<PAGE>
 
                      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 March 29, 1998

                                      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 0-16071

                             --------------------

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

                 Delaware                            06-0888312
      (State or other jurisdiction of            (I.R.S. Employer
       incorporation or organization)           Identification No.)

          2411 W. La Palma Avenue,                      92801
            Anaheim, California                      (Zip Code)
  (Address of principal executive offices)
                                        
                                (714) 821-2000
             (Registrant's telephone number, including area code)

                             --------------------

     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, 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.

<TABLE>
<CAPTION>
         Class of Common Stock           Outstanding at April 24, 1998
         ---------------------           -----------------------------
         <S>                             <C>
             $.01 par value                        47,094,950
</TABLE>
<PAGE>
 
                           CALCOMP TECHNOLOGY, INC.
                                        
                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION
   Item 1.  Financial Statements
            Condensed Consolidated Balance Sheets as of March 29, 1998
              (unaudited) and December 28, 1997...........................    3
            Condensed Consolidated Statements of Operations for the three
              months ended March 29, 1998 and March 30, 1997 (unaudited)..    4
            Condensed Consolidated Statements of Cash Flows for the three
              months ended March 29, 1998 and March 30, 1997 (unaudited)..    5
            Notes to Condensed Consolidated Financial Statements
              (unaudited).................................................    6
 
   Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................   11
 
PART II. OTHER INFORMATION
   Item 6.  Exhibits and Reports on Form 8-K..............................   14
 
   Signatures.............................................................   15

                                       2
<PAGE>
 
                           CALCOMP TECHNOLOGY, INC.
                                        
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                        March 29,   December 28,
                                                          1998          1997
                                                       -----------  ------------
                                                       (Unaudited)  
<S>                                                    <C>          <C>
ASSETS:                                                             
Current assets:                                                     
  Cash...............................................   $   4,764     $   6,494
  Accounts receivable, net...........................      22,912        26,208
  Accounts receivable from affiliates................       3,610         4,428
  Receivable under Joint Development Agreement.......      20,000            --
  Inventories (Note 4)...............................      40,446        43,069
  Prepaids and other current assets..................       4,676         4,783
                                                        ---------     ---------
     Total current assets............................      96,408        84,982
                                                                      
Property, plant and equipment, net...................      29,518        29,048
Goodwill, net........................................      78,485        79,994
Other assets.........................................      15,805        15,433
                                                        ---------     ---------
Total assets.........................................   $ 220,216     $ 209,457
                                                        =========     =========
                                                                      
LIABILITIES AND STOCKHOLDERS' EQUITY:                                 
Current liabilities:                                                  
  Accounts payable...................................   $  10,701     $  14,395
  Accounts payable to affiliates.....................       6,461         5,591
  Deferred revenue...................................      22,066         6,828
  Accrued restructuring costs (Note 3)...............       4,561         5,049
  Accrued reorganization costs.......................       6,429         6,878
  Accrued salaries and related expenditures..........       4,766         4,487
  Line of credit with Majority Shareholder (Note 5)..      70,145            --
  Other current liabilities..........................      23,789        22,600
                                                        ---------     ---------
     Total current liabilities.......................     148,918        65,828
                                                                      
Other long-term liabilities..........................       8,495         8,371
Line of credit with Majority Shareholder (Note 5)....          --        59,525
                                                                      
STOCKHOLDERS' EQUITY:                                                 
  Preferred stock, $.01 par value, 5,000,000 shares                 
   authorized, none issued...........................          --            --
  Common stock, $.01 par value, 60,000,000 shares                   
   authorized, 47,092,950 and 47,070,950 shares                     
   issued on March 29, 1998, and December 28, 1997,                 
   respectively......................................         471           471
  Additional paid-in capital.........................     292,743       287,322
  Accumulated deficit................................    (235,424)     (217,145)
  Accumulated other comprehensive income:
   Cumulative translation adjustment.................       5,478         5,550
  Less: Treasury stock, at cost, 49,000 shares.......        (465)         (465)
                                                        ---------     ---------
  Total stockholders' equity.........................      62,803        75,733
                                                        ---------     ---------
     Total liabilities and stockholders' equity......   $ 220,216     $ 209,457
                                                        =========     =========
</TABLE>
                                                                                
                                                                                
    See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                           CALCOMP TECHNOLOGY, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                         -----------------------
                                                          March 29,    March 30,
                                                            1998         1997
                                                         ----------   ----------
                                                               (Unaudited)
<S>                                                      <C>          <C>
Net revenue...........................................   $   37,834   $   60,523
Cost of revenue.......................................       36,137       48,596
                                                         ----------   ----------
  Gross profit........................................        1,697       11,927
                                                                      
Operating expenses:                                                   
  Research and development............................        2,723        3,638
  Selling, general and administrative.................       14,695       15,595
  Corporate expenses from Majority Shareholder........        1,000          725
                                                         ----------   ----------
Loss from operations..................................      (16,721)      (8,031)
Interest expense......................................       (1,257)        (881)
Other (expense) income, net...........................         (473)        (284)
                                                         ----------   ----------
Loss before income taxes..............................      (18,451)      (9,196)
Provision (benefit) for income taxes..................         (172)         293
                                                         ----------   ----------
Net loss..............................................   $  (18,279)  $   (9,489)
                                                         ==========   ==========
Basic and diluted loss per share (Note 1).............   $    (0.39)  $    (0.20)
                                                         ==========   ==========
Weighted-average shares outstanding...................   47,087,946   46,898,650
                                                         ==========   ==========
</TABLE>
                                                                                

    See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                           CALCOMP TECHNOLOGY, INC.
                                        
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                           ---------------------
                                                           March 29,   March 30,
                                                             1998        1997
                                                           ---------   ---------
                                                                (Unaudited)
<S>                                                        <C>         <C>
Operating activities:                                    
Net loss.................................................  $(18,279)   $ (9,489)
Adjustments to reconcile net loss to net cash used       
 in operating activities:                                
  Depreciation and amortization..........................     3,890       2,520
  Restructuring payments.................................      (488)     (4,386)
  Investee income........................................       (56)        (97)
  Net changes in operating assets and liabilities........     5,069      (4,255)
                                                           --------    --------
     Net cash used in operating activities...............    (9,864)    (15,707)
                                                                       
Investing activities:                                                  
Purchase of property, plant and equipment................    (2,465)     (1,427)
Proceeds from disposition of property, plant and         
 equipment...............................................         2         245
                                                           --------    --------
     Net cash used in investing activities...............    (2,463)     (1,182)
                                                                       
Financing activities:                                                  
Proceeds from line of credit with Majority Shareholder...    10,620      19,799
Reduction in revolving line of credit....................        --      (2,948)
Exercise of stock options................................        71          --
                                                           --------    --------
     Net cash provided by financing activities...........    10,691      16,851
Effect of exchange rate changes on cash..................       (94)       (895)
                                                           --------    --------
Change in cash...........................................    (1,730)       (933)
Cash at beginning of quarter.............................     6,494      15,290
                                                           --------    --------
Cash at end of quarter...................................  $  4,764    $ 14,357
                                                           ========    ========
Supplementary disclosures of cash flow information:                    
  Net income taxes received..............................  $   (392)   $   (392)
  Interest paid..........................................  $    564    $    699
</TABLE>


    See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
                           CALCOMP TECHNOLOGY, INC.
                                        
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)
                                        
1)  Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 29,
1998, are not necessarily indicative of the results that may be expected for the
Company's fiscal year or any other interim period. Certain reclassifications of
prior year amounts have been made to conform to the current year presentation.

     It is suggested that the financial statements be read in conjunction with
the information contained in the Company's Annual Report for the year ended
December 28, 1997, on Form 10-K/A, filed with the Securities and Exchange
Commission.

     The Company has adopted SFAS 128, "Earnings Per Share," and applied this
pronouncement to all periods presented.  This statement requires the
presentation of both basic and diluted net income (loss) per share for financial
statement purposes.  Basic net income (loss) per share is computed by dividing
income (loss) available to common stockholders by the weighted average number of
common shares outstanding.  Diluted net income (loss) per share includes the
effect of the potential shares outstanding, including dilutive stock options and
warrants, using the treasury stock method.  Because the impact of options and
warrants are antidilutive, there is no difference between the loss per share
amounts computed for basic and diluted purposes.

     As of December 29, 1997, the Company adopted SFAS 130, "Reporting
Comprehensive Income." SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net loss or stockholders' equity.
SFAS 130 requires foreign currency translation adjustments, which prior to
adoption were reported separately in stockholders' equity to be included in
other comprehensive income.

     The components of comprehensive income for the three months ended March 29,
1998, and March 30, 1997, are as follows:

<TABLE>
<CAPTION>
                                                                1998      1997
                                                              -------   -------
<S>                                                           <C>       <C>
    Net loss..............................................    $18,279   $ 9,489
    Foreign currency translation adjustment...............         72     1,053
                                                              -------   -------
    Comprehensive loss....................................    $18,351   $10,542
                                                              =======   =======
</TABLE>

2)  Operations and Financing

     The Company's recent operations have resulted in net losses of $18.3
million, $75.2 million and $56.6 million for the three months ended March 29,
1998 and the years ended December 28, 1997 and December 29, 1996, respectively.
The Company's main sources of financing have been a $75 million line of credit
with Lockheed Martin Corporation (the "Majority Shareholder") under the
Revolving Credit and Cash Management Agreements ("Credit Agreements") and the
proceeds from the sale of the Company's headquarters facility. At March 29,
1998, the Company had drawn $70.1 million against that line. In March 1998, the
Credit Agreements were amended to extend the maturity date to

                                       6
<PAGE>
 
                           CALCOMP TECHNOLOGY, INC.
                                        
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)
                                        
2)  Operations and Financing - Continued

January 31, 1999, to eliminate the requirement for compliance with certain
financial ratio covenants, to eliminate the right of the Majority Shareholder to
cancel the Credit Agreements upon 120 days prior written notice, and to remove
the security interest of the Majority Shareholder in the assets of the Company.

     After determining that remaining amounts available under the line were not
adequate to fund the Company's operations in the near term, the Company entered
into a letter of intent in March 1998 with a bank which contemplated an
additional $25 million senior line of credit (the "Secured Agreement"). The
Secured Agreement will allow the Company to borrow up to 80 percent of its
eligible accounts receivable and 20 percent of eligible inventory through April
2000. In addition, in March 1998, the Company entered into the Joint Development
Agreement with Kodak that provided $20 million which was due at signing and was
paid to the Company in April 1998 and an additional $16 million in cash over the
term to be funded incrementally upon the achievement of certain milestones and
the occurrence of certain events. Management believes these financial resources
will be sufficient to satisfy the Company's liquidity requirements through 1998.
If not, the Company will be required to seek additional financing from others or
pursue other financing alternatives. No assurance can be given that, if
required, additional financing will be available on acceptable terms or at all.

     The Company is implementing plans to improve the Company's competitive
position by introducing a new line of CrystalJet(TM) piezo inkjet printers, in
the first half of 1998, as well as increasing operating efficiencies.  The
Company anticipates that these efforts will result in improved gross margins and
operating results during fiscal 1998. However, no assurances can be given that
the Company will be successful in realizing these goals.  Failure to achieve
market acceptance of these products or the inability to timely achieve required
production volumes at acceptable costs could have a material adverse impact on
the Company's consolidated financial position, results of operations and cash
flows.

3)  Restructuring

     During the fourth quarter of 1997, the Company expanded its plan to
restructure its operations worldwide and provided a charge of approximately
$4,788,000 consisting primarily of $2,900,000 for the elimination of an
additional 91 positions, relating to further realignment of the Company's
international operations, and $1,888,000 for lease termination and fixed asset
disposition costs for certain international facilities. During the first quarter
of 1998, the Company incurred cash expenditures aggregating $277,000 and non
cash charges aggregating $211,000 that were applied against the reserve. At
March 29, 1998, the restructuring accrual approximates $4,561,000, consisting of
$3,763,000 from the 1997 restructuring plan and $798,000 remaining from the 1996
restructuring plan. The remaining amount of the 1996 plan principally relate to
lease termination obligations. Although subject to future adjustment, management
of the Company believes that the amounts accrued at March 29, 1998 are adequate
to complete the various restructuring plans.

4)  Inventories

     Inventories consist of the following:
<TABLE>
<CAPTION>
                                                    March 29,   December 28,
                                                      1998         1997
                                                    ---------   ------------
                                                         (In thousands)
     <S>                                            <C>         <C>
     Raw materials and purchased components......    $12,962       $11,042
     Work in process.............................        739           434
     Finished goods..............................     26,745        31,593
                                                     -------       -------
                                                     $40,446       $43,069
                                                     =======       =======
</TABLE>                                                     

                                       7
<PAGE>
 
                            CALCOMP TECHNOLOGY, INC.         
                                                             
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)
                                        
5)  Indebtedness

Credit Agreements with Majority Shareholder

     In July 1996, the Company and the Majority Shareholder entered into two
separate agreements, the Revolving Credit Agreement and the Cash Management
Agreement, collectively referred to as the "Credit Agreements". The Revolving
Credit Agreement was subsequently amended and restated, pursuant to which the
Majority Shareholder will provide, from time to time, financing of up to
$73,000,000 for repayment of specified indebtedness and general corporate
purposes, including financing the working capital needs of the Company and its
subsidiaries. The Revolving Credit Agreement contained negative and affirmative
covenants. As of December 28, 1997, the Company was in breach of certain of
these financial covenants. On January 22, 1998, the Majority Shareholder waived
compliance with these covenants. In March 1998, the Revolving Credit Agreement
was further amended to extend the maturity date from July 22, 1998, to January
31, 1999, to eliminate the requirement for compliance with certain financial
ratio covenants, to eliminate the right of the Majority Shareholder to cancel
the Revolving Credit Agreement upon 120 days prior written notice, and to remove
the security interest of the Majority Shareholder in the assets of the Company.

     The Revolving Credit Agreement bears interest, at the Company's option, at
either (1) a rate per annum equal to the higher of the federal funds rate as
published in the Federal Reserve System plus 0.5% or the rate publicly announced
from time to time by Morgan Guaranty Trust Company of New York as its "prime"
rate or (2) LIBOR plus 2.0%.  There is no required prepayment or scheduled
reduction of availability of loans under the Agreement.

     The Cash Management Agreement provides cash advances of up to $2,000,000 to
the Company by the Majority Shareholder for cash shortfalls.  In March 1998, the
Cash Management Agreement was amended to extend the maturity date from June 1,
1998, to January 31, 1999.  The agreement bears interest equal to the Federal
Funds Rate.

      As of March 29, 1998, the Company has an aggregate outstanding balance of
$70,145,000 on the Revolving Credit Agreement, with interest rates ranging from
5.3% to 7.7%.

Secured Agreement with Bank

     In March 1998, the Company entered into a letter of intent with a bank
which contemplates an additional $25 million senior line of credit (the "Secured
Agreement"). The Secured Agreement will allow the Company to borrow up to 80
percent of its eligible accounts receivable and 20 percent of eligible inventory
through April 2000.

6)  Patent License and Joint Development Agreement

     On March 29, 1998, the Company entered into a five-year Patent License and
Joint Development Agreement with Eastman Kodak Co. ("Kodak") covering the joint
development of the Company's CrystalJet(TM) technology into a range of products,
printers and consumables for commercial applications.  Under the terms of the
agreement, Kodak will contribute up to $36 million, $20 million of which was due
at signing and was paid to the Company in April 1998.  The additional $16
million in contributions will be funded incrementally upon the achievement of
certain milestones and the occurrence of certain events.  The agreement also
calls for Kodak to pay royalties in respect of licenses granted thereunder which
allow Kodak under certain circumstances to exploit the inkjet technology
developed under the terms of the agreement.

                                       8
<PAGE>
 
                            CALCOMP TECHNOLOGY, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                        
                                  (Unaudited)

6)  Patent License and Joint Development Agreement - Continued

     In addition to the license, the Company granted to Kodak a warrant for 8
million shares of its Common Stock with an exercise price of $3.88, vesting 50
percent on the first anniversary of the agreement and 50 percent on the second
anniversary of the agreement. The warrant expires on the seventh anniversary of
the agreement. At the date of grant, the fair value of the stock warrant was
$5.4 million, based on an independent appraisal, and has been reflected as an
increase to additional paid-in capital in the accompanying condensed
consolidated balance sheet. The remaining $14.6 million to be received has been
recorded as deferred revenue and will be amortized into income as certain
expenditures related to the Joint Development Agreement are incurred.

7)  Contingencies

Legal

     A complaint was filed on January 25, 1997, in California Superior Court in
Santa Clara County by Raster Graphics, Inc. ("Raster Graphics"), against Topaz
Technologies, Inc., the Company's wholly owned subsidiary ("Topaz"), the former
shareholders of Topaz, and the Company. The complaint alleged, among other
things, misappropriation of trade secrets, breach of fiduciary duty, unfair
competition, breach of contract and conversion arising from the employment by
Raster Graphics of the former Topaz shareholders who founded Raster Graphics in
1987 while they participated in the development of certain inkjet technology. On
April 18, 1997, Raster Graphics filed an amended complaint, dismissing its
claims against the Company and amending the complaint to focus on technology
relating to a test fixture that had been developed at Raster Graphics. The
complaint seeks unspecified compensatory damages, punitive damages, costs and
injunctive relief. The Company continues to believe that the inkjet printing
technology, developed by Topaz, is proprietary to the Company, is not based on
Raster Graphics technology and that this lawsuit is without merit.

     A complaint was filed on October 14, 1997, by Wacom Co., Ltd. and Wacom
Technology Corp., against CalComp Inc., a wholly-owned subsidiary of the
Company, in the U.S. District Court for the Central District of California. The
complaint alleged, among other things, that CalComp Inc.'s sale of ULTRASLATE
digitizer tablets infringes three patents and infringes Wacom's common law
trademark, ULTRAPEN. Wacom's request for a preliminary injunction concerning
infringement of two of the three patents was denied by the Court on February 12,
1998. Wacom is also seeking damages and permanent injunctive relief with respect
to alleged infringement of the three patents, pre-judgment interest and, among
other things, has requested an award of its attorneys' fees and costs. The
Company does not believe that any of the allegations made by Wacom in this suit
have merit and intends to defend itself against all the claims.

     The Company is also party to other legal actions in the normal course of
its business. The Company does not believe that the disposition of any of these
matters will have a material adverse effect on its consolidated financial
position, results of operations or cash flows.

Environmental Matters

     In connection with the June 1997 sale of the Company's headquarters
facility in Anaheim, California, the Company agreed to remain obligated to
address certain environmental conditions which existed at the site prior to the
closing of the sale. In addition, the Majority Shareholder has guaranteed the
performance of the Company under this environmental agreement.

                                       9
<PAGE>
 
                            CALCOMP TECHNOLOGY, INC.
                                        
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)

     In 1988, the Company submitted a plan to the California Regional Water
Quality Control Board ("the Water Board") relating to its facility in Anaheim,
California. This plan contemplated site assessment and monitoring of soil and
ground water contamination. In 1997, the Company, at the request of the Water
Board, submitted work plans to conduct offsite water investigations and onsite
soil remediation. The initial phase of work commenced in January 1998. As of
March 29, 1998, the Company has established reserves which it considers to be
adequate to cover the cost of investigations and tests required by the Water
Board, any additional remediation that may be requested and potential costs of
continued monitoring of soil and groundwater contamination, if required.

     The Company believes that it has adequately accrued for any future
expenditures in connection with environmental matters and that such expenditures
will not have a materially adverse effect on its consolidated financial
condition, results of operation or cash flows.

                                       10
<PAGE>
 
                            CALCOMP TECHNOLOGY, INC.
                                        
Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

     This report on Form 10-Q contains statements which, to the extent that they
are not recitations of historical facts, constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  All forward
looking statements involve risks and uncertainties.  The forward looking
statements in this report on Form 10-Q have been made subject to the safe harbor
protections provided by Sections 27A and 21E.

General

     The Company's products and services compete in several markets including
CAD/CAE/CAM, presentation graphics, graphics arts, and printing and publishing.
The Company's ability to successfully market its products requires adapting new
technologies, such as its proprietary CrystalJet(TM) technology, and leveraging
the channels of distribution in order to remain competitive. The Company
encounters extensive competition in all of its lines of business with numerous
other parties, depending on the particular product or market environment. The
Company's business involves rapidly changing technologies resulting in continued
performance improvements at lower customer prices. The companies that
participate in the industry are highly competitive. Reduced unit selling prices
and shortened product life cycles are expected to continue to place pressure on
the Company's margins. Many of the Company's competitors have larger technical
staffs, larger marketing and sales organizations and significantly greater
financial resources than the Company. There can be no assurance that the
products of existing or new competitors will not obtain greater market
acceptance than the Company's products.

      In 1997, the Company introduced its new CrystalJet(TM) product line and
initiated a transition plan to eliminate certain existing output product lines
and accelerate the Company's end-of-life process for those products that will be
discontinued. As a result, the Company's diversity of inkjet product offerings,
by the end of 1998, will be limited to the new CrystalJet line of wide-format
digital printers until subsequent CrystalJet product offerings are introduced.
Failure to achieve market acceptance for these products or the inability to
increase manufacturing volumes to achieve production efficiencies, could have a
material adverse impact on the Company's consolidated financial position and
results of operations.

      In addition, the Company's strategy for its new products focuses on
capturing consumable sales through establishing a strong installed base of
CrystalJet products, both through CalComp branded products and through the
various channels provided by the Company's strategic partners. However, there
can be no assurance that the Company will be able to achieve this strategic
goal.

     For a further discussion of risk factors related to the Company's 
operations, see Item 1.  "Business-Risk Factors Affecting the Company" contained
in the Company's Annual Report for the year ended December 28, 1997, on Form 
10-K/A, filed with the Securities and Exchange Commission.

Results of Operations

     Revenues. Revenues for the quarter ended March 29, 1998, declined $22.7
million, or 37%, to $37.8 million from the same period in 1997. Product revenues
were down 41% and service revenue was down 19% versus the same period in 1997.
The decline in product revenues resulted from decreases in product demand for
input and output products. Output product revenues declined primarily due to the
maturity of the output products compared to competitors' products and lower
customer demand resulting from the Company's announcement of its intent to
discontinue certain output products in anticipation of the release of the new
CrystalJet product lines. Digitizer input product revenue also declined
primarily as a result of the impact of increasing interchangeability of mouse
input devices as an alternative to digitizer tablet input devices made possible
by recent releases of CAD application software. This trend is expected to
continue but may be somewhat offset by broader use of digitizers in graphic arts
applications. The decrease in service revenue compared to the same period in
1997 is primarily a result of fewer service contracts being generated due to the
lower product revenue base and a lower rate of service contract renewals as
older generation products are retired from service.

                                       11
<PAGE>
 
     Gross Profit. Gross profit as a percentage of revenue was 4% for the first
quarter of 1998 compared to 20% for the same period in 1997. This decline was
primarily due to the erosion of margin dollars related to lower revenues,
selling price reductions required to transition out of mature and end-of-life
products, the manufacturing inefficiencies resulting from decreased production
volumes on the Company's mature output products, as well as start up cost
inefficiencies on new products.

     Operating Expenses. Operating expenses for the first quarter of 1998
decreased 8%, or $1.5 million, to $18.4 million compared to the same period in
1997. The decline in spending resulted primarily from the benefits of staffing
and facility consolidation as a result of restructuring actions taken in 1996
and 1997 to streamline the Company's infrastructure.

     Research and development expenses decreased $0.9 million in the first
quarter of 1998 compared to the same period in 1997 reflecting the benefits of
cost reductions resulting from the Company's decision to narrow its focus to its
new technologies. Research and development expense as a percentage of net
revenue remained relatively flat at 7% and 6% for the quarter in 1998 and 1997,
respectively, as the reduced spending was applied against a smaller revenue base
in the first quarter of 1998.

     Selling, general and administrative expenses decreased $0.9 million in the
first quarter of 1998 compared to the same period in 1997. As a percentage of
revenue, these expenses increased 13%, to 39% in the first quarter of 1998
compared to 26% for the first quarter of 1997. The decline in spending was due
primarily to reduced staffing and facility expenses from the restructuring
actions taken in 1996 and 1997 to streamline the Company's infrastructure. The
expenses did not commensurately decrease with revenue as marketing and
advertising costs slightly increased in the first quarter of 1998 compared to
the first quarter of 1997 to support the introduction of the CrystalJet(TM)
product line to the marketplace.

     Corporate expenses from Lockheed Martin increased $0.3 million to $1.0
million in the first quarter of 1998 from $0.7 million in the same period in
1997 as a result of allocations received from the Majority Shareholder.

     Interest Expense. Interest expense increased to $1.3 million in the first
quarter of 1998 from $0.9 million in the same period in 1997 due substantially
to increases in the Company's outstanding balances under its line of credit with
the Majority Shareholder.

     Income Taxes (Benefit). The first quarter 1998 net tax benefit of $0.2
million relates primarily to a state tax refund recorded as a receivable in the
quarter.

Liquidity and Capital Resources

     The Company's recent operations have resulted in net losses of $18.3
million, $75.2 million and $56.6 million for the three months ended March 29,
1998, and the years ended December 28, 1997, and December 29, 1996,
respectively. The Company's main sources of financing have been a $75 million
line of credit with the Majority Shareholder under the Revolving Credit and Cash
Management Agreements ("Credit Agreements") and the proceeds from the sale of
the Company's headquarters facility. At March 29, 1998, the Company had drawn
$70.1 million against that line. In March 1998, the Credit Agreements were
amended to extend the maturity date to January 31, 1999, to eliminate the
requirement for compliance with certain financial ratio covenants, to eliminate
the right of the Majority Shareholder to cancel the Credit Agreements upon 120
days prior written notice, and to remove the security interest of the Majority
Shareholder in the assets of the Company.

     After determining that remaining amounts available under the line were not
adequate to fund the Company's operations in the near term, the Company entered
into a letter of intent in March 1998 with a bank which contemplates an
additional $25 million senior line of credit (the "Secured Agreement"). The
Secured Agreement will allow the Company to borrow up to 80 percent of its
eligible accounts receivable and 20 percent of eligible inventory through April
2000. In addition, in March 1998, the Company entered into the Joint Development
Agreement with Kodak that provided $20 million which was due at signing and was
paid to the Company in April 1998 and an additional $16 million in cash over the
term to be funded incrementally upon the achievement of certain milestones and
the

                                       12
<PAGE>
 
occurrence of certain events. Management believes these financial resources,
will be sufficient to satisfy the Company's liquidity requirements through 1998.
If not, the Company will be required to seek additional financing from others or
pursue other financing alternatives. No assurance can be given that, if
required, additional financing will be available on acceptable terms or at all.

     The Company is implementing plans to improve the Company's competitive
position by introducing a new line of CrystalJet(TM) piezo inkjet printers in
the first half of 1998, as well as increasing operating efficiencies. The
Company anticipates that these efforts will result in improved gross margins and
operating results during fiscal 1998. However, no assurances can be given that
the Company will be successful in realizing these goals. Failure to achieve
market acceptance for these products or the inability to timely achieve required
production volumes at acceptable costs could have a material adverse impact on
the Company's consolidated financial position, results of operations and cash
flows.

     During the first quarter of 1998, the Company used $9.9 million of cash in
its operations primarily to fund its continuing net losses of $18.3 million for
the quarter, net of depreciation and amortization of $3.9 million and funds of 
$5.1 million provided primarily from reductions in inventories and receivables. 
In addition, $2.5 million was expended on plant and equipment, relating
primarily to purchases of tooling and equipment for the development and
manufacture of the new CrystalJet(TM) product line These uses of cash were
funded substantially by borrowings from the Majority Shareholder of $10.6
million, pursuant to the Credit Agreements.

     During the fourth quarter of 1997, the Company expanded its plan to
restructure its operations worldwide and provided a charge of approximately
$4,788,000 consisting primarily of $2,900,000 for the elimination of an
additional 91 positions, relating to further realignment of the Company's
international operations, and $1,888,000 for lease termination and fixed asset
disposition costs for certain international facilities. During the first quarter
of 1998, the Company incurred cash expenditures aggregating $277,000 and non
cash charges aggregating $211,000 that were applied against the reserve. At
March 29, 1998, the restructuring accrual approximates $4,561,000, consisting of
$3,763,000 from the 1997 restructuring plan and $798,000 remaining from the 1996
restructuring plan. The remaining amount of the 1996 plan principally relate to
lease termination obligations.

     Although the Company believes that cost savings from the restructuring of
its worldwide operations, which will be substantially completed in the first
half of 1998, combined with the introduction of its proprietary new CrystalJet
product line, will allow the Company to better respond to intense industry
competition, no assurance can be given that such goals will be realized. The
Company anticipates operating losses to continue through 1998.

     Year 2000 Compliance. Many existing computer systems, applications, and
other control devices, use only two digits to identify a year in the date field,
without considering the impact of the upcoming change in the century. Such
systems and applications could fail or create erroneous results unless corrected
to process data related to the Year 2000. The Company relies on its systems,
applications and devices in operating and monitoring all major aspects of its
business, including systems (such as general ledger, accounts payable, and
payroll modules), customer services, infrastructure, embedded computer chips,
networks and telecommunications equipment. The Company also relies, directly and
indirectly, on external systems of business enterprises such as customers,
suppliers, creditors, financial organizations and governmental entities, both
domestic and international, for accurate exchange of data.

     The Company has been investigating and continues to assess the impact, if
any, which Year 2000 issues may have on its internal computer systems. Although
the assessment process is not complete, based on information and estimates
currently available, Year 2000 issues related to these systems will not have a
material adverse effect on the operations of or on the financial results of the
Company. The inability of customers, suppliers, and other external enterprises
with which the Company interacts to make timely changes to their own systems
could have an adverse impact on the Company.

     The Company believes all of its products are Year 2000 compliant.

                                       13
<PAGE>
 
                            CALCOMP TECHNOLOGY, INC.

                          PART II.  OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits--The following exhibits are included herein:

27     Financial data schedule.

(b) Reports on Form 8-K:

       None.

                                       14
<PAGE>
 
                           CALCOMP TECHNOLOGY, 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.

                                       Calcomp Technology, Inc
                                         (Registrant)

Date: May 12, 1998


                                               /s/ John J. Millerick
                                       -----------------------------------------
                                                   John J. Millerick
                                       Senior Vice President and Chief Financial
                                            Officer (Principal Financial and
                                                  Accounting Officer)
                                        

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