<PAGE>
                                FORM 10-QSB

                 U.S. SECURITIES AND EXCHANGE COMMISSION 
                          Washington, D.C. 20549

  (Mark One)

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

                For the quarterly period ended September 30, 1997

     [ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
              THE EXCHANGE ACT

  For the transition period from _______________ to ______________


                       Commission File No. 0-16335

                      OZO DIVERSIFIED AUTOMATION, INC.
                      7450 East Jewell Avenue, Suite A
                           Denver, Colorado  80231

                         Telephone:   (303) 368-0401

         Colorado                                84-0922701
(State of Incorporation)              (IRS Employer Identification No.)

Indicate by check mark whether the Issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 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 September 30, 1997, Registrant had 458,164 shares of its $.10 par
value common stock outstanding.

                                     1

<PAGE>

                   PART I - FINANCIAL INFORMATION

                   OZO Diversified Automation, Inc.
                           BALANCE SHEETS
                               ASSETS
<TABLE>
<CAPTION>

                                          September 30,       December 31,  
                                               1997                1996
                                            (Unaudited)

<S>                                        <C>               <C>
CURRENT ASSETS
  Cash                                     $        525      $       3,111
  Accounts and notes receivable, net
    of allowance for doubtful accounts
    of $5,016                                   455,754            257,775
  Inventories (Note 3)                          255,204            388,425
  Prepaid expenses                                9,475             11,385
  Other                                           2,082                  0
                                           ------------      -------------
                                                
      Total Current Assets                      723,040            660,696
                                           ------------      -------------
PROPERTY AND EQUIPMENT
  Manufacturing                                 151,953            149,328
  Furniture and Fixtures                        158,537            156,958
  Capitalized Lease                             195,246            195,246
  Leasehold Improvements                          5,010                  0
  Vehicle                                        10,820             10,820
                                           ------------      -------------
                                                521,566            512,352


    Less accumulated depreciation               360,782            326,199
                                           ------------      -------------
      Total Property and Equipment              160,784            186,153

OTHER ASSETS
  Deferred Financing Costs                       10,383             16,254
                                           ------------      -------------

      Total Assets                         $    894,207      $     863,103
                                           ------------      -------------
                                           ------------      -------------
</TABLE>







                 See notes to financial statements
            
                                 2
<PAGE>

                   PART I - FINANCIAL INFORMATION (CONTINUED)

                        OZO DIVERSIFIED AUTOMATION, INC.
                           BALANCE SHEETS (CONTINUED)
                      LIABILITIES AND SHAREHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
                                         September 30,       December 31,   
                                               1997              1996
                                            (Unaudited)
<S>                                        <C>               <C>
CURRENT LIABILITIES
  Current portion of notes payable         $     47,869      $    34,607

  Accounts payable and accrued expenses         498,897          470,205
  Note payable  Bank                             28,812           28,000
  Note payable - Officer                         50,000           84,500
                                           ------------      -----------
     Total Current Liabilities                  625,578          617,312
                                           ------------      -----------
OTHER LIABILITIES
  Long Term Debt and Capitalized
    Lease Obligation                            331,782          387,387
                                           ------------      -----------
      Total Liabilities                         957,360        1,004,699
                                           ------------      -----------

SHAREHOLDERS' DEFICIENCY
  Preferred stock, $.10 par value
    authorized 1,000,000 shares
    issued - none
  Common stock, $.10 par value
    authorized, 5,000,000 shares
    issued and outstanding
       458,164 shares                            45,816           45,816
  Capital in excess of par value              1,176,254        1,176,254
  Accumulated deficit                        (1,285,223)      (1,363,666)
                                          -------------      -----------
      Total Shareholders' Deficiency            (63,153)        (141,596)

      Total Liabilities &
        Stockholders' Deficiency          $     894,207      $   863,103
                                          -------------      -----------
                                          -------------      -----------

</TABLE>








                 See notes to financial statements

                                 3


<PAGE>

                  OZO DIVERSIFIED AUTOMATION, INC.


                      STATEMENTS OF OPERATIONS
                             (UNAUDITED)
<TABLE>
<CAPTION>
                                                  Nine Months Ended
                                                    September 30,
                                               1997              1996
<S>                                       <C>               <C>
Net Sales                                 $  2,032,998      $  1,490,301
Cost of Sales                                1,181,231           773,018
                                          ------------      ------------
Gross Profit                                   851,767           717,283
                                          ------------      ------------
Operating Expenses:
  Marketing & Sales                            290,491           252,781
  Research & Development                       116,845           119,992
  General and Administrative                   365,988           471,165
                                          ------------      ------------
                                               773,324           843,938
                                          ------------      ------------
Income (loss) before taxes                      78,443          (126,655)

Provision for Income Taxes                      15,689                 -

Tax Benefit of Operating
  Loss Carry Forward                           (15,689)                - 
                                          ------------      ------------

NET INCOME (LOSS)                         $     78,443      $   (126,655)
                                          ------------      ------------
                                          ------------      ------------
NET INCOME (LOSS) PER SHARE               $       0.17      $      (0.28)
                                          ------------      ------------
                                          ------------      ------------


</TABLE>













                See notes to financial statements

                                4


<PAGE>
                 OZO DIVERSIFIED AUTOMATION, INC.

                     STATEMENTS OF CASH FLOWS
                            (UNAUDITED)
<TABLE>
<CAPTION>
                                                Nine Months Ended
                                                  September 30,
                                               1997              1996
<S>                                        <C>               <C>
Cash flows from operating activities:
  Net Income (Loss)                        $    78,443       $  (126,655)
  Adjustments to reconcile net income
    to net cash used in
    operating activities:
     Depreciation                               34,583            18,751
     Amortization of deferred
      financing costs                            5,871             5,870
     Other                                      (2,082)           (9,785)
     Decrease (increase) in assets:
       Accounts receivable                    (197,979)           16,019
       Inventories                             133,221            98,789
       Prepaid expenses                          1,910             6,644

     (Decrease) in accounts
       payable and accrued expenses            (39,604)          (83,165)
                                           -----------       -----------
     Total adjustments                         (64,080)           53,123
                                           -----------       -----------
    Net cash provided (used) in 
     operating activities                       14,363           (73,532)
                                           -----------       -----------
Cash flows from investing activities:
    Capital Expenditures                        (9,213)          (11,760)
                                           -----------       -----------
    Net cash (used) in
     investing activities                       (9,213)          (11,760)
                                           -----------       -----------

Cash flows from financing activities:
    (Decrease) increase in notes payable        (7,736)           83,317
                                           -----------       -----------

      Net cash (used) provided by
       financing activities                     (7,736)           83,317
                                           -----------       -----------

Net decrease in cash                            (2,586)           (1,975)

Cash at beginning of period                      3,111             3,162
                                           -----------       -----------
Cash at end of period                      $       525       $     1,187
                                           -----------       -----------
                                           -----------       -----------
</TABLE>
                  See notes to financial statements

                                  5
<PAGE>
                   OZO DIVERSIFIED AUTOMATION, INC.

                       STATEMENTS OF OPERATIONS
                              (UNAUDITED)
<TABLE>
<CAPTION>

                                                   Three Months Ended
                                                      September 30,

                                               1997          1996 
<S>                                        <C>               <C>
Net Sales                                  $   604,809       $   418,254   
Cost of Sales                                  354,083           183,492       
                                           -----------       -----------
Gross Profit                                   250,726           234,762

Operating Expenses:                         
     Marketing & Sales                          78,407            44,852
     Research & Development                     39,523            38,237
     General and Administrative                115,971           189,369
                                           -----------       -----------
                                               233,901           272,458
                                           -----------       -----------
Income (loss) before Taxes                      16,825           (37,696)

Provision for Income Taxes                       3,365                 -

Tax Benefit of Operating
   Loss Carry Forward                           (3,365)                -
                                           -----------       -----------
NET INCOME (LOSS)                          $    16,825       $   (37,696)
                                           -----------       -----------
                                           -----------       -----------
NET INCOME (LOSS) PER SHARE                $      0.04       $     (0.08)
                                           -----------       -----------
                                           -----------       -----------
</TABLE>

















                     See notes to financial statements      

                                     6

<PAGE>
                   OZO DIVERSIFIED AUTOMATION, INC.

                     NOTES TO FINANCIAL STATEMENTS
                 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                (UNAUDITED)


In the opinion of Management of OZO Diversified Automation, Inc. (the
Company), the accompanying unaudited financial statements reflect all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position of the Company as of September 30, 1997
and the results of operations and changes in financial position
for the nine months ended September 30, 1997.

The results of operations for the nine months ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1997.

These unaudited financial statements should be read in conjunction with
the Company's annual report on Form 10-KSB for the year ended
December 31, 1996.

NOTE 1 -   A summary of significant accounting policies is currently on
           file with the Securities and Exchange Commission on 
           Form 10-KSB.

NOTE 2 -   Income Taxes:

           At December 31, 1996, the Company had net operating loss
           carryforwards totaling approximately $1,165,000 that may
           be offset against future taxable income through 2011 and
           research and development credits of approximately $51,000
           expiring through 2011.

           The Company has fully reserved the tax benefits of these
           operating losses because the likelihood of realization of the tax
           benefits cannot be determined.  These carryforwards are subject
           to review by the Internal Revenue Service.

           Temporary differences between the time of reporting certain
           items for financial and tax reporting purposes, primarily from
           using different methods of reporting depreciation costs and
           warranty and vacation accruals, are not considered significant
           by management of the Company.

NOTE 3 -   Inventories:
<TABLE>
<CAPTION>
                                               September 30,     December 31,
                                                   1997             1996
                    <S>                      <C>               <C>
                    Raw Materials            $     215,503     $    311,989
                    Work in process                 10,324           76,436
                    Finished Goods                  29,377                0
                                             -------------     ------------
                                             $     255,204     $    388,425
                                             -------------     ------------
                                             -------------     ------------
</TABLE>

                                   7
<PAGE>

                  MANAGEMENTS DISCUSSION AND ANALYSIS
                       OF FINANCIAL CONDITION AND
                          RESULTS OF OPERATIONS



For the nine months ended September 30,1997, the Company had
revenues of $2,032,998, an increase of 36% over the 
comparable period in 1996.  During the quarter ended September 30, 1997,
the Company recorded sales of $604,809, an increase of 45% over 
the same quarter in the previous year.  The increase in revenues
can be attributed to several factors, including but not limited to,
a favorable marketplace where the demand for electronic goods (and
hence the Company's products) continues to grow steadily; realization
of benefits from an aggressive marketing campaign aimed at achieving
top line growth; and a favorable shift in customer demand towards
the Company's higher end products.

The Company posted earnings of $78,443 for the nine months ended 
September 30, 1997.  This is in comparison to a loss of $126,655
for the nine months ended September 30, 1996.  Earnings per share during this
period improved to $0.17, compared to a loss of $0.28 recorded during the
first nine months of 1996.  On a quarterly basis, earnings for the three
months ended September 30, 1997 were $16,825, compared to a loss of $37,696
for the same three months in 1996.  While sales and earnings were lower
in third quarter as compared to each of the first two quarters of 1997,
this activity level is consistent with the seasonality of the business.  
Overall, the Company is not only experiencing a favorable sales growth
for new systems, but is also enjoying a resurgence in its parts
and service businesses as the number of systems installed 
worldwide continues to increase.  As reported earlier, net earnings 
continue to be favorably impacted by price increases secured for the
Company's products (beginning in first quarter 1997), aggressive cost
containment efforts adopted by Management in the fourth quarter of 1996 and
continuing into 1997, as well as the realization of benefits resulting from
numerous re-engineering projects that the Company has actively pursued over
the past twelve months.  

In terms of business outlook, the Company continues to focus on the 
depaneling application as the primary market for its premium routing
equipment, the PanelMASTER HS and the PanelROUTER SI.  In September, the
Company attended the SMI trade show in San Jose, California, where the newly
designed PanelMASTER HS was introduced to the West Coast market.  The new 
design was extremely well-received, with the product receiving very favorable
feedback from trade show attendees, customers, and industry representatives.
The Company will continue its efforts to improve quality, performance,
and overall reliability on all core product lines.

As of October 28, 1997 the Company had a backlog of open orders of
approximately $368,000, compared to a backlog of $743,000 on  
October 9, 1996.  The reduction in backlog over levels experienced in   
1996 is indicative of the Company's success in dramatically compressing
cycle times on all systems manufactured year to date.  Since initiating
the re-engineering process late in 1996, the Company has been able
to reduce the total time required from receipt-of-order to ship date by
more than 60%.  The current backlog combined with the forecast of orders
in subsequent quarters, in Management's opinion, provide the opportunity
for the Company to continue as a going concern.

Except for historical information contained herein, the statements in this
report are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results.  These risks and uncertainties include,
among other things, product demand and acceptance, market competition, and
risks inherent in the Company's international operations.  These and other
risks are described elsewhere herein and in the Company's other filings with
the Securities and Exchange Commission.

                                      8

<PAGE>

                      PART II - OTHER INFORMATION

                    OZO Diversified Automation, Inc.



Items 1- 5       Not Applicable.


Item  6          Exhibits and Reports on Form 8-K

                 a)  Exhibits  none.

                 b)  No Reports on Form 8-K were filed during the quarter
                     ending September 30, 1997.


Item  7          Not Applicable






                                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.



OZO DIVERSIFIED AUTOMATION, INC.



By:     David J. Wolenski                         Brantley J. Halstead

        David J. Wolenski                         Brantley J. Halstead
        Principal Executive Officer               Principal Accounting Officer
        Principal Financial Officer               Corporate Controller



Dated:  November 13, 1997

                                       9


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