**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 **March 31, 2001** 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 0-12254**

**SCIENTIFIC TECHNOLOGIES INCORPORATED**
(Exact name of registrant as specified in its charter)



|**Oregon**                                                     | **77-0170363**                         
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

**6550 Dumbarton CircleFremont, CA     94555**(Address of principal executive offices including zip code)

**(510) 608-3400**(Registrant's telephone number, including area code)







Check 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 preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days.    YES [X] NO [   ],

Common stock outstanding as of April 30, 2001 was 9,650,369 shares.









**SCIENTIFIC TECHNOLOGIES INCORPORATED
                           Report On Form 10-Q For The
                           Quarter Ended March 31, 2001
                                     INDEX**



|**PART I.   Financial Information**                                                                                   | **Page No.**
|--------------------------------------------------------------------------------------------------------------------- | ------------
|                                                                                                                      |             
|Item 1.   Financial Statements
                  (unaudited):                                                         |             
|                                                                                                                      |             
|Consolidated Balance Sheets as of
          
     March 31, 2001 and December 31, 2000                                | **          
|                                                                                                                      |             
|Consolidated Statements of Operations for the
          
    Three Months ended March 31, 2001 and 2000               | **          
|                                                                                                                      |             
|Consolidated Statements of Cash Flows for the
          
    Three Months ended March 31, 2001 and 2000               | **          
|                                                                                                                      |             
|Notes to Consolidated Financial Statements                                                                            | **          
|                                                                                                                      |             
|Item 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations | **          
|                                                                                                                      |             
|**PART II.  Other Information**                                                                                       |             
|                                                                                                                      |             
|Item 6.   Exhibits and Reports on Form 8-K                                                                            | **          
|                                                                                                                      |             
|**Signatures**                                                                                                        | **          

---

**PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements**

---

SCIENTIFIC TECHNOLOGIES INCORPORATED

CONSOLIDATED BALANCE SHEET

(Unaudited, in thousands)

|                                   |              |               | 
|---------------------------------- | ------------ | ------------- | 
|Assets                             | Mar.31, 2001 | Dec. 31, 2000
|Current assets                     |              |              
|Cash and cash equivalents          | $ 4,561      | $ 4,048      
|Short-term investments             | 322          | 406          
|Accounts and notes receivable, net | 8,443        | 8,776        
|Inventories                        | 9,839        | 9,283        
|Deferred income taxes              | 1,680        | 1,680        
|Other assets                       | 719          | 505          
|Total current assets               | 25,564       | 24,698       
|                                   |              |              
|Intangible assets                  | 8,406        | 8,581        
|Property and equipment, net        | 3,719        | 3,749        
|Total assets                       | $37,689      | $37,028      



Liabilities and Shareholders' Equity

|Current liabilities       |        
|------------------------- | -------
|Accounts payable          | $ 2,647
|Payable to Parent         | 94     
|Accrued expenses          | 2,537  
|Total current liabilities | 5,278  
|                          |        
|Long-term tax liability   | 240    
|Total liabilities         | 5,518  

Shareholders' equity

|Common stock: shares authorized 20,000,    |        
|------------------------------------------ | -------
|issued and outstanding; 9,650              |        
|($.001 par value)                          | 10     
|Capital in excess of par value             | 5,553  
|Retained earnings                          | 26,608 
|Total shareholders' equity                 | 32,171 
|Total liabilities and shareholders' equity | $37,689
|                                           |        
|                                           |        

The accompanying notes are an integral part of these
financial statements.

---



SCIENTIFIC TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited, in thousands)



|                                                   | For the three months ended
|-------------------------------------------------- | --------------------------
|                                                   | Mar.31, 2001              
|                                                   |                           
|Sales                                              | $14,323                   
|                                                   |                           
|Cost of goods sold                                 | 7,852                     
|                                                   |                           
|Gross profit                                       | 6,471                     
|                                                   |                           
|Operating expenses                                 |                           
|Selling, general and administrative                | 3,988                     
|Research and development                           | 1,499                     
|Amortization of intangible assets                  | 128                       
|Total operating expenses                           | 5,615                     
|                                                   |                           
|Income from operations                             | 856                       
|                                                   |                           
|Interest and other income, net                     | 80                        
|                                                   |                           
|Income before income taxes                         | 936                       
|                                                   |                           
|Provision for taxes on income                      | 356                       
|                                                   |                           
|Net income                                         | $580                      
|                                                   |                           
|Net income per common share                        |                           
|Basic and diluted net income per share (Note 2)    | $0.06                     
|                                                   |                           
|Shares used to compute net income per common share | 9,673                     
|                                                   |                           

The accompanying notes are an integral part of these financial
statements.

---



SCIENTIFIC TECHNOLOGIES INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)



|                                                     | For the three months ended
|---------------------------------------------------- | --------------------------
|                                                     | Mar.31, 2001              
|                                                     |                           
|Cash flows from operating activities                 |                           
|Net income                                           | $ 580                     
|Adjustments to reconcile net income to cash          |                           
|provided by operating activities:                    |                           
|Depreciation and amortization                        | 494                       
|                                                     |                           
|Changes in assets and liabilities                    |                           
|Decrease (increase) in accounts receivable           | 333                       
|Decrease (increase) in inventories                   | (556)                     
|Decrease (increase) in other assets                  | (214)                     
|Decrease in accounts payable                         | (128)                     
|Increase in payable to Parent                        | 94                        
|Increase (decrease) in accrued liabilities           | 115                       
|Cash flows provided by operating activities          | 718                       
|                                                     |                           
|Cash flows from investing activities                 |                           
|Purchase of property, plant and equipment            | ( 289)                    
|Net cash used in the acquisition of PSI-Tronix, Inc. | --                        
|Sale of short-term investments                       | 84                        
|Cash flows used in investing activities              | (205)                     
|                                                     |                           
|Change in cash and cash equivalents                  | 513                       
|                                                     |                           
|Cash and cash equivalents at beginning of period     | 4,048                     
|Cash and cash equivalents at end of period           | $4,561                    

Supplemental disclosure of cash flow information

|Cash paid to the Parent for income taxes | $356 | $707
|---------------------------------------- | ---- | ----

The accompanying notes are an integral part of these financial
statements.

---

SCIENTIFIC TECHNOLOGIES INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial
statements for the three months ended March 31, 2001 and 2000 are unaudited. The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited condensed
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, considered necessary to present fairly the
financial position, results of operations and cash flows of Scientific
Technologies, Inc. (the "Company") and its subsidiaries for all periods
presented.

Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these condensed
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.

The results of operations are not necessarily indicative
of the results to be expected in the future or for the full fiscal year. It is
recommended that these condensed consolidated financial statements be read in
conjunction with the Company's consolidated financial statements and the notes
thereto included in its 2000 Annual Report on Form 10-K.

1. INVENTORIES

Inventories consisted of the following:	 	(In thousands)

|                | Mar.31, 2001 | Dec. 31, 2000
|--------------- | ------------ | -------------
|Raw Materials   | $5,202       | $2,209       
|Subassemblies   | 1,159        | 1,105        
|Work in Process | 416          | 659          
|Finished Goods  | 3,062        | 5,310        
|                | $9,839       | $9,283       

2. NET INCOME PER SHARE

A reconciliation of the numerators and denominators of the
basic and diluted income per common share computations is provided below.

|                                       |        | (In thousands) | (Per share)
|-------------------------------------- | ------ | -------------- | -----------
|Three months ended March 31, 2001      | Income | Shares         | Amount     
|Basic earnings per share calculation   | $ 580  | 9,650          | $0.06      
|Effect of dilutive securities          |        |                |            
|Stock options                          | -      | 23             | -          
|Diluted earnings per share calculation | $580   | 9,673          | $0.06      
|                                      
|Three months ended March 31, 2000     
|Basic earnings per share calculation   | $1,154 | 9,642          | $0.12      
|Effect of dilutive securities          |        |                |            
|Stock options                          | -      | 27             | -          
|Diluted earnings per share calculation | $1,154 | 9,669          | $0.12      



3. DIVIDEND PAID

On March 8, 2001, the Company declared a cash
dividend of $.0525 per share on all outstanding shares of its common stock to
shareholders of record on March 23, 2001. This dividend was paid on April 2,
2001. Approximately 87% of the outstanding common stock of the Company is
beneficially owned by Scientific Technology Incorporated, a California
corporation under common control with the Company. Dividends paid to Scientific
Technology Incorporated were applied to the Payable to Parent account.

4. COMPREHENSIVE INCOME

For the three months ended March 31, 2001 and 2000, there
is no significant difference between net income and comprehensive income.

5. SEGMENT REPORTING AND OTHER INFORMATION

Financial information for each product group for the
three months ended March 31, 2001 and 2000 follows:



|2001                   | Safety Products | Automation Products
|---------------------- | --------------- | -------------------
|Sales                  | $11,765         | $ 2,558            
|Group operating profit | 704             | 152                
|Total Assets           | $15,687         | $22,002            
|2000                   |                 |                    
|Sales                  | $12,141         | $ 1,349            
|Group operating profit | 1,653           | 151                
|Total Assets           | $16,731         | $18,023            



The Company operates principally in the United
States. The Company's operations in Germany are insignificant to the Company as
a whole. Sales to foreign customers represented less than 10% of total sales in
the first quarter of 2001 and 2000.

6. RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities. SFAS No. 133 requires that all derivatives be recognized
at fair value in the statement of financial position, and that the corresponding
gains or losses be reported either in the statement of operations or as a
component of comprehensive income, depending on the type of hedging relationship
that exists. The Company does not currently hold derivative instruments or
engage in hedging activities. Our adoption of SFAS No. 133, which became
effective January 1, 2001, did not have a material effect on our financial
statements.

---

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

This interim report on Form 10-Q contains trend analysis
and other forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of 1934. Such
statements include expectations, beliefs, intentions or strategies regarding
future operating results, future expenditures, future cash requirements, and
future industry conditions that involve risks and uncertainties. The Company's
actual results could differ materially from those projected in such forward-
looking statements as a result of many factors, including, without limitation,
those set forth under this section, the section entitled "Business Factors"
below and elsewhere in this report on Form 10-Q.

Results of Operations

(Amounts in thousands except percentages)

Scientific Technologies Incorporated designs,
manufactures and distributes automation safeguarding and specialty sensor
products for the industrial control market. The Company's products include
safety light guards, profiling scanners, factory automation sensors, controls,
components, microcomputers, fiber optics, power monitoring devices, safety mats,
pressure, displacement and velocity transducers, digital pressure gauges and
comparators and other electronic equipment supplied to industrial automation,
commercial and defense customers.

Sales for the three months ended March 31, 2001 increased
6% to $14,323 from $13,490 in the first quarter of 2000. The increase in sales
was due to the acquisition of PSI-Tronix in March of 2000. Our consolidated
sales include three months of sales of PSI-Tronix for the quarter ended March
31, 2001 and lees than one month of sales of PSI-Tronix for the quarter ended
March 31, 2000.

Gross margin as a percentage of sales for the three-month
period ended March 31, 2001 was 45% of sales compared to 52% for the same period
in 2000. This was primarily the result of a shift in the mix of sales in the
first quarter of 2001 to products with a relatively higher cost of sales than in
the comparable 2000 period.

Selling, general and administrative expenses increased 6%
to $3,988 in the first quarter of 2001 from $3,766 in the first quarter of 2000.
This increase was due to the full quarter effect of expenses incurred by the
PSI-Tronix business we acquired. Selling, general and administrative expenses
increased to 29% of sales for the three months ended March 31, 2001 compared to
28% in the same 2000 period.

First quarter 2001 research and development expenses were
the same as the comparable period in 2000. Research and development expenses
were 10% of sales for the three months ended March 31, 2001 compared to 11% for
the comparable 2000 quarter. We anticipate that we will continue to make
substantial investments in research and development in future quarters.

Amortization of intangible assets, amounting to $128 for
the quarter ended March 31, 2001, related to the acquisition of PSI-Tronix.

Liquidity and Capital Resources

At March 31, 2001, our working capital was $20,286, a
4% increase from the $19,501 reported at December 31, 2000. This increase was
primarily the result of positive cash flows from operations.

Available bank borrowings were $6,100, all of which were
unused at March 31, 2001. The Company believes that cash from operations,
together with its cash resources and available bank borrowings, will be
sufficient to fund its working capital requirements for the next twelve months.

Business Factors

Because of the variety of factors and uncertainties
affecting our operating results, past financial performance and historic trends
may not be a reliable indicator of future performance. These factors, as well as
other factors affecting our operating performance, may result in significant
volatility in our common stock price. Among the factors which could affect our
future business, financial condition or operating results are the following:

Our operating results may fluctuate.

We have experienced fluctuations in annual and quarterly
operating results and anticipate that these fluctuations will continue. These
fluctuations are caused by a number of factors, including the level and timing
of customer orders, fluctuations in complementary third party products with
which our products are sold, the mix of products sold and the timing of
operating expenditures. Our operating results could also be negatively impacted
by generally adverse economic conditions throughout the high technology sector.
In particular, our PSI-Tronix subsidiary may experience decreases in sales due
to the current market conditions in the semiconductor industry.

The seasonality inherent in our business could cause our operating results
to fluctuate.

The industrial manufacturing equipment industry in which
we compete has historically been subject to seasonality. This is also true with
respect to European markets in which we compete where business activity declines
due to vacations taken in the summer months. This seasonality, combined with
other factors such as the variability in our operating results described above,
renders quarter-to-quarter comparisons of our results of operations unreliable
as indicia of our overall performance.

The market for our products is highly competitive.

The market for industrial sensors is highly competitive.
Many competitors have substantially greater name recognition and technical,
marketing and financial resources than we have. Competitive pressures could
reduce market acceptance of our products and result in price reductions,
decreased revenues and increases in expenses.

Our business could suffer if we do not respond to rapid technological
change and new product development demands of our customers.

The market for our products is characterized by rapidly
changing technology, evolving industry standards, changes in customer needs and
frequent new product introductions. Our future success will depend on our
ability to enhance current products, develop new products and respond to
emerging industry standards, all on a timely and cost-effective basis. The
introduction of new products also requires that we manage the transition from
older products in order to minimize disruption of customer orders, avoid
excessive levels of older product inventories and ensure that adequate supplies
of new products can be delivered to meet customer demands.

Our sales are dependent on indirect distribution channels.

A majority of our sales are through third party
distributors, system integrators and original equipment manufacturers. These
resellers are not required to offer our products exclusively. We cannot assure
you that a reseller will continue to offer our products. In addition many of our
resellers are privately owned firms which may not be well capitalized. If our
ability to sell products through these third parties is impaired, our results of
operations would likely suffer.

Our international sales are subject to risks.

Our international sales may be disrupted by currency
fluctuations or other events beyond our control, including political or
regulatory changes. If our international sales were disrupted for any reason,
our revenue levels would decline.

Our business could suffer if we are unable to protect and enforce our
intellectual property rights.

We rely on a combination of patent, trademark and trade
secret laws and contractual restrictions to establish and protect proprietary
rights in our products and services. There can be no assurance that our patents,
trademarks, or contractual arrangements or other steps taken by us to protect
our intellectual property will prove sufficient to prevent misappropriation of
our technology or defer independent third party development of similar
technologies. Moreover, there can be no assurance that the technology licenses
granted to us from our parent company will continue to be available. The loss of
any of our proprietary technology could require us to obtain technology of lower
quality or performance standards or at greater cost, which could materially
adversely affect our business, results of operations and financial condition.
Furthermore, the laws of certain foreign countries may not protect our products,
services or intellectual property rights to the same extent as do the laws of
the United States.

PART II - OTHER INFORMATION

Items 1 - 4 and 5 are not applicable for this reporting
period.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following documents are filed as a part of this Report:



|Exhibit 3.1 -  | Articles of Incorporation, as amended, are incorporated by reference to the
Registrant's Form 10-K for the year ended December 31, 1988, Exhibit 3.1.
|-------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                      
|Exhibit 3.3 -  | By-Laws are incorporated by reference to the Registrant's Form 10-K for the
year ended December 31, 1985, Exhibit 3.                                 
|               |                                                                                                                                                      
|Exhibit 4.1 -  | 1997 Employee Stock Purchase Plan is incorporated by reference to the
Registrant's Registration Statement on Form S-8 dated October 2, 1998.         
|               |                                                                                                                                                      
|Exhibit 4.2 -  | 1997 Stock Plan is incorporated by reference to the Registrant's Registration
Statement on Form S-8 dated October 2, 1998.                           
|               |                                                                                                                                                      
|Exhibit 21.1 - | Subsidiaries of the Registrant is incorporated by reference to the
Registrant's Form 10-K for the year ended December 31, 2000, Exhibit 21.1.        
|               |                                                                                                                                                      
|Exhibit 23.1 - | Consent of Independent Accountants is incorporated by reference to the
Registrant's Form 10-K for the year ended December 31, 2000, Exhibit 23.1.    
|               |                                                                                                                                                      
|Exhibit 24.1 - | Power of Attorney is incorporated by reference to the Registrant's Form 10-K
for the year ended December 31, 2000, Exhibit 24.1.                     





1. No Reports on Form 8-K were filed during the first quarter of
2001.

---

**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.



| |                                     
| | ------------------------------------
| | SCIENTIFIC TECHNOLOGIES INCORPORATED

| |             
| | ------------
| | (Registrant)

Date: May 8, 2001



| |     |                     
| | --- | --------------------
| | By: | /s/Joseph J. Lazzara

| |                                                                                  
| | ---------------------------------------------------------------------------------
| |                                                                                  
| | Joseph J. Lazzara                                                                
| | President and Chief Executive Officer
(Principal Executive and Financial officer)

Date: May 8, 2001



| |     |                     
| | --- | --------------------
| | By: | /s/ Richard O. Faria

| |                                                                        
| | -----------------------------------------------------------------------
| |                                                                        
| | Richard O. Faria                                                       
| | Vice-President, Finance & Administration
(Principal Accounting Officer)

---