Financial Data Schedule

       The above-listed exhibit is filed herewith. No other exhibits are
included in this report as the contents of the required exhibits are either not
applicable to Registrant, to be provided only if Registrant desires, or
contained elsewhere in this report.

       (b) No reports on Form 8-K were filed by Registrant during the quarter
for which this report is filed.

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:

                                 DREXLER TECHNOLOGY CORPORATION
                                 (Registrant)


Date: February 6, 1998           /s/Jerome Drexler
                                 -------------------------------
                                 Jerome Drexler, Chairman of the Board of 
                                 Directors and Chief Executive Officer 
                                 (Principal Executive Officer)

Date: February 6, 1998           /s/Steven G. Larson
                                 -------------------------------
                                 Steven G. Larson, Vice President of Finance 
                                 and Treasurer (Principal Financial Officer 
                                 and Principal Accounting Officer)


                                      -10-


<PAGE>   11
                                 EXHIBIT INDEX



Ex. 27              Financial Data Schedule