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 September 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 October 31, 1998 was 9,624,838 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>
                                                  September 30, December 31,
                                                      1998         1997
                                                   -----------  -----------
<S>                                                <C>          <C>
                     Assets                        (unaudited)
Current assets:
    Cash and cash equivalents                         $4,520       $4,559
    Short-term investments                            10,191        4,973
    Accounts receivable, net                           6,312        7,474
    Inventories                                        4,844        5,113
    Deferred income taxes                              1,020        1,020
    Other assets                                         566          294
                                                   -----------  -----------
       Total current assets                           27,453       23,433
Property and equipment, net                            2,712        2,686
                                                   -----------  -----------
       Total assets                                  $30,165      $26,119
                                                   ===========  ===========

              Liabilities and Stockholders' Equity
Current liabilities:
    Trade accounts payable                            $1,651       $1,934
    Payable to Parent                                  2,392          --
    Accrued expenses                                   1,622        1,667
                                                   -----------  -----------
       Total current liabilities                       5,665        3,601
                                                   -----------  -----------

Commitments and contingencies

Stockholders' Equity
    Common stock                                          10           10
    Capital in excess of par value                     5,635        5,532
    Retained earnings                                 18,855       16,976
                                                   -----------  -----------
       Total stockholders' equity                     24,500       22,518
                                                   -----------  -----------
       Total liabilities and stockholders' equity    $30,165      $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
                                        September 30,
                                    ---------------------
                                       1998       1997
                                    ---------- ----------
<S>                                 <C>        <C>
Sales                                 $10,161    $11,491
Cost of goods sold                      5,358      5,529
                                    ---------- ----------
  Gross profit                          4,803      5,962
                                    ---------- ----------
Operating expenses
  Selling, general and
    administrative                      2,992      2,844
  Research and development                739        757
                                    ---------- ----------
   Total operating expenses             3,731      3,601
                                    ---------- ----------
   Income from operations               1,072      2,361

Interest and other income, net            123        113
                                    ---------- ----------
   Income before income taxes           1,195      2,474

Provision for income taxes                454        940
                                    ---------- ----------
        Net income                     $  741     $1,534
                                    ========== ==========

 Basic net income per common share      $0.08      $0.16
                                    ========== ==========
 Shares used to compute basic
   net income per common share          9,648      9,607
                                    ========== ==========
 Diluted net income per common share    $0.08      $0.16
                                    ========== ==========
 Shares used to compute diluted
   net income per common share          9,830      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>
                                     Nine Months Ended
                                         September 30,
                                    ---------------------
                                       1998       1997
                                    ---------- ----------
<S>                                 <C>        <C>
Sales                                 $32,618    $33,178
Cost of goods sold                     16,421     15,984
                                    ---------- ----------
  Gross profit                         16,197     17,194
                                    ---------- ----------
Operating expenses
  Selling, general and
    administrative                      8,887      8,094
  Research and development              2,164      2,288
                                    ---------- ----------
   Total operating expenses            11,051     10,382
                                    ---------- ----------
   Income from operations               5,146      6,812

Interest and other income, net            591        376
                                    ---------- ----------
   Income before income taxes           5,737      7,188

Provision for income taxes              2,180      2,731
                                    ---------- ----------
        Net income                     $3,557     $4,457
                                    ========== ==========

 Basic net income per common share      $0.37      $0.46
                                    ========== ==========
 Shares used to compute basic
   net income per common share          9,619      9,618
                                    ========== ==========
 Diluted net income per common share    $0.36      $0.45
                                    ========== ==========
 Shares used to compute diluted
   net income per common share          9,805      9,833
                                    ========== ==========
</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>
                                                       Nine Months Ended
                                                          September 30,
                                                      -----------------------
                                                          1998        1997
                                                      ----------- -----------
<S>                                                   <C>         <C>
Cash flows from operating activities
  Net income                                              $3,557      $4,457
  Adjustments to reconcile net income to cash
    provided by operating activities:
    Depreciation and amortization                            714         613

    Changes in assets and liabilities:
      Accounts receivable, net                             1,162        (682)
      Inventories                                            269        (621)
      Payable to Parent                                    2,392       1,651
      Trade accounts payable                                (283)       (733)
      Accrued expenses                                       (45)        343
      Other                                                 (336)        107
                                                      ----------- -----------
        Cash flows provided by operating activities        7,430       5,135
                                                      ----------- -----------

Cash flows from investing activities
  Investment in intangibles and fixed assets                (676)     (1,032)
  Sale (purchase) of short-term investments               (5,218)       (236)
                                                      ----------- -----------
        Cash flows used in investing activities           (5,894)     (1,268)
                                                      ----------- -----------

Cash flows from financing activities
   Dividends                                              (1,678)     (1,225)
   Issuance of common stock                                  103          71
                                                      ----------- -----------
        Cash flows used in financing activities           (1,575)     (1,154)
                                                      ----------- -----------
Change in cash and cash equivalents                          (39)      2,713

Cash and cash equivalents at beginning of period           4,559       2,371
                                                      ----------- -----------
Cash and cash equivalents at end of period                $4,520      $5,084
                                                      =========== ===========

Supplemental disclosure of cash flow information:
  Cash paid to the Parent for income taxes                $2,180      $2,731
                                                      =========== ===========
</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 September 30, 1998 and 
the three and nine months ended September 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):

                                            September 30,   December 31,
                                                 1998           1997
                                             ------------   ------------
         Finished goods                         $1,966           $1,496
         Work in process                           443              624
         Subassemblies                             508              613
         Raw materials                          $1,927            2,380
                                             ------------   ------------
                                                $4,844           $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 August 6, 1998, the Company declared a cash dividend of $.045 
per share on all outstanding shares of its common stock. This dividend 
was paid on September 1, 1998 to shareholders of record on August 19, 
1998. A dividend of $.045 per share was paid on July 1, 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 September 30, 1998 declined 12% to 
$10,161,000 from $11,491,000 in the third quarter of 1997. During the 
third quarter of 1998, the General Motors labor dispute and the Asia 
economic situation continued to have 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 third 
quarter of 1997. Sales for the nine months ended September 30, 1998 
declined 2% to $32,618,000 from the $33,178,000 recorded in the first 
nine months of 1997. The above mentioned labor dispute and economic 
situation, led to a reduction in units shipped in the first nine months 
of 1998, which was also the primary cause of the year to date sales 
decline.

        Cost of sales in the third quarter of 1998 declined 4% compared to 
the comparable 1997 period, as a result of the lower sales volume. As a 
percent of sales, cost of sales rose to 53% compared to 48% in the third 
quarter of 1997. This was caused by a change in sales mix to products 
carrying  a higher relative cost of sales. Year to date cost of sales 
increased 3% as compared to the comparable 1997 period. As a percent of 
sales, cost of sales increased to 50% of sales in the first nine months 
of 1998 compared to 48% in the same period in 1997. This was primarily 
the result of increased costs associated with the change in sales mix, 
which was partially offset by the reduction in units shipped.

        Selling, general and administrative expenses increased 5% to 
$2,992,000 in the third quarter of 1998 from $2,844,000 in 1997. 
Selling, general and administrative expenses as a percent of sales 
increased to 29% in the third quarter of 1998 from 25% in the comparable 
1997 quarter. This increase resulted from increased staffing expenses in 
marketing and selling, which were partially offset by a reduction in the 
Company's printing and publicity expenses. As a result of the above-
mentioned staffing expenses, which were partially offset by lower 
advertising, commission, publicity and printing expenses, selling, 
general and administrative expenses during the first nine months of 1998 
increased 10% to $8,887,000 from the $8,094,000 recorded in the first 
nine months of 1997. 

        Research and development expenses in the three months ended 
September 30, 1998 declined 2% to $739,000 from $757,000 in the comparable 
period in 1997. Research and development expenses as a percent of sales, 
remained constant at 7% for the three and nine months ended September 30, 
1998 and the comparable 1997 periods. The quarterly decline in 
expenditures was chiefly the result of lower material and consulting 
expenses. Research and development expenses for the nine months ended 
September 30, 1998 decreased 5% to $2,164,000 from $2,288,000 in 1997. 
Again, this was primarily due to lower consulting and materials usage. The 
Company anticipates that, consistent with STI's continuing commitment to 
new product development, research and development expenditures will 
increase in the fourth quarter of 1998 and on into 1999.

        Interest and other income, net increased to $123,000 and to $591,000 
for the three and nine months ended September 30, 1998, respectively, 
compared to $113,000 and $376,000 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 $454,000 and $2,180,000 
for the three and nine months ended September 30, 1998 compared to 
$940,000 and $2,731,000 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 September 30, 1998 the Company's working capital was $21,788,000, 
a 10% 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 September 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 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 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 third 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:  November 16, 1998                            /s/Joseph J. Lazzara
       -----------------                       ---------------------------------
                                                     Joseph J. Lazzara
                                               President and Chief Executive
                                                          Officer
                                                 (Principal Executive and
                                                     Financial officer)







Date:  November 16, 1998                           /s/ Richard O. Faria
       -----------------                     ----------------------------------
                                                     Richard O. Faria
                                                  Vice-President, Finance &
                                                      Administration
                                                (Principal Accounting Officer)