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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
--------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 1996.

Commission file number 0-10605
ODETICS, INC.

(Exact name of registrant as specified in its charter)
Delaware 95-2588496

(State of or Other Jurisdiction of (I.R.S. Employer

Incorporation or Organization) Identification No.)
1515 South Manchester Avenue, Anaheim, CA 92802

(Address of Principal Executive Offices) (Zip Code)
(714) 774-5000

(Registrant's Telephone Number, Including Area Code)
Securities Registered pursuant to Section 12(b) of the Act:

None
Securities Registered pursuant to Section 12(g) of the Act:
Title of Each Class
Class A Common Stock, $.10 par value
Class B Common Stock, $.10 par value

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

filing requirements for the past 90 days.

YES X NO

---------- ----------
The aggregate market value of the voting stock held by non-affiliates of the

registrant as of June 19, 1996 was approximately $22,750,000.
Check mark indicates that disclosure of delinquent filers pursuant to Item

405 of Regulation S-K is not contained herein, and will not be contained, to the

best of registrant's knowledge, in definitive proxy or information statements

incorporated by reference in Part III of this Form 10-K or any amendment to this

Form 10-K [_].
As of June 20, 1996, there were 5,111,472 shares of registrant's Class A

Common Stock and 1,139,431 shares of registrant's Class B Common Stock

outstanding.
The following documents are incorporated by reference into this report:
Part III incorporates by reference information from the proxy statement of

the registrant for the annual meeting of stockholders to be held on September

27, 1996.
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The exhibit index to this report appears at page 37 of 42 consecutively

numbered pages.

PART I


ITEM 1. BUSINESS.
COMPANY BACKGROUND
Odetics (the "Company") was founded in 1969 to supply digital recorders

for use in the U.S. space program. The Company pioneered new designs and

standards for digital magnetic tape recorders offering enhanced performance in

the adverse environments attendant to space flight, high reliability and long

product life. In the 1970s, the Company broadened its information automation

product line to include time-lapse VCRs for commercial and industrial security

and surveillance applications. Through the Company's GYYR Division, it is a

leading supplier of time-lapse videotape cassette recorders, digital image

processing modules and related products used in security and surveillance

systems.
In the early 1980s, the Company set out to develop the technical expertise

to apply automation to new commercial applications. As part of its initial

development efforts, the Company built ODEX, a prototype six-legged walking

robot now part of the Smithsonian Institution's permanent collection of

historically significant technology. The Company established the Broadcast

Division which pioneered the use of large-library cart machines in broadcast

television stations and satellite uplink operations. The Broadcast Division is

a leading supplier of broadcast automation control systems in the U.S.
The success of the Company's cart machines led the Company to pursue new

applications for information automation technologies, and in 1990, the Company

teamed with E-Systems, Inc. ("E-Systems") to develop and provide a 19mm

automated tape cartridge handling subsystem for E-Systems' EMASS mainframe

computer tape library for the U.S. Government. In 1991, in a strategic move to

expand its business into new and potentially larger markets, the Company

introduced an automated tape handling subsystem for integration into tape

libraries designed for mid-range computers and client/server networks employing

IBM 3480 and similar industry-standard tape cartridges. In January 1993, the

Company formed a separate subsidiary, ATL Products Inc., ("ATL") to pursue the

market for automated tape-libraries.
The Company is a leading supplier of systems and subsystems to automate

the collection, storage, distribution and management of information. The

Company's business strategy is to focus on selected markets in which the Company

may bring to bear its expertise in electromechanical design, real-time software

control and highly reliable system implementations to produce superior products

with a sustainable competitive advantage, and to capture major market shares.

The Company's data storage products manage the vast amounts of data on computer

systems, automate television and cable station operations, record video

surveillance, store information gathered in space exploration and archive movies

for video on demand systems.
2
ATL PRODUCTS, INC.
ATL Products, Inc. is a leading supplier of automated tape libraries to

the midrange and client/server computing marketplaces. The markets for these

products began emerging in the early 1990's as a result of the shift of

computing investments from the mainframe proprietary system environment to the

midrange (and, later, client/server) open system environment. The growth of

these markets is driven by two principal factors; the rapid increase in the

amount of data in midrange and client/server computing environments (which ATL

has referred to as The Data Storm in its marketing literature), and the shift of

business-critical applications from a mainframe to a client/server environment

(which the industry has referred to as downsizing).
ATL has invested in product development, production capability, industry

partnerships, and distribution channels appropriate to this market. It has

focused upon serving the market for users whose data is understood to be

business critical. At the present time ATL's production is more than 1,000

libraries per year. Approximately 75% of ATL's sales are made through a broad

set of Value Added Resellers (VAR's) who have direct contractual relationships

with ATL. The remaining sales are to OEM's who private-label ATL's Products.
ATL entered into a partnership with Digital Equipment Corporation

("Digital") in 1993 and undertook an ambitious development activity to automate

the use of Digital Linear Tape (DLT(TM)), a proprietary Digital tape format

which was, at that time, beginning to emerge as a cost-effective tape solution

for open system applications. As a result of that partnership, ATL brought the

first DLT(TM) Library to market in 1994. ATL currently has stable products and

strong customer relationships and commands the leading market share of DLT(TM)

libraries which represent the fastest growing segment of the market. According

to Freeman Associates, a leading analyst in the data storage market, ATL

Products had a 55% share of the DLT(TM) library market in 1995.
ATL's current product line consists of two families of systems referred to

as the Midrange Library (MRL) family and the Small Library Products (SLP)

family. The MRL family of products was originally designed in 1990 and 1991 for

the 3480-class (3480, 3490, and potentially 3590 and NCTP) of tape systems and

was extended, as a result of the alliance with Digital Equipment Corporation in

1993 to the DLT(TM) tape systems. The SLP family of products was designed in

1993 and 1994 for the DLT(TM) tape system. The MRL family of products is sold

primarily to the midrange and data-intensive server market, while the SLP

product family is sold primarily to the horizontal client/server market for use

in the server segment.
ATL has invested significant resources and engineering effort in the

development of relationships with software Integrated System Vendors (ISV's) in

the open systems storage management area. This program is called the 1/STOP

program and has led to the native support of ATL's libraries by more than 40 of

the leading ISV's representing over 90% of the Unix and NT storage management

market.
A key element in the ATL business strategy is the supply of product

support throughout the product life cycle. Anticipated useful installed life is

in excess of five years and may range up to twenty years. The MRL product

family requires modest installation support and has a six-month preventative

maintenance interval. The SLP product family requires minimal installation

support and has twelve-month preventative maintenance intervals.
ATL began to establish an installed base during 1993. Between 1993 and

1995, the installed base has grown at a CAGR of over 140%. The 1,000th

installation was made late in 1995. ATL is second only to StorageTek in the

number of installed libraries for high performance linear tape technologies;

IBM, with an installed base of approximately 500 libraries is in third place.

At the present time, approximately 70% of the installed base are DLT(TM)

libraries. This ratio is expected to increase to over 80% by the end of the

year since the vast majority of the shipments expected in 1996 are DLT(TM)

libraries.
Sales, Marketing and Principal Customers
ATL's market strategy has been to emphasize management of business

critical data and "Total Cost of Ownership" both to motivate the introduction of

automated tape libraries into the midrange and client/server computing markets

and to differentiate ATL from its competition.
3
From 1990 through the third quarter of fiscal 1995, ATL manufactured

certain automation subsystems utilizing 19mm technology exclusively for E-

Systems. In the third quarter of fiscal 1995, the Company announced that its

contractual relationship with E-Systems was deteriorating and it would incur

charges related to the loss of E-Systems business. On November 15, 1994, the

Company initiated an action against E-Systems alleging breach of contract.

On May 22, 1996, the Company announced that it and ATL Products settled

all pending litigation with E-Systems, Inc. and EMASS, Inc. See "Legal

Proceedings" for further discussion.
Manufacturing and Materials
The manufacture of the MRL and SLP product families occurs on two

continuous unit flow assembly lines. Subassembly work is subcontracted to

outside vendors to the maximum extent practicable. ATL maintains ownership of

proprietary tooling necessary for the manufacture of its products. The MRL and

SLP families are both based upon architectures which have been adapted to

provide a range of products. The MRL architecture was designed for production

rates of two-hundred to six-hundred units per year. The SLP architecture was

designed for production rates of one thousand to four-thousand units per year.
ATL purchases numerous parts and fabricated components for its automation

subsystems. Such parts and components are available from a number of

fabricators in Southern California.
BROADCAST DIVISION
The Broadcast Division's large-library cart machines automate the storage

and televising of commercials, news spots and other television programming

recorded on videotape cassettes. Cart machines increase labor efficiency by

automatically performing tape insertion and other filing tasks previously

performed manually or by machines with limited capacity and utility. Management

believes that enhanced operational efficiencies are a principal factor

underlying the increased automation of broadcast television stations and

satellite uplink operations.
The Broadcast Division' earliest commercial success in the manufacture of

cart machines was with the TCS 2000 followed by the TCS 90. The recent market

trend toward smaller cart machines, coupled with digital hard disk drive

recording devices was led by Odetics with the introduction of highly integrated

cacheing systems employing Odetics' newest cart machine, the TCS 45. The TCS 45

can be coupled with hard drive recorders available from several recognized

suppliers to the broadcast community. Odetics now offers several automated

video management control systems that include software to form powerful

integrated systems. Among these, the MicroSpot(TM) and the SpotBank(TM) do not

utilize cart machines.
Multi channel presentation systems, which integrate the complete line of

Odetics hardware with commonly available broadcast quality program player

devices, are quickly becoming the core business of Odetics Broadcast Division.
Sales, Marketing and Principal Customers
The Broadcast Division sells directly to broadcast television stations,

satellite uplink operations, and other broadcast television and cable television

system operators. Sales and marketing management is located at the Company's

principal facilities in Anaheim, California, with a dedicated field sales force

of four persons operating in four U.S. sales regions. European sales and

marketing activities are conducted and managed by Odetics Europe, Ltd., a wholly

owned subsidiary of the Company. Asia sales and marketing activities are

conducted by Odetics Asia Pacific Pte Ltd., a wholly owned subsidiary of the

Company located in Singapore. Additional representative organizations are

utilized to promote the Broadcast Division's products in various other foreign

markets.
Customers include major television networks such as the British

Broadcasting Corporation, Canadian Broadcasting Corporation, CNBC/FNN, Euronews,

INA (French Cultural Video Archive), International Television News (ITN), NBC,

the PBS Network, Group W Satellite Communications (for the Arts & Entertainment

Network and Discovery Channel) and over 100 independent and network-affiliated

television stations. The Broadcast Division has systems installed in over 30

countries.
4
Manufacturing and Materials
The Broadcast Division maintains a dedicated manufacturing area located

within the Company's Anaheim, California facilities. The Company's SpotBank(TM)

and MicroSpot(TM) products are manufactured at its Austin, Texas facility. The
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