UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A1
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 0-8193

DAEDALUS ENTERPRISES, INC.
(Exact name of registrant as specified in charter)

DELAWARE 38-1873250
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization)

300 Parkland Plaza (P.O. Box 1869)
Ann Arbor, Michigan 48106
(Address of principal executive offices)

(313) 769-5649
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 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
such filing requirements for the past 90 days.

Yes [X] No [ ]
Indicate by check mark if 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. [ X]

Aggregate market value of voting common stock held by non-affiliates of
Registrant at September 30, 1997 (computed by reference to the average bid
and asked prices of the Registrant's common stock): $1,335,474. (Assuming,
but not admitting for any purpose, that all executive officers and directors
of the Registrant, and their associates, may be deemed affiliates.)

Number of shares outstanding of common stock, $.01 par value, as of
September 30, 1997: 534,024 shares

DOCUMENTS INCORPORATED BY REFERENCE
None.

ITEM 1. BUSINESS

GENERAL

Daedalus Enterprises, Inc. (the "Company"), incorporated in Delaware
in August 1968, manufactures products for, and performs development projects
in, the field broadly described as "remote sensing." Remote sensing is the
detection or measurement of various physical parameters of an object or
system without making direct contact with the observed object. The
Company's customers use these remote sensing products to detect and measure
either the emitted or reflected radiation of objects or systems.

The Company is also developing a remote sensing service operation
that would utilize the Company's technology to acquire and process remote
sensing data for users of such data. See "Growth Plan".

PRODUCTS

The principal products manufactured by the Company are airborne
imaging systems. The Company's customers install these systems in aircraft
and use them to acquire optical radiation data from objects on the earth's
surface and in the atmosphere. This data is then processed into a useful
form by data handling and data processing equipment which, in some cases, is
also manufactured by the Company. A principal application of the Company's
remote sensing products has been the measurement of environmental parameters
in support of pollution control programs and environmental impact studies.

The Company manufactures these products by integrating precision
optical, mechanical and electronic components into unified systems. These
components are either purchased off the shelf, or custom designed by the
Company and manufactured by the Company, or designed and specified by the
Company for outside manufacture. Highly technical personnel, supported by
supervisors and engineers, assemble, test and calibrate these systems in
preparation for delivery to customers.

The Company engages in customer-funded projects for the development
of advanced equipment in the remote sensing field. In addition to being a
source of revenue, the Company undertakes these projects to increase its
technical expertise in areas demonstrating strong potential for use in
future products. Some of these projects may lead to the incorporation of
newly developed technology into the existing product line or an expansion of
the product line.

During fiscal 1997, the Company shared costs on two U.S. government
sponsored Small Business Innovation Research ("SBIR") programs. One of
these programs, Large Format Multispectral Camera, is scheduled for
completion in early fiscal 1998. The other, Laser Search and Rescue, will
be completed in late fiscal 1998. The Company has applied for a patent
related to the LASAR search and rescue technology developed under the SBIR
program. The Company is conducting marketing efforts and actively seeking
partners for participation in Phase III commercialization efforts for these
two programs, as well as lobbying the U.S. Government for additional funds
for these programs.

Revenue from standard remote sensing systems and customer-funded
product development systems during the three most recent fiscal years ended
July 31 was approximately as follows:

Year Standard Customer-Funded Product Total
Systems Development Systems (000)
(000) (000)
- ------------------------------------------------------------

1997 2200 788 2988
1996 1657 430 2087
1995 2340 1278 3618

MARKETING

Marketing activities are conducted principally through the Company's
office in Ann Arbor, Michigan, primarily through direct customer contact.
The Company markets its products through direct sales and leases with a
purchase option. In addition to direct marketing of its standard systems,
the Company is engaged in seeking customer-funded product development
projects for advanced equipment. See "Growth Plan" for a description of
expected changes in the Company's marketing strategy as it implements its
growth plan.

Products are marketed to government customers in the United States
and Canada by the Company's sales force which consists of three persons, one
of whom is an officer who carries on other duties in addition to sales
efforts, and a commissioned representative who handles commercial customers.

The Company has no active international subsidiaries or branch
offices. In several countries, the Company has exclusive Sales Agency
Agreements with existing high technology marketing operations. These
agents' efforts are supported by the Company's own sales personnel, who also
travel to other countries where there is no formal representation.

CUSTOMERS

The Company's customers include aerospace, aerial survey, oil and
mineral exploration companies, universities and domestic and foreign federal
and state government agencies. The Company's ability to continue to
contract with such parties is dependent on political, economic and social
factors. Revenue from international markets are sometimes subject to
receiving approved U.S. government export licenses. A substantial portion
of revenue in both domestic and international markets is generated by
customers who depend, at least in part, upon federal, state or local
government appropriations. Many of these customers are involved in programs
aimed at improving man's impact on the environment. See "Growth Plan" for a
description of the Company's efforts to diversify its customer base.

The following table sets forth information with respect to domestic
and international revenue during the three most recent fiscal years ended
July 31:

INTERNATIONAL AND DOMESTIC REVENUE
(in thousands)

Year International Domestic
Asia Europe Other(1) U.S. Gov't. Other Total

1997 1178 154 0 1625 31 2988
1996 562 814 0 618 93 2087
1995 43 2255 8 1228 84 3618

(1) Revenue from geographic areas that amount to less than 10% of total
revenue are shown as "Other."

International revenue normally consists largely of standard
products, while domestic revenue is largely customer-funded product
development. The standard product and customer-funded product development
portions of the business are conducted by the same pool of personnel using
the same operating space and equipment and constitute a single industry
segment. For further information regarding the Company's revenue by
geographic area and operations, see the table included under the caption
"Selected Financial Data", and Note J to Consolidated Financial Statements
which table and note are incorporated herein by reference.

To protect against foreign currency transaction losses,
international sales are generally contracted in U.S. dollars and many large
contracts are secured by irrevocable letters of credit. The Company also
generally receives substantial deposits on large orders from international
customers.

A majority of the Company's revenue each year is derived from a
small number of high dollar value equipment sales and contracts to a
relatively small number of customers. Because each customer may represent a
substantial portion of total revenue for that fiscal year, a small increase
or decrease in the number of customers with whom the Company has contracts
could generate a relatively large percentage increase or decrease in total
revenue. Revenue during a particular fiscal year may result, in substantial
part, from contracts with a single customer. Revenue from U.S. Government
agencies accounted for approximately 54%, 30% and 34% of revenue for fiscal
1997, 1996 and 1995, respectively. Asian customers are an important source
of revenue for the Company, generating 38% and 29% of operating revenue for
fiscal years ended July 31, 1997 and 1996. Italian customers were an
important source of revenue for the Company in fiscal 1995 (28%), but no
significant orders were received in fiscal 1997 or fiscal 1996 as the
Italian market for the Company's current products is near saturation.

In fiscal 1997, 1996 and 1995, the Company had three, four and three
major customers, respectively, each accounting for at least 10% of the
Company's revenue from operations. Such major customers accounted for
approximately 91%, 81% and 91% of the Company's revenue from operations in
fiscal 1997, 1996 and 1995, respectively. See Note J to Consolidated
Financial Statements. No single customer has generated a majority of the
Company's revenue during any consecutive years during this period.
Management does not consider the Company's business to be dependent upon a
single customer or group of customers.

PRODUCT DEVELOPMENT

The Company is in an industry characterized by technological change,
which requires continuous expenditure of funds for research, development and
product improvement. The Company currently intends to use, whenever
possible, external contract funds and licensing agreements to expand its
product line and minimize internal research and development costs.

The Company has incurred research and development expense of
approximately $102,000, $469,000 and $586,000 for fiscal 1997, 1996 and
1995, respectively. In fiscal 1997, 1996 and 1995 the Company expended
approximately $789,000, $395,000 and $839,000, respectively, in performing
customer-funded product development under contracts for advanced equipment
in the field of remote sensing.

The Company has five employees whose primary responsibility is
product development and five employees who, in addition to their primary
production, manufacturing and administrative duties, also contribute to the
product development effort.

RAW MATERIALS

The Company's operations require a variety of unique precision
optical-mechanical and electronic components and other supplies. Although
most components and supplies are generally available from many commercial
sources, certain components, which are designed and specified to meet the
Company's particular requirements, have a limited number of manufacturing
sources. Due to the specialized nature of these components and the limited
quantities in which they are purchased, procurement lead times may be as
long as six months. However, the Company believes that the loss of a single
supplier would not be expected to have a material adverse effect on the
Company.

COMPETITION

There are several competitors that compete with individual products
produced by the Company. During the past few years, one of these
competitors has begun offering to build products that compete with more of
the Company's standard remote sensing systems. To date, the Company has not
been materially affected by this competition. The Company expects an
increase in the number of competitors as governments worldwide continue to
reduce military spending since many companies selling similar instruments
for military purposes are now beginning to pursue non-military customers.
In addition, the Company's products compete with related technologies, such
as satellite remote sensing systems. In general, the superior spectral and
spatial resolution and scheduling flexibility of the Company's products
enable the Company to compete effectively with suppliers of satellite-based
data when the capabilities of the Company's products justify the generally
more costly airborne data. The Company has been able to compete
successfully against its competitors through the demonstrated performance of
its products and its product support mechanisms, and through the excellent
reputation it has earned and maintained for the durability of its products.
The Company also competes on the basis of its continuous efforts to offer
product improvements and new products that keep its technology at the
leading edge and offer customers the latest innovations.

Management believes that the Company competes successfully in the
field of product development due to the Company's special capabilities in
remote sensing technology and its history of successful completion of such
development products. See "Growth Plan" for a description of expected
changes in competition as the Company implements its growth plan.

BACKLOG

Total August 31, 1997 backlog of unfilled customer orders was
approximately $530,000 compared to approximately $895,000 one year earlier.
The Company expects to fill substantially all of its August 1997 backlog
during fiscal 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - New Orders and Backlog".

GOVERNMENT CONTRACTS

Contracts with U.S. Government agencies generally provide for
reimbursement of costs plus a fee. Revenue, fees and profits on such
contracts are generally recognized on the costs incurred to date.
Reimbursable contract costs (including overhead and general and
administrative expenses) are generally subject to audit and adjustment by
negotiation between the Company and U.S. government representatives.
Revenue under these contracts is recorded at amounts that are expected to be
realized upon the final settlement with any adjustments to revenue reflected
in the year of settlement.

GROWTH PLAN

The Company is in the process of implementing a growth plan that is
focused on two initiatives to provide growth in revenues and profits from
new market areas. The goal of the growth plan is to diversify the Company's
revenue-producing activities and reduce fluctuations in the Company's
revenue and earnings. Management has focused its efforts on two areas of
the plan with the most near-term potential.

The first growth area involves the use and sale of airborne digital
cameras ("ADC") developed by the Company for the mapping of infrastructure
within narrow corridors. Examples of the types of infrastructure that would
be mapped with such a system include gas pipelines, electrical distribution
systems, railroads and highways. The Company has developed an enhanced
version of the ADC and an image processing system that can be bundled with
the ADC for delivery to its customers and for use by the Company in
performing services for customers. The Company completed three contracts in
fiscal 1996 for which it has utilized the ADC, and in the fourth quarter of
fiscal 1996, the Company entered into a marketing alliance with a major
company which provides infrastructure maintenance services to the electric
and gas utilities, and railroads in the United States and Canada. Although
the Company did not receive any such contracts in fiscal 1997, marketing
efforts by the Company and its marketing partner have generated considerable
market interest in the ADC which the Company hopes will generate orders in
fiscal 1998. The Company has also been requested to team with several
engineering companies to provide airborne digital camera services for a
large multi-year inventory program that would establish a foothold in this
emerging market. The Company is continuing to pursue various alternatives to
obtain the additional funding necessary to bring these services to market.
However, there can be no assurance that such funding will be obtained. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Sources of Capital".

The other growth area involves performing domestic environmental
surveys to provide a better applications market for the Company's airborne
multispectral scanners. In order to exploit this market, the Company must
perform specific applications and show the results to be reliable and
cost-effective. To date, the Company has completed several contracts in
this area for customers such as the U.S. Environmental Protection Agency and
the U. S. Bureau of Reclamation, and continues to pursue other demonstration
projects. In addition, the Company has completed development of an airborne
digital multispectral camera for NASA under a SBIR project and has
negotiated a strategic alliance to bring this product to the commercial
market in the spring of 1998.

Competition in these new areas of business will be different than
that faced by the Company in its core business and competitors will be more
numerous since there are many more companies offering products and services
in each of these areas of new business. Competition will include
conventional aerial survey firms using film cameras and commercial remote
sensing satellite data. The commercial remote sensing satellite competitors
are in the formative stage and will not have products to offer until two to
three years in the future. The Company believes, however, that its
capabilities in providing the source of unique data using its airborne
digital camera and multispectral scanners for each of these market areas,
coupled with its strategy to team with selected partners in processing and
analyzing such data, will provide the opportunity to secure significant new
business and will enable the Company to compete successfully in each of
these market areas.

These growth plan initiatives will require changes in the Company's
sales and marketing strategies and budgets. The marketing alliance for the
infrastructure information service calls for the Company's partner to
perform most marketing and sales functions. However, the Company will
provide brochures, data samples, and other support to its partner. In
addition, it is anticipated that this market will require more participation
in trade shows and more space advertising than the Company has engaged in
during previous years.

The customers for these new products and services will also be
different than those involved in the Company's core product business. It is
expected that these customers are unfamiliar with the Company. However,
they are familiar with the services provided by the Company's marketing
alliance partner and this is one of the primary strategies to accelerate
access to these markets.

Although implementation of the growth plan began in fiscal 1995,
material revenue impact is not expected until late fiscal 1998 at the
earliest. These strategies are intended to reduce fluctuations in the
Company's revenue and earnings and enhance the Company's profitability and
stockholder value. However, the Company's implementation of these growth
initiatives has been slowed by the small size of the Company's staff, by its
current financial position and by the lack of solid market information
caused by the Company's limited resources. The Company is seeking partners
and additional financing to help bring these services into the market more
quickly. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Sources of Capital".

PERSONNEL

As of September 30, 1997, the Company had 16 full-time employees,
three of whom were executive officers.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company (who serve as such at the
pleasure of the Board of Directors), their ages and the position or office
held by each are as follows:

Name Age Positions with the Company
- ---- --- --------------------------
Thomas R. Ory 58 President and Chief Executive Officer and
Director
Charles G. Stanich 53 Vice President-Research and Development and Chief
Operating Officer and Director
Jane E. Barrett 46 Vice President-Finance, Treasurer and Chief
Financial Officer

Mr. Ory, who was appointed President and Chief Executive Officer in
August 1987, joined the Company in 1972 as Director of its Applications
Division, served as Vice President-Marketing from 1979 to 1984, and
Executive Vice President from 1985 to 1987.

Mr. Stanich, who was appointed Chief Operating Officer in 1987,
joined the Company in 1974 and served as Manager, Research and Development
from 1979 to 1984, and Vice President-Research and Development since 1984.

Ms. Barrett, who was appointed Vice President-Finance and Chief
Financial Officer in March 1997 and who was appointed Treasurer in August
1996, joined the Company in May 1996 as its Controller. Prior to joining
the Company, Ms. Barrett was employed by Federal-Mogul Corporation, a
Fortune 500 manufacturer and distributor of automotive parts, from 1984 to
1996 in various managerial accounting positions. Her most recent position
was International Accounting Manager with responsibility for the financial
functions of a $600 million international division.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS AND EXECUTIVE OFFICERS

The following is a listing of the members of the Board of Directors
of the Company and includes information regarding the individual's age,
principal occupation, other business experience, directorships in other
publicly-held companies and term of service with the Company. Directors are
elected at each Annual Meeting of Stockholders, each to hold office until
the next Annual Meeting of Stockholders or until his successor is elected
and qualified. Information regarding executive officers is included under
"Item 1. Business" pursuant to General Instruction G.

Name Age Positions with the Year First
Company and Principal Elected or Appointed
Occupation or Employment Director
- ----------------------------------------------------------------------------

John D. Sanders 59 Director and Chairman of the Board 1982
Thomas R. Ory 58 President and Chief Executive 1987
Officer and Director
William S. Panschar 40 Director 1989
Philip H. Power 59 Director 1985
Charles G. Stanich 53 Vice President-Research and 1989
Development, Chief Operating
Officer and Director

Mr. Sanders serves as a business consultant to emerging technology
companies. He was Chairman and Chief Executive Officer of Tech News, Inc.,
a news publisher, from 1988 to 1996, prior to its sale to The Washington
Post Company. In addition, Mr. Sanders has been a Registered Representative
of Wachtel & Co., Inc., a Washington D.C.-based stock brokerage firm, since
1968. Mr. Sanders serves on the boards of Information Analysis, Inc.,
Hadron Inc., ITC Learning Corp. and S. T. Research Corp.

Mr. Ory, who was appointed President and Chief Executive Officer of
the Company in August 1987, joined the Company in 1972 as Director of its
Applications Division, served as Vice President-Marketing from 1979 to 1984,
and as Executive Vice President from 1985 to 1987.

Mr. Panschar is an insurance agent at The Equitable Life
Assurance Society of the United States, a life insurance and annuity
company, and a registered representative at EQ Financial Consultants, Inc.,
a company which sells mutual funds and other various products, since June
1996. Prior to that he was a Vice-President of National City Bank, Indiana
from October 1993 to May 1996. Prior to taking the position at National
City Bank, Mr. Panschar was the Director-Corporate Development of The Alquin
Group from 1991 to October 1993. Prior to joining The Alquin Group, Mr.
Panschar was employed by Avis Enterprises, Inc. as Vice President-Mergers
and Acquisitions from 1987 to 1990 and by Citicorp Industrial Credit Inc.
from 1981 to 1987.

Mr. Power has served as the Chairman of Suburban Communications
Corp., Livonia, Michigan, for more than five years. Mr. Power currently
serves on the board of Jacobson Stores Inc.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors, and persons who own
more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Officers and directors and greater than 10%
shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it since August 1, 1996, or written
representations from certain reporting persons that no Forms 5 were required
for those persons, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with.

ITEM 11. EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

The following table provides a summary of compensation paid or
accrued by the Company and its subsidiaries during fiscal 1997, 1996 and
1995 to or on behalf of the Company's Chief Executive Officer and Chief
Operating Officer (the "Named Officers"). None of the Company's other
executive officers earned more than $100,000 in salary and bonus during
fiscal 1997 for services rendered to the Company and its subsidiaries.

Long-Term
Compensation
Annual Securities
Name and Principal Fiscal Compensation Underlying All Other
Position Year Salary Options/SARs Compensation (1)
- --------------------------------------------------------------------------------------------

Thomas R. Ory 1997 $148,000 20,000 $25,865
President and CEO 1996 $148,000 -0- $26,501
1995 $148,000 -0- $28,824

Charles G. Stanich 1997 $130,000 20,000 $24,653
Vice President-Research 1996 $130,000 -0- $25,406
and Development 1995 $130,000 -0- $26,439
and COO

(1) Detail of amounts reported in the "All Other Compensation" column is provided in the table below.

Officer's Name Director Medical Reimburse- Imputed Interest on Pension Plan
Fees ment & Related Tax Interest-Free Loan Contribution
- --------------------------------------------------------------------------------------------

Thomas R. Ory $4,800 $2,630 $ 50 $18,385
Charles G. Stanich $4,500 $4,125 $ 0 $16,028

OPTIONS

The following table sets forth information concerning stock option
grants during fiscal 1997 to the Named Officers. Such options were not
granted pursuant to any of the Company's plans.

Option/SAR Grants in Last Fiscal Year

Individual Grants
Number of Percent of
Securities total
Underlying Options/SARs
Options/SARs Granted to Exercise
Granted Employees in Price Expiration
Name (#)(a) Fiscal Year ($/Share) Date
- ---- ------------ ------------ --------- ----------
T. Ory 20,000 35.2% $2.25 12/10/06
C. Stanich 20,000 35.2% $2.25 12/10/06

(a) 50% of the options became exercisable immediately upon grant and the
remainder become exercisable on the first anniversary of the grant
date.

The following table provides information concerning unexercised
stock options held as of the end of fiscal 1997 by the Named Officers.
There were no options exercised by the Named Officers during fiscal year
1997.

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values

Number of Unexercised Value of Unexercised In-the-Money
Options/SARS at Options/SARs at
Fiscal Year-End Fiscal Year-End
-------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable(a) Unexercisable
- ---- ----------- ------------- -------------- -------------
T. Ory 25,000 10,000 $10,000 -0-
C. Stanich 23,000 10,000 $11,500 -0-

(a) The value of unexercised in-the-money options was calculated
using the last sale price of the Company's Common Stock at
July 31, 1997.

TERMINATION OF EMPLOYMENT

Each of the Named Officers is a party to a Senior Officer Severance
Agreement that would require the Company to pay each such officer an amount
equal to one and one-half times each officer's highest annual W-2
compensation from the Company during the three calendar years immediately
preceding each Officer's termination of employment if such termination of
employment meets one of several criteria. In general, such amounts would be
payable upon termination in anticipation of, or after, a change in control
or upon resignation following a reduction in such officer's salary or other
compensation, any diminution of the Officer's authority or duties or a
significant change in the nature and scope of the Officer's duties, any
change in the Officer's status or title (other than a bona fide promotion)
or any required relocation of the Officer's residence should any event occur
after a change in control or within six months prior to a change in control.
The Officer would also be entitled to continuation of coverage under Company
benefit plans for up to 18 months and to outplacement services. The cash
payment required under the agreement may be paid in a lump sum or in monthly
installments over an 18 month period, depending upon the circumstances of
the change in control.

COMPENSATION OF DIRECTORS

Directors receive $900 per quarter with an additional payment of
$300 for each Board or Committee meeting attended, and are reimbursed for
travel expenses incurred in connection with their attendance at Board and
Committee meetings. In addition, Mr. Sanders received payments of $1,500 per
month for consulting services from the Company from January 1997 through
September 1997.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information with respect to
the beneficial ownership of shares of the Company's Common Stock, as of
September 30, 1997, by each person who is known by the Company to have been
the beneficial owner of 5% or more of the shares of Common Stock outstanding
as of such date, by each director, director-nominee and Named Officer and by
all directors and executive officers as a group. Unless otherwise noted,
each stockholder exercises sole voting and investment power with respect to
the shares beneficially owned.

Name of Number of Percent of
Beneficial Owner Shares(1) Class(2)
- ---------------- --------- ----------
Thomas R. Ory 56,230 (3) 10.1
Charles G. Stanich 40,226 (4) 7.2
John D. Sanders 28,500 (5) 5.3
William S. Panschar 2,760 0.5
Philip H. Power 15,150 2.8
All directors and executive
officers as a group (6 persons) 147,116 (6) 24.8

(1) The column sets forth shares of Common Stock which are deemed to be
"beneficially owned" by the persons named in the table under Rule
13d-3 of the SEC, including shares of Common Stock that may be
acquired upon the exercise of stock options or warrants that are
currently exercisable or become exercisable within 60 days after
September 30, 1997 as follows: Mr. Ory -- 25,000 shares; Mr.
Stanich -- 23,000 shares; Messrs. Sanders, Power and Panschar --
2,250 shares each; and all directors and executive officers as a
group (including 250 shares purchased under the Employee Stock
Purchase Plan within 60 days after September 30, 1997) -- 58,500
shares.

(2) For purposes of calculating the percentage of Common Stock
beneficially owned, the shares issuable to such person upon exercise
of stock options or warrants that are currently exercisable or
become exercisable within the next 60 days are considered
outstanding.

(3) Includes 24,565 shares with respect to which Mr. Ory shares voting
and investment power with his spouse. Mr. Ory's address is P.O. Box
1869, Ann Arbor, Michigan 48106.

(4) Includes 3,526 and 2,700 shares with respect to which Mr. Stanich
shares voting and investment power with his wife and mother,
respectively. Mr. Stanich's address is P.O. Box 1869, Ann Arbor,
Michigan 48106.

(5) Includes 550 shares owned by Mr. Sanders' wife. Mr. Sanders' address
is 4600 N. 26th St., Arlington, Virginia 22207.

(6) Includes the shares described in notes 1, 3, 4 and 5.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

NONE.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Financial Statements, Financial Statement Schedules and Exhibits

1) The following consolidated financial statements are included in
response to Item 8 of this report.

Independent Auditors' Report

Consolidated Statements of Operations and Stockholder's Equity for
the years ended July 31, 1997, 1996 and 1995

Consolidated Balance Sheets--July 31, 1997 and 1996

Consolidated Statements of Cash Flows for the years ended July 31,
1997, 1996 and 1995

Notes to Consolidated Financial Statements

2) Schedules are omitted because of the absence of the conditions
under which they are required or because the information called for is
included in the consolidated financial statements or notes thereto.

3) The exhibits filed herewith are set forth in the Index to
Exhibits which is incorporated herein by reference.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of the Company's
fiscal year ended July 31, 1997.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.

DAEDALUS ENTERPRISES, INC.

By: /s/Thomas R. Ory
Thomas R. Ory, President
November 21, 1997

INDEX TO EXHIBITS

The Commission File Number for all reports filed on Forms 10-K, 10-Q or 8-K
filed by the Company is 0-8193.

Exhibit No. Description

3.01 Certificate of Incorporation of the Company, with all amendments
thereto, as presently in effect (filed as exhibit 3.01 to the 1994
Form 10-K and incorporated herein by reference)

3.02 Bylaws of the Company, with all amendments thereto, as presently in
effect (filed as exhibit 3.02 to the 1994 Form 10-K and incorporated
herein by reference)

4.43 Real Estate Mortgage in the amount of $425,000 dated March 1, 1991,
between the Company and Manufacturers National Bank, Ann Arbor
(formerly filed as exhibit 4.43, Term Note, to the Company's
Quarterly Report on Form 10-Q for the second quarter of fiscal 1991
and incorporated herein by reference)

4.46 First Amendment to Real Estate Mortgage dated December 23, 1991
between the Company and Manufacturers Bank, N.A. (filed as exhibit
4.46 to the Company's Quarterly Report on Form 10-Q for the second
quarter of fiscal 1992 and incorporated herein by reference)

4.55 Mortgage Extension Agreement between the Company and Comerica Bank,
dated October 30, 1995 (filed as exhibit 4.55 to the Company's
Quarterly Report on Form 10-Q for the first quarter of fiscal 1996
and incorporated herein by reference)

4.57 Master Revolving Note and Advance Formula Agreement between the
Company and Comerica Bank, both dated October 25, 1996 (filed as
exhibit 4.57 to the 1996 Form 10-K and incorporated herein by
reference)

10.60* 1983 Incentive Stock Option Plan (filed as exhibit 10.60 to the 1994
Form 10-K and incorporated herein by reference)

10.610* Long-term Incentive Plan (filed as exhibit 10.610 to the 1994 Form
10-K and incorporated herein by reference)

10.611* Stock Option Plan for Nonemployee Directors (filed as exhibit 10.611
to the 1994 Form 10-K and incorporated herein by reference)

10.612* Form of Senior Officer Severance Agreement with Messrs. Ory and
Stanich, dated June 21, 1995 (filed as Exhibit 10.612 to the 1995
Form 10-K and incorporated herein by reference)

10.613* Form of Incentive Stock Option Agreement Under Long-Term Incentive
Plan (filed as exhibit 10.613 to the Company's Quarterly Report on
Form 10-Q for the first quarter of fiscal 1997 and incorporated
herein by reference)

10.614* Form on Non-Qualified Stock Option Agreement Under Long-Term
Incentive Plan (filed as exhibit 10.614 to the Company's Quarterly
Report on Form 10-Q for the second quarter of fiscal 1997 and
incorporated herein by reference)

10.615* Non-Qualified Stock Option Agreement with Mr. Thomas R. Ory, dated
December 10, 1996 (filed herewith)

10.616* Non-Qualified Stock Option Agreement with Mr. Charles G. Stanich,
dated December 10, 1996 (filed herewith)

10.901 Teaming agreement between the Company and Coastal Environmental
Services, Inc., dated March 17, 1994. (filed as exhibit 10.901 to
the 1994 Form 10-K and incorporated herein by reference)

10.902 Agreement between the Company and James W. Sewall Company, dated
March 25, 1994, for the development of the Airborne Digital Camera
and related software for pipeline right-of-way monitoring and other
applications (filed as exhibit 10.902 to the 1994 Form 10-K and
incorporated herein by reference)

10.903 Teaming agreement between the Company and Pacific Meridian
Resources, dated August 17, 1994 (filed as exhibit 10.903 to the
1994 Form 10-K and incorporated herein by reference)

11.01 Computation of Earnings Per Share (filed on October 21, 1997 with
1997 Form 10-K)

21.01 Subsidiaries of the Company (filed on October 21, 1997 with 1997
Form 10-K)

23.01 Consent of Deloitte & Touche LLP (filed on October 21, 1997 with
1997 Form 10-K)

27.01 Financial Data Schedule (filed on October 21, 1997 with 1997 Form
10-K)

*Company's management contracts and compensatory plans and arrangements
which are required to be filed as exhibits in this Form 10-K.

The Company will furnish to its stockholders a copy of any of the exhibits
listed above upon written request and upon payment of a reasonable fee
(limited to the Company's reasonable expenses in furnishing such exhibits).
Request for exhibits may be directed to Jane E. Barrett, Treasurer, Daedalus
Enterprises, Inc., P.O. Box 1869 Ann Arbor, MI 48106.