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 December 28, 1996

                                       OR

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

For the transition period from                       to
                               ---------------------   -------------------------
Commission file number                          0-20109
                               -------------------------------------------------
                                                Kronos Incorporated
--------------------------------------------------------------------------------
                    (Exact name of registrant as specified in its charter)

                 Massachusetts                                   04-264094
------------------------------------------------       -------------------------
        (State or other jurisdiction of                       (I.R.S. Employer
        incorporation or organization)                       Identification No.)

        400 Fifth Avenue,  Waltham,  MA                            02154
--------------------------------------------------------------------------------
       (Address of principal executive offices)                   (Zip Code)

                                      (617) 890-3232
--------------------------------------------------------------------------------
                  (Registrant's telephone number, including area code)



--------------------------------------------------------------------------------
(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  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                   Yes    X                        No
                      ---------                      ---------

     As of December 31, 1996, 8,159,181 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
                              KRONOS INCORPORATED

                                     INDEX



PART I.    FINANCIAL INFORMATION                                           Page

Item 1.    Condensed Consolidated Financial Statements (Unaudited)           

           Condensed Consolidated Statements of Income for the Three         
               Months Ended December 28, 1996 and December 30, 1995          1

           Condensed Consolidated Balance Sheets at December 28, 1996
               and September 30, 1996                                        2

           Condensed Consolidated Statements of Cash Flows for the Three
               Months Ended December 28, 1996 and December 30, 1995          3

           Notes to Condensed Consolidated Financial Statements              4

Item 2.    Management's Discussion and Analysis of Financial Condition and
               Results of Operations                                         5

PART II.   OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K

Signatures

Exhibit Index
<PAGE>
<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements (Unaudited)

                               KRONOS INCORPORATED
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                        (In thousands, except share data)
                                    UNAUDITED

                                                               Three Months Ended
                                                           --------------------------
                                                           December 28,   December 30,
                                                               1996           1995
                                                           -----------    -----------
    
<S>                                                        <C>            <C>       
Net revenues:
      Product ..........................................   $    25,718    $    22,538
      Service ..........................................        11,392          8,929
                                                           -----------    -----------
                                                                37,110         31,467
                                                           -----------    -----------
Cost of sales:
      Product ..........................................         6,415          5,981
      Service ..........................................         7,830          6,540
                                                           -----------    -----------
                                                                14,245         12,521
                                                           -----------    -----------
           Gross profit ................................        22,865         18,946
Expenses:
      Sales and marketing ..............................        13,101         10,409
      Engineering, research and development ............         3,757          2,646
      General and administrative .......................         2,508          2,352
      Other (income) expense, net ......................           (37)            52
                                                           -----------    -----------
                                                                19,329         15,459
                                                           -----------    -----------
           Income before income taxes ..................         3,536          3,487
Provision for income taxes .............................         1,350          1,336
                                                           -----------    -----------
           Net income ..................................   $     2,186    $     2,151
                                                           ===========    ===========


Net income per common share:
      Primary and fully diluted ........................   $      0.26    $      0.26

Average common and common equivalent shares outstanding:
           Primary .....................................     8,371,366      8,281,659
                                                           ===========    ===========
           Fully diluted ...............................     8,397,349      8,296,248
                                                           ===========    ===========

     See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                              KRONOS INCORPORATED
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
                                    UNAUDITED

                                                                     December 28,  September 30,
                                                                        1996            1996
                                                                     -----------   -------------
                                         ASSETS
<S>                                                                  <C>            <C> 
Current assets:
   Cash and equivalents .............................................$    13,587    $    10,795
   Marketable securities ............................................     20,200         21,995
   Accounts receivable, less allowances for doubtful accounts of $977
      at December 28, 1996 and $987 at September 30, 1996 ...........     28,979         30,622
   Inventories ......................................................      4,534          4,149
   Deferred income taxes ............................................      3,025          3,025
   Other current assets .............................................      4,033          3,765
                                                                     -----------    -----------
          Total current assets ......................................     74,358         74,351
Equipment, net ......................................................     15,643         14,738
Excess of cost over net assets of businesses acquired ...............      6,955          7,221
Other assets ........................................................     10,818          8,556
                                                                     -----------    -----------
          Total assets ..............................................$   107,774    $   104,866
                                                                     ===========    ===========

                          LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses ............................$    10,997    $    11,894
   Accrued compensation .............................................      9,045          8,445
   Federal and state income taxes payable ...........................      1,465          1,367
   Unearned service revenue .........................................     17,492         16,388
                                                                     -----------    -----------
          Total current liabilities .................................     38,999         38,094
Deferred income taxes ...............................................      2,236          2,236
Unearned service revenue ............................................      2,690          2,721
Other liabilities ...................................................        615            717
Shareholders' equity:
   Preferred Stock, par value $1.00 per share:  authorized 1,000,000 shares,
      no shares issued and outstanding
   Common Stock, par value $.01 per share:  authorized 12,000,000 shares,
    8,138,645    shares and 8,124,133 shares issued at December 28, 1996 and
    September 30, 1996, respectively ................................         81             81
   Additional paid-in capital .......................................     27,500         27,512
   Retained earnings ................................................     35,959         33,773
   Equity adjustment from translation ...............................      (271)          (251)
   Cost of Treasury Stock (1,196 shares and 583 shares at
      December 28, 1996 and September 30, 1996, respectively) .......       (35)           (17)
                                                                     -----------    -----------
          Total shareholders' equity ................................     63,234         61,098
                                                                     -----------    -----------
          Total liabilities and shareholders' equity ................$   107,774    $   104,866
                                                                     ===========    ===========

     See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                              KRONOS INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                    UNAUDITED

                                                                                     Three Months Ended
                                                                                   ------------------------
                                                                                 December 28, December 30,
                                                                                     1996        1995
                                                                                   --------    --------

<S>                                                                                <C>         <C>   
Operating activities:
     Net income ................................................................   $  2,186    $  2,151
     Adjustments to reconcile net income to net cash and equivalents
         provided by operating activities:
               Depreciation ....................................................      1,460       1,001
               Amortization of deferred software development costs and
                   excess of cost over net assets of businesses acquired .......      1,022         753
               Changes in certain operating assets and liabilities:
                   Accounts receivable, net ....................................      1,651       1,766
                   Inventories .................................................       (382)        (29)
                   Unearned service revenue ....................................      1,015         988
                   Accounts payable, accrued compensation
                       and other liabilities ...................................        (95)        985
                   Net investment in sales-type leases .........................     (1,810)
               Other ...........................................................       (498)       (458)
                                                                                   --------    --------
                       Net cash and equivalents provided by operating activities      4,549       7,157

Investing activities:
     Purchase of equipment .....................................................     (2,229)     (2,312)
     Capitalization of software development costs ..............................     (1,163)       (705)
     (Increase) decrease in marketable securities ..............................      1,795      (1,975)
     Acquisitions of businesses ................................................       (178)
     Other .....................................................................         (9)        146
                                                                                   --------    --------
                       Net cash and equivalents used in investing activities ...     (1,784)     (4,846)

Financing activities:
     Principal payments under capital leases ...................................        (18)
     Net proceeds from exercise of stock option and employee stock
         purchase plans ........................................................         26         169
                                                                                   --------    --------
                       Net cash and equivalents provided by financing activities         26         151

Effect of exchange rate changes on cash and equivalents ........................          1         (19)
                                                                                   --------    --------
Increase in cash and equivalents ...............................................      2,792       2,443
Cash and equivalents at the beginning of the period ............................     10,795      14,727
                                                                                   --------    --------
Cash and equivalents at the end of the period ..................................   $ 13,587    $ 17,170
                                                                                   ========    ========

     See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>


                               KRONOS INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE A - General

The accompanying  unaudited condensed  consolidated financial statements include
all  adjustments,  consisting  of normal  recurring  accruals,  that  management
considers  necessary for a fair presentation of the Company's financial position
and results of operations as of and for the interim periods  presented  pursuant
to the rules and regulations of the Securities and Exchange Commission.  Certain
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to such rules and  regulations,  although the Company believes
the  disclosures  in  these  financial  statements  are  adequate  to  make  the
information  presented not misleading.  These condensed  consolidated  financial
statements  should be read in conjunction with the Company's  audited  financial
statements  for the  fiscal  year  ended  September  30,  1996.  The  results of
operations  for the three month period ended  December 28, 1996 and December 30,
1995 are not  necessarily  indicative  of the results  for a full  fiscal  year.
Certain amounts have been  reclassified in fiscal 1996 to permit comparison with
fiscal 1997.

NOTE B  -  Fiscal Quarters

The Company utilizes a system of fiscal quarters.  Under this system,  the first
three  quarters  of each  fiscal  year end on a  Saturday.  However,  the fourth
quarter of each fiscal year will always end on  September  30.  Because of this,
the number of days in the first and fourth quarters of each fiscal year may vary
slightly  from year to year.  The second and third  quarters of each fiscal year
will be exactly thirteen weeks long. This policy does not have a material effect
on the comparability of results of operations between quarters.

NOTE C - Inventories

Inventories consist of the following (in thousands):
                                              December 28,       September 30,
                                                 1996                1996
                                         ------------------- -------------------
                                                                                
Finished goods                                   $2,340             $2,148
Work - in - process                                 432                283
Raw materials                                     1,762              1,718
                                         ------------------- -------------------
                                                 $4,534             $4,149
                                         =================== ===================


<PAGE>



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

Results of Operations

       Revenues. Revenues for the first quarter of fiscal 1997 amounted to $37.1
million as compared  with $31.5 million for the first quarter of the prior year.
Revenue growth  amounted to 18% and 20% in the first quarters of fiscal 1997 and
1996, respectively.  During the quarter, the Company continued the transition of
its core products from DOS and Unix  platforms to the Windows and  client/server
environments.  In  December,  an  enhanced  version  of the  Company's  time and
attendance  Windows product was released for distribution.  Due to the timing of
that  product  release,  there  was no  significant  impact on  revenues  in the
quarter.  The Company anticipates  releasing an enhanced version of its time and
attendance  product in the  client/server  environment  in the second quarter as
well as  enhanced  versions  of its  time  and  attendance  product  in both the
client/server and Windows environment  throughout fiscal 1997. Revenue growth in
fiscal  1997 will  depend in part on the  commercial  success of its Windows and
client/server versions of its time and attendance product.  Product revenues for
the  quarter  increased  14% to $25.7  million  principally  driven by  customer
demand.  Service  revenues for the quarter  increased 28% to $11.4 million.  The
growth in service  revenues  reflects  increases  in  maintenance  revenue  from
expansion of the installed  base as well as an increase in the level of services
accompanying the sale of new products.

       Gross  Profit.  Gross profit as a  percentage  of revenues was 62% in the
first  quarter of fiscal 1997 as compared  with 60% in the first  quarter of the
prior year.  The  improvement  in gross profit was evidenced in both product and
service gross profit.  Product gross profit increased to 75% in the quarter from
73% in the first  quarter of the prior year.  The  improvement  in product gross
profit in the first quarter of fiscal 1997 is  principally  attributable  to the
Company's  ability  to  decrease  the per  unit  product  cost  of the  hardware
component of its  systems.  Service  gross profit  increased to 31% in the first
quarter  of fiscal  1997 from 27% in the first  quarter of the prior  year.  The
increase in service  gross  profit is  primarily  attributable  to the growth in
service  revenues.  The Company has been able to absorb the  increase in service
volume without a proportionate increase in service expenses, favorably impacting
gross margins.  This has been  accomplished  by the  implementation  of programs
which focus on revenue  enhancement for services  provided,  as well as improved
efficiency in the delivery of such services.

       Expenses.  Expenses as a  percentage  of  revenues  were 52% in the first
quarter of fiscal  1997 as compared  with 49% in the first  quarter of the prior
year. Sales and marketing  expenses as a percentage of revenues increased to 35%
in the first  quarter of fiscal 1997 from 33% in the first  quarter of the prior
year.  The increase in sales and marketing  expenses as a percentage of revenues
is a result  of the  Company's  investment  in its  international  direct  sales
organization and corporate marketing organization.


<PAGE>



       Engineering,  research and development expenses increased as a percentage
of  revenues to 10% in the first  quarter of fiscal 1997 as compared  with 8% in
the first  quarter of the prior year.  The growth in  engineering,  research and
development  expenses as a percentage  of revenues  results  primarily  from the
Company's continuing  development of new products.  Expenses of $3.8 million and
$2.6 million in the first quarter of fiscal 1997 and 1996 are net of capitalized
software development costs of $1.2 million and $.7 million, respectively.

       General and administrative  expenses as a percentage of revenues amounted
to 7% for all periods  presented.  Other (income) expense,  net amounted to less
than 1% of revenues for all periods  presented.  Other (income) expense,  net is
composed  primarily of amortization of intangible assets related to acquisitions
made by the Company which is partially  offset by interest  income earned on its
investments.

       Income  Taxes.  The  provision for income taxes as a percentage of pretax
income was 38% in the first quarters of both fiscal 1997 and 1996. The Company's
effective  income tax rate may fluctuate  between periods as a result of various
factors, none of which is material,  either individually or in aggregate, to the
consolidated results of operations.


Liquidity and Capital Resources

       Working  capital as of December  28, 1996,  amounted to $35.4  million as
compared with $36.3  million at September 30, 1996. As of those dates,  cash and
equivalents  and  marketable  securities  amounted  to $33.8  million  and $32.8
million, respectively.  Cash generated from operations decreased to $4.6 million
in the first  quarter of fiscal 1997 from $7.2  million in the first  quarter of
the prior year,  principally  due to the  Company's  investment  in its internal
customer lease program. The Company's investment in equipment in the quarter was
comparable to its investment in the first quarter of the prior year.

       Cash  generated  from   operations  was  more  than  sufficient  to  fund
investments in equipment and capitalized software development costs. The Company
expects to fund its investments in equipment and software development costs over
the  remainder of its fiscal year with existing  cash and  equivalents  together
with  internally  generated  cash.  The Company  recently  decided to cancel its
committed  bank  line of  credit  of $3.0  million,  in light  of the  Company's
available cash and equivalents. The Company has replaced the line of credit with
an informal $3.0 million  credit  facility in which the bank may offer credit to
the Company at the bank's discretion.



<PAGE>


Certain Factors That May Affect Future Operating Results

         The Company's actual operating  results may differ from those indicated
by forward  looking  statements  made in this Quarterly  Report on Form 10-Q and
presented  elsewhere  by  management  from time to time  because  of a number of
factors,  including the potential  fluctuations in quarterly results,  timing of
new product  announcements  or introductions by the Company and its competitors,
competitive  pricing  pressures,  the ability to attract  and retain  sufficient
technical personnel,  the dependence on alternate distribution channels, and the
dependence on the Company's time and attendance product line and on key vendors,
as further  described below and in the Company's  Annual Report on Form 10-K for
the fiscal  year ended  September  30,  1996,  which  factors  are  specifically
incorporated by reference herein.

         Potential  Fluctuations in Quarterly Results.  The Company's  quarterly
operating  results may fluctuate as a result of a variety of factors,  including
the timing of the  introduction of new products and product  enhancements by the
Company and its competitors,  market acceptance of new products, mix of products
sold, the purchasing patterns of its customers, competitive pricing pressure and
general economic conditions.  The Company historically has realized a relatively
larger percentage of its annual revenues and profits in the fourth quarter and a
relatively smaller percentage in the first quarter of each fiscal year, although
there can be no assurance  that this pattern will continue.  In addition,  while
the  Company  has  contracts  to supply  systems  to certain  customers  over an
extended period of time,  substantially all of the Company's product revenue and
profits  in each  quarter  result  from  orders  received  in that  quarter.  If
near-term   demand  for  the  Company's   products  weakens  or  if  significant
anticipated  sales in any  quarter do not close  when  expected,  the  Company's
revenues for that quarter will be adversely affected.  The Company believes that
its  operating  results for any one quarter are not  necessarily  indicative  of
results for any future period.

         Product Development and Technological  Change. The markets for time and
attendance and data collection systems are characterized by continual change and
improvement in computer software and hardware  technology.  The Company's future
success will depend largely on its ability to enhance its existing product lines
and to develop new products and  interfaces to third party  products on a timely
basis for the increasingly  sophisticated  needs of its customers.  Although the
Company is continually  seeking to further enhance its product  offerings and to
develop  new  products  and  interfaces,  there can be no  assurance  that these
efforts will succeed, or that, if successful,  such product  enhancements or new
products  will  achieve  widespread  market  acceptance,  or that the  Company's
competitors  will not  develop  and market  products  which are  superior to the
Company's  products  or  achieve  greater  market  acceptance.  The  Company  is
transitioning  its product  offerings from DOS and Unix platforms to the Windows
and  client/server  environments.  The Company's  revenue  growth and results of
operations  in fiscal 1997 will  depend in part on the  success of this  product
transition.


<PAGE>



         Competition. The time and attendance and data collection industries are
highly  competitive.   Competition  is  increasing  as  competitors  in  related
industries,  such as human resources and payroll, enter the market.  Advances in
software  development  tools have accelerated the software  development  process
and,  therefore,  can allow  competitors  to penetrate  certain of the Company's
markets.  Maintaining  the Company's  technological  and other  advantages  over
competitors  will require  continued  investment  by the Company in research and
development and marketing and sales programs. There can be no assurance that the
Company will have  sufficient  resources to make such  investments or be able to
achieve  the  technological  advances  necessary  to  maintain  its  competitive
advantages. Increased competition could adversely affect the Company's operating
results through price reductions and/or loss of market share. 
<PAGE>

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

          (a)    Exhibits
 
          10.1   Amendment dated October 11, 1996 to Lease dated November 6, 
                 1992, as amended, between John Hancock Mutual Life Insurance 
                 Company and the Registrant, relating to premises leased in 
                 Waltham, MA.

          10.2   Fleet Bank Letter Agreement and Promissory Note dated 
                 January 1, 1997 relating to amendment of $3,000,000 credit 
                 facility.

          11     Statement re: Computation of Per Share Earnings

          27     Financial Data Schedule

          (b)    Reports on Form 8-K

                 There were no reports on Form 8-K filed during
                 the fiscal quarter ended December 28, 1996.
<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.

                                                KRONOS INCORPORATED



                                                By   /s/   Paul A. Lacy
                                                           Paul A. Lacy
                                                     Vice President of Finance
                                                       and Administration
                                                   (Duly Authorized Officer and
                                                    Principal Financial Officer)





February 7, 1997
<PAGE>



                               KRONOS INCORPORATED

                                  EXHIBIT INDEX



     Exhibit
     Number        Description


      10.1         Amendment  dated October 11, 1996 to Lease dated  November 6,
                   1992, as amended,  between John Hancock Mutual Life Insurance
                   Company and the  Registrant,  relating to premises  leased in
                   Waltham, MA.

      10.2         Fleet Bank Letter Agreement and Promissory Note dated 
                   January 1, 1997 relating to amendment of $3,000,000 credit 
                   facility.

      11           Statement re: Computation of Per Share Earnings

      27           Financial Data Schedule