Form 10-Q
                           UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                                           


       [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934
                                              
         For the quarterly period ended September 30, 1997

                                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 No. 33-49869-01


             TALLEY MANUFACTURING AND TECHNOLOGY, INC.
      (Exact name of registrant as specified in its charter)

             Delaware                             86-0739329
   (State or other jurisdiction of             (I.R.S. Employer
    incorporation or organization)            Identification No.)
                                                                         
   2702 North 44th Street - Suite 100-A, Phoenix, Arizona  85008
(Address of principal executive offices)                (Zip Code)

 Registrant's telephone number, including area code:(602) 957-7711

(Former name, former address and former fiscal year, if changed since last
report)

 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 requirement for the past 90 days.

       YES[ X ]                                  NO[   ]   

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

                                                    Outstanding at
Class of Common Stock                             September 30, 1997 
---------------------                             ------------------
 $1.00 par value                                        1,000       





=============================================================================
                                                                         
<PAGE>                      
                      
              TALLEY MANUFACTURING AND TECHNOLOGY, INC.



                               INDEX



                                                               Page No.

Part I  Financial Information


   Consolidated Balance Sheet -
     September 30, 1997 and December 31, 1996                     1

   Consolidated Statement of Earnings -
     Three Months and Nine Months Ended September 30, 1997
     and 1996                                                     2

   Consolidated Statement of Cash Flows -  
    Nine Months Ended September 30, 1997 and 1996                 3

   Consolidated Statement of Changes in Stockholder's
     Equity -Nine Months Ended September 30, 1997 and 1996        4

   Notes to Consolidated Financial Statements                    5-6

   Management's Discussion and Analysis                          7-13





Part II  Other Information


   Legal Proceedings                                             14 

   Exhibits and Reports on Form 8-K                              14

   Signatures                                                    15
















<PAGE>

                  PART I - FINANCIAL INFORMATION

            TALLEY MANUFACTURING AND TECHNOLOGY, INC.
                    Consolidated Balance Sheet
                           (thousands)

                                                  September 30,    December 31,
ASSETS                                                 1997           1996    
                                                  -------------    ------------
  Cash and cash equivalents                          $ 14,316        $ 39,450 
  Accounts receivable, net of allowance for
    doubtful accounts of $1,228 at September
    30, 1997 and $925 at December 31, 1996             50,336          53,048 
  Inventories, net                                     67,207          64,684 
  Deferred income taxes                                 3,800           3,660 
  Prepaid expenses                                      7,361           6,100 
                                                     --------        --------
    Current assets                                    143,020         166,942 

  Property, plant and equipment, net                   53,298          49,324 
  Intangibles                                          38,296          41,965 
  Deferred charges and other assets                     9,683          12,646 
                                                     --------        --------
     Total assets                                    $244,297        $270,877 
                                                     ========        ========
LIABILITIES AND STOCKHOLDER'S EQUITY
  Current maturities of long-term debt               $  2,988        $  3,094 
  Accounts payable                                     23,673          18,754 
  Accrued expenses                                     35,405          35,006 
                                                     --------        --------
     Current liabilities                               62,066          56,854 

  Long-term debt                                      120,967         123,185 
  Deferred income taxes                                 3,650           2,179 
  Other liabilities                                     8,966           8,948 

  Stockholder's equity:
    Preferred stock, $1 par value,
      authorized 100 shares:
        Series A, issued 0 shares - 1997;
        6 shares - 1996                                     -               - 
    Common stock, $1 par value,         
      authorized 1,000 shares                               1               1 
  Capital in excess of par value                       54,902          79,273 
  Foreign currency translation adjustment                 (34)           (562)
  Retained earnings                                    (6,221)            999 
                                                     --------        --------
      Total stockholder's equity                       48,648          79,711 
                                                     --------        --------
        Total liabilities and stockholder's equity   $244,297        $270,877 
                                                     ========        ========


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


                                     -1-

<PAGE>

              TALLEY MANUFACTURING AND TECHNOLOGY, INC.
                 Consolidated Statement of Earnings
                (thousands, except per share amounts)


                                   Three Months         Nine Months
                                       Ended               Ended
                                   September 30,        September 30,  
                                -------------------   -------------------
                                  1997       1996       1997       1996   
                                --------   --------   --------   --------
Sales                           $ 64,787   $ 73,816   $197,992   $214,908
Services                          20,627     17,082     62,896     49,904
Royalties                            179    109,023        891    122,709
                                --------   --------   --------   --------
                                  85,593    199,921    261,779    387,521
                                --------   --------   --------   --------

Cost of sales                     48,323     67,264    146,226    173,481
Cost of services                  18,481     15,168     56,316     44,036
Selling, general,
  and administrative expenses     14,547     12,545     49,910     46,978
                                --------   --------   --------   --------
                                  81,351     94,977    252,452    264,495
                                --------   --------   --------   --------

Earnings from operations           4,242    104,944      9,327    123,026

Other income (expense), net         (706)    17,495       (297)    17,273 
                                --------   --------   --------   --------
                                   3,536    122,439      9,030    140,299

Interest expense                   3,492      3,912     10,605     12,166 
                                --------   --------   --------   --------

Earnings (loss) before 
  income taxes                        44    118,527     (1,575)   128,133 
Income tax provision                 562     52,108      3,164     56,284
                                --------   --------   --------   --------

  Net earnings (loss)           $   (518)  $ 66,419   $ (4,739)  $ 71,849 
                                ========   ========   ========   ========











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


                                     -2-

<PAGE>
               TALLEY MANUFACTURING AND TECHNOLOGY, INC.
                 Consolidated Statement of Cash Flows
                              (thousands)
                                                       Nine Months Ended
                                                          September 30,  
                                                       -------------------
                                                         1997       1996  
                                                       --------   --------
Cash and cash equivalents at beginning of year         $ 39,450   $  3,461
                                                       --------   --------
Cash flows from operating activities:
  Net earnings (loss)                                    (4,739)    71,849 
  Adjustments to reconcile net income (loss)
    to cash flows from operating activities:
     Change in deferred income taxes                      1,331     (3,099)
     Depreciation and amortization                        6,684      6,619
     Loss on sale of subsidiary and product line          1,325          - 
     Other                                                1,044     14,412
  Changes in assets and liabilities, net of
    effects from acquired businesses:
     (Increase)decrease in accounts receivable             (277)    16,686 
     Increase in inventories                             (6,910)      (329)
     (Increase) decrease in prepaid expenses             (2,531)       294 
     Increase in accounts payable                         4,919      3,193 
     Increase in accrued expenses                         2,083     21,168 
     Increase (decrease) in other liabilities               580       (503)
     Other, net                                            (186)     2,863 
                                                       --------   --------
      Cash flows from operating activities                3,323    133,153 

Cash flows from investing activities:
  Proceeds from sale of subsidiary and product line       6,162          -
  Purchase of assets of acquired business                     -     (4,327)
  Purchases of property and equipment                    (9,921)    (4,675)
  Reduction in income tax receivables                     4,400          -
  Proceeds from sale of property and equipment               78        150
                                                       --------   --------
   Cash flows from investing activities                     719     (8,852)

Cash flows from financing activities:
  Payment of dividends                                  (23,547)  (106,849)
  Increase in investment by parent                        2,695     41,572
  Preferred stock issued                                  5,000    105,000
  Redemption of preferred stock                         (11,000)   (12,000)
  Repayment of long-term debt                            (2,324)    (2,925)
  Proceeds from borrowings under line of credit               -    375,213
  Reduction in borrowings under line of credit                -   (385,792)
                                                       --------   --------
   Cash flows from financing activities                 (29,176)    14,219  

Net increase (decrease) in cash and cash equivalents    (25,134)   138,520
                                                       --------   --------
Total cash and cash equivalents at September 30,       $ 14,316   $141,981
                                                       ========   ========

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

                                     -3-

<PAGE>

               TALLEY MANUFACTURING AND TECHNOLOGY, INC.

       Consolidated Statement of Changes in Stockholder's Equity
         For the Nine Months Ended September 30, 1997 and 1996
                              (thousands)






                                                  Capital in    Retained
                                      Common      Excess of     Earnings
                                       Stock      Par Value     (Deficit)
                                      -------     ---------     --------
BALANCE AT DECEMBER 31, 1995          $     1     $ 23,494      $ 29,872

Net earnings                                                      71,849
Issuance of preferred stock                        105,000
Redemption of preferred stock                      (12,000)
Contribution from parent                            41,572           
Dividends                                           (5,128)     (101,721)
                                      -------     --------      --------

BALANCE AT SEPTEMBER 30, 1996         $     1     $152,938      $      -
                                      =======     ========      ========

BALANCE AT DECEMBER 31, 1996          $     1     $ 79,273      $    999

Net loss                                                          (4,739)
Contribution from parent                             2,695
Issuance of 5 shares of Series A
  preferred stock                                    5,000
Redemption of 11 shares of Series A
  preferred stock                                  (11,000)
Dividends                                          (21,066)       (2,481)
                                      -------     --------      --------
BALANCE AT SEPTEMBER 30, 1997         $     1     $ 54,902      $ (6,221)
                                      =======     ========      ========














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


                                     -4-

<PAGE>

            TALLEY MANUFACTURING AND TECHNOLOGY, INC.

            Notes to Consolidated Financial Statements



Note 1 - General
----------------

    In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of September 30, 1997 and December
31, 1996 and the results of operations for the three-month and
nine-month periods ended September 30, 1997 and 1996, and cash
flows and changes in stockholder's equity for the nine-month
periods ended September 30, 1997 and 1996.  Such results, however,
may not be indicative of the results for the full year.
    For additional information regarding significant accounting
policies, and accounting matters applicable to the Company,
reference  should  be  made  to  the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.

Note 2 - Inventories
--------------------

   Inventories are summarized as follows (in thousands):

                                     September 30, December 31,
                                         1997          1996    
                                     ------------  ------------
   Raw materials and supplies          $12,710       $10,995
   Work-in-process                      11,311        11,564
   Finished goods                       26,784        26,158
   Inventories applicable to
     government contracts               16,402        15,967
                                       -------       -------
                                       $67,207       $64,684
                                       =======       =======

Note 3 - Acquisition and Dispositions
-------------------------------------

   In May 1997, a subsidiary of the Company sold certain assets
of the connector product line.  Proceeds include a note receivable
for $1.9 million and cash of $.2 million.
   In March 1997, the Company sold the assets of its Canadian
steel distributor.  Cash proceeds from the sale were $4.1 million. 
The purchaser assumed $2.3 million of liabilities.
   In January 1996, a subsidiary of the Company acquired certain
assets of a manufacturer of a silicone wire product line.  The
purchase price was approximately $4.3 million.




                                     -5-

<PAGE>

Note 4 - Agreement and Plan of Merger
-------------------------------------

   On September 26, 1997, the Company's parent (Talley) announced
that it had entered into a definitive Agreement and Plan of Merger
(Agreement) with Carpenter Technology Corporation (Carpenter) to be
acquired for cash.
   Under the terms of the Agreement, Carpenter commenced an all-
cash tender offer on October 2, 1997 for all outstanding shares of
Talley stock at a price of $12 per share of Talley Common stock,
$16 per share of Talley Series B Preferred stock, and $11.70 per
share of Talley Series A Preferred stock.  Assuming a majority
(measured by aggregate voting power) of Talley's stock is duly
tendered under the tender offer and not withdrawn before the
expiration date of the offer (December 4, 1997, unless extended),
Carpenter is obligated under the terms of the Agreement to purchase
all shares of Talley stock tendered and not withdrawn, and is
further obligated to complete as soon as possible an all-cash
merger whereby all Talley shares remaining outstanding will be
acquired for cash at the same per-share prices as under the tender
offer.  The tender offer is also subject to other customary
conditions, including expiration of the Hart-Scott-Rodino (HSR)
waiting period.  The U.S. Department of Justice, Antitrust Division
(DOJ) has requested that Talley and Carpenter provide DOJ certain
additional information, which has the effect of automatically
extending the HSR waiting period.  Talley and Carpenter have
advised DOJ that they intend to provide the requested information
as soon as possible.
   In connection with the tender offer and proposed merger,
Carpenter, Talley and certain of its present and former directors
were named as defendants in various purported class action
complaints filed on behalf of the stockholders of Talley.  The
complaints alleged, among other things, breach of fiduciary duty on
the part of the Board of Directors arising out of the Merger
Agreement and failure to disclose material information.  On October
16, 1997 a Memorandum of Understanding was entered into by counsels
for the plaintiffs and defendants requiring Talley to amend and
supplement the disclosure contained in its filings with the
Securities and Exchange Commission-Schedule 14D-9.  In exchange,
the plaintiffs agreed to dismiss the actions.  The settlement is
subject to various conditions, including Court approval.
   The foregoing summary of certain provisions of the Agreement
is general in nature and is qualified in its entirety by reference
to the definitive Agreement.  No assurance can be given that the
conditions to the consummation of the tender offer and the merger
under the Agreement will be fulfilled or as to the timing for
consummation of the tender offer or the merger.









                                     -6-

<PAGE>

            TALLEY MANUFACTURING AND TECHNOLOGY, INC.

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


   The following is management's discussion and analysis of
certain significant factors which have affected the Company.  A
summary of period-to-period changes in the consolidated statement
of earnings is shown below (in thousands):
                         
                                Three Months         Nine Months
                                   Ended                Ended
                                September 30,        September 30,  
                            -------------------   -------------------
                               1997      1996       1997      1996  
REVENUES:                   --------   --------   --------   --------
 Government Products
   and Services             $ 37,648   $ 36,906   $117,775   $105,877
 Airbag Royalties                  -    108,520          -    121,913
 Stainless Steel Products     29,337     34,418     88,711    105,954
 Industrial Products          18,608     20,077     55,293     53,777
                            --------   --------   --------   --------
                            $ 85,593   $199,921   $261,779   $387,521
                            ========   ========   ========   ========
OPERATING INCOME:
 Government Products
   and Services             $  2,420   $ (1,421)  $ 11,476   $  3,372
 Airbag Royalties                  -    135,367          -    148,760
 Stainless Steel Products      1,740       (509)     6,770      9,351
 Industrial Products           1,654     (7,082)     4,428     (5,996)
                            --------   --------   --------   --------
   Total operating income      5,814    126,355     22,674    155,487
 Corporate expense            (2,443)    (4,889)   (14,583)   (16,202)
 Non-segment interest
   income                        165        973        939      1,014
 Interest expense             (3,492)    (3,912)   (10,605)   (12,166)
                            --------   --------   --------   --------
   Earnings (loss) before 
    income taxes            $     44   $118,527   $ (1,575)  $128,133
                            ========   ========   ========   ========

    Revenues for the nine-month period ended September 30, 1997
decreased $125.7 million when compared with the corresponding
period in the prior year.  Loss before income taxes for the nine
months ended September 30, 1997 was $1.6 million compared with
earnings of $128.1 million in the first nine months of the previous
year.  Included in the results for periods ended September 30, 1996 
were payments received from TRW Inc. of $156.4 million to settle 
the airbag royalties litigation.  This amount represents a 






                                     -7-

<PAGE>

settlement for airbag royalties and certain other matters,
reimbursement of litigation cost and interest from the date of
award until paid.  Royalties from automotive airbags ceased with
the payments from TRW.  Revenue increases for the first nine months
of 1997 from the Company's Government Products and Services segment
(primarily from the naval architectural and engineering unit) were
offset by decreases in stainless steel revenues resulting from the
March 1997 sale of the Canadian steel distributor and from lower
sales, as competitive pressures from United States and foreign
suppliers affected the sales volume and sales prices.
    During the nine months ended September 30, 1997 operating
income from the Government Products and Services segment and the
Industrial Products segment increased when compared with the first
nine months of 1996.  The prior year operating income included
writedowns of goodwill and inventories in the Stainless Steel
Products and the Industrial Products segments, as well as a non-
recurring charge in the Government Products and Services segment
regarding defense contract costs and claims.
    The gross profit percentage, excluding airbag royalties, was
22.6% for the nine months ended September 30, 1997, up from the
gross profit percentage of 18.1% for the comparable period in 1996. 
The gross profit percentage in 1996 was below historical levels due
to non-recurring inventory and goodwill writedowns.  The 1997 gross
profit percentage is comparable to the 23.4% experienced by the
Company during the first nine months of 1995.
    Net loss for the nine months ended September 30, 1997 was $4.7 
million compared to net earnings of $71.8 million for the same
period in the prior year. 

    GOVERNMENT PRODUCTS AND SERVICES.  Revenue and operating
income for the nine months ended September 30, 1997  increased by
$11.9 million and $8.1 million, respectively, when compared with
the same period in the prior year, primarily the result of an
increase in service revenues from the Company's naval architectural
and engineering unit and favorable results upon conclusion, or the
timing of completion, of certain other contracts.  Earnings were
also favorably impacted in 1997 when compared with 1996, as a
result of reimbursement of past research and development cost by a
joint venture partner working with the Company in the development
of automotive airbag inflators.  Increases in research and
development costs reduced earnings in 1997 and 1996 and a non-
recurring charge in the third quarter of 1996 regarding defense
contract costs and claims further reduced prior year earnings.

    AIRBAG ROYALTIES.  As described in the Notes to the
Consolidated Financial Statements for the year ended December 31,
1996, the quarterly royalty payments ceased with the payments
received from TRW in the third quarter of 1996.  Airbag royalties
in the first nine months of 1996 were $121.9 million.  This amount
included a portion of the payments received from TRW to settle the
airbag royalties litigation.





                                     -8-

<PAGE>

    STAINLESS STEEL PRODUCTS.  During the first nine months of
1997,  sales  for  the Stainless Steel Products segment decreased
$17.2 million, and operating income decreased $2.6 million, when
compared with the same period in 1996.  Revenue and earnings were
affected by the sale of the Canadian steel distributor in March
1997, and by lower sales, as competitive pressures from United
States and foreign suppliers affected the sales volume and sales
prices.

    INDUSTRIAL PRODUCTS.  In the nine-month period ended September
30, 1997, Industrial Products sales increased $1.5 million while
operating income increased $10.4 million, when compared with the
same period in 1996.  The prior year's earnings were affected by
inventory and goodwill writedowns in the third quarter of 1996.
Increases in sales and operating income also resulted from
increased orders for insecticides and air fresheners. 

    OTHER.  Interest expense for the nine months ended September
30, 1997 decreased to $10.6 million, from $12.2 million in the
comparable period in 1996.  The decrease is primarily due to the
paydown of the Company's revolving credit facility in the second
half of 1996.  The overhead expenses in the first nine months of
1997 of $14.6 million and $16.2 million in 1996 are above
historical levels.  The 1997 corporate expenses include $5.8
million incurred in connection with the severance payments made to 
the former Chief Executive Officer of the Company.  Higher than
normal corporate expenses were also attributed to above average
proxy solicitation costs incurred in connection with the 1997
Annual Meeting of Stockholders, due to the contested nature of the
meeting.  The 1996 corporate expenses included an increase in
employee benefit costs.  The income tax provision for the first
nine months of 1997 was $3.2 million compared to $56.3 million in
the comparable period in 1996.  Higher income tax provision in the
prior year was due primarily to the airbag litigation settlement
payments received from TRW Inc. 


Financial Condition, Liquidity and Capital Resources
----------------------------------------------------

    At September 30, 1997, the Company had $14.3 million in cash
and cash equivalents and net working capital of $81.0 million. 
Cash generated from operating activities for the nine months ended
September 30, 1997 of $3.3 million includes an increase in accounts
payable and accrued expenses, offset by loss from operations, cash
used to increase inventories, and an increase in prepaid expenses
and other assets.  Cash generated from operations during the first
nine months of 1996 was $133.2 million, due primarily to receipt of 








                                     -9-

<PAGE>

the airbag royalties litigation payment settlement from TRW.  Cash
generated from investing activities during the nine months ended
September 30, 1997 of $.7 million consists primarily of the sale of
assets of a subsidiary and a product line, and the collection of an
income tax refund receivable, offset by capital expenditures.  Cash
used in financing activities of $29.2 million reflects the payment
of dividends to the parent company, the redemption of preferred
stock and a decrease in the Company's long-term debt, offset in
part by an increase in investment by the parent company and
proceeds received from the issuance of preferred stock.  There were
no borrowings under the Company's line of credit during this
period.
    In October 1993, the Company and its parent Talley completed
a major refinancing program.  This refinancing program included an
offering of $185 million of debt securities, consisting of $70
million gross proceeds of Senior Discount Debentures due 2005,
issued by Talley to yield 12.25%, and $115 million of Senior Notes
due 2003, with an interest rate of 10.75% issued by the Company. 
In connection with this refinancing, the Company  obtained a
secured credit facility with institutional lenders.
    Borrowings under the secured credit facility may not exceed
the collateral base as defined in the governing credit agreement. 
The facility consists of a five-year revolving credit facility of
up to $40.0 million and a five-year $20.0 million term loan 
facility.  At September 30, 1997 availability under the total
facility  was approximately $49.0 million, of which approximately
$9.0 million (the principal balance of the term loan) was borrowed.
    The Company's parent, Talley has recently entered into a joint
venture agreement with Delphi Automotive Systems to manufacture
automotive airbag inflators, which will require significant capital
contributions through 1998 to fund the capital requirements of the
venture, as it develops its manufacturing capability.  In addition,
the Company is expected to have capital requirements to develop its
manufacturing capability for other airbag related products.  The
Company is also committed to significantly higher-than-normal
research and development expenditures for automotive airbag
inflators and other airbag related products.  These commitments
will require financial resources in the next two to three years.
The Company believes with present cash balances and cash available
under the Company's credit facility, there will be sufficient
financial resources to meet these needs and to support the long-
term growth of the Company's core businesses.
    The Company is permitted to distribute cash to its parent,
Talley, for specific purposes and under certain other
circumstances. These distributions will be made using funds
available from operations and the secured credit facility. In
addition, the Company is a party to a cost sharing agreement and a
tax sharing agreement which will require the Company to reimburse
Talley for certain ongoing general and administrative expenses and
to make certain tax payments to Talley.






                                     -10-

<PAGE>

OTHER MATTERS

  Agreement and Plan of Merger
  ----------------------------

    On September 26, 1997, the Company's parent (Talley) announced
that it had entered into a definitive Agreement and Plan of Merger
(Agreement) with Carpenter Technology Corporation (Carpenter) to be
acquired for cash.
    Under the terms of the Agreement, Carpenter commenced an all-
cash tender offer on October 2, 1997 for all outstanding shares of
Talley stock at a price of $12 per share of Talley Common stock,
$16 per share of Talley Series B Preferred stock, and $11.70 per
share of Talley Series A Preferred stock.  Assuming a majority
(measured by aggregate voting power) of Talley's stock is duly
tendered under the tender offer and not withdrawn before the
expiration date of the offer (December 4, 1997, unless extended),
Carpenter is obligated under the terms of the Agreement to purchase
all shares of Talley stock tendered and not withdrawn, and is
further obligated to complete as soon as possible an all-cash
merger whereby all Talley shares remaining outstanding will be
acquired for cash at the same per-share prices as under the tender
offer.  The tender offer is also subject to other customary
conditions, including expiration of the Hart-Scott-Rodino (HSR)
waiting period.  The U.S. Department of Justice, Antitrust Division
(DOJ) has requested that Talley and Carpenter provide DOJ certain
additional information, which has the effect of automatically
extending the HSR waiting period.  Talley and Carpenter have
advised DOJ that they intend to provide the requested information
as soon as possible.
    In connection with the tender offer and proposed merger,
Carpenter, Talley and certain of its present and former directors
were named as defendants in various purported class action
complaints filed on behalf of the stockholders of Talley.  The
complaints alleged, among other things, breach of fiduciary duty on
the part of the Board of Directors arising out of the Merger
Agreement and failure to disclose material information.  On October
16, 1997 a Memorandum of Understanding was entered into by counsels
for the plaintiffs and defendants requiring Talley to amend and
supplement the disclosure contained in its filings with the
Securities and Exchange Commission-Schedule 14D-9.  In exchange,
the plaintiffs agreed to dismiss the actions.  The settlement is
subject to various conditions, including Court approval.
    The foregoing summary of certain provisions of the Agreement
is general in nature and is qualified in its entirety by reference
to the definitive Agreement.  No assurance can be given that the
conditions to the consummation of the tender offer and the merger
under the Agreement will be fulfilled or as to the timing for
consummation of the tender offer or the merger.







                                     -11-

<PAGE>

  Litigation - TRW Inc.
  ---------------------

    A judgment in the Company's favor in the amount of $138.0
million was entered against TRW Inc. (TRW) by the United States
District Court for the  District of Arizona in June 1995 following
a jury verdict that TRW had repudiated and breached the April 1989
Airbag Royalty Agreement with the Company.  The $138.0 million
damages amount represented  the jury's  calculation of the present
value of the remaining stream of Airbag Royalties which would have 
been payable by TRW through the April 2001 scheduled expiration
date of the Airbag Royalty Agreement had TRW not breached the
Agreement.  TRW appealed the judgment, and, during the pendency of
the appeal, was ordered by the District Court to continue making
quarterly payments to the Company in the same amounts as if the
Airbag Royalty Agreement had not been terminated and repudiated by
TRW.  On June 19, 1996, the United States Court of Appeal for the
Ninth Circuit rejected TRW's appeal and affirmed the $138.0 million
judgment.  A petition for rehearing filed by TRW with the Court of
Appeals was denied on July 30, 1996.
    In August 1996 TRW made payments aggregating approximately
$133.1 million to the Company on account of TRW's obligations under
the judgment.  The payments represented the $138.0 million face
amount of the judgment award, plus interest at the default rate
specified by the Airbag Royalty Agreement (prime plus 5%), less the
quarterly payments made by TRW pursuant to the District Court's
order during the pendency of the appeal.  A further payment was
made by TRW at the same time in the amount of approximately $6.7 
million as that portion of a court-ordered reimbursement of
litigation fees and costs (and interest on the reimbursement amount
at the same default rate).
    During  September  1996, claims  between  the  Company  and
TRW (which had been scheduled for trial) and all other matters in 
dispute with TRW were settled by the parties pursuant to a global
settlement agreement.  Under that settlement, TRW made a further
cash payment to the Company on September 3, 1996 in the aggregate
amount of $16.6 million.  Accordingly, all claims between the
parties have now been resolved, and cash payments have been made by
TRW aggregating $156.4 million.
    The litigation in which this judgment was entered arose out of
the Asset Purchase Agreement dated February 4, 1989 and the License
Agreement dated April 21, 1989, between TRW and the Company
pursuant to which TRW acquired the Company's airbag business.  The
court dismissed TRW's claims that the Company had breached a non-
compete provision contained in the Asset Purchase Agreement,
thereby entitling TRW to terminate airbag royalty payments to the
Company under the License Agreement (which it purported to do in
February 1994) and obtain a paid-up license to use the Company's
airbag technology.  The jury found in fact that TRW had improperly
terminated and repudiated the License Agreement.






                                     -12-

<PAGE>

Forward-Looking Statements
--------------------------

    This Management's Discussion and Analysis of Financial
Condition and Results of Operations and other sections of this
Quarterly Report contain forward-looking statements that are based
on current expectations, estimates and projections about the
industries in which the Company operates.  Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks,"
"estimates," and variations of such words and similar expressions 
are intended to identify such forward-looking statements.  These
statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions which are difficult to
predict.  Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-
looking statements.  The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
    Factors affecting the future include, but are not limited to,
increasing prices and product/service competition by foreign and
domestic competitors, including new entrants; rapid technological
developments and changes; the ability to continue to introduce
competitive new products and services on a timely and cost
effective basis;  the  mix  of products/services; the achievement
of lower  costs  and  expenses; domestic and foreign governmental
and  public  policy  changes  including environmental regulations;
protection and validity of patent and other intellectual property
rights; reliance on large customers; the cyclical nature of certain
of the Company's businesses; the outcome of pending and future
litigation and governmental proceedings and continued availability
of financing, and financial resources in the amounts, at the times 
and on the terms required to support future business.  In addition,
such statements could be affected by general industry and market
conditions and growth rates, general domestic and international
economic conditions including interest rate and currency exchange
rate fluctuations and other factors.




















                                     -13-

<PAGE>

                   PART II - OTHER INFORMATION


Item 1.  Legal Proceedings
--------------------------

  Litigation - TRW Inc.
  ---------------------

    For a description of legal proceedings involving the Company, 
    see "Other Matters" within Management's Discussion and
    Analysis.

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

(a) Exhibits:

     10.1 *  Ninth Amendment to the Loan and Security Agreement
             dated July 31, 1997 by and among Talley Manufacturing
             and Technology, Inc. and Transamerica Business Credit
             Corporation.

     10.2 *  Form of Fourth Amendment to Subsidiary Loan and
             Security Agreements dated July 31, 1997 between
             Talley Manufacturing and Technology, Inc. and each of
             certain subsidiaries.

       27 *  Financial Data Schedule for Talley Manufacturing and
             Technology, Inc., September 30, 1997.

     99.1 *  Severance and Settlement Agreement between  William
             H. Mallender and Talley Industries, Inc. dated  June 
             21, 1997.

     99.2 *  Employment Agreement dated August 11, 1997 between
             the Company and Paul L. Foster.


* Documents marked with an asterisk are filed with this report.


(b) Reports on Form 8-K:

       There were no reports filed on Form 8-K for the three
       months ended September 30, 1997.










                                     -14-

<PAGE>

                            SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.




                                      TALLEY MANUFACTURING AND
                                        TECHNOLOGY, INC.          
                                      ---------------------------  
                                      (Registrant)







Date: November 5, 1997                By /s/  Kenneth May                
     ----------------------              --------------------------
                                         Kenneth May
                                         Vice President, Controller
                                         Principal Accounting
                                         Officer






Date: November 5, 1997                By /s/  Mark S. Dickerson          
     ----------------------              --------------------------
                                         Mark S. Dickerson
                                         Vice President 
                                         and Secretary
                                   















                                     -15-