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                              UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20549

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

                              FORM 10-Q

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

                    FOR THE QUARTERLY PERIOD ENDED
                          SEPTEMBER 30, 1997

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


                           UTILX CORPORATION
                     COMMISSION FILE NUMBER 0-16821


              DELAWARE                              91-1171716
     (State of Incorporation)           (I.R.S. Employer Identification Number)

     22404 - 66TH AVENUE SOUTH
          P. O. BOX 97009
    KENT, WASHINGTON  98064-9709                       (253) 395-0200
(Address of Principal Executive Offices)       (Registrant's Telephone Number)

Indicate by checkmark whether the Registrant has (1) 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) been subject to such filing 
requirements for the past 90 days.  Yes  X   No
                                        ---    ---
As of  September 30, 1997, 7,199,186 shares of Common Stock were outstanding.


            The total number of pages in this Form 10-Q is 16.

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                           TABLE OF CONTENTS


  ITEM                                                      PAGE
  ----                                                      -----

                                PART I

  1.  Financial Statements

      Consolidated Balance Sheet
      September 30, 1997 and March 31, 1997.................  3

      Consolidated Statement of Operations
      For the Three Months Ended
      September 30, 1997 and  September 30, 1996............  4

      Consolidated Statement of Operations
      For the Six Months Ended
      September 30, 1997 and 1996...........................  5

      Consolidated Statement of Cash Flows
      For the Six Months Ended
      September 30, 1997 and 1996..........................   6

      Notes to Consolidated Financial Statements...........   7

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


                               PART II

  1.  Legal Proceedings....................................  14

  2.  Changes in Securities................................  14

  3.  Defaults Upon Senior Securities......................  14

  4.  Submission of Matters to a Vote of Security Holders..  14

  5.  Other................................................  14

  6.  Exhibits.............................................  15


Signatures.................................................  16




                                     -2-
<PAGE>

PART I - FINANCIAL INFORMATION
       ITEM 1.  FINANCIAL STATEMENTS

                              UTILX CORPORATION

                          CONSOLIDATED BALANCE SHEET
                        SEPTEMBER 30 AND MARCH 31, 1997
                         (IN THOUSANDS, EXCEPT SHARES)
                                   (UNAUDITED)

                                    ASSETS

                                                      SEPTEMBER 30    MARCH 31
                                                      ------------    --------
Current assets:
  Cash and cash equivalents.........................     $   770      $ 1,490
  Accounts receivable, trade, net...................      20,558       15,873
  Materials, supplies and inventories...............       9,519        7,715
  Income taxes receivable...........................         481          469
  Prepaid expenses and other........................         536          184
                                                         -------      -------
      Total current assets..........................      31,864       25,731

Equipment and improvements, net.....................       8,885        9,446
Other assets, net...................................         612          735
                                                         -------      -------
      Total assets..................................     $41,361      $35,912
                                                         -------      -------
                                                         -------      -------
             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Note payable to bank..............................     $ 6,075       $  985
  Accounts payable..................................       4,287        3,737
  Accrued liabilities...............................       4,836        4,449
                                                         -------      -------
      Total current liabilities.....................      15,198        9,171
                                                         -------      -------

Commitments and Contingencies
Stockholders' equity:
  Common Stock, $0.01 par value
      (authorized 25,000,000 shares)................          72           72
  Common Stock Warrants.............................         936          936
  Additional paid-in capital........................      17,438       17,390
  Retained earnings.................................       8,320        8,908
  Unearned compensation.............................                       (3)
  Cumulative foreign currency
   translation adjustment...........................        (603)        (562)
                                                         -------      -------
      Total stockholders' equity....................      26,163       26,741
                                                         -------      -------
          Total liabilities and stockholders'
           equity...................................     $41,361      $35,912
                                                         -------      -------
                                                         -------      -------

  Common Stock issued and outstanding...............   7,199,186    7,184,631


             (See Notes to Consolidated Financial Statements)


                                     -3-
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                          UTILX CORPORATION

                   CONSOLIDATED STATEMENT OF OPERATIONS
       FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                (UNAUDITED)


                                                    1997        1996
                                                    ----        ----

Revenues.....................................      $20,734     $15,549
Cost of revenues.............................       18,898      13,029
                                                   -------     -------
  Gross profit...............................        1,836       2,520
                                                   -------     -------
Operating expenses:
    Selling, general and administrative........      1,916       1,845
    Research and engineering...................        130         178
                                                   -------     -------
        Total operating expenses...............      2,046       2,023
                                                   -------     -------
Operating income (loss)........................       (210)        497

Other income (expense), net....................       (110)         25
                                                   -------     -------
Income (loss) before income taxes..............       (320)        522
Income tax provision...........................                      6
                                                   -------     -------
Net income (loss)..............................    $  (320)    $   516
                                                   -------     -------
                                                   -------     -------
Earnings (loss) per share (Note 2):
    Primary....................................    $  (.04)    $   .07

    Fully diluted..............................    $  (.04)    $   .07

Weighted average number of shares (Note 2):
    Primary....................................      7,190       7,330
    Fully diluted..............................      7,190       7,345


               (See Notes to Consolidated Financial Statements)


                                     -4-
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                               UTILX CORPORATION

                       CONSOLIDATED STATEMENT OF OPERATIONS
              FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                     (UNAUDITED)


                                                    1997        1996
                                                    ----        ----

Revenues.......................................   $39,501      $30,673

Cost of revenues...............................    35,765       25,273
                                                   -------     -------
    Gross profit...............................     3,736        5,400
                                                   -------     -------
Operating expenses:
  Selling, general and administrative..........     3,854        3,832
  Research and engineering.....................       288          371
                                                   -------     -------
        Total operating expenses...............     4,142        4,203
                                                   -------     -------
Operating income (loss)........................      (406)       1,197
Other expense, net.............................      (181)         (16)
                                                   -------     -------
Income (loss) before income taxes..............      (587)       1,181
Income tax provision...........................         1           12
                                                   -------     -------
Net income (loss)..............................    $ (588)      $1,169
                                                   -------     -------
                                                   -------     -------
Earnings (loss) per share (Note 2):
    Primary....................................    $ (.08)      $  .16
    Fully diluted..............................    $ (.08)      $  .16

Weighted average number of shares (Note 2):
    Primary....................................     7,187        7,264
    Fully diluted..............................     7,187        7,271


          (See Notes to Consolidated Financial Statements)


                                     -5-
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                              UTILX CORPORATION

                      CONSOLIDATED STATEMENT OF CASH FLOWS
            FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                (IN THOUSANDS)
                                 (UNAUDITED)



                                                        1997        1996
                                                        ----        ----

OPERATING ACTIVITIES:
    Net income (loss)..............................   $ (588)     $ 1,169

     Adjustments to reconcile to net cash provided
     by (used by) operating activities:
       Depreciation and amortization...............    2,003        1,822
       Other non-cash (income) expenses, net.......       50           31
       Changes in assets and liabilities...........   (5,949)       1,416
                                                     -------      -------
       Total adjustments...........................   (3,896)       3,269
                                                     -------      -------
          Net cash provided by (used by) operating
          activities...............................   (4,484)       4,438
                                                     -------      -------

INVESTING ACTIVITIES:
    Cost of additions to equipment.................   (1,368)      (2,071)
    Proceeds from sale of equipment................                     5
                                                     -------      -------
          Net cash used by investing activities....   (1,368)      (2,066)
                                                     -------      -------
FINANCING ACTIVITIES:
    Net borrowings (repayments) on note payable....    5,090       (1,750)
    Issuance of Common Stock.......................       48            1
    Purchase of Common Stock.......................                    (1)
                                                     -------      -------
          Net cash provided by (used by)
          financing activities.....................    5,138       (1,750)
                                                     -------      -------
CUMULATIVE TRANSLATION ADJUSTMENT
  OF FOREIGN CURRENCY TRANSACTIONS.................       (6)          12
                                                     -------      -------
    Net increase (decrease) in cash and cash
    equivalents....................................     (720)         634
                                                     -------      -------
CASH AND CASH EQUIVALENTS:
    Beginning of period............................    1,490          495
                                                     -------      -------
    End of period..................................  $   770       $1,129
                                                     -------      -------
                                                     -------      -------


                (See Notes to Consolidated Financial Statements)


                                     -6-
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                             UTILX CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)

1. FINANCIAL STATEMENT PRESENTATION

In the opinion of management 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 
and operating results for the three-month and six-month periods ended 
September 30, 1997 and 1996.  The statements should be read in conjunction 
with the March 31, 1997 audited consolidated financial statements included in 
the fiscal 1997 Annual Report on Form 10-K.

In June 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards ("SFAS) No. 130, "Comprehensive 
Income" ("FAS 130").  FAS 130 establishes standards for reporting and display 
of comprehensive income and its components in a full set of financial 
statements.  Comprehensive income includes items such as foreign currency 
translation adjustments that are currently being presented by the company as 
a component of shareholders' equity.  The impact of adopting FAS 130 has not 
been determined.  The Company will adopt the statement for the year ending 
March 31, 1999.

In June 1997 the FASB issued SFAS No. 131, "Disclosure about Segments of an 
Enterprise and Related Information" ("FAS 131").  FAS 131 establishes 
standards for disclosures about operating segments in annual financial 
statements and selected disclosures about operating segments in annual 
financial statements and selected information in interim financial reports.  
It also establishes standards for related disclosures about products and 
services, geographic areas and major customers.  FAS 131 supersedes FAS No. 
14, "Financial Reporting for Segments of a Business Enterprise."  FAS 131 is 
effective for the year ending March 31, 1999 and requires restatement of 
earlier periods presented.  The impact of adopting FAS 131 has not been 
determined.

2. EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued Financial 
Accounting Standard No. 128, "Earnings Per Share."  This statement will 
change the computation, presentation and disclosure requirements for earnings 
per share ("EPS").  The statement will be effective for interim and annual 
reporting periods ending after December 15, 1997.  This statement will 
replace "primary" EPS with" basic" EPS, the principal difference being the 
exclusion of common stock equivalents in the computation of basic EPS.  In 
addition, this statement will require the dual presentation of basic and 
diluted EPS on the face of the consolidated statement of operations.  EPS 
computed pursuant to the statement is not expected to be materially different 
from the historical earnings per share previously presented.

Primary earnings (loss) per share is computed by dividing net income (loss) 
by the weighted average number of shares of Common Stock of UTILX 
Corporation, $0.01 par value per share (the "Common Stock") and, when 
dilutive, common stock equivalents outstanding during the period.  Common 
stock equivalents include shares issuable upon exercise of the Company's 
stock options and certain warrants.  Fully diluted earnings per share is 
computed based on the weighted average number of shares of Common Stock and 
common stock equivalents outstanding during the period taking into 
consideration maximum potential dilution.


                                     -7-
<PAGE>


3. ACCOUNTS RECEIVABLE

Accounts receivable, trade, net at September 30 and March 31, 1997 consist of 
the following:

                                                  (In thousands)

                                     September 30, 1997       March 31, 1997
                                     ------------------       --------------
North American Customers:
   Completed work not yet billed             $ 8,470               $ 5,396
   Billed but uncollected                     11,001                 9,427
International customers                        1,508                 1,332
Less allowance for doubtful accounts            (421)                 (282)
                                             -------               -------
                                             $20,558               $15,873
                                             -------               -------
                                             -------               -------
4. MATERIALS, SUPPLIES AND INVENTORIES

Materials, supplies and inventories at September 30 and March 31, 1997 
consist of the following:

                                                   (In thousands)

                                     September 30, 1997       March 31, 1997
                                     ------------------       --------------
Raw Materials and Spare Parts               $  7,668              $  6,729
Work in Process                                1,305                   562
Finished Goods                                   983                   918
Less allowance for potentially
 obsolete or overstocked inventory              (437)                 (494)
                                             -------               -------
                                              $9,519                $7,715
                                             -------               -------
                                             -------               -------

5. NOTE PAYABLE TO BANK

The Company has a committed credit facility of $10,000,000 with Seattle-First 
National Bank of Washington ("Seafirst").  The agreement is collateralized by 
the Company's inventory and accounts receivable.  The credit agreement 
requires that the Company maintain certain financial covenants, including 
requirements to maintain certain levels of tangible net worth, current ratio, 
and debt ratio.  Borrowings bear interest at the Seafirst prime rate, the 
LIBOR rate plus 1.40%, or other specified rates, at the Company's option.  
The Company pays a commitment fee of up to 0.125% on the unused portion of 
the facility.  This line of credit currently expires on June 30, 1998.  The 
Company currently anticipates that it will be able to negotiate an extension 
of this line of credit.

6. COMMITMENTS AND CONTINGENCIES

The Company is party to an agreement (the "underlying agreement") under which 
it utilizes a single Florida-based subcontractor for performance of certain 
CableCure injection tasks for Florida Power & Light through January 2000.  
The underlying agreement calls for the Company to pay the subcontractor a 
percentage of the amount charged to Florida Power & Light for certain 
services defined in the underlying agreement. The Company agreed to new 
pricing in its contract with Florida Power & Light.  The Company is in a 
dispute with this subcontractor, over amounts to be paid to the subcontractor 
effective April 1, 1997. An interim agreement, subject to retroactive 
adjustments, was agreed to by the Company and the subcontractor for the 
period April 1, 1997 to May 31, 1997.  The subcontractor is continuing to 
perform the injection services required by the Company under the underlying 
agreement while the negotiations continue.  The Company believes that 
payments made to the subcontractor subsequent to April 1, 1997 are in 
conformity with the underlying agreement. The

                                     -8-
<PAGE>

subcontractor claims to be entitled to a percentage of additional amounts. On 
October 31, 1997, the Company filed suit against the subcontractor in 
Florida, seeking resolution of the price dispute, among other matters. There 
can be no complete assurance that the final price settled upon for payments 
to the subcontractor will not result in an adverse effect on the gross profit 
realized by the Company under its contract with Florida Power & Light. 
Based on the footage injected by the subcontractor during the first two 
quarters of fiscal 1998, management of the Company does not anticipate that 
the final resolution of this matter will result in a material adverse impact 
on the results of operations through September 30, 1997, or on the Company's 
consolidated financial position or liquidity, as of September 30, 1997.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS


                 RESULTS OF OPERATIONS FOR SECOND QUARTER
                            OF FISCAL YEAR 1998
                         COMPARED TO SECOND QUARTER
                            OF FISCAL YEAR 1997


REVENUES

Consolidated revenues increased 33% in the second quarter of fiscal 1998, 
compared to the same period in fiscal 1997.  Consolidated revenues increased 
29% in the first six months of fiscal 1998, compared to the same period in 
fiscal 1997.

NORTH AMERICAN OPERATIONS.  Revenues from installation and replacement 
services in North America increased to $14.0 million in the second quarter of 
fiscal 1998, compared to $9.7 million in the same period of fiscal 1997.  
Revenues from repair and restoration services in North America increased to 
$5.3 million in the second quarter of fiscal 1998, compared to $3.7 million 
in the same period of fiscal 1997.

Revenues from installation and replacement services in North America 
increased to $26.2 million in the first six months of fiscal 1998 compared to 
$19.2 million in the same period of fiscal 1997.  Revenues from repair and 
restoration services in North America increased to $9.7 million in the first 
six months of fiscal 1998 compared to $7.2 million in the same period of 
fiscal 1997.

The increased revenues from installation and replacement operations were 
attributed to increased demand for such services and the Company's ability to 
maintain a higher level of drilling crews than in the prior year to meet the 
demand.  The Company added four new drilling crews in September 1998, 
utilizing the new equipment delivered in the second quarter.  Also, the 
Company has increased the number of crews performing installation and 
replacement services using conventional trenching methods and added its own 
crews for pulling cable through conduit installed by its FlowMole crews.  
These new crews also contributed to the increased revenues in the second 
quarter of fiscal 1998.

Continued strong demand for repair and restoration services, primarily under 
"Test, Treat or Replace" contracts, contributed to the increased repair and 
restoration revenue levels.  Revenues also increased due to the addition of 
new services, such as location and repair of faults in electric cables.  
Customers choosing Test, Treat or Replace contracts also contributed to the 
increased demand for installation and replacement services.


                                     -9-
<PAGE>


INTERNATIONAL OPERATIONS.  Revenues from international operations decreased 
to $1.4 million in the second quarter of fiscal 1998, compared to $2.2 
million in the same period of fiscal 1997.  Revenues from international 
operations decreased to $3.6 million in the first six months of fiscal 1998 
compared to $4.3 million in the same period of the prior year.  The decrease 
resulted from decreased revenues from equipment sales due to the Company's 
decision to outsource the manufacturing of its equipment.  On April 2, 1996 
the Company announced a decision to cease its in-house assembly of FlowMole 
drilling equipment.  During the first six months of fiscal 1997, the Company 
was able to sell equipment from its remaining inventory of drilling systems 
assembled in-house.  The Company has issued purchase orders to a number of 
manufacturers for new FlowMole drilling systems to be delivered in fiscal 
1998 and 1999.  The second quarter of 1998 was the first opportunity for 
equipment delivery from the new vendors, and the Company completed an 
equipment sale in September 1997. Delivery of new drilling systems from the 
Company's vendors allow the Company to continue selling equipment in the 
third quarter of fiscal 1998 and beyond.

GROSS PROFIT

Gross profit decreased 27% in the second quarter of fiscal 1998, compared to 
the same period in fiscal 1997.  Gross profit decreased 31% in the first six 
months of fiscal 1998, compared to the same period in fiscal 1997.

NORTH AMERICAN OPERATIONS.   Gross profit from installation and replacement 
services decreased in the second quarter of fiscal 1998 compared to the same 
period of fiscal 1997.  New employees were hired both for drilling crews and 
for new conventional trenching and cable pulling crews, including employees 
being trained, in anticipation of the delivery of newly ordered FlowMole 
equipment.  New equipment began to arrive in September 1997.  Additional 
hiring and training expenses, which are generally not offset by new revenues 
until the new crews are deployed to perform work and trained sufficiently to 
be productive, reduced gross profit as a percentage of revenue in the second 
quarter of fiscal 1998.  The Company also determined that pricing on certain 
contracts was adversely affecting fiscal 1998 gross margin.  The Company 
approached several customers for price increases during the second quarter of 
fiscal 1998, after identifying its least profitable contracts.  The Company 
either obtained price increases or canceled work under those contracts.

Gross profit from repair and restoration services decreased for similar 
reasons. The Company substantially increased the number of crews involved in 
the preparation of cables for CableCure injection, including crews starting 
up new services for location and repair of faults in electric cables.  Those 
services are more labor intensive and generated lower profit margins than 
injection services.  The Company has also negotiated price increases in 
October 1997 on certain contracts for location and repair of electric faults. 
In addition, during the first two quarters of fiscal 1998, the Company 
encountered a high percentage of cables where, after testing by Company 
crews, it was determined that injection would not be cost-effective.  As a 
result, the amount of CableCure revenues produced  per crew decreased, which 
adversely impacted gross profit for the period.

INTERNATIONAL OPERATIONS.  Gross profit from international operations in the 
second quarter of fiscal 1998 decreased compared to the same period of the 
prior year due to lower revenue levels.  Gross profit for the first six 
months of fiscal 1998 decreased due to the decreased revenues from equipment 
sales.  Increased levels of personnel in the Company's European service 
operations combined with slow work release by customers in the second quarter 
of fiscal 1998 adversely affected on gross profit.

OPERATING EXPENSES AND OTHER INCOME (EXPENSES)

Total operating expenses increased 1% in the second quarter of fiscal 1998, 
compared to the same period of fiscal 1997. Total operating expenses 
decreased 1% in the first six months of fiscal 1998 compared to the same 
period of fiscal 1997. Selling, general and administrative expenses 
increased 4% and research and engineering expenses decreased 27% compared to 
the second quarter of fiscal 1997. The relatively small increase in selling, 
general and administrative expenses in fiscal 1998 was primarily generated by 
costs associated with the selection of a new


                                     -10-
<PAGE>


management information system, targeted for fiscal 1999 implementation. The 
lower level of research and engineering expense in fiscal 1998 reflected 
reduced spending on the Company's Series G Drill from fiscal 1997 levels.

Other income (expense), net, was an expense of $110,000 and $181,000 in the 
second quarter of fiscal 1998 and the first six months of fiscal 1998, 
respectively, compared to income of $25,000 and an expense of $16,000 in the 
same periods of the prior year.  This change was a result of increased 
interest expense due to higher average borrowings on the Company's line of 
credit.

As a result of the foregoing, the Company recorded a pretax loss of $320,000 
in the second quarter of fiscal 1998, compared to pretax income of $522,000 
in the same period of fiscal 1997.  The Company recorded a pretax loss of 
$587,000 in the first six months compared to pretax income of $1.2 million in 
the same period of 1997.

INCOME TAX EXPENSE (BENEFIT)

The Company would normally expect an effective income tax rate of 
approximately 40% on positive pretax income.  This exceeds the federal 
statutory rate of 34% due to the impact of state income taxes and 
nondeductible expenses. The impact of deductions deferred from prior years 
and net operating loss carryforwards eliminated substantially all of the 
Company's income tax provision in the first two quarters of fiscal 1997, due 
to the provision of a valuation allowance at the end of fiscal 1996 against 
the full amount of the Company's net deferred tax assets.  The Company did 
not provide for any federal income tax benefit in the first two quarters of 
fiscal 1998 as it continues to provide a valuation allowance against the full 
amount of its net deferred tax assets.

NET INCOME (LOSS)

As a result of the foregoing, the Company recorded a net loss of $320,000 in 
the second quarter of fiscal 1998, compared to net income of $516,000 in the 
same period of fiscal 1997.  The Company recorded a net loss of $588,000 in 
the first six months of fiscal 1998 compared to net income of $1.2 million in 
the same period of fiscal 1997.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Financial 
Accounting Standard No. 128, "Earnings Per Share."  This statement will 
change the computation, presentation and disclosure requirements for earnings 
per share ("EPS").  The statement will be effective for interim and annual 
reporting periods ending after December 15, 1997.  This statement will 
replace "primary" EPS with "basic" EPS, the principal difference being the 
exclusion of common stock equivalents in the computation of basic EPS.  In 
addition, this statement will require the dual presentation of basic and 
diluted EPS on the face of the consolidated statement of operations.  EPS 
computed pursuant to the statement is not expected to be materially different 
from the historical earnings per share previously presented.

In June 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards ("SFAS) No. 130, "Comprehensive 
Income" ("FAS 130").  FAS 130 establishes standards for reporting and display 
of comprehensive income and its components in a full set of financial 
statements.  Comprehensive income includes items such as foreign currency 
translation adjustments that are currently being presented by the company as 
a component of shareholders' equity.  The impact of adopting FAS 130 has not 
been determined.  The Company will adopt the statement for the year ending 
March 31, 1999.


                                     -11-
<PAGE>


In June 1997 the FASB issued SFAS No. 131, "Disclosure about Segments of an 
Enterprise and Related Information" ("FAS 131").  FAS 131 establishes 
standards for disclosures about operating segments in annual financial 
statements and selected disclosures about operating segments in annual 
financial statements and selected information in interim financial reports.  
It also establishes standards for related disclosures about products and 
services, geographic areas and major customers.  FAS 131 supersedes FAS No. 
14, "Financial Reporting for Segments of a Business Enterprise."  FAS 131 is 
effective for the year ending March 31, 1999 and requires restatement of 
earlier periods presented.  The impact of adopting FAS 131 has not been 
determined. 

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1997, the Company had unused sources of liquidity consisting 
of $770,000 in cash and cash equivalents and an unused balance on its 
committed line of credit of $3,925,000.  This compares to $1,490,000 in cash 
and cash equivalents and an unused balance on its committed line of credit of 
$4,015,000 at March 31, 1997.  Uses of cash during the first half of fiscal 
1998 primarily related to capital expenditures of $1.4 million for equipment 
to expand the Company's capabilities to perform additional auxiliary 
services, such as equipment for locating and repairing faults in electric 
cables.  The Company also is financing a growing level of working capital, 
due to rapid growth in North American service operations.  The Company 
anticipates the periodic usage of its line of credit throughout fiscal 1998.  
The Company anticipates that through cash generated by operations, lease 
financing of certain purchases of new equipment and the periodic use of its 
credit facility, it will be able to meet its cash requirements through at 
least fiscal 1998.

REVIEW AND OUTLOOK

The Company is experiencing strong demand for its services in North America, 
and is recruiting personnel to expand its capacity.  The third quarter of the 
Company's fiscal year has historically generated its peak revenue levels due 
to the normal seasonality of work release from utility customers.  The 
Company had received eleven new drilling systems for use in its North 
American service operations as of October 30, 1997, including four placed 
into service in September 1997.  The Company is scheduled to receive an 
additional twelve new systems by December 31, 1997.  Increased equipment 
capacity will allow the Company to increase its capacity to perform work.  
However, the Company's revenue levels and the weighted average number of 
FlowMole systems in operation on any given day are also affected by factors 
which include weather, pricing, competition, customer work release practices, 
soil and other work difficulty determinants, and permitting.  The Company's 
contracts typically allow for cancellation by the customers on relatively 
short notice. Therefore, sudden changes in demand may have an immediate 
adverse impact on the Company's revenue levels. The Company expects to see 
increased volumes from new customers in calendar year 1998, and some 
increased volumes from existing customers. The Company expects to continue to 
rely on a small number of customers for the majority of the Company's North 
American CableCure revenues, increasing the exposure of the Company to such 
short-term fluctuations in revenues. See also the discussion under "Risk 
Factors," below.

This Form 10-Q contains forward-looking statements, in addition to those 
under the caption "Review and Outlook."  Such statements are subject to 
substantial risk.  Actual results may vary materially due to risks and 
uncertainties inherent in the Company's business, including those described 
under "Review and Outlook," those described under "Risk Factors," below, and 
additional factors described in Item 7 of the Company's fiscal 1997 Form 10-K 
filed with the Securities and Exchange Commission.


                                     -12-
<PAGE>


RISK FACTORS

   COMPETITION. The Company has experienced a long-term trend of declining 
prices for guided boring ("FlowMole") services, particularly for smaller 
diameter utility installations, due to competitive pressures and changes in 
utility bidding practices. This trend has also caused the Company to lower 
its prices for CableCure injection services, which are priced at a discount 
to replacement costs, including replacement via guided boring. In addition, 
the Company's utility customers are increasing their requests for "turnkey" 
installation, replacement and restoration services, requiring their drilling 
contractors to take responsibility for switching circuits, terminating 
circuits, and other non-incidental tasks. These tasks require additional 
equipment and labor, and the cost increases can offset any price increase the 
Company is able to negotiate for the expansion of its services.  The overall 
trend of falling prices for installation and replacement services is expected 
to continue into the future, as more customers award work based on 
competitive bidding, more customers require their drilling contractors to 
perform additional tasks as part of the drilling contract, and more 
conventional contractors acquire drilling capabilities in order to enter into 
this segment of the construction industry. This trend will continue to put 
downward pressure on the market price for CableCure Services. The Company 
cannot predict the ultimate duration or the magnitude of these decreases.

   SEASONAL FACTORS.  Weather and other seasonal factors may decrease the 
Company's revenues and profits in any given period.  Adverse weather may 
preclude the Company from operating its FlowMole drilling systems or 
providing its CableCure services at certain times of the year. In addition, 
the Company believes that the regular budgetary cycles of certain of its 
North American utility customers tend to concentrate demand for the Company's 
services during the third quarter of its fiscal year (the fourth quarter of 
the calendar year), although other budgetary factors described below may 
override this trend in any given quarter.  As a result of these factors, 
results of operation in any given fiscal quarter are not necessarily 
indicative of results in any other fiscal quarter.

   UTILITIES' BUDGETARY CONSIDERATIONS.  Budgetary considerations arising 
from unfavorable regulatory determinations on matters such as rate-setting, 
capitalization of services performed by the Company, or siting of power 
production facilities, or from reductions in new housing starts, reductions 
in electric utility revenues due to mild weather, and general economic 
downturns have affected the ability of some of the Company's utility 
customers to sustain their cable replacement or other maintenance programs 
and accordingly adversely impact the Company's revenues and profits.  
Although the Company has broadened its customer base, three customers 
generate a significant portion of the Company's consolidated revenues, and a 
small number of customers generate more than half of its CableCure revenues.  
Because cable replacement, restoration and other maintenance programs are, to 
a substantial extent, deferrable and the Company's contracts with its utility 
customers permit termination of orders on relatively short notice, 
postponement or cancellation of such programs by customers can interject 
substantial volatility into the Company's revenues and profits.

   DOW CORNING CORPORATION.  The Company purchases its CableCure fluid 
exclusively from Dow Corning.  In May 1995, Dow Corning filed for protection 
under Chapter 11.  While the Company has been informed by Dow Corning that it 
intends to continue the CableCure business, there can be no assurance that 
Dow Corning or the bankruptcy court will not take action to amend or 
terminate the CableCure license agreement.

   FLORIDA SUBCONTRACT NEGOTIATIONS.  The Company is party to an agreement 
(the "underlying agreement") under which it utilizes a single Florida-based 
subcontractor for performance of certain CableCure injection tasks for 
Florida Power & Light through January 2000.  The underlying agreement calls 
for the Company to pay the subcontractor a percentage of the amount charged 
to Florida Power & Light for certain services defined in the underlying 
agreement. The Company agreed to new pricing in its contract with Florida 
Power & Light.  The Company is in a dispute with this subcontractor, over 
amounts to be paid to the subcontractor effective April 1, 1997.  An interim 
agreement, subject to retroactive adjustments, was agreed to by the Company 
and the subcontractor for the period April 1, 1997 to May 31, 1997.  The 
subcontractor is continuing to perform the injection services required by the 
Company under the underlying agreement while the negotiations continue.  The 
Company believes that payments made to the subcontractor subsequent to April 1,
1997 are in conformity with the

                                     -13-
<PAGE>

underlying agreement. The subcontractor claims to be entitled to a percentage 
of additional amounts. On October 31, 1997, the Company filed suit against 
the subcontractor in Florida, seeking resolution of the price dispute, among 
other matters (See Part II, Item 1 and Note 6 of Notes to Consolidated 
Financial Statements included in Part I, Item 1). There can be no complete 
assurance that the final price settled upon for payments to the subcontractor 
will not result in an adverse effect on the gross profit realized by the 
Company under its contract with Florida Power & Light. Based on the footage 
injected by the subcontractor during the first two quarters of fiscal 1998, 
management of the Company does not anticipate that the final resolution of 
this matter will result in a material adverse impact on the results of 
operations through September 30, 1997, or on the Company's consolidated 
financial position or liquidity, as of September 30, 1997. The subcontractor 
may continue injection services until this matter is resolved, which will 
service to increase the total amount of footage subject to the pricing 
dispute.

   IMPACT OF INFLATION AND CHANGING PRICES.  Inflation has had only a minimal 
effect on the Company's revenues and expenses and is not expected to have a 
significant impact on revenues or expenses in fiscal 1998.

   FOREIGN CURRENCY FLUCTUATIONS.  The Company's financial results are 
affected by fluctuations in certain foreign currencies, particularly the 
British Pound Sterling and the German Deutschemark.

PART II - OTHER INFORMATION

   ITEM 1.  LEGAL PROCEEDINGS

   UTILX Corporation vs. Power Cable Restoration, Inc. and Ronald E. Aleshire 
- On October 31, 1997, the Company filed a complaint in Federal District 
Court in Tampa, Florida against Power Cable Restoration, Inc. ("PCR"), a 
contractor in Florida with whom the Company has a contract for certain cable 
injection services for Florida Power & Light through January 2000, and Ronald 
E. Aleshire, a principal shareholder in PCR.  The complaint alleges certain 
failures and breaches of contractual obligations and requests declaratory 
relief and determination that UTILX may terminate its contracts with PCR.  
The Company and PCR have an ongoing dispute over the amount to be paid to PCR 
under its subcontract for certain cable injection services performed 
subsequent to April 1, 1997.  The complaint also requests, among other 
matters, that the court determine that the price being paid currently by 
UTILX to PCR is in accordance with the contract between the parties.  This 
case is in its early stages and at this time it is not possible to predict 
the outcome of this matter (See also Note 6 of Notes to Consolidated 
Financial Statements included in Part I, Item 1).

   The Company is involved in other litigation matters, both as a plaintiff 
and as a defendant, arising in the ordinary course of its business.  
Management expects that these other matters will not have a materially 
adverse effect on the consolidated financial position, results of operations 
or liquidity of the Company.

   ITEM 2.  CHANGES IN SECURITIES

   None.

   ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

   None. 

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

   None.


                                     -14-
<PAGE>

   ITEM 5.  OTHER

   None. 



   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)   Exhibits:

     10.39  Loan Modification Agreement between Registrant and Bank of America
               NW, N.A., doing business as Seafirst Bank, successor by name
               change to Seattle-First National Bank, dated September 30, 1997.
               Filed herewith.

      11.1  Statement Regarding Computation of Per Share Earnings.  Filed
            herewith.

      27.1  Financial Data Schedule.  Filed herewith.


    (b)  Reports on Form 8-K:

         None





                                     -15-
<PAGE>



                                 UTILX CORPORATION

                                    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.

                                           UTILX CORPORATION
                                      ---------------------------
                                              (Registrant)


Date: November 6, 1997                    By:/s/ Craig E. Davies
                                          --------------------------------
                                          Craig E. Davies, President and
                                              Chief Executive Officer


Date: November 6, 1997                    By:/s/ Larry D. Pihl
                                          --------------------------------
                                          Larry D. Pihl, VicePresident and
                                              Chief Financial Officer






                                     -16-
<PAGE>




                               INDEX TO EXHIBITS



      EXHIBIT
      NUMBER           DESCRIPTION
      ------           -----------

       10.39   Loan Modification Agreement between Registrant and Bank of
                 America NW, N.A., doing business as Seafirst Bank, successor by
                 name change to Seattle-First National Bank, dated September 30,
                 1997. Filed herewith.

       11.1    Statements Regarding Computation of Per Share Earnings.  Filed
               herewith.

       27.1    Financial Data Schedule.  Filed herewith.