UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                   FORM 10-Q

[X]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the Quarterly Period Ended June 30, 1998

[ ]   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
                      ------------------------------------
                                    (Issuer)


          Oregon                                        77-0170363
 -------------------------                ------------------------------
  (State of incorporation)               (I.R.S. Employer Identification Number)


 6550 Dumbarton Circle, Fremont, California                      94555
---------------------------------------------               ----------------
  (Address of principal executive offices)                     (Zip Code)


                               (510) 608-3400
            -----------------------------------------------------
                         (Issuers telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 OR 15(d) of the Securities Exchange Act during the past 12 months (or 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
   -----   -----


Common stock outstanding as of July 31, 1998 was 9,646,300 shares.

<PAGE>







                         PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                      CONDENSED CONSOLIDATED BALANCE SHEET
                     (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                   June 30,    December 31,
                                                   1998         1997
                                                   -----------  -----------
<S>                                                <C>          <C>
                     Assets                        (unaudited)
Current assets:
    Cash and cash equivalents                         $3,945       $4,559
    Short-term investments                             8,810        4,973
    Accounts receivable, net                           7,403        7,474
    Inventories                                        4,918        5,113
    Deferred income taxes                              1,020        1,020
    Other assets                                         554          294
                                                   -----------  -----------
       Total current assets                           26,650       23,433
Property and equipment, net                            2,708        2,686
                                                   -----------  -----------
       Total assets                                  $29,358      $26,119
                                                   ===========  ===========

              Liabilities and Stockholders' Equity
Current liabilities:
    Trade accounts payable                            $1,802       $1,934
    Payable to Parent                                  1,001          --
    Accrued expenses                                   1,562        1,667
                                                   -----------  -----------
       Total current liabilities                       4,365        3,601
                                                   -----------  -----------

Commitments and contingencies

Stockholders' Equity
    Common stock                                          10           10
    Capital in excess of par value                     5,625        5,532
    Retained earnings                                 19,358       16,976
                                                   -----------  -----------
       Total stockholders' equity                     24,993       22,518
                                                   -----------  -----------
       Total liabilities and stockholders' equity    $29,358      $26,119
                                                   ===========  ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.
<PAGE>






                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                    CONDENSED CONSOLIDATED STATEMENT OF INCOME
                      (In thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                     Three Months Ended
                                         June 30,
                                    ---------------------
                                    1998       1997
                                    ---------- ----------
<S>                                 <C>        <C>
Sales                                 $11,344    $11,577
Cost of goods sold                      5,676      5,632
                                    ---------- ----------
  Gross profit                          5,668      5,945
                                    ---------- ----------
Operating expenses
  Selling, general and
    administrative                      2,992      2,731
  Research and development                790        704
                                    ---------- ----------
   Total operating expenses             3,782      3,435
                                    ---------- ----------
   Income from operations               1,886      2,510

Interest and other income, net            348        152
                                    ---------- ----------
   Income before income taxes           2,234      2,662

Provision for income taxes                849      1,012
                                    ---------- ----------
        Net income                     $1,385     $1,650
                                    ========== ==========

 Basic net income per common share      $0.14      $0.17
                                    ========== ==========
 Shares used to compute basic
   net income per common share          9,645      9,607
                                    ========== ==========
 Diluted net income per common share    $0.14      $0.17
                                    ========== ==========
 Shares used to compute diluted
   net income per common share          9,839      9,743
                                    ========== ==========
</TABLE>
  The accompanying notes are an integral part of these financial statements.
<PAGE>







                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                    CONDENSED CONSOLIDATED STATEMENT OF INCOME
                      (In thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                     Six Months Ended
                                         June 30,
                                    ---------------------
                                    1998       1997
                                    ---------- ----------
<S>                                 <C>        <C>
Sales                                 $22,457    $21,687
Cost of goods sold                     11,062     10,455
                                    ---------- ----------
  Gross profit                         11,395     11,232
                                    ---------- ----------
Operating expenses
  Selling, general and
    administrative                      5,896      5,249
  Research and development              1,425      1,532
                                    ---------- ----------
   Total operating expenses             7,321      6,781
                                    ---------- ----------
   Income from operations               4,074      4,451

Interest and other income, net            468        263
                                    ---------- ----------
   Income before income taxes           4,542      4,714

Provision for income taxes              1,726      1,792
                                    ---------- ----------
        Net income                     $2,816     $2,922
                                    ========== ==========

 Basic net income per common share      $0.29      $0.30
                                    ========== ==========
 Shares used to compute basic
   net income per common share          9,620      9,607
                                    ========== ==========
 Diluted net income per common share    $0.29      $0.30
                                    ========== ==========
 Shares used to compute diluted
   net income per common share          9,822      9,743
                                    ========== ==========
</TABLE>
  The accompanying notes are an integral part of these financial statements.
<PAGE>






                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                               (In thousands)
                                 (unaudited)
<TABLE>
<CAPTION>
                                                       Six Months Ended
                                                           June 30,
                                                      -----------------------
                                                          1998        1997
                                                      ----------- -----------
<S>                                                   <C>         <C>
Cash flows from operating activities
  Net income                                              $2,816      $2,922
  Adjustments to reconcile net income to cash
    provided by operating activities:
    Depreciation and amortization                            473         397

    Changes in assets and liabilities:
      Accounts receivable, net                                71        (774)
      Inventories                                            195        (313)
      Payable to Parent                                    1,001         381
      Trade accounts payable                                (132)       (141)
      Accrued expenses                                      (105)        442
      Other                                                 (260)        (29)
                                                      ----------- -----------
        Cash flows provided by operating activities        4,059       2,885
                                                      ----------- -----------

Cash flows from investing activities
  Investment in intangibles and fixed assets                (495)       (856)
  Sale (purchase) of short-term investments               (3,837)         91
                                                      ----------- -----------
        Cash flows used in investing activities           (4,332)       (765)
                                                      ----------- -----------

Cash flows from financing activities
   Dividends                                                (434)       (407)
   Issuance of common stock                                   93          24
                                                      ----------- -----------
        Cash flows used in financing activities             (341)       (383)
                                                      ----------- -----------
Change in cash and cash equivalents                         (614)      1,737

Cash and cash equivalents at beginning of period           4,559       2,371
                                                      ----------- -----------
Cash and cash equivalents at end of period                $3,945      $4,108
                                                      =========== ===========

Supplemental disclosure of cash flow information:
  Cash paid to the Parent for income taxes                $1,726      $1,792
                                                      =========== ===========
</TABLE>
  The accompanying notes are an integral part of these financial statements.
<PAGE>

                 SCIENTIFIC TECHNOLOGIES INCORPORATED

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

       The consolidated financial statements as of June 30, 1998 and the 
three and six months ended June 30, 1998 and 1997 are unaudited. In the 
opinion of management, they reflect all adjustments (consisting only of 
normal recurring adjustments) necessary for a fair statement of the 
results of these periods but may not necessarily be indicative of the 
results to be expected for the full fiscal year. Certain information and 
footnote disclosures normally included in financial statements prepared 
in accordance with generally accepted accounting principles have been 
consolidated or omitted pursuant to the rules and regulations of the 
Securities and Exchange Commission. It is suggested that these 
consolidated financial statements be read in conjunction with the 
financial statements and notes thereto included in Scientific 
Technologies Incorporated's Annual Report to Shareholders on Form 10-K 
for the year ended December 31, 1997.

   1. INVENTORIES
    Inventories consist of the following (in thousands):

                                              June 30,     December 31,
                                                 1998           1997
                                             ------------   ------------
         Finished goods                         $1,779           $1,496
         Work in process                           504              624
         Subassemblies                             716              613
         Raw materials                          $1,919            2,380
                                             ------------   ------------
                                                $4,918           $5,113
                                             ============   ============

2. NET INCOME PER SHARE
        The Company has adopted Statement of Financial Accounting Standards 
No. 128 ("SFAS 128"). SFAS 128 requires presentation of both Basic and 
Diluted income per share on the face of the Statement of Operations. 
Basic income per common share is computed based on the weighted average 
number of shares outstanding during the period. Diluted income per share 
is computed based on the weighted average number of shares outstanding 
during the period plus the weighted average of stock options outstanding 
during the period. In computing diluted net income per common share, the 
average stock price for the period is used in determining the number of 
shares assumed to be repurchased from the proceeds of the stock options.

3. DIVIDEND PAID
       On June 4, 1998, the Company declared a cash dividend of $.045 per 
share on all outstanding shares of its common stock. This dividend was 
paid on July, 1998 to shareholders of record on June 19, 1998. A 
dividend of $.045 per share was paid on April 1, 1998 to shareholders of 
record on March 20, 1998.  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. 


<PAGE>


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

   The following section contains certain forward looking statements based 
on current expectations. The  Company's actual results may differ 
materially from those anticipated in such forward-looking statements. 
Among the factors which could effect actual results are those listed 
under "Business Factors" below and those listed under "Management's 
Discussion and Analysis of Financial Conditions and Results of 
Operations" in the Company's Annual Report on Form 10K  for the year 
ended December 31, 1997.

                  Results of Operations

   Sales for the three months ended June 30, 1998 declined 2% to 
$11,344,000 from $11,577,000 in the second quarter of 1997. During the 
second quarter of 1998, the General Motors labor dispute and the Asia 
economic situation had an adverse effect on the Company's customers 
doing business in those sectors, which, in turn, negatively impacted the 
Company's sales during such period compared to the second quarter of  
1997. Sales for the six months ended June 30, 1998 increased 4% over 
levels in the first six months of 1997, primarily due to an increase in 
units shipped, partially offset by an increase in distributor and OEM 
discounts.

   Cost of sales in the second quarter of 1998 increased 1% compared to 
the comparable 1997 period. This was primarily the result of a change in 
sales mix to products carrying  a higher relative cost of sales. As a 
percent of sales, cost of sales rose to 50% compared to 49% in the 
second quarter of 1997. Year to date cost of sales increased 6% as 
compared to the comparable 1997 period. This was primarily the result of 
increased costs associated with the higher sales volume and, to a lesser 
extent, an increase in manufacturing overhead. As a percent of sales, 
cost of sales increased to 49% of sales in the first six months of 1998 
compared to 48% in the same period in 1997. 

   Selling, general and administrative expenses increased 10% to 
$2,992,000 in the second quarter of 1998 from $2,731,000 in 1997. 
Selling, general and  administrative expenses as a percent of sales 
increased to 26% in the second quarter of 1998 from 24% in the 
comparable 1997 quarter. This increase was primarily due to increased 
staffing expenses in marketing and selling, partially offset by a 
reduction in the Company's network of independent sales representatives. 
For the first six months of 1998, selling, general and administrative 
expenses increased 12% to $5,896,000 from the $5,249,000 recorded in the 
first half of 1997. This was primarily due to the increased sales 
revenue and the above mentioned staffing expenses.


   Research and development expenses in the three months ended June 30, 
1998 increased 12% to $790,000 from $704,000 in the comparable period in 
1997. Research and development expenses were 7% of sales for the three 
months ended June 30, 1998 compared to 6% for the comparable 1997 period. 
The quarterly increase was chiefly the result of higher expense levels 
associated with the Company's continuing commitment to product 
development. Research and development expenses for the six months ended 
June 30, 1998 decreased 7% to $1,425,000 from $1,532,000 in 1997were 7% 
lower than the comparable period in 1997. This was primarily due to lower 
consulting and materials usage. Research and development expenses were 6% 
of sales for the six months ended June 30, 1998 compared to 7% for the 
same period in 1997. The Company anticipates that, consistent with STI's 
continuing commitment to new product development, research and development 
expenditures will increase.

   Interest and other income, net increased to $348,000 and to $468,000 
for the three and six months ended June 30, 1998, respectively, compared 
to $152,000 and $263,000 for the same periods in the prior year. This 
was the result of a non-recurring gain associated with the settlement of 
a patent lawsuit in the second quarter of 1998.

   The Company's provision for income taxes was $849,000 and $ 
1,726,000 for the three and six months ended June 30, 1998 compared to 
$1,012,000 and $ 1,792,000 for 1997.

   In light of the significant growth of the Company's operations in 
recent years, the Company believes that period to period comparisons of 
its financial results should not be relied upon as an indication of 
future performance.

                  Liquidity and Capital Resources

   At June 30, 1998 the Company's working capital was $22,285,000, a 
12% increase from the $19,832,000 reported at December 31, 1997. This 
was due to positive cash flows from operations resulting in increased 
short-term investments, lower accounts payable and accrued expenses, 
which offset increased payable to Parent and lower accounts receivable 
and inventories. 

   During the second quarter of 1998, the Company expanded its line of 
credit with Bank of The West to $6,000,000, none of which had been 
utilized at June 30, 1998. The Company believes that cash from 
operations, together with its cash resources and available bank 
borrowings, should be adequate to fund its working capital requirements 
through at least the remainder of 1998. However, in the event that the 
Company expands its capital requirements, it may be required to raise 
capital in debt or equity financing. Such financing may be available on 
terms less  favorable to the Company.

                       Business Factors
   Because of the variety of factors and uncertainties affecting the 
Company's 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 the Company's operating 
performance, may result in significant volatility in the Company's 
common stock price. Among the factors which could affect future results:

Variability of operating results
   The Company has experienced fluctuations in annual and quarterly 
operating results and anticipates that these fluctuations will continue. 
These fluctuations are caused by a number of factors, including the 
level and timing of customer orders, the mix of products sold, 
fluctuations in complementary third party products with which STI 
products are sold, the timing of operating expenditures and general 
economic conditions in the U.S. and abroad, particularly in Asia and 
Europe.

Seasonality
   The industrial manufacturing equipment industry can be subject to 
seasonality. This is also true with respect to European markets where 
business activity declines due to vacations taken in the summer months.

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

Rapid technological change and new product development
   The Company's future success will depend on its ability to enhance its 
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 the Company to devote substantial resources 
in order to 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.

Dependence on indirect distribution channel
   A majority of the Company's products are sold through third party 
distributors, system integrators and original equipment manufacturers. 
These resellers are not required to offer the Company's products 
exclusively and there can be no assurance that a reseller will continue 
to offer the Company's products. 

International sales
   The Company's international sales may be disrupted by currency 
fluctuations or other international events beyond the Company's control, 
including political or regulatory changes and changes in general 
economic conditions.

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

Year 2000 Compliance
   The Company has completed upgrading its information systems to Year 2000 
compliant versions, and therefore does not anticipate any internal Year 
2000 issues from its own information systems. However, the Company could 
be adversely impacted by Year 2000 issues faced by major distributors, 
suppliers, customers, vendors and financial service organizations. 
Management has not yet completed an assessment of the impact that third 
parties that are not Year 2000 compliant may have on the operations of 
the Company.







































<PAGE>
                          PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
        Not Applicable

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   At the Annual Meeting of shareholders held on May 28, 1998, the 
shareholders reelected the following to the Board of Directors, Anthony 
R. Lazzara: 9,501,804 shares for, Joseph J. Lazzara: 9,501,904 shares 
for, James A. Lazzara: 9,500,254 shares for, James A. Ashford: 9,500,408 
shares for, Carl H. Frei: 9,500,758 shares for, and Bernard L. Ploshay: 
9,500,578 shares for. The 1997 Stock Plan was approved by a vote of 
8,717,027 shares for, 335,537 against and 6,256 shares abstaining. . The 
1997 Employee Stock Purchase Plan was approved by a vote of 9,021,525 
shares for, 31,279 against and 6,016 shares abstaining. The shareholders 
also approved the selection of Price Waterhouse as the Company's 
independent accountants by a vote of 9,502,470 shares for, 768 shares 
against and 5,298 shares abstaining.

Item 5. OTHER INFORMATION
        Not Applicable

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 - 1987 Employee Stock Purchase Plan is incorporated        
                   by reference to the Registrant's Registration            
                   Statement on Form S-8 dated May 13, 1988.

    Exhibit  4.2 - 1987 Stock Option Plan is incorporated by reference 
                   to the Registrant's Registration Statement on Form 
                   S-8 dated May 13, 1988.

    Exhibit 10.1 - Lease agreement dated February 21, 1995 for 6550         
                   Dumbarton Circle, Fremont, California 94555, is 
                   incorporated by reference to the Registrant's Form 
                   10-KSB for the year ended December 31, 1994,             
                   Exhibit 10.4.

    Exhibit 10.2 - Bank agreement dated November 29, 1994 with Bank of 
                   The West is incorporated by reference to the
                   Registrant's Form 10-KSB for the year ended             
                   December 31, 1994, Exhibit 10.3.


    Exhibit 10.3 - Amendment dated May 31, 1997 to Bank Agreement           
                   dated November 29, 1994 is incorporated by           
                   reference to the Registrant's Form 10-K for the      
                   year ended December 31, 1997, Exhibit 10.3.

    Exhibit 10.4 - Lease agreement dated November 21, 1995  is
                   incorporated by reference to the Registrant's Form
                   10-KSB for the year ended December 31, 1995, 
                   Exhibit 10.4.

    Exhibit 10.5 - Agreement dated January 1, 1997 with Scientific  
                   Technology Inc. for the purchase of the level             
                   sensor product line.

    Exhibit 21.1 - Subsidiaries of the Registrant  is incorporated by 
                   reference to the Registrant's Form 10-K for the      
                   year ended December 31, 1997, 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, 1997, 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, 1997, Exhibit 24.1.

    Exhibit 27.0 - Financial Data Schedule.

(b)  No Reports on Form 8-K were filed during the first quarter of 1998.

<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.




                                            SCIENTIFIC TECHNOLOGIES INCORPORATED
                                            ------------------------------------
                                                        Registrant


Date:  August 13, 1998                                /s/Joseph J. Lazzara
       -----------------                       ---------------------------------
                                                     Joseph J. Lazzara
                                               President and Chief Executive
                                                          Officer
                                                 (Principal Executive and
                                                     Financial officer)







Date:  August 13, 1998                                /s/ Richard O. Faria
       -----------------                     ----------------------------------
                                                     Richard O. Faria
                                                  Vice-President, Finance &
                                                      Administration
                                                (Principal Accounting Officer)