<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                      ----------------------------------

 
                                   FORM 10-Q


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


For the quarter ended September 30, 1997          Commission File Number 0-26858

 
                                  MIZAR, INC.
            (Exact name of registrant as specified in its charter)

 
           Delaware                                             41-1425902
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                               Identification No.)




    2410 Luna Road                                                75006
    Carrollton, Texas                                           (Zip Code)
(Address of principal executive offices)


                                (972) 277-4600
                        (Registrant's telephone number)


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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                                 Outstanding at
                Class                           November 11,1997
                -----                           ----------------

Common Stock, par value $0.01 per share            5,135,976
<PAGE>
 
                                  MIZAR, INC.
                                        
                                   Form 10-Q
                   For the Quarter Ended September 30, 1997

                                     INDEX

                                                                    Page No.
                                                                    --------
PART I.     FINANCIAL  INFORMATION
 
Item 1.     Financial Statements
 
            Balance Sheets
            September 30, 1997 and June 30, 1996                        3
 
            Statements of Operations
            for the three months ended September 30, 1997 and 1996      4
 
            Statements of Cash Flows
            for the three months ended September 30, 1997 and 1996      5
 
            Notes to Interim Financial Statements                     6-8
 
Item 2.     Management's Discussion and Analysis of
            Financial Condition and Results of Operations            9-10
 
PART II.    OTHER INFORMATION
 
Item 6.     Exhibits and Reports on Form 8-K                           11
 

SIGNATURE                                                              12



 

                                       2
<PAGE>

                                   MIZAR, INC.

                                 BALANCE SHEETS
                     (in thousands, except number of shares)

<TABLE>
<CAPTION>
                                                    September 30,    June 30,
                                                        1997           1997
                                                    ------------     --------
                                                    (unaudited)

                         ASSETS
                         ------
<S>                                                  <C>             <C>     
Current assets:
  Cash and cash equivalents                          $  1,993        $  2,266
  Marketable securities, at fair value                  7,931           8,598
  Accounts receivable, net of allowances
   of $86 and $123, respectively                        2,300           1,816
  Inventories, net                                      2,609           1,840
  Prepaid expenses and other                               63              92
  Deferred tax asset                                    1,104           1,110
                                                     --------        --------
     Total current assets                              16,000          15,722
                                                     --------        --------

Plant and equipment:
  Machinery and equipment                               1,946           1,910
  Furniture and fixtures                                  325             321
                                                     --------        --------
                                                        2,271           2,231
  Less accumulated depreciation                        (1,434)         (1,303)
                                                     --------        --------
     Plant and equipment, net                             837             928
                                                     --------        --------
Other assets                                               91              46
                                                     --------        --------
     Total assets                                    $ 16,928        $ 16,696
                                                     ========        ========

            LIABILITIES AND STOCKHOLDERS' EQUITY
            ------------------------------------
Current liabilities:
  Accounts payable                                   $  1,068        $    915
  Accrued compensation                                    348             421
  Other current liabilities                               736             696
  Current maturities of capital lease obligations           -               2
                                                     --------        --------
     Total current liabilities                          2,152           2,034
                                                     --------        --------

     Total liabilities                                  2,152           2,034
                                                     --------        --------

Stockholders' equity:
  Preferred stock, $.01 par value; 1,000,000 
   shares authorized; no shares issued and 
   outstanding at September 30 and June 30, 
   1997, respectively
  Common stock, $.01 par value; 25,000,000 shares  
   authorized, 5,658,464 and 5,472,810 shares 
   issued at September 30 and June 30, 1997, 
   respectively, and 5,135,976 and 4,805,922 
   shares outstanding at September 30 and June 30,
   1997, respectively                                      56              55
  Additional paid-in capital                           14,074          13,934
  Net unrealized loss on marketable securities             (5)            (16)
  Retained earnings                                     1,242           1,789
                                                     --------        --------
                                                       15,367          15,762
                                                     --------        --------
  Less--treasury stock, at cost                          (591)         (1,100)
                                                     --------        --------
     Total stockholders' equity                        14,776          14,662
                                                     --------        --------
     Total liabilities and stockholders' equity      $ 16,928        $ 16,696
                                                     ========        ========
</TABLE>

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

                                       3

<PAGE>

                                   MIZAR, INC.

                            STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                         September 30,
                                                       1997         1996
                                                      ------       ------

<S>                                                   <C>          <C>   
Net sales                                             $3,203       $3,025
Cost of sales                                          1,555        1,380
                                                      ------       ------

          Gross margin                                 1,648        1,645

Operating expenses:
     Product development and engineering                 571          474
     Sales and marketing                                 520          464
     General and administrative                          353          351
                                                      ------       ------

          Total operating expenses                     1,444        1,289
                                                      ------       ------

Operating income                                         204          356

Interest income                                          146          135
                                                      ------       ------

Income before provision for income taxes                 350          491

Provision for income taxes                                35           52
                                                      ------       ------
Net income                                            $  315       $  439
                                                      ======       ======

Primary net income per share                          $ 0.06       $ 0.08
                                                      ======       ======

Fully diluted net income per share                    $ 0.06       $ 0.08
                                                      ======       ======


Weighted average common shares outstanding:
      Primary                                          5,404        5,579
                                                      ======       ======
      Fully diluted                                    5,458        5,579
                                                      ======       ======

</TABLE>

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

                                       4
<PAGE>

                                   MIZAR, INC.

                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                             Three Months Ended
                                                                September 30,
                                                              1997       1996
                                                             -------    -------
<S>                                                          <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                  $   315    $   439
 Adjustments to reconcile net income to net cash
  provided by operating activities -
    Depreciation                                                 134         90
    Prepaid rent                                                   5         (4)
 Changes in assets and liabilities -
    Accounts receivable, net                                    (484)    (1,265)
    Inventories, net                                            (769)      (343)
    Prepaid expenses                                              29        (16)
    Other assets                                                 (50)        12
    Accounts payable                                             153        194
    Accrued liabilities                                          (33)       108
                                                             -------    -------
        Net cash used by operating activities                   (700)      (785)
                                                             -------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of machinery, equipment, furniture
     and fixtures                                                (43)      (280)
    Net sales of marketable securities                           684      1,526
                                                             -------    -------
        Net cash provided by investing activities                641      1,246
                                                             -------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Exercise of stock warrants and options                       361         11
    Purchase of treasury stock                                  (573)        (3)
    Net payments on capital lease obligations                     (2)        (6)
                                                             -------    -------
        Net cash provided (used) by financing activities        (214)         2
                                                             -------    -------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            (273)       463
CASH AND CASH EQUIVALENTS, beginning of period                 2,266      1,550
                                                             -------    -------
CASH AND CASH EQUIVALENTS, end of period                     $ 1,993    $ 2,013
                                                             =======    =======

SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Cash paid for income taxes                               $    10    $    16

</TABLE>

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

                                       5
<PAGE>
 
                                  MIZAR, INC.

                      Notes to Interim Financial Statements

1.  Basis of Presentation

  While the accompanying interim financial statements are unaudited, they have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission.  In the opinion of the Company, all material
adjustments and disclosures necessary to fairly present the results of such
periods have been made.  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.  These financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended June 30, 1997, as included in the Form 10-K,
previously filed.  The interim results of operations for the period ended
September 30, 1997, are not necessarily indicative of results to be expected for
the year ending June 30, 1998.

2.  Marketable Securities

  The Company has determined that all of its marketable securities should be
classified as available for sale and reflected in the accompanying balance sheet
at their respective market values.  The Company's results of operations  include
earnings from such securities as calculated on a yield-to-maturity basis.
Unrealized gains and losses from the changes in fair value are excluded from
income and are reported as an adjustment to stockholders' equity, net of the
deferred tax effect.  The Company's marketable securities consist of direct and
implied obligations of the U. S. Government, certificates of deposit, and
corporate bonds.
 
3.  Inventories

  Inventories at September 30, 1997 and June 30, 1997, consisted of the
following (in thousands):
 
<TABLE>
<CAPTION>
                               September 30, 1997       June 30, 1997
                               ------------------       -------------      
<S>                            <C>                      <C>
Raw materials                        $  884                 $  948
Work-in-process                       1,514                    752
Finished goods                          211                    140
                                     ------                 ------
Inventories, net                     $2,609                 $1,840
                                     ======                 ======
</TABLE>
                                                                               
4.  Income Taxes

  The Company's effective income tax rate as reflected in the accompanying
interim statements of operations has been significantly impacted by the
utilization of net operating loss carryforwards.  During fiscal year 1996, the
Company's accounting for income taxes was further impacted by the recognition of
a deferred tax asset of $790,000.  In accordance with SFAS No. 109, Accounting
for Income Taxes, a valuation allowance associated with the net operating loss
carryforward was reduced and the $790,000 asset was recognized.  In fiscal 1997,
the deferred tax asset was increased to $1,101,000, primarily as a result of the
tax benefit recorded as a result of disqualifying dispositions of employee
incentive stock options.  The Company believes that it is more likely than not
that it will be able to realize the benefit of this net asset, which relates to
the estimated value to be derived from utilizing net operating loss
carryforwards in future accounting periods.

                                       6
<PAGE>
 
                                  MIZAR, INC.


                     Notes to Interim Financial Statements

5.  Income Per Share

  Primary and fully diluted income per share for the three months ended
September 30, 1997 and 1996 were computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the periods presented.  Common stock equivalents included in
both primary and fully diluted income per share are stock options using the
treasury stock method.  For the three months ended September 30, 1997, common
stock equivalents included in primary income per share were calculated under the
treasury stock method using the average market price, whereas the common stock
equivalents included in fully diluted income per share were calculated using the
ending market price, which was higher than the average market price.  For the
three months ended September 30, 1996, both primary and fully diluted income per
share were computed using the average market price, which was higher than the
ending market price.  Shares used in primary and fully diluted income per share
calculations are presented below (in thousands):
<TABLE>
<CAPTION>
                                                                   Primary                          Fully Diluted
                                                                   -------                          ------------- 
                                                              Three Months Ended                  Three Months Ended
                                                                September 30,                       September 30,
                                                              1997         1996                   1997         1996
                                                             ------       ------                 ------       ------
<S>                                                           <C>         <C>                    <C>          <C>
Weighted average common stock
    outstanding during the period                             5,020        4,966                  5,020        4,966
Common stock equivalents of stock programs                      384          613                    438          613
                                                              -----        -----                  -----        -----
Shares used in net income per share calculation               5,404        5,579                  5,458        5,579
                                                              =====        =====                  =====        =====
</TABLE>


6.  Recently Adopted Accounting Pronouncements

  In fiscal year 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of.  This statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  The impact of the
adoption was not material.

  In fiscal year 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation.  SFAS No. 123
requires companies to either recognize compensation expense related to employee
stock options in the statements of operations or disclose the proforma effect on
earnings of the stock options in the footnotes to the financial statements.  The
Company has elected to follow the proforma disclosure requirements promulgated
by SFAS No. 123 and the proforma disclosure can be found in Note 6 to the
financial statements in the Form 10-K for the year ended June 30, 1997.


7.  New Accounting Pronouncements

  In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, Earnings per Share. The adoption of this
standard is required for financial statements issued for periods ending after
December 15, 1997. This Statement establishes standards for computing and
presenting earnings per share ("EPS"). It replaces the presentation of primary
EPS with a presentation of basic earnings per share. Additionally, it requires
presentation of diluted EPS which is similar to fully diluted EPS, pursuant to
APB

                                       7
<PAGE>
 
Opinion No. 15. Had the Company previously adopted the provisions of SFAS No.
128, basic and diluted earnings per share for the quarter ended September 30,
1997, would have been $0.06 and $0.06, respectively.

  In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 129, Disclosure of Information About Capital
Structure. The adoption of this standard is required for financial statements
issued for periods ending after December 15, 1997. This Statement establishes
standards for disclosing information about an entity's capital structure. The
impact of this adoption will not be significant.


8.  Stockholders' Equity

  In May 1997, the Company announced a plan to repurchase up to $1,000,000 worth
of the common stock outstanding. As of June 30, 1997, 144,400 shares had been
repurchased for a total of $509,000. In August 1997, the Company announced a
$1,000,000 expansion to its common stock repurchase plan. As of September 30,
1997, a total of 281,900 shares had been repurchased for a total of $1,081,000
since the commencement of the program in May.

                                       8
<PAGE>
 
                                  MIZAR, INC.

          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

Results of Operations
---------------------

  For the three months ended September 30, 1997, the Company reported net sales
of $3,203,000, as compared to $3,025,000 in the same period of the prior year.
DSP-based product sales were $2,568,000, or 80% of total sales during the
quarter.  On a comparative basis, sales from DSP-based products were $2,363,000,
or 78% of total sales during the same quarter in the prior year.  Sales in the
first quarter of fiscal 1998 from non-DSP products were essentially flat as
compared to the same period in the prior year.  Bookings, which are generally
realized upon receipt of a written purchase order or contract, were $4,143,000
in the first quarter of fiscal 1998, as compared to $4,805,000 during the same
period in fiscal 1997.  The customer order backlog was $8,669,000 at September
30, 1997, as compared to $4,047,000 at September 30, 1996.  A much larger
proportion of the customer orders received in fiscal 1997 required engineering
effort in order to meet ruggedization (environmental) specifications which in
turn has resulted in longer lead times.  Much of the adaptation is the result of
environmental requirements associated with deployed customer systems in the
military/aerospace market.  Previously, a large portion of the Company's DSP
business were modest orders for relatively standard products which were used to
prove a concept or deploy a small number of prototypes or systems.

  Gross margin percent for the quarter ended September 30, 1997, was 51%, as
compared to 54% for the same period in the prior year.  The Company's historical
gross margin percentage has varied by quarter in both a positive and negative
fashion due to volume related efficiencies and changes in product and customer
mix.  Such variations will continue to impact gross margin percentages in a
similar fashion during future reporting periods as DSP-based products comprise a
larger percentage of revenues.

  During the three months ended September 30, 1997, operating expenses were
$1,444,000, or 45% of net sales, as compared to $1,289,000, during the same
period in the prior year.  Product development and engineering expenses were
higher during the first quarter of fiscal 1998 as compared to the same period in
fiscal 1997 due to increased headcount dedicated to ruggedization efforts and
the design of a new suite of products targeted for the digital wireless
communications market.  Sales expense was higher during the first quarter of
fiscal 1998 as compared to the same period in fiscal 1997 due to increased sales
commissions.

  Interest income for the quarter ended September 30, 1997, was $146,000, as
compared to $135,000 for the same period in the prior year.

  The Company reported net income of $315,000 for the quarter ended September
30, 1997, as compared to net income of $439,000 during the same period in the
prior year.  The decrease in net income for the three months ended September 30,
1997, as compared to the same period in the prior year, is due primarily to the
increase in operating expenses and a lower gross margin percentage.


Liquidity and Capital Resources
-------------------------------

  The Company's total cash, cash equivalents and purchased marketable securities
were $9,924,000 at September 30, 1997, as compared to $10,864,000 at June 30,
1997.  Net working capital at September 30, 1997, was $13,848,000, as compared
to $13,688,000 at June 30, 1997, an increase of $160,000.

  Expenditures for capital equipment were $43,000 for the three months ended
September 30, 1997, as compared to $280,000 in the prior year.  The expenditures
in the first quarter of fiscal 1997 included the costs of facility expansion and
remodeling.

                                       9
<PAGE>
 
                                  MIZAR, INC.

          Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

  In May 1997, the Company announced a plan to repurchase up to $1,000,000 worth
of the common stock outstanding. As of June 30, 1997, 144,400 shares had been
repurchased for a total of $509,000. In August 1997, the Company announced a
$1,000,000 expansion to its common stock repurchase plan. As of September 30,
1997, a total of 281,900 shares had been repurchased for a total of $1,081,000
since the commencement of the program in May.

  The Company believes that its near-term liquidity requirements will be met
with cash flow from operations and existing cash and short-term investments.


Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995:

  Certain matters discussed or incorporated by reference in this Form 10-Q,
other printed material and in oral presentations are forward-looking statements
which are based on expectations of the Company but involve a number of risks and
uncertainties including, but not limited to, rapid technological change, defense
industry concentration, relationship with Texas Instruments, commercial market
uncertainties, dependence upon suppliers and subcontractors, dependence on key
personnel, competition, and fluctuations in quarterly financial performance. The
foregoing list should not be construed as exhaustive and the Company disclaims
any obligation subsequently to revise forward-looking statements to reflect
unanticipated events. For a further explanation of risk factors, please see the
Company's Form 10-K for the year ended June 30, 1997. The Company further
cautions users who may utilize published bookings and backlog information as
tools to forecast the Company's revenue during a given timeframe since certain
purchase orders may be subject to cancellation and/or revision to delivery
schedules.

                                       10
<PAGE>
 
                                  MIZAR, INC.

                         Part II.     Other Information


Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits (exhibit reference numbers refer to Item 601 of Regulation S-K)

     11(a) Computation of Per Share Income for the three months ended September
           30, 1997 and 1996.

     27    Financial Data Schedule (filed electronically only).

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the period.

 

                                       11
<PAGE>
 
                                  MIZAR, INC.


                                   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.


                                  Mizar, Inc.

 
Date:  November 12, 1997        By  /s/ Charles D. Brockenbush
                                    --------------------------------
                                    Charles D. Brockenbush
                                    Vice President, Finance and
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)






 

                                       12
<PAGE>
 
                                 EXHIBIT INDEX

EXHIBIT
  NO.                  DESCRIPTION
-------    -------------------------------------
 11 (a)    Computation of Per Share Income for the three months ended September
           30, 1997 and 1996.

 27        Financial Data Schedule (filed electronically only).



 

                                       13