<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

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

                  For the Quarterly period ended October 5, 1996

                                       OR

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

                   For the transition period from         to

                         Commission file number 0-23418

                           MTI TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)

                  Delaware                             95-3601802
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                 Identification No.)

                            4905 East La Palma Avenue
                            Anaheim, California 92807
               (Address of principal executive offices, zip code)

       Registrant's telephone number, including area code: (714) 970-0300

      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
                                              ---    ---
      The number of shares outstanding of the issuer's common stock, $.001 par
value, as of November 11, 1996 was 25,679,164.

                                       1
<PAGE>   2
                           MTI TECHNOLOGY CORPORATION

                                      INDEX

                                                                    Page
                                                                    ----

PART I.    FINANCIAL INFORMATION

   Item 1.    Financial Statements                                   

              Condensed Consolidated Balance Sheets at October 5,
              1996 and April 6, 1996                                  3

              Condensed Consolidated Statements of Operations for
              the Three and Six Months Ended October 5, 1996 and
              September 30, 1995                                      4

              Condensed Consolidated Statements of Cash Flows for
              the Six Months Ended October 5, 1996 and
              September 30, 1995                                      6

              Notes to Condensed Consolidated Financial Statements    7

   Item 2.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations                     9

PART II.   OTHER INFORMATION

   Item 1.    Legal Proceedings                                      15

   Item 4.    Submission of Matters to a Vote of Security Holders    15

   Item 6.    Exhibits and Reports on Form 8-K                       16

                                       2
<PAGE>   3
                           MTI TECHNOLOGY CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      OCTOBER 5,        APRIL 6,
                                                                                         1996            1996
                                                                                         ----            ----
<S>                                                                                   <C>             <C> 
        ASSETS

Current assets:
  Cash and cash equivalents                                                            $  4,938        $  4,055
  Accounts receivable, net                                                               23,464          21,101
  Inventories                                                                            13,791          21,499
  Deferred income tax benefit                                                               784             784
  Prepaid expenses and other receivables                                                  4,664           3,750
                                                                                       --------        --------
        Total current assets                                                             47,641          51,189
Property, plant and equipment, net                                                       14,670          16,323
Intangible assets and goodwill, net                                                      14,944          15,852
Other                                                                                       683             659
                                                                                       --------        --------
                                                                                       $ 77,938        $ 84,023
                                                                                       ========        ========
        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
  Short-term borrowings                                                                $ 23,937        $ 20,613
  Current maturities of long-term debt                                                    3,341           8,297
  Accounts payable                                                                       11,266          14,580
  Accrued liabilities                                                                    16,025          18,724
  Deferred income                                                                         9,696          14,941
                                                                                       --------        --------
        Total current liabilities                                                        64,265          77,155
Long-term debt, less current maturities                                                   1,062           5,966
Deferred income                                                                             324             550
Other                                                                                         4             539
                                                                                       --------        --------
        Total liabilities                                                                65,655          84,210
                                                                                       --------        --------
Stockholders' equity (deficiency):
  Preferred stock, $.001 par value; authorized
    5,000 shares; issued and outstanding, none                                               --              --
  Common stock, $.001 par value; authorized
    40,000 shares; issued (including treasury shares) 
    and outstanding 26,396 and 20,243 shares at 
    October 5 and April 6, 1996, respectively                                                26              20
  Additional paid-in capital                                                             88,388          77,762
  Accumulated deficit                                                                   (71,920)        (73,645)
  Less cost of treasury stock (774 and 794 shares at
    October 5 and April 6, 1996, respectively)                                           (2,863)         (2,938)
  Cumulative foreign currency translation
    adjustments                                                                          (1,348)         (1,386)
                                                                                       --------        --------
Total stockholders' equity (deficiency)                                                  12,283            (187)
                                                                                       --------        --------
                                                                                       $ 77,938        $ 84,023
                                                                                       ========        ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>   4
                           MTI TECHNOLOGY CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED
                                            OCTOBER 5,     SEPTEMBER 30,
                                              1996            1995
                                              ----            ----
<S>                                        <C>            <C>
Net product revenue                         $ 28,153       $ 25,729
Service revenue                                8,358          8,617
                                            --------       --------
        Total revenue                         36,511         34,346

Product cost of revenue                       20,004         18,523
Service cost of revenue                        4,910          5,163
                                            --------       --------
        Total cost of revenue                 24,914         23,686

        Gross profit                          11,597         10,660
                                            --------       --------

Operating expenses:

  Selling, general and administrative          8,171          9,967
  Research and development                     2,376          2,969
                                            --------       --------
        Total operating expenses              10,547         12,936

        Operating income (loss)                1,050         (2,276)

Other income (expense), net                      331         (1,111)
                                            --------       --------

Income (loss) before income taxes              1,381         (3,387)
Income tax expense (benefit)                     150             (7)
                                            --------       --------
        Net income (loss)                   $  1,231       $ (3,380)
                                            ========       ========

Income (loss) per common and  common
  equivalent share                          $   0.05       $  (0.17)
                                            ========       ========

Weighted average common and common
  equivalent shares                           26,007         19,380
                                            ========       ========
</TABLE>




     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>   5
                           MTI TECHNOLOGY CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  SIX MONTHS ENDED
                                            OCTOBER 5,     SEPTEMBER 30,
                                              1996            1995
                                              ----            ----
<S>                                        <C>            <C>
Net product revenue                         $ 55,757       $ 50,506
Service revenue                               16,931         17,392
                                            --------       --------
        Total revenue                         72,688         67,898

Product cost of revenue                       40,063         36,113
Service cost of revenue                        9,902         10,200
                                            --------       --------
        Total cost of revenue                 49,965         46,313

        Gross profit                          22,723         21,585
                                            --------       --------

Operating expenses:

  Selling, general and administrative         16,749         20,935
  Research and development                     4,667          6,209
                                            --------       --------
        Total operating expenses              21,416         27,144

        Operating income (loss)                1,307         (5,559)

Other income (expense), net                      531         (1,764)
                                            --------       --------

Income (loss) before income taxes              1,838         (7,323)
Income tax expense                               150            315
                                            --------       --------
        Net income (loss)                   $  1,688       $ (7,638)
                                            ========       ========

Income (loss) per common and  common
  equivalent share                          $   0.06       $  (0.39)
                                            ========       ========

Weighted average common and common
  equivalent shares                           26,070         19,366
                                            ========       ========
</TABLE>




See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>   6
                           MTI TECHNOLOGY CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           SIX MONTHS ENDED
                                                                                     OCTOBER 5,     SEPTEMBER 30,
                                                                                        1996            1995
                                                                                        ----            ----
<S>                                                                                 <C>             <C>
Net cash used in operating activities                                                $   (254)       $(11,385)
                                                                                     --------        --------

Cash flows from investing activities:
        Capital expenditures for property, plant
          and equipment, net                                                           (1,725)         (4,662)
        Disposal of property, plant and equipment                                          --             340
        Acquisition of NPI assets and liabilities, net of cash
         acquired                                                                          --          (2,608)
        Other investment                                                                   --             (43)
                                                                                     --------        --------
        Net cash used in investing activities                                          (1,725)         (6,973)
                                                                                     --------        --------

Cash flows from financing activities:

        Borrowings under notes payable, net of acquisitions                            56,194          69,965
        Borrowings under notes payable to fund acquisition
         of NPI                                                                            --           2,608
        Proceeds from issuance of common stock and
         exercise of options and warrants                                                 267             128
        Repayment of notes payable                                                    (53,380)        (57,503)
                                                                                     --------        --------
        Net cash provided by financing activities                                       3,081          15,198
                                                                                     --------        --------

Effect of exchange rate changes on cash                                                  (219)             47
                                                                                     --------        --------

Net increase (decrease) in cash and cash equivalents                                      883          (3,113)

Cash and cash equivalents at beginning of period                                        4,055           5,562
                                                                                     --------        --------

Cash and cash equivalents at end of period                                           $  4,938        $  2,449
                                                                                     ========        ========

Supplemental disclosures of cash flow information: 

        Cash paid during the period for:
          Interest                                                                   $    866        $  2,009
          Income taxes                                                                     22             235
</TABLE>




     See accompanying notes to condensed consolidated financial statements.


                                       6
<PAGE>   7
                           MTI TECHNOLOGY CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. The interim condensed consolidated financial statements included herein have
been prepared by MTI Technology Corporation (the "Company") without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"). Certain information and footnote disclosures, normally included in
the financial statements prepared in accordance with generally accepted
accounting principles, have been omitted pursuant to such SEC rules and
regulations; nevertheless, the management of the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
April 6, 1996. In the opinion of management, the condensed consolidated
financial statements included herein reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the condensed
consolidated financial position of the Company as of October 5, 1996, and the
condensed consolidated results of operations and cash flows for the three month
and six month periods ended October 5, 1996 and September 30, 1995. The results
of operations for the interim periods are not necessarily indicative of the
results of operations for the full year. References to amounts are in thousands,
except share and per share data, unless otherwise specified.

2.    Inventories consist of the following:

<TABLE>
<CAPTION>
                                             OCTOBER 5,      APRIL 6,
                                                1996           1996
                                                ----           ----
<S>                                          <C>          <C>
Raw Materials                                 $ 6,207       $13,090
Work in Process                                   294         2,106
Finished Goods                                  7,290         6,303
                                              -------       -------
                                              $13,791       $21,499
</TABLE>          


3. During July 1994, the Company and certain directors and officers were served
with four purported stockholder class-action lawsuits alleging certain
improprieties surrounding the April 1994 initial public offering and subsequent
decrease in the Company's stock price. Subsequently, these four actions were
consolidated into a single case (In re MTI Technology Securities Litigation) in
the United States District Court, Central District of California. This
litigation was a class action complaint for alleged violation of the federal
securities laws. Plaintiffs sought compensatory damages and other relief as
permitted by applicable law. The claims related to the Company's initial public
offering in April 1994 and the Company's announcements for financial results for
the quarter ended July 2, 1994.

       In March 1996, the Company agreed to settle with plaintiffs. A Memorandum
of Understanding was signed providing for a total settlement amount of $5,500,
and the Claims Receipt and Policy Release agreement became effective March 29,
1996. The Company's unreimbursed portion of the aggregate settlement was $1,655.
Preliminary approval for the settlement was granted by the Court on June 3,
1996, and final approval for the settlement was granted by the Court on August
5, 1996.


                                       7
<PAGE>   8
4. On July 19, 1995, the Company entered into an agreement (the "Agreement"),
whereby it received a loan of approximately $10,000 from NFT Ventures II, LLC
("NFT V2"), an entity affiliated with the Company's major stockholder and
Chairman of the Board. Pursuant to the loan agreement, the Company issued a
long-term, secured subordinated note ("Note") to NFT V2, which bore annual
interest of 10.75% and was repayable in two equal installments, the first
installment being due and payable in January 1997, the second in July 1997.
Pursuant to the terms of the agreement, the Note was convertible at the lender's
option into common stock of the Company 90 days after the date of the agreement
at a price per common share equal to the then fair market value of such stock.
Proceeds from the loan were being used for working capital purposes.

      During the second quarter of fiscal 1996, the Company entered into an
agreement with NFT V2, whereby, pursuant to the terms of the agreement, the
Company licensed certain software products to NFT V2 for commercial use and
resale. As consideration for the licenses, the Company received a $650 credit
against amounts owing to NFT V2 under the Agreement and has access to certain
product enhancements to be developed by NFT V2.

      On April 11, 1996, NFT V2 exercised its right to convert current principal
and accrued interest outstanding of $10,113, under the Note, into 5,992,665
common shares of the Company.

5. Effective April 7, 1996, the Company entered into an agreement with NFT
Ventures, Inc. ("NFT"), an entity affiliated with the Company's major
stockholder and Chairman of the Board, whereby NFT will provide the Company with
up to $2,400 of non-refundable research and development funding based on actual
research and development expenses incurred in connection with new and enhanced
Backup-UNET software products, the RLM software Products Group and the Open
Media Products Group. The funding payments will be received in essentially four
equal quarterly installments of approximately $600 each, of which the first two
payments have been received. The remaining installments will be paid within ten
days of submission of a statement of incurred expenses for the next two
successive quarters. The consideration NFT received for the funding commitment
included: (a) an irrevocable, worldwide, nonexclusive license to develop, market
and sell certain defined new or substantially enhanced software products
developed by the Company; (b) the right to royalty payments based on the revenue
recognized by the Company from sale of the defined software products that are
sold within four years of the effective date of the agreement; and, (c) warrants
to purchase up to 750,000 shares of the Company's common stock with an exercise
price of $2.25 per share. The warrants expire on June 27, 2001.

6. In August 1996, the Company agreed with NFT to enter into a joint venture in
the form of a limited liability corporation (the "LLC") at some future date not
yet determined. The initial business purpose of the LLC will be the design and
development of RAID-based data storage systems that will work across multiple
operating environments.

7. Net income (loss) per common and common equivalent share was computed based
on the weighted average number of common and common equivalent shares
outstanding during the periods presented. The Company has granted certain stock
options which have been treated as common stock equivalents in computing both
primary and fully diluted income (loss) per share, except in those periods where
such inclusion would be antidilutive. The primary and fully dilutive income
(loss) per share computations are approximately the same.



                                       8
<PAGE>   9
PART 1 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

         MTI's historic revenues have been achieved through introductions of new
or updated products, expansion of the Company's international operations, and
through acquisitions. The Company has attempted to increase its focus on
expanding its software, systems and service offerings for the Open Systems
computing environment and decrease its historic dependence on sales and service
from the Digital Equipment Corporation ("DEC") computing environment. Revenue
from product sales to the Open Systems marketplace increased from less than 10%
for fiscal 1994, to approximately 21% for fiscal 1995, to approximately 43% for
fiscal 1996, and to approximately 77% for the second quarter of fiscal 1997.

         In January 1995, the Company acquired certain assets, including
intellectual properties and source code rights, of the UNIX and Open VMS storage
management software product lines of Raxco, Inc. ("Raxco"). The purchase price
of the acquired assets consisted of $1.0 million in cash, notes in the amount of
$2.5 million, assumption of $1.9 million of certain liabilities, primarily
deferred service maintenance contracts, and the issuance of warrants to purchase
250,000 shares of the Company's common stock at a price of $6.00 per share. The
warrants will expire on December 31, 1999. As part of the transaction the
Company also acquired software development and technical support teams located
domestically and in the United Kingdom. In addition, the Company acquired access
to the existing Raxco storage management software customer base.

         Effective April 2, 1995, the Company acquired National Peripherals,
Inc. ("NPI"), a privately-held provider of cross-platform RAID based storage
solutions for the Open Systems computing environment. Consideration paid in the
NPI acquisition included: (a) payments of $2.6 million in cash to NPI and its
stockholders, (b) promissory notes in the aggregate amount of $2.0 million
bearing 6% interest per annum and payable in two equal annual installments
beginning April 1996, (c) guaranteed earnout payments in the aggregate amount of
$3.0 million and payable in three equal annual installments beginning in April
1996, and (d) acquisition costs of $0.4 million. In addition, the acquisition
agreement provides for contingent payments of up to $1.0 million payable in
April 1998 based on certain performance criteria. As a result of the NPI
acquisition, MTI increased its presence in the Open Systems marketplace by
adding approximately 18 salespeople at the time of acquisition who were
exclusively focused on Open Systems sales opportunities.

         The Raxco and NPI acquisitions are part of the Company's strategy to
expand its product lines and increase revenue from the non-DEC marketplace, and
to heighten emphasis on the Company's software product development efforts.

         Effective February 9, 1996, the Company entered into an agreement with
EMC Corporation ("EMC"), whereby the Company sold to EMC substantially all of
the Company's existing patents, patent applications and rights thereof. The
consideration the Company will receive for these rights includes: (a) $30.0
million to be received in six equal annual installments of $5.0 million, the
first of which was received upon closing of the agreement on February 9, 1996,
the remaining payments to be received beginning January 1997 and in each of the
subsequent four years; and (b) royalty payments in the aggregate of up to a
maximum of $30.0 million over the term of the agreement, of which a minimum of
$10.0 million will be received in five annual installments, beginning within
thirty days of the first anniversary of the effective date of the agreement, and
within thirty days of each subsequent anniversary thereof. In addition, the
Company also received an irrevocable, non-cancelable, perpetual and royalty-free
license to exploit, market and sell the technology protected under the
aforementioned patents. Pursuant to the terms and conditions of the agreement,
this license will terminate in the event of a change of control of the Company
involving certain identified acquirers. As part of the agreement, the Company


                                       9
<PAGE>   10
and EMC granted to each other the license to exploit, market and sell the
technology associated with each of their respective existing and future patents
arising from any patent applications in existence as of the effective date of
the agreement for a period of five years.

         Effective April 7, 1996, the Company entered into an agreement with NFT
Ventures, Inc. ("NFT"), an entity affiliated with the Company's major
stockholder and Chairman of the Board, whereby NFT will provide the Company with
up to $2.4 million of non-refundable research and development funding based on
actual research and development expenses incurred in connection with new and
enhanced Backup-UNET software products, the RLM Software Products Group and the
Open Media Products Group. The funding payments will be received in essentially
four equal quarterly installments of approximately $600 each, of which the first
two payments have been received. The remaining installments will be paid within
ten days of submission of a statement of incurred expenses for the next two
successive quarters. The consideration NFT received for the funding commitment
included: (a) an irrevocable, worldwide, nonexclusive license to develop, market
and sell certain defined new or substantially enhanced software products
developed by the Company; (b) the right to royalty payments based on the revenue
recognized by the Company from sale of the defined software products that are
sold within four years of the effective date of the agreement; and, (c) warrants
to purchase up to 750,000 shares of the Company's common stock with an exercise
price of $2.25 per share. The warrants expire on June 27, 2001.

      The Company has experienced significant quarterly fluctuations in
operating results and anticipates that these fluctuations may continue in the
future. These fluctuations have been and may continue to be caused by a number
of factors, including competitive pricing pressures, the timing of customer
orders (a large majority of which have historically been placed in the last
month of each quarter), the introduction of new versions of the Company's
products, and the timing of sales and marketing and research and development
expenditures. Future operating results may fluctuate as a result of these and
other factors, including, but not limited to, the Company's ability to continue
to develop innovative products, the introduction of new products by the
Company's competitors, decreases in gross profit margin for mature products, the
ability to obtain certain key components used in the manufacture of the
Company's products, and the ability to retain and attract key personnel. There
can be no assurance that the Company will be profitable on a quarter-to-quarter
or annual basis.

      The Company has operated historically without a significant backlog of
orders and, as a result, net product revenue in any quarter is dependent on
orders booked and products shipped during that quarter. A significant portion of
the Company's operating expenses are relatively fixed in nature and planned
expenditures are based primarily on sales forecasts. If revenue does not meet
the Company's expectations in any given quarter, the adverse impact on the
Company's liquidity position and net income may be magnified by the Company's
inability to reduce expenditures quickly enough to compensate for the revenue
shortfall. Further, as is common in the computer industry, the Company
historically has experienced an increase in the number of orders and shipments
in the latter part of each quarter and the Company expects this pattern to
continue in the future. The Company's failure to receive anticipated orders or
to complete shipments in the latter part of a quarter could have a material
adverse effect on the Company's results of operations for that quarter.

      The non-historical information in this Form 10-Q includes forward-looking
statements which involve risks and uncertainties. The actual results for the
Company may differ materially from those described in any forward-looking
statement. Factors that might cause such a difference include, but are not
limited to, those discussed in this Form 10-Q. Additional information on
potential factors that could affect the Company's financial results are included
in the Company's Annual Report on Form 10-K for the year ended April 6, 1996.


                                       10
<PAGE>   11
RESULTS OF OPERATIONS

      The following table sets forth selected items from the Condensed
Consolidated Statements of Operations as a percentage of net revenues for the
periods indicated, except for product gross profit and service gross profit,
which are expressed as a percentage of the related revenue. This information
should be read in conjunction with the Condensed Consolidated Financial
Statements included elsewhere within:

<TABLE>
<CAPTION>
                                   FOR THE THREE MONTHS ENDED  FOR THE SIX MONTHS ENDED
                                   --------------------------  ------------------------

                                   OCTOBER 5,   SEPTEMBER 30,  OCTOBER 5,  SEPTEMBER 30,
                                      1996          1995          1996        1995
                                      ----          ----          ----        ----
<S>                                 <C>          <C>           <C>          <C>
                           
Net product revenue                   77.1%        74.9%         76.7%        74.4%
Service revenue                       22.9         25.1          23.3         25.6
                                     -----        -----         -----        -----
     Total revenue                   100.0        100.0         100.0        100.0

Product gross profit                  28.9         28.0          28.1         28.5
Service gross profit                  41.3         40.1          41.5         41.4
                                     -----        -----         -----        -----
     Gross profit                     31.8         31.0          31.3         31.8

Selling, general and
     administrative expenses          22.4         29.0          23.1         30.8
Research and development               6.5          8.6           6.4          9.2
                                     -----        -----         -----        -----
     Operating income (loss)           2.9         (6.6)          1.8         (8.2)

Other income (expense), net            0.9         (3.2)          0.7         (2.6)
Income tax expense                     0.4         --             0.2          0.5
                                     -----        -----         -----        -----
     Net income (loss)                 3.4%        (9.8)%         2.3%       (11.3)%
                                     =====        =====         =====        =====
</TABLE>

Net Product Revenue: Net product revenue increased $2.4 million, or 9.4% over
the same quarter of the prior year. This increase was primarily due to increased
revenue of $2.2 million from optical/tape products, primarily the mid-range 1500
series of automated DLT tape libraries. In addition, software revenue and server
revenue both increased $0.3 million over the same period of the prior year.
These increases were partially offset by decreased sales of $0.4 million to
Boeing Information Services, Inc. relating to Boeing's RCAS contract with the
federal government. The RCAS program has ended.

Net product revenue increased $5.3 million, or 10.4% for the first six months of
fiscal 1997 as compared to the same period of the prior year. This increase was
primarily due to increased revenue of $4.9 million from optical/tape products,
primarily the mid-range 1500 series of automated DLT tape libraries. In
addition, software revenue and server revenue increased $0.9 million and $0.7
million, respectively, over the same period of the prior year. These increases
were partially offset by decreased sales of $1.2 million to Boeing Information
Services, Inc. relating to Boeing's RCAS contract with the federal government.

Service Revenue: Service revenue decreased $0.3 million, or 3.0% from the same
quarter of the prior year. Service revenue decreased $0.5 million, or 2.7% for
the first six months of fiscal 1997 from the comparable period of the prior
year. These decreases are primarily due to fewer post-warranty service contracts
sold as a result of lower product revenues from the DEC market from the same
period of the prior year.


                                       11
<PAGE>   12
Product Gross Profit: Product gross profit was $8.1 million for the second
quarter of fiscal 1997, an increase of $0.9 million, or 13.1% over the same
quarter of the preceding year, and the gross profit percentage of net product
sales was 28.9% for the second quarter of fiscal 1997 as compared to 28.0% for
the same period of the prior year. The increase in the gross profit percentage
was primarily due to the inclusion of $0.5 million of royalty revenue related to
the February 1996 sale of substantially all of the Company's existing patents,
patent applications and rights thereof to EMC Corporation ("EMC"), partially
offset by the higher mix of Open Systems product revenues, which carry a lower
margin percentage.

Product gross profit was $15.7 million for the first six months of fiscal 1997,
an increase of $1.3 million, or 9.0% over the same quarter of the preceding
year, and the gross profit percentage of net product sales was 28.1% for the
first six months of fiscal 1997 as compared to 28.5% for the same period of the
prior year. The decrease in the gross profit percentage was primarily due the
higher mix of Open Systems product revenue, which carry a lower margin
percentage, partially offset by the inclusion of $1.0 million of royalty revenue
related to the February 1996 sale of substantially all of the Company's existing
patents, patent applications and rights thereof to EMC.

Service Gross Profit: Service gross profit was $3.4 million for the second
quarter of fiscal 1997, a decrease of $0.1 million from the same period of the
previous year. The gross profit percentage of service revenue increased to 41.3%
in the first quarter of fiscal 1997 over 40.1% in the same quarter of the
preceding year. The increase in the gross profit percentage was primarily a
result of a reduction in the service cost infrastructure partially offset by a
corresponding decrease in service revenues.

Service gross profit was $7.0 million for the first six months of fiscal 1997, a
decrease of $0.2 million, or 2.3% from the first quarter of the prior year. The
gross profit percentage of service revenue increased to 41.5% in the first six
months of fiscal 1997 over 41.4% in the comparable period of the preceding year.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses for the second quarter of fiscal 1997 decreased $1.8
million, or 18.0% from the same quarter of the preceding year. This decrease was
primarily due to reduced payroll and related expenses of approximately $1.0
million as a result of restructuring actions begun in the fourth quarter of
fiscal 1996 and completed in the first quarter of fiscal 1997, decreased
goodwill amortization of $0.5 million due to the write-off of goodwill in the
fourth quarter of fiscal 1996, and reductions in other expense categories of
$0.3 million.

For the first six months of fiscal 1997, selling, general and administrative
expenses decreased $4.2 million, or 20.0% from the comparable period of the
prior year. This decrease was primarily due to reduced payroll and related
expenses of approximately $1.8 million as a result of restructuring actions
begun in the fourth quarter of fiscal 1996 and completed in the first quarter of
fiscal 1997, decreased goodwill amortization of $1.0 million due to the
write-off of goodwill in the fourth quarter of fiscal 1996, decreased travel
expenses of $0.3 million due to restructuring actions noted above, decreased
legal expense of $0.2 million, primarily as a result of the settlement of
shareholder litigation, and reductions in other expense categories of $0.9
million.


                                       12
<PAGE>   13
Research and Development Expenses: Research and development expenses for the
second quarter of fiscal 1997 decreased $0.6 million, or 20.0% from the same
quarter of the preceding year. This decrease was primarily due to non-refundable
research and development funding from NFT.

Research and development expenses for the first six months of fiscal 1997
decreased $1.5 million, or 24.8% from the comparable period of the preceding
year. This decrease was primarily due to reduced payroll and related expenses of
approximately $0.8 million as a result of restructuring actions begun in the
fourth quarter of fiscal 1996 and completed in the first quarter of fiscal 1997,
and non-refundable research and development funding from NFT of $0.9 million,
partially offset by reductions in other expense categories of $0.2 million.

Other Income (Expense), Net: Other income, net, for the second quarter of fiscal
1997 increased $1.4 million, or 129.8% over the same period of the prior year.
This increase was primarily due to $1.2 million of income recognized on the sale
of substantially all of the Company's existing patents, patent applications and
rights thereof to EMC in February 1996, and decreased interest expense of $0.2
primarily due to the reduction of long-term debt.

Other income, net, for the first six months of fiscal 1997 increased $2.3
million, or 130.1% over the comparable period of the previous year. This
increase was primarily due to income recognized on the sale of substantially all
of the Company's existing patents, patent applications and rights thereof to EMC
in February 1996.


                                       13
<PAGE>   14
LIQUIDITY AND CAPITAL RESOURCES

      Cash and cash equivalents were $4.9 million at October 5, 1996, an
increase of $0.9 million as compared to April 6, 1996, the prior fiscal year
end. Net operating activities used $0.3 million during the first six months of
fiscal 1997, primarily due to an increase in accounts receivable of $2.4 million
as a result of increased revenues and a decrease in accounts payable and accrued
liabilities of $6.0 million primarily due to reduced trade purchases, partially
offset by decreased inventories of $7.7 million. Cash provided by financing
activities was $3.1 million, primarily as a result of increased bank line
borrowings.

      The Company's average days outstanding were 59 days at the end of the
second quarter of fiscal 1997, as compared to 75 days at the end of the same
quarter of fiscal 1996.

      Stockholders' equity at the end of the second quarter of fiscal 1997 was
$12.3 million as compared to $(0.2) million at the end of fiscal 1996. The
increase was primarily due to the conversion on April 11, 1996, of $10.1 million
of outstanding debt principal and accrued interest into approximately 6.0
million shares of common stock pursuant to the terms and conditions of a loan
agreement between the Company and the lender, an entity affiliated with the
Company's major stockholder and Chairman of the Board.

      On March 31, 1995, the Company entered in to an agreement whereby the
Company had available asset secured bank lines of credit of up to $20.0 million,
limited by the value of the pledged collateral which consists of the Company's
accounts receivable and inventories. In May 1996, the agreement was amended to
increase the line of credit to $30.0 million as a result of a collateralized
guarantee made to the bank by an affiliate of NFT, an entity affiliated with the
Company's major stockholder and Chairman of the Board. At October 5, 1996,
borrowings outstanding under this agreement were $23.9 million. At November 11,
1996, the outstanding balance under this line was approximately $24.3 million.
The bank line of credit contains certain restrictive covenants. At October 5,
1996, the Company was in compliance with all such covenants.

      Effective February 9, 1996, the Company entered into an agreement with EMC
Corporation ("EMC"), whereby the Company sold to EMC substantially all of the
Company's existing patents, patent applications and rights thereof. The
consideration the Company will receive for these rights include: (a) $30.0
million to be received in six equal annual installments of $5.0 million each,
the first of which was received upon closing of the agreement on February 9,
1996, the remaining payments to be received beginning January 1997 and in each
of the subsequent four years; and (b) royalty payments in the aggregate of up to
a maximum of $30.0 million over the term of the agreement, of which a minimum of
$10.0 million will be received in five annual installments, beginning within
thirty days of the first anniversary of the effective date of the agreement, and
within thirty days of each subsequent anniversary thereof.

      Effective April 7, 1996, the Company entered into an agreement with NFT
whereby NFT will provide the Company with up to $2.4 million of non-refundable
research and development funding based on actual research and development
expenses incurred in connection with new and enhanced Backup-UNET software
products, RLM Software Products Group, and the Open Media Products Group. The
funding payments will be received in essentially four equal quarterly
installments of approximately $0.6 million, of which the first two payments have
been received. The remaining installments will be paid within ten days of
submission of a statement of incurred expenses for the next two successive
quarters.

      Management believes that the Company's working capital, bank lines of
credit and cash flow from operating activities will be sufficient to meet the
Company's operating and capital expenditure requirements for the next twelve
months; however, in the longer term, the Company may require additional funds to
support its working capital requirements including financing of accounts
receivable and inventory, or for other purposes, and may seek to raise such
funds through public or private equity financing, bank lines of credit or from
other sources. No assurance can be given that additional financing will be
available or that, if available, will be on terms favorable to the Company.


                                       14
<PAGE>   15
                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

       During July 1994, the Company and certain directors and officers were
served with four purported stockholder class-action lawsuits alleging certain
improprieties surrounding the April 1994 initial public offering and subsequent
decrease in the Company's stock price. Subsequently, these four actions were
consolidated into a single case (In re MTI Technology Securities Litigation) in
the United States District Court, Central District of California. This
litigation was a class action complaint for alleged violation of the federal
securities laws. Plaintiffs sought compensatory damages and other relief as
permitted by applicable law. The claims related to the Company's initial public
offering in April 1994 and the Company's announcements for financial results for
the quarter ended July 2, 1994.

       In March 1996, the Company agreed to settle with plaintiffs. A Memorandum
of Understanding was signed providing for a total settlement amount of $5.5
million, and the Claims Receipt and Policy Release agreement became effective
March 29, 1996. The Company's unreimbursed portion of the aggregate settlement
was $1.7 million. Preliminary approval for the settlement was granted by the
Court on June 3, 1996, and final approval for the settlement was granted by the
Court on August 5, 1996.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The annual meeting of the stockholders of the Company was held on October
3, 1996. The following members were elected to the Company's Board of Directors
to hold office for the ensuing year:

<TABLE>
<CAPTION>
Nominee                                In Favor                   Withheld
-------                                --------                   --------
<S>                                   <C>                        <C>
Val Kreidel                            24,068,092                 26,934
Earl Pearlman                          24,067,392                 27,634
</TABLE>


Raymond J. Noorda, Steven J. Hamerslag and David Proctor remain members of the
Board of Directors.

The stockholders of the Company voted in favor of the ratification of selection
of KPMG Peat Marwick LLP as the Company's independent public accountants for
fiscal year 1997. The number of shares voted for ratification was 21,669,807.
The number of shares abstaining was 2,400,192. The number of shares voted
against ratification was 25,027.

The stockholders of the Company voted in favor of the issuance of warrants to
purchase 750,000 shares of the Company's common stock at an exercise price of
$2.25 per share as part of an agreement entered into with NFT Ventures. Inc. The
number of shares voted for approval of the issuance of the warrants was
18,871,170. The number of shares voted against approval of the issuance of the
warrants was 61,504. The number of shares abstaining was 53,367.

The stockholders of the Company voted in favor of the issuance of warrants to
purchase 500,000 shares of the Company's common stock as consideration for a
$10.0 million loan guaranty provided to the Company by NFT. The number of shares
voted for approval of the issuance of the warrants was 5,794,859. The number of
shares voted against approval of the issuance of the warrants was 1,856,638. The
number of shares abstaining was 51,567.

The stockholders of the Company voted in favor of the 1996 Stock Incentive Plan.
The number of shares voted for approval of the 1996 Stock Incentive Plan was
17,547,553. The number of shares voted against approval of the 1996 Stock
Incentive Plan was 1,263,717. The number of shares abstaining was 165,416.


                                       15
<PAGE>   16
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits:

      10.46     1996 Stock Incentive Plan

      10.47     Amendment No. 2 to Stock Purchase Agreement and Senior
                Promissory Notes dated as of October 3, 1996 between Earl M.
                Pearlman, William E. Decker, the William E. Decker Trust
                and Registrant.

      27        Financial Data Schedule

(b)   Reports on Form 8-K:

      Registrant filed a report on Form 8-K dated August 30, 1996, regarding the
commencement of the trading of the Company's common stock on the Nasdaq SmallCap
Market.


                                       16
<PAGE>   17
                                         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, on the 12th day of November 1996.

                                    MTI TECHNOLOGY CORPORATION

                                    By:     /s/ Dale R. Boyd

                                            Dale R. Boyd
                                            Vice President and Chief Financial
                                            Officer
                                            (Principal Financial and Accounting
                                            Officer)


                                       17
<PAGE>   18
                                  EXHIBIT INDEX

Exhibit Number                  Description                       Page
--------------                  -----------                       ----     

      10.46            1996 Stock Incentive Plan                   19

      10.47            Amendment No. 2 to Stock Purchase
                       Agreement and Senior Promissory
                       Notes dated as of October 3, 1996
                       between Earl M. Pearlman, William
                       E. Decker, the William E. Decker
                       Trust and the Registrant                    32

      27               Financial Data Schedule                     36



                                       18