<PAGE>


                                 UNITED STATES
                       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 December 31, 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  1-13780

                        POWER CONTROL TECHNOLOGIES INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


             DELAWARE                                       02-0423416
-------------------------------------------------------------------------------
State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                         Identification No.)

35 EAST 62ND STREET, NEW YORK, N.Y.                            10021
-------------------------------------------------------------------------------
(Address of principal executive
offices)                                                      (Zip Code)

                                 212-572-8600
-------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Act:

         TITLE OF EACH CLASS         NAME OF EACH EXCHANGE ON WHICH
                                                REGISTERED
    -----------------------------    -------------------------------
     Common Stock, par value $.01      New York Stock Exchange, Inc.
               per share

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

      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 requirement for the past 90 days. X Yes 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]

      The aggregate market value of the Common Stock held by non-affiliates of
the registrant as of March 7, 1997 was $114,057,541.

      The number of shares of Common Stock outstanding as of March 7, 1997
were 20,656,502.

                      Documents incorporated by reference

      Portions of the registrant's Proxy Statement for its Annual Meeting of
Stockholders, which is to be filed pursuant to Regulation 14A not later than
April 30, 1997, are incorporated herein by reference into Part III.



<PAGE>







                                     PART I
ITEM 1.   BUSINESS

GENERAL

      Power Control Technologies Inc. ("PCT" or the "Company") was
incorporated in Delaware on June 1, 1988 and is a holding company that
conducts its operations through its wholly-owned subsidiary Pneumo Abex
Corporation ("Pneumo Abex").

      PCT has been a public company since June 15, 1995 when shares of its
common stock, par value $.01 per share (the "PCT Common Stock"), were publicly
distributed (the "PCT Distribution") to existing stockholders of Abex Inc.
("Abex"), PCT's former parent, in connection with the merger (the "Abex
Merger") of Abex and a wholly-owned subsidiary of Mafco Holdings Inc.
("Holdings") and the related transfer (the "Transfer") to a subsidiary of
Mafco Consolidated Group, Inc. ("Mafco") of substantially all of Abex's
consolidated assets and liabilities, other than those relating to its Abex NWL
Aerospace Division ("Aerospace"), which continued to be owned by PCT. On July
16, 1992, Abex was spun off (the "Abex Distribution") from the Henley Group
Inc. ("Henley Group"). Following the Abex Distribution and prior to the PCT
Distribution, Abex, through PCT, sold three of its five operating divisions
and combined the two others to form Aerospace. Prior to July 16, 1992, PCT was
an indirect wholly-owned subsidiary of Henley Group.

      On April 15, 1996, the Company sold to Parker Hannifin Corporation
("Parker Hannifin") its entire Aerospace operations including substantially
all of its assets (the "Aerospace Sale"), pursuant to the terms of a Master
Asset Purchase Agreement for aggregate cash consideration of $201.1 million.
In connection with the Aerospace Sale, Parker Hannifin, the buyer, assumed the
operating liabilities of the Aerospace Business, including the Company's
existing debt.

      On November 25, 1996, Mafco and PCT consummated the transactions
contemplated by a Stock and VSR Purchase Agreement (the "Purchase Agreement"),
dated as of October 23, 1996, by and among Mafco, PCT and PCT International
Holdings Inc. ("Purchaser"), a Delaware corporation and wholly-owned
subsidiary of PCT. Pursuant to the Purchase Agreement, Purchaser acquired from
Mafco (the "Flavors Acquisition"), all the issued and outstanding shares (the
"Shares") of capital stock of Flavors Holdings Inc. ("Flavors"), a Delaware
corporation and wholly-owned subsidiary of Mafco, and 23,156,502 Value Support
Rights (each a "VSR" and, collectively, the "VSRs") issued pursuant to a Value
Support Rights Agreement (the "VSR Agreement"), dated November 25, 1996
between Mafco and American Stock Transfer & Trust Company, as trustee.

      In consideration for the Shares and VSRs, Purchaser paid Mafco cash in
the amount of $180 million. In addition, Purchaser will pay Mafco deferred
cash payments of $3.7 million on June 30, 1997 and $3.5 million on December
31, 1997. The source of funds for such payments was, and is anticipated to be,
available cash. Mafco owns approximately 28.8% of the outstanding shares of
PCT Common Stock and all of the convertible redeemable preferred stock which
has an aggregate liquidation preference of $20.0 million.

      Immediately following the Flavors Acquisition, Mafco Worldwide
Corporation ("Mafco Worldwide"), then a wholly-owned subsidiary of Flavors,
through a series of transactions merged with and into Pneumo Abex, with Pneumo
Abex being the surviving corporation and becoming a wholly-owned subsidiary of
Flavors.

      Through Pneumo Abex (as the successor to Mafco Worldwide), the Company
is primarily in the business of producing licorice extract and other flavoring
agents. Based upon its knowledge of the



                                      2
<PAGE>

licorice industry, the Company believes that it is the world's largest
producer of licorice extract and the only manufacturer of licorice extract in
the United States. The Company also believes that it manufactures more than
70% of the worldwide licorice extract sold to end-users. Approximately 72% of
the Company's licorice sales are to the worldwide tobacco industry for use as
flavoring and moistening agents in the manufacture of American blend
cigarettes as well as other tobacco products (moist snuff, chewing tobacco and
pipe tobacco). While licorice extract represents a small percentage of the
total cost of manufacturing American blend cigarettes and other tobacco
products, the particular formulation and quantity used by each brand is an
important element of the brand's flavor.

      The Company also sells licorice extract to worldwide confectioners, food
processors and pharmaceutical manufacturers for use as flavoring or masking
agents. In addition, the Company sells licorice root residue as a garden mulch
under the name Right Dress. The Company's other products include non-licorice
natural flavors, spices and botanicals that are used as flavoring ingredients
in food and tobacco products.

      The Company has achieved its position as the world's leading
manufacturer of licorice extract through its experience in obtaining licorice
root, its technical expertise at maintaining the consistency and quality of
its product and its ability to develop and manufacture proprietary
formulations for individual customers and applications.

OPERATING STRATEGIES

      The Company intends to maintain its position as the world leader in
licorice extract: (a) by continuing to expand in foreign markets as the
popularity of American blend cigarettes continues to increase; (b) by
improving its manufacturing process and raw material procurement in order to
achieve lower costs and; (c) by forming joint ventures in strategic areas of
the world to increase its overall licorice business.

PRODUCTS AND MANUFACTURING

      Licorice extract products. The Company produces a variety of licorice
products from licorice root, licorice extract produced by others and certain
other flavor ingredients at its facilities in Camden, New Jersey and Gardanne,
France. The Company selects licorice root from various sources to optimize
flavoring and chemical characteristics and then shreds the root to matchstick
size. Licorice solids are then extracted from the shredded root with hot
water. After filtration and evaporation, the concentrated extract is converted
into powder, semifluid or blocks, depending on the customer's requirements,
and then packaged and shipped. For certain customers, extracts from root may
be blended with licorice extracts from other producers and non-licorice
ingredients to produce licorice flavors that meet the individual customer's
requirements. Licorice extract can be further purified to produce licorice
derivatives. The Company maintains finished goods inventories of sufficient
quantity to provide immediate delivery to its domestic tobacco and non-tobacco
customers. Foreign orders for licorice extract are produced upon receipt of
orders and are available to ship in approximately 30 days.

      Other products. The Company also sells non-licorice flavoring agents to
the tobacco, spice, pharmaceutical and health food industries. The Company
cleans, grinds or cuts unprocessed spices and botanicals, principally chilies,
sage, cassia (cinnamon) and cocoa bean shells to customer specifications.


                                      3
<PAGE>




RAW MATERIALS

      Licorice extract is derived from the roots of the licorice plant, a
shrub-like leguminous plant that is indigenous to the Middle East and Central
Asia. The plant's roots, which can be up to several inches thick and up to 25
feet long are harvested when the plant is about four years old. They are then
cleaned, dried and bagged or pressed into bales. Through its foreign
suppliers, the Company acquires the root in local markets for shipment to the
Company's processing facilities in Camden, New Jersey or Gardanne, France.
Most of the licorice root processed by the Company originates in Afghanistan,
China, Pakistan, Azerbaijan, Uzbekistan, Turkmenistan, Syria and Turkey.
Through many years of experience, the Company has developed extensive
knowledge and relationships with their suppliers in these areas. Although the
amount of licorice root the Company purchases from any individual source or
country varies from year to year depending on cost and quality, the Company
endeavors to purchase some licorice root from all available sources. This
enables the Company to maintain multiple sources of supply and relationships
with many suppliers so that if the licorice root from any one source becomes
temporarily unavailable or uneconomic, the Company will be able to replace
that source with licorice root from another area or supplier. During 1996, two
suppliers of root, one in Pakistan and one in China, supplied 15% and 20%,
respectively of the Company's total root purchases. The Company tries to
maintain a sufficient licorice root inventory and open purchase contracts to
meet production needs for up to two years. Licorice root has an indefinite
retention period as long as it is kept dry, and therefore the Company has
experienced little, if any, material spoilage. The Company has been able to
obtain licorice root without interruption since World War II even though there
has been periodic instability in the areas of the world where licorice root
grows.

      In addition to licorice root, the Company also purchases significant
quantities of licorice extract produced by others for use as a raw material.
These licorice extracts are available from producers primarily in China in
quantities sufficient to meet the Company's current requirements and
anticipated requirements for the foreseeable future. During 1996, the Company
had three licorice suppliers of licorice extracts who supplied more than 10%
each of total licorice extract purchases.

      Other non-licorice raw materials for the Company's other blended
licorice and non-licorice products are commercially available through many
domestic and foreign sources.

SALES AND MARKETING

      All licorice sales in the U.S. (including sales of licorice extract to
U.S. cigarette manufacturers for use in American blend cigarettes to be
exported) are made through the Company's executive offices located in Camden,
New Jersey, with technical support from the Company's research and development
department. Outside the U.S., the Company sells its products directly from its
Camden, New Jersey offices and through its French subsidiary, exclusive agents
and independent distributors.

      The Company has established strong relationships with its customers in
the tobacco and other industries because of its expertise in producing and
supplying consistent quality licorice products with a high level of service
and security of supply. The Company ships products worldwide and provides
technical assistance for product development for both tobacco and non-tobacco
applications.

      The Company sells licorice root residue, a by-product of the licorice
extract manufacturing process, as a garden mulch under the name Right Dress.
Distribution of Right Dress is limited to the area within a 200-mile radius of
Camden, New Jersey due to shipping costs and supply limitations.

                                      4
<PAGE>

      In 1996, Pneumo Abex's ten largest customers, seven of which are
manufacturers of tobacco products, accounted for approximately 58% of the
Company's pro forma net revenues and one customer, Philip Morris Companies
Inc. ("Philip Morris") accounted for 26% of the Company's pro forma sales. If
Philip Morris were to stop purchasing licorice extract from the Company, it
would have a significant adverse effect on the financial results of the
Company.

COMPETITION

      The Company believes that its position as the largest manufacturer of
licorice extract in the world arises from its long-standing ability to provide
its customers with a steady supply of high quality and consistent products,
together with superior technical support. Producing licorice extract of
consistently high quality at low cost requires an experienced work force,
careful manufacturing and rigorous quality control. The Company's long-term
relationships and knowledge of the licorice root market are of great value in
enabling it to consistently acquire quality raw materials at reasonable cost.
Although the Company could face increased competition in the future, the
Company currently encounters limited competition in sales of licorice extract
to tobacco companies in many of its markets as a result of the factors
described above and the large investments in inventories of raw materials and
production facilities that are required to adequately fulfill its customers'
needs. Other markets in which the Company operates, particularly the
confectionery licorice market in Europe, are more competitive. Significant
competing producers of licorice extract are government owned and private
corporations in China, a government owned corporation in Iran and a government
affiliated corporation based in Israel.

THE TOBACCO INDUSTRY

      Developments and trends within the tobacco industry may have a material
effect on the operations of the Company.

      Producers of tobacco products are subject to regulation in the U.S. at
the federal, state and local levels. Together with changing public attitudes
toward smoking, a constant expansion of smoking regulations since the early
1970s has been a major cause for the decline in consumption. Moreover, the
trend is toward increasing regulation of the tobacco industry.

      For more than 30 years, the sale and use of cigarettes has been subject
to opposition from government and health officials in the U.S. and other
countries due to claims that cigarette smoking is harmful to an individual's
health. These claims have resulted in a number of substantial restrictions on
the marketing, advertising, sale and use of cigarettes, in diminished social
acceptability of smoking and in activities by anti-smoking groups designed to
inhibit cigarette sales. The effects of these claims together with substantial
increases in state and federal taxes on cigarettes have resulted in lower
cigarette consumption, which is likely to continue in the future.

     During the period 1992-1996, U.S. cigarette consumption declined at an
average of 0.7% per year and exports of cigarettes by U.S. manufacturers
increased at an average rate of 6.0% per year. The growth of U.S. cigarette
exports is due to successful marketing of U.S. cigarette brands by U.S.
tobacco manufacturers and the increasing popularity of the lighter flavor of
American blend cigarettes, particularly in Europe and Asia. In addition,
certain countries have reduced trade barriers that had previously limited
imports of cigarettes manufactured by U.S. manufacturers. In response to the
growing popularity of American blend cigarettes and increased exports by U.S.
manufacturers, foreign manufacturers are now producing American blend
cigarettes.
                                      5
<PAGE>

      Consumption of chewing tobacco and moist snuff is concentrated primarily
in the U.S. U.S. production of chewing tobacco products has steadily declined
for more than a decade and from 1992 through 1996 it has declined by 4.3%.
Consumption has declined because chewing tobacco appeals to a limited and
declining customer base, primarily males living in rural areas. Moist snuff
consumption has risen steadily since the mid-1970s and has increased 1.2% from
1992 through 1996 due to the shift away from cigarettes and other types of
smoking tobacco.

      Health Regulations. Federal law has required health warnings on
cigarettes since 1965 and has recently required states, in order to receive
full funding for federal substance abuse block grants, to establish a minimum
age of 18 years for the sale of tobacco products, together with an appropriate
enforcement program. In recent years, a variety of bills relating to tobacco
issues have been introduced in the Congress of the United States, including
bills that would have (i) prohibited the advertising and promotion of all
tobacco products and/or restricted or eliminated the deductibility of such
advertising expenses; (ii) increased labeling requirements on tobacco products
to include, among other things, addiction warnings and lists of additives and
toxins; (iii) modified federal preemption of state laws to allow state courts
to hold tobacco manufacturers liable under common law or state statutes; (iv)
shifted regulatory control of tobacco products and advertisements from the
Federal Trade Commission to the U.S. Food and Drug Administration (the "FDA");
(v) increased tobacco excise taxes; and (vi) required tobacco companies to pay
for health care costs incurred by the federal government in connection with
tobacco related diseases. Hearings have been held on certain of these
proposals; however, to date, none of such proposals or similar bills have had
an adverse effect on the sales or operations of the Company. In addition,
various federal agencies, including the FDA as discussed below, have recently
proposed to regulate the tobacco industry.

      In addition, federal, state and local legislative and regulatory bodies
have increasingly moved to curtail smoking by prohibiting smoking in certain
public places, restricting the sale of tobacco products to minors, increasing
labeling requirements, regulating the marketing, promotion and advertisement
of cigarettes and smokeless tobacco and protecting non-smokers from so-called
"second-hand" smoke. Smokeless tobacco manufacturers are subject to similar
health warning regulations as cigarette producers, and there has been
litigation that claims smokeless tobacco causes oral cancer. To the extent
that further actions are taken to regulate tobacco products and restrict
smoking, such actions could have a material adverse effect on the Company.
Some foreign countries have also taken steps to restrict or prohibit cigarette
advertising and promotion, to require ingredient disclosure, to impose maximum
constituent levels, to increase taxes on cigarettes, to control prices, to
restrict imports, to ban or severely restrict smoking in workplace and public
places, and otherwise to discourage cigarette smoking.

      As a producer of food-grade products, the Company's business is subject
to certain FDA and New Jersey Department of Health Regulations. Compliance
with these regulations has not had a material effect on the Company's
business.

      Tobacco Industry Litigation. The cigarette and smokeless tobacco
industries have experienced and are experiencing significant health-related
litigation involving tobacco and health issues. Current tobacco litigation
generally falls within one of three categories: class actions, individual
actions and actions brought by individual states or localities to recover
Medicaid costs allegedly attributable to tobacco-related illnesses. The
pending actions allege a broad range of injuries resulting from the use of
tobacco products or exposure to tobacco smoke and seek various remedies,
including compensatory and, in some cases, punitive damages together with
certain types of equitable relief such as the establishment of medical
monitoring funds and restitution. There can be no assurance that there will
not be an increase in health-related litigation involving tobacco and health
issues against the cigarette



                                      6
<PAGE>

industry or that the Company, as a supplier to the tobacco industry, will not
be party to such litigation. This litigation, if successful, could have a
material adverse effect on the Company.

      Excise Taxes. The tobacco industry, including cigarettes and smokeless
tobacco, has been subject to federal, state and local excise taxes for many
years. In recent years, federal, state and local governments have proposed
increases to such taxes as a means of both raising revenue and discouraging
the consumption of tobacco products. The Company is unable to predict the
likelihood of enactment of such proposals or the extent to which enactment of
such proposals would effect tobacco sales. A significant reduction in
consumption of cigarettes and other tobacco products could have a material
adverse effect on the Company.

SEASONALITY

      The licorice business is generally non-seasonal. However, sales of Right
Dress garden mulch occur primarily in the first seven months of the year.

BACKLOG

      The backlog of the Company at any time is generally not significant.
Domestic and foreign tobacco orders are received quarterly, monthly or weekly
depending upon customer requirements. Certain confectionery customers
negotiate annual contracts which were not significant at December 31, 1996.

EMPLOYEES

      At December 31, 1996, the Company has approximately 291 employees. The
Company has 154 employees covered under collective bargaining agreements. The
agreement covering employees at the Camden, New Jersey facility expires at the
end of May 1997. Management believes that its employee relations are good.

CORPORATE INDEMNIFICATION MATTERS

      The Company is indemnified by third parties with respect to certain of
its contingent liabilities, such as certain environmental and asbestos
matters, as well as certain tax and other matters. In order to implement the
Transfer, a subsidiary of Abex and PCT and certain other subsidiaries of PCT
entered into a Transfer Agreement. Under the Transfer Agreement, substantially
all of Abex's consolidated assets and liabilities, other than those relating
to Aerospace, were transferred to a subsidiary of Mafco, with the remainder
being retained by PCT. The Transfer Agreement provides for appropriate
transfer, indemnification and tax sharing arrangements, in a manner consistent
with applicable law and existing contractual arrangements.

      The Transfer Agreement requires such subsidiary of Mafco to undertake
certain administrative and funding obligations with respect to certain
asbestos claims and other liabilities retained by PCT. PCT will be obligated
to make reimbursement for the amounts so funded only when amounts are received
by PCT under related indemnification and insurance agreements. Such
administrative and funding obligations would be terminated as to asbestos
products claims in the case of a bankruptcy of Pneumo Abex or PCT or of
certain other events affecting the availability of coverage for such claims
from third party indemnitors and insurers. The Transfer Agreement further
provides for certain funding indemnification and cooperation arrangements
between PCT and such subsidiary in respect of certain liabilities which may
arise under the Employee Retirement Security Act of 1974 in respect of the
sale of Abex Friction Products (the "Friction Products Sale").


                                      7
<PAGE>

ITEM 2.   PROPERTIES

   THE COMPANY'S PRINCIPAL PROPERTIES ARE AS FOLLOWS:

<TABLE>
<CAPTION>

                                                           OWNED       APPROXIMATE
                                                           OR          FLOOR  SPACE
LOCATION            USE                                    LEASED      (SQUARE FEET)
--------            ----                                   -------     ------------
<S>                 <C>                                    <C>         <C>
Camden, New Jersey  Licorice manufacturing, warehousing     Owned      390,000
                    and administration
Camden, New Jersey  Warehousing                             Leased(a)  140,000
Gardanne, France    Licorice manufacturing and              Owned       48,900
                    administration
Richmond, Virginia  Manufacturing and warehousing           Owned       45,000
                    for non-licorice products
Richmond, Virginia  Manufacturing and administration        Leased(b)   65,000
                    for non-licorice products
</TABLE>
----------------------
(a)   Lease expires on March 31, 1998.
(b)   Lease expires on October 30, 2001

      The Company believes that its facilities are well maintained and are in
substantial compliance with environmental laws and regulations.

ITEM 3.  LEGAL PROCEEDINGS

      The Company is a party to lawsuits incidental to its business. The
Company believes that the outcome of such pending legal proceedings in the
aggregate will not have a material adverse effect on the Company's
consolidated financial position or results of operations. The Company carries
general liability insurance but has no health hazard policy, which, to the
best of the Company's knowledge, is consistent with industry practice.

      See Item 1.  Business - The Tobacco Industry.

      In addition, various legal proceedings, claims and investigations are
pending against the Company and certain subsidiaries, including those relating
to commercial transactions, product liability, safety and health matters and
other matters. PCT is involved in various stages of legal proceedings, claims,
investigations and cleanup relating to environmental natural resource matters,
some of which relate to waste disposal sites. Most of these matters are
covered by insurance, subject to deductibles and maximum limits, and by
third-party indemnities.

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

      There were no matters submitted to a vote of security holders during the
fourth quarter of 1996.


                                      8
<PAGE>

                                    PART II

ITEM 5.   MARKET OF REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The PCT Common Stock is listed on the New York Stock Exchange, Inc.
("NYSE") under the symbol ATP. The PCT Common Stock began trading on the NYSE
on June 16, 1995. The following table sets forth, for the calendar quarters
indicated, the high and low closing prices per share of the PCT Common Stock
on the NYSE based on published financial sources.

                                                HIGH        LOW
      CALENDAR 1995
            Second Quarter (since June 16, 1995) $6 3/4      $5
            Third Quarter                         8 1/8       6 3/8
            Fourth Quarter                        8 1/4       7 1/8
      CALENDAR 1996
            First Quarter                         9 1/2       7 3/4
            Second Quarter                        9 1/2       8 3/4
            Third Quarter                         9           7 1/2
            Fourth Quarter                        8 1/2       7 1/2

      The number of holders of record of the PCT Common Stock as of March 7,
1997 was approximately 7,034.

      PCT has not paid any cash dividends on the PCT Common Stock to date. PCT
does not currently intend to pay regular cash dividends on the PCT Common
Stock. PCT's dividend policy will be reviewed from time to time by the Board
of Directors in light of PCT's results of operations and financial position
and such other business considerations as the Board of Directors considers
relevant. The ability of Pneumo Abex to pay dividends is limited by its
indenture and credit agreement, which in turn may limit the ability of the
Company to pay dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and the Notes to Consolidated Financial Statements.

      In order to protect the availability of the Company's net operating loss
carryforwards, the PCT charter prohibits, subject to certain exceptions,
transfers of PCT Common Stock, until such date as fixed by the Board of
Directors of PCT, to any person who owns, or after giving effect to such
transfer would own, at least 5% of the outstanding PCT Common Stock. The
Company has been advised by counsel that the transfer restriction in the PCT
charter is enforceable. The Company intends to take all appropriate action to
preserve the benefit of the restriction including, if necessary, the
institution of legal proceedings seeking enforcement.

      On December 31, 1996, the Company distributed to its stockholders the
VSRs received as part of the Flavors Acquisition. Each VSR, subject to certain
limitations, entitles its holder to receive a payment, if any, of up to $3.25
per VSR if the 30-Day Average Market Price (as defined in the VSR Agreement)
of PCT Common Stock is below $11.00 per share, subject to adjustment, on
January 1, 1999; provided, however, Mafco has an optional right to call the
VSRs each April 1, July 1, October 1 and January 1 from and including April 1,
1997 to and including October 1, 1998 (each, an "Optional Call Date"). If
Mafco calls the VSRs on or before January 1, 1998, holders will be entitled to
receive a payment of at least $0.50 and up to $3.25 per VSR if the 30-Day
Average Market Price is below $10.25 per share, subject to adjustment, as of
such Optional Call Date. If Mafco calls the VSRs after January 1, 1998, each
VSR will entitle its holder to a payment, if any, of up to $3.25 per VSR if
the
                                      9
<PAGE>

30-Day Average Market Price is below $11.00 per share on such Optional Call
Date.

ITEM 6.        SELECTED FINANCIAL DATA

      PCT is the successor to Abex for financial reporting purposes as a
result of the Transfer, the Abex Merger and the PCT Distribution, which
occurred on June 15, 1995. Accordingly, financial information presented for
periods prior to June 15, 1995 represent Abex's results. The following table
sets forth selected historical financial data of Abex and PCT. Abex was formed
by the Henley Group in connection with the Abex Distribution in 1992.
Accordingly, the Abex consolidated financial statements may not necessarily
reflect the results of operations or financial position had Abex been a
separate stand-alone entity. Abex's industrial products and aerospace
businesses have been classified as discontinued operations in the statements
of operations data. See the Notes to Consolidated Financial Statements for a
discussion of the Company's formation and the basis of presentation.

      The table below reflects financial data for each of the years in the
five-year period ended December 31, 1996. The selected historical financial
information for each of the years in the three-year period ended December 31,
1994 has been derived from the audited consolidated financial statements of
Abex, while information for the years 1995 and 1996 have been derived from the
audited consolidated financial statements of PCT.

      The selected historical financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements of PCT included
elsewhere in this Annual Report on Form 10-K.


                                       For the Year Ended December 31,
                                 -------------------------------------------
                                 1996      1995     1994      1993      1992
                                 ----      ----     ----      ----      ----
                                 (Dollars in millions, except per share data)
STATEMENT OF OPERATIONS DATA:

Net sales (a)                    %  9.5   $   --    $   --    $   --    $    --
Income (loss) from
 continuing operations (b)         10.4     (4.0)     (30.1)   (39.4)     (74.5)
Income (loss) from
 continuing operations per
 common share                      0.43    (0.24)     (1.52)   (1.99)     (3.77)

BALANCE SHEET DATA (AT PERIOD END)

Total assets (c)                 $318.1    $51.3     $336.8    $302.2    $522.5
Long-term debt (including
 current portion and short
 term borrowings) (d)             100.1       --       31.1     112.8     309.6
Redeemable preferred stock (e)     20.0     20.0         --        --        --
Total stockholders' equity
 (deficit) (f)                    166.0     22.5      102.2     (29.2)    (68.6)


--------------------
(a)   Reflects sales of Flavors since its acquisition on November 25, 1996.
      Sales of the Company's aerospace and industrial products businesses are
      included in discontinued operations through their respective dates of
      sale.

(b)   Includes the results of Flavors, since its acquisition on November 25,
      1996. Prior to the Abex Merger and the Transfer, results from continuing
      operations reflects costs associated with the former corporate office of
      Abex.

(c)   Decrease in total assets from 1992 to 1993 was primarily the result of
      the sale of a business and the related debt reduction. The decrease from
      1994 to 1995 was primarily the result of the Transfer. The


                                      10
<PAGE>

      increase from 1995 to 1996 primarily reflects the Flavors Acquisition
      funded with proceeds from the Aerospace Sale.

(d)   Decrease in long-term debt from 1992 to 1995 was primarily related to
      the paydown of debt as well as the sale of certain business segments.
      The increase in long-term debt from 1995 to 1996 was primarily the
      result of the Flavors Acquisition.

(e)   Reflects the issuance of redeemable convertible preferred stock in
      connection with the Abex Merger and Transfer.

(f)   Stockholders' equity (deficit) includes the extraordinary gain of $94.0
      in 1993 reflecting an adjustment to the Company's reserves for
      indemnification under its tax sharing agreements, the gain recorded in
      1994 on the sale of the industrial products business of $128.4 and the
      gain of $153.7 in 1996 on the sale of the Aerospace business partially
      offset by the VSR distribution of $23.2 in 1996.

ITEM 7.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

      The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto included elsewhere
herein.

GENERAL

      As a result of the sale of the Company's aerospace business in 1996 and
industrial products businesses in 1994, the Company has classified those
operations as discontinued in the consolidated financial statements.
Accordingly, the results of operations below do not reflect the sales, cost of
sales or selling, general and administration expenses ("SG&A") from the
discontinued aerospace and industrial products businesses for the years
presented.

      The discussion of historical results reflects the results of operations
of Flavor's licorice extract and other flavoring agents business since
November 25, 1996, the date of the Flavors Acquisition. The results of
operations data presented below reflects the application of the purchase
method of accounting for the Flavors Acquisition based on the purchase price
allocation.

      The pro forma consolidated financial information below gives effect to
the Flavors Acquisition, the Abex Merger and Transfer and the Aerospace Sale
as if such transactions occurred on January 1, 1995.

RESULTS OF OPERATIONS

      During 1993, Mafco Worldwide's largest customer substantially reduced
the price of its premium brand cigarettes in order to regain market share
which had been lost to generic or "no frills" type cigarettes. The generic
cigarettes sold at a discount to premium brands and had captured a substantial
share of the U.S. cigarette market. In addition, cigarette inventories at
distributors were reduced by abandoning the practice of loading distributors
with cigarettes at the end of each quarter. As a result of these actions,
Mafco Worldwide sold less licorice extract to the cigarette industry in 1993
than in previous years. In 1994, Mafco Worldwide's sales volume to the
cigarette industry increased as production volumes in the cigarette industry
returned to pre-1993 levels. This trend continued in 1995 and 1996.



                                      11
<PAGE>



Pro forma year ended December 31, 1996 compared to pro forma year ended
December 31, 1995

<TABLE>
<CAPTION>
                                                        PRO FORMA YEAR
                                                             ENDED
                                                          DECEMBER 31,
                                                       ------------------
                                                          1996      1995
                                                       --------  --------
                                                          (IN MILLIONS)
<S>                                                    <C>       <C>
Net Sales                                                $103.4    $103.2
Cost of sales                                              57.3      62.3
                                                       --------  --------
Gross profit                                               46.1      40.9
Selling, general and administrative expenses               12.5      13.4
                                                       --------  --------
Operating income                                           33.6      27.5
Interest expense                                           (9.9)    (11.0)
Interest, investment and dividend income, net               0.4       0.5
Other expense, net                                          0.1      (0.4)
                                                       --------  --------
Income from continuing operations before income taxes      24.2      16.6
Provision for income taxes                                 (3.3)     (2.8)
                                                       --------  --------
Income from continuing operations                        $ 20.9    $ 13.8
                                                       ========  ========
</TABLE>


      On a pro forma basis, net sales in 1996 and 1995 were $103.4 million and
$103.2 million, respectively. U.S. sales increased $0.6 million in 1996 to
$63.2 million. The increase resulted from higher average selling prices due to
the mix of products sold which was partially offset by lower volume from the
Company's smokeless tobacco customers. Foreign sales in 1996 decreased by $0.4
million to $40.2 million in 1996. The decrease was due to lower average
selling prices.

      Pro forma cost of sales were $57.3 million in 1996 as compared to $62.3
million in 1995. The decrease of $5.0 million was due to lower material costs,
a gain on an insurance claim of $0.5 million in 1996, and a reduction in the
amortization of the purchase accounting adjustment related to inventory. As a
percentage of net sales, cost of sales decreased to 55.4% in 1996 from 60.4%
in 1995.

      Pro forma SG&A expenses were $12.5 million in 1996 and $13.4 million in
1995. The decrease of $0.9 million was primarily due to an increase in income
recognized on the Company's overfunded pension plan and a bad debt recovery of
$0.8 million in 1996, partially offset by higher compensation expense.

      Pro forma interest expense was $9.9 million in 1996 and $11.0 million in
1995, a decrease of $1.1 million due to lower debt outstanding at lower
average interest rates in 1996.

      Pro forma tax expense was $3.3 million in 1996 and $2.8 million in 1995,
an increase in $0.5 million. The increase primarily relates to state and
foreign taxes.

Year ended December 31, 1996 compared to the year ended December 31, 1995

      Net sales were $9.5 million for the year ended December 31, 1996. Net
sales reflects the business of Flavors since the Flavors Acquisition on
November 25, 1996.

      Cost of sales were $6.6 million for the year ended December 31, 1996.
Cost of sales reflects the business of Flavors since the Flavors Acquisition
on November 25, 1996, including one month's amortization of the purchase
accounting write-up related to inventory of $1.3 million and depreciation
expense on property, plant and equipment.

                                      12
<PAGE>

      SG&A expenses were $0.3 million and $10.5 million for the years ended
December 31, 1996 and 1995, respectively. The 1996 expenses primarily reflect
on-going corporate costs, SG&A expenses of Flavors since the Flavors
Acquisition on November 25, 1996, including one month's amortization of the
purchase accounting adjustments related to intangibles partially offset by
income recognized on the Company's overfunded pension plan. The 1995 expenses
primarily related to costs associated with the former office of Abex before
the Transfer and Abex Merger and on-going corporate costs of the Company after
the Transfer and Abex Merger, partially offset by income recognized on the
Company's overfunded pension plan.

      Interest expense was $0.9 million and $0.4 million for the years ended
December 31, 1996 and 1995, respectively. The increase primarily reflects
interest expense on the debt of Pneumo Abex since the Flavors Acquisition on
November 25, 1996.

      Interest, investment and other income, net was $8.9 million and $6.9
million for the years ended December 31, 1996 and 1995, respectively.
Interest, investment and other income, net in 1996 primarily reflects income
on the proceeds from the Aerospace Sale which were invested in cash
equivalents and marketable securities pending its use to finance the Flavors
Acquisition. Interest, investment and other income, net in 1995 primarily
relates to interest income on cash held by Abex before the Abex Merger and
Transfer.

      The Company recorded a tax provision in continuing operations of $0.2
million (an effective rate of 1.9%) and $0.0 for the years ended December 31,
1996 and 1995, respectively. For the year ended December 31, 1996, the
effective tax rate differs from the statutory tax rate primarily due to the
benefit realized on the tax loss associated with discontinued operations as
well as a reduction of the valuation allowance which represents a portion of
the Company's net operating losses which are expected to be utilized. Based
upon the combined results of operations of Mafco Worldwide and the Company
over the last several years and taking into consideration the current
operating environment of the tobacco industry, the Company believes that is
more likely than not that these tax benefits will be realized. However,
realization of the net deferred tax assets and future reversals of the
valuation allowance will depend on future earnings and accordingly the
valuation allowance will be evaluated on a periodic basis.

      Income from discontinued operations of Aerospace was $4.4 million and
$16.9 million for the years ended December 31, 1996 and 1995, respectively.
The 1996 period represents Aerospace through April 15, 1996, the date of sale
while the 1995 period represents Aerospace for the full period.

      The Company recorded a net gain of $153.7 million related to the
Aerospace Sale in the year ended December 31, 1996. There were no income taxes
provided in connection with the sale as the tax bases of the assets and
liabilities sold exceeded the net proceeds and resulted in a tax loss.

Year ended December 31, 1995 compared to the year ended December 31, 1994

      SG&A expenses were $10.5 million and $22.3 million for the years ended
December 31, 1995 and 1994, respectively. The decrease was primarily due to
the elimination of expenses related to Abex's former corporate office
subsequent to the Abex Merger.

      Interest expense was $0.4 million and $9.7 million for the years ended
December 31, 1995 and 1994, respectively. The decrease was primarily due to
the reduction in outstanding indebtedness, including the repayment of $31.1
million of debt in January 1995.



                                      13
<PAGE>

      Interest, investment and other income, net was $6.9 million and $1.9
million for the years ended December 31, 1995 and 1994, respectively. The
increase primarily reflects an increase in interest earned on higher cash
balances in 1995 prior to the Abex Merger.

      Income from discontinued operations, net of taxes, was $16.9 million and
$166.3 million for the years ended December 31, 1995 and 1994, respectively.
Discontinued operations reflect the improved results of operations of
Aerospace in 1995 from $7.7 million in 1994 to $16.9 million in 1995. The 1994
period also reflects the operations of the Company's discontinued industrial
products businesses through their respective dates of sale of $30.2 million
and the gain on sale of such businesses of $128.4 million.

LIQUIDITY AND CAPITAL RESOURCES

      The Company's net cash flows provided by (used in) operating activities
were $8.2 million, ($16.8) million and ($36.0) million for the years ended
December 31, 1996, 1995 and 1994, respectively. Cash provided by operating
activities during 1996 primarily reflects interest and investment income and
operating cash flows of Flavors since the Flavors Acquisition. Operating cash
used during 1995 and 1994 reflect payment of corporate expenses related to the
former corporate office of Abex as well as payments with respect to
non-operating liabilities of Abex prior to the Abex Merger and the Transfer.

      Cash flows from investing activities during 1996 consisted primarily of
the proceeds from the sale of Aerospace partially offset by the cash used in
the Flavors Acquisition. In 1995, cash flows used in investing activities was
$181.2 million, which reflects cash transferred in the Abex Merger, while cash
flows provided by investing activities in 1994 was $247.2 million, reflecting
the proceeds from the sale of the industrial products business. Capital
expenditures by the Company since the Flavors Acquisition were $0.2 million.
On a pro forma basis, assuming the Flavors Acquisition had occurred on January
1, 1995, capital expenditures would have been $1.9 million and $2.3 million in
1996 and 1995, respectively. While the Company has not made any significant
commitments for capital expenditures, such expenditures are expected to be
approximately $3.1 million for 1997. In addition, the Company has entered into
an agreement to invest in a joint venture in China totaling $1.3 million in
1997.

      Cash flows from financing activities primarily reflect net repayments of
borrowings of $25.1 million, $31.1 million and $81.6 million in 1996, 1995 and
1994, respectively. Under the senior credit agreement as amended in February
1997, the Company may borrow up to $12.5 million under a revolving credit
facility. At December 31, 1996, approximately $2.3 million of this facility
had been reserved to support lender guarantees for outstanding letters of
credit. Management believes the remaining availability of approximately $2.9
million under the revolving credit facility and cash generated from operations
will be sufficient to meet the Company's needs for working capital, capital
expenditures and debt service for the foreseeable future.

TAX MATTERS

      In connection with the Abex Merger and the Transfer, Mafco and the
Company entered into a tax sharing agreement. Under the indemnification
provisions of the tax sharing agreement and with respect to periods ending on
or prior to June 15, 1995, Mafco will generally be required to pay any tax
liabilities of the Company, except for foreign income taxes related to
Aerospace. At December 31, 1996, the Company had available Federal net
operating loss carryforwards of approximately $194.0 million, which expire in
years 2000 through 2011.



                                      14
<PAGE>

      The IRS is currently examining the returns for the years 1989, 1990 and
1991. The Company has been notified by the IRS that its 1994 and its short
period 1995 return will be examined. The amount of net operating loss
carryforwards available at December 31, 1996 could be affected by the outcome
of this examination.

OTHER

      Various legal proceedings, claims and investigations are pending against
the Company and certain subsidiaries, including those relating to commercial
transactions, product liability, safety and health matters and other matters.
PCT is involved in various stages of legal proceedings, claims, investigations
and cleanup relating to environmental or natural resource matters, some of
which relate to waste disposal sites. Most of these matters are covered by
insurance, subject to deductibles and maximum limits, and by third-party
indemnities.

      For a discussion of certain indemnification  obligations to the Company,
see Item 1.  Business - Corporate Indemnification Matters.

      In the opinion of management, based upon the information available at
this time, the outcome of the outstanding matters referred to above will not
have a material adverse effect on the Company's financial position or results
of operations.

FOREIGN EXCHANGE

      Most  of the  Company's  export  sales  and  purchase  of  licorice  raw
materials are made in U.S.  dollars.  The Company's French subsidiary sells in
several  European  currencies  as well as the U.S.  dollar and  purchases  raw
materials principally in U.S. dollars.

INFLATION

      Prior to 1993, Mafco Worldwide had historically been able to pass
inflationary increases for raw materials and other costs onto customers
through price increases. Since 1993, inflationary increases for raw materials
and other costs have not been significant. There can be no assurance that the
Company will be able to pass on future cost increases to its customers.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      See the financial statements and supplementary data listed in the
accompanying Index to Consolidated Financial Statements and Schedule on page
F-1 herein. Information required by other schedules called for under
Regulation S-X is either not applicable or is included in the financial
statements or notes thereto.

ITEM 9.  CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

      On November 25, 1996, the Registrant dismissed Arthur Andersen LLP
("AA") and engaged Ernst & Young LLP ("E&Y") as its independent auditors. This
change of auditors was approved by the Registrant's Board of Directors based
upon the recommendation of its Audit Committee.

      In connection with the audits of the Registrant's financial statements
for each of the years in the two year period ended December 31, 1995, and the
subsequent interim period, there have been no

                                      15
<PAGE>

disagreements with AA on any matters of accounting principles or practices,
financial statement disclosure or auditing scope and procedures.

      The reports of AA on the Registrant's financial statements for each of
the years in the two year period ended December 31, 1995 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope, or accounting principles.

      The Registrant obtained from AA a letter addressed to the Commission
stating that it agrees with the statements in the three preceding paragraphs.
A copy of that letter, dated December 5, 1996 was filed as Exhibit 16.1 of
Form 8-K/A on December 23, 1996.

      On November 25, 1996, the Registrant consummated the Flavors
Acquisition. E&Y has been the independent auditors for Flavors since 1987.

      Prior to the Flavors Acquisition, the Registrant had no operating
assets. Its primary assets were short term marketable securities.
Substantially all of these securities were used to acquire Flavors.
Accordingly, the capital stock of Flavors is currently the Registrant's
primary asset. E&Y is also the auditor for Mafco.


                                    PART III

      The information required by Part III, Items 10 through 13, of Form 10-K
is incorporated by reference from the Registrant's definitive proxy statement
for its 1997 annual meeting of stockholders, which is to be filed pursuant to
Regulation 14A not later than April 30, 1997.


                                    PART IV

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

(a)   (1 and 2) Financial  statements and financial  statement  schedule.  See
      Index to  Consolidated  Financial  Statements and Schedule which appears
      on page F-1 herein.

      All other schedules for which provision is made in the applicable
accounting regulation of the SEC are not required under the related
instructions or are inapplicable and therefore have been omitted.

(3)   Exhibits

      EXHIBIT NO.       DESCRIPTION

      2.1               Master Asset Purchase Agreement, dated as of January
                        15, 1996, as amended, by and among the Company, Pneumo
                        Abex and Parker Hannifin, without exhibits and
                        schedules (incorporated by reference to Exhibit 2.1 to
                        PCT's Form 10-K dated December 31, 1995).

      2.2               Closing Agreement, dated as of April 15, 1996, by and
                        among the Company, Pneumo Abex and Parker Hannifin
                        (incorporated by reference to Exhibit 2.2 to PCT's Form
                        8-K dated April 30, 1996).

                                      16
<PAGE>

      2.3               Stock and VSR Purchase Agreement, dated as of October
                        23, 1996, by and among Mafco, the Company and PCT
                        International Holdings Inc. (incorporated by reference
                        from Exhibit 7 of Mafco's Schedule 13D, dated October
                        25, 1996, filed with respect to PCT).

      3.1               Restated Certificate of Incorporation of the Company
                        (incorporated by reference to Exhibit 3.1 to PCT's Form
                        8-K dated April 30, 1996).

      3.2               By-Laws  of  the  Company  as   currently   in  effect
                        (incorporated  by  reference  to Exhibit  3.2 to PCT's
                        Form 10-K dated December 31, 1995).

      4.1               Form  of  Indenture,  together  with  form  of  Senior
                        Subordinated   Note   (incorporated  by  reference  to
                        Amendment  No.  1 to  Mafco  Worldwide's  Registration
                        Statement on Form S-1 (33-48904) (the "1992 S-1")).

      4.2*              First Supplemental Indenture, dated as of November 25,
                        1996, between Pneumo Abex Corporation and First Trust
                        of New York, National Association, pursuant to the
                        Indenture dated as of November 12, 1992 between Mafco
                        Worldwide Corporation and First Trust of New York,
                        National Association (successor to Security Pacific
                        National Trust Company (New York), as trustee).

      4.3               Form of  Purchase  Agreement  among  Mafco  Worldwide,
                        Flavors  Holdings Inc. and the  institutional  sellers
                        party thereto  (incorporated by reference to Amendment
                        No. 2 to the 1992 S-1).

      4.4               Credit Agreement dated as of June 29, 1994 among Mafco
                        Worldwide, the Banks (as defined in the Credit
                        Agreement) and The Chase Manhattan Bank, N.A., as agent
                        (incorporated by reference to Mafco Worldwide's Form
                        10-Q filed August 16, 1994).

      4.5*              Consent Number 5 and First Amendment, dated as of
                        November 11, 1996, to the Credit Agreement dated as of
                        June 29, 1994 among Mafco Worldwide, the Banks (as
                        defined in the Credit Agreement) and The Chase
                        Manhattan Bank, N.A., as agent.

      4.6*              Consent Number 6 and Second Amendment, dated as of
                        December 12, 1996, to the Credit Agreement, dated as of
                        June 29, 1994 among Pneumo Abex Corporation, the Banks
                        (as defined in the Credit Agreement) and The Chase
                        Manhattan Bank, as agent.

      4.7*              Third Amendment dated as of February 5, 1997, to the
                        Credit Agreement, dated as of June 29, 1994 among
                        Pneumo Abex Corporation, the Banks (as defined in the
                        Credit Agreement) and The Chase Manhattan Bank, as
                        agent.

      4.8*              Assumption Agreement, dated as of November 25, 1996,
                        made by Pneumo Abex Corporation in favor of the Banks
                        (as defined in the Assumption Agreement) and The Chase
                        Manhattan Bank (successor by merger to The Chase
                        Manhattan Bank, N.A.) as agent.


                                      17
<PAGE>

            10.1        Transfer Agreement among the Company, MCG Intermediate
                        Holdings Inc., Pneumo Abex and PCT International
                        Holdings Inc. (incorporated by reference to Exhibit
                        10.1 to PCT's Current Report on Form 8-K dated June
                        28, 1995).

            10.2        Tax Sharing Agreement between the Company and Mafco
                        (incorporated by reference to Exhibit 10.2 to PCT's
                        Form 10-K dated December 31, 1995).

            10.3        Registration Rights Agreement between Mafco and the
                        Company (incorporated by reference to Exhibit 2 to the
                        Schedule 13D dated June 26, 1995 filed by Mafco
                        Holdings Inc., Mafco Consolidated Holdings Inc. and
                        Mafco in connection with the Company's capital stock).

            10.4        Letter Agreement, dated as of June 26, 1995, between
                        the Company and Mafco (incorporated by reference to
                        Exhibit 10.2 to the Company's Current Report on Form
                        8-K dated June 28, 1995).

            10.5        Letter Agreement, dated as of February 5, 1996,
                        between the Company and Mafco (incorporated by
                        reference to Exhibit 6 to Amendment No. 2 to Schedule
                        13D dated February 8, 1996 filed by Mafco Holdings
                        Inc., Mafco Consolidated Holdings Inc. and Mafco in
                        connection with the Company's capital stock).

            10.6        Reimbursement Agreement, dated as of February 5, 1996,
                        among the Company, Mafco and Chemical Bank
                        (incorporated by reference to Exhibit 10.6 to PCT's
                        Form 10-K dated December 31, 1995).

            10.7        Stock Purchase Agreement, dated April 28, 1988,
                        between Pneumo Abex and Whitman Corporation
                        (incorporated by reference to Exhibit 2.1 to Pneumo
                        Abex's Registration Statement on Form S-1, Commission
                        File No. 33-22725) as amended by an Amendment, dated
                        as of August 29, 1988, and a Second Amendment and
                        related Settlement Agreement, dated September 23, 1991
                        (incorporated by reference to exhibit 10.4 to Abex
                        Inc.'s Annual Report on Form 10-K for 1992).

            10.8        Asset Purchase Agreement, dated as of May 15, 1993,
                        between Pneumo Abex and The BF Goodrich Company
                        (incorporated by reference to Exhibit 2.1 to Abex
                        Inc.'s Current Report on Form 8-K dated June 10,
                        1993).

            10.9        Asset Purchase Agreement, dated as of November 21,
                        1994, by and between Pneumo Abex and Wagner Electric
                        Corporation (incorporated by reference to Exhibit 1 to
                        Abex Inc.'s Current Report on Form 8-K dated November
                        21, 1994).

            10.10       Lease dated as of December 26, 1989, between
                        MacAndrews & Forbes Group, Inc. and Fulton Bottom
                        Associates, L.P., as amended on May

                                      18
<PAGE>


                        14, 1990, and as further amended on October 15, 1991
                        (incorporated by reference to the 1992 S-1).

            10.11       Contract dated as of May 31, 1994 between Mafco
                        Worldwide and the Licorice and Paper Employees
                        Association of Camden, N.J. (incorporated by reference
                        to Mafco Worldwide's Form 10-Q filed November 14,
                        1994).

            10.12       Agreement dated January 1, 1994 between M.F. Neal &
                        Co. and Local Union No. 309T (incorporated by
                        reference to Mafco Worldwide's 1993 Form 10-K).

            10.13       Form of Reimbursement Agreement between the Company
                        and Holdings (incorporated by reference to Amendment
                        No. 2 to the 1992 S-1).

            10.14*      Consent Number 1 and First Amendment, dated as of
                        November 25, 1996, to the Reimbursement Agreement,
                        dated as of February 5, 1996, among Pneumo Abex
                        Corporation (the "Account Party"), Mafco (the
                        "Guarantor") and The Chase Manhattan Bank as issuing
                        bank.

            10.15       Form of License Agreement between Mafco Worldwide and
                        Holdings (incorporated by reference to Amendment No. 2
                        to the 1992 S-1).

            10.16       Form of Lease to be dated March 31, 1993 between the
                        Company and H.W.R. Corporation (incorporated by
                        reference to Mafco Worldwide's 1992 Form 10-K).

            10.17       Tax Sharing Agreement between Mafco Worldwide and
                        Mafco (incorporated by reference to Mafco Worldwide's
                        1995 Form 10-K).

                        MANAGEMENT CONTRACTS AND COMPENSATORY PLANS

            10.18       Power Control Technologies Inc. 1995 Stock Plan (the
                        "1995 Stock Plan") for employees of the Company and
                        employees of affiliated corporations (incorporated by
                        reference to Annex C to the Proxy Statement/Prospectus
                        included in the Company's Registration Statement on
                        Form S-1 (File No. 33-92186)).

            10.19*      Amendment to the 1995 Stock Plan

            10.20       Amendment dated June 15, 1995 to Trust Agreement dated
                        as of July 1, 1992 between Pneumo Abex and Mellon with
                        respect to the 1992 Stock Trust for Former
                        Participants in the 1989 Stock Plan for Executive
                        Employees of the Henley Group and its Subsidiaries
                        (incorporated by reference to Exhibit 10.16 to PCT's
                        Form 10-K dated December 31, 1995).

            10.21       Abex Inc. Executive Retirement and Savings Program as
                        amended and restated effective June 15, 1995
                        (incorporated by reference to Exhibit 10.17 to PCT's
                        Form 10-K dated December 31, 1995).


                                      19
<PAGE>


            10.22       Trust Agreement dated July 1, 1992 between MCG
                        Intermediate Holdings Inc. and Mellon, as amended and
                        restated effective as of June 15, 1995 (incorporated
                        by reference to Exhibit 10.18 to PCT's Form 10-K dated
                        December 31, 1995).

            10.23       First Amendment, dated November 13, 1995, to Amended
                        and Restated Trust Agreement between MCG Intermediate
                        Holdings Inc. and Mellon (incorporated by reference to
                        Exhibit 10.19 to PCT's Form 10-K dated December 31,
                        1995).

            10.24*      Employment agreement, dated January 7, 1997, between
                        the Registrant and J. Eric Hanson.

            10.25*      The Company's 1997 Stock Option Plan.

            10.26       Tobacco Products Group Performance Bonus Plan
                        (incorporated by reference to Exhibit 10.5 to Mafco's
                        Form 10-Q dated March 31, 1996).

            11.0*       Earnings Per Share

            16.1        Letter on change in certifying accountant
                        (incorporated by reference to Exhibit 16.1 of Form
                        8-K/A of PCT filed on December 23, 1996).

            21*         List of subsidiaries

            24*         Powers of attorney executed by Messrs. Perelman,
                        Durnan, Folz, Gittis, Hanson, Liebman, Meister, Roche
                        and Slovin.

            27*         Financial data schedule


      *Filed herein.

(b)   Reports on Form 8-K:

      Form 8-K filed on November 27, 1996 (Items 2, 4 and 7).

      Form 8-K/A filed on December 23, 1996 (Item 4).




                                      20
<PAGE>


                                   SIGNATURES


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

                                    POWER CONTROL TECHNOLOGIES INC.


Dated:  March 21, 1997              By: Theo W. Folz*
                                        -----------------------------------
                                        Theo W. Folz
                                        President and Chief Executive Officer


Dated:  March 21, 1997              By: /s/Irwin Engelman
                                        ------------------------------------
                                        Irwin Engelman
                                        Executive Vice President and
                                        Chief Financial Officer


Dated:  March 21, 1997              By: /s/Laurence Winoker
                                        -------------------------------------
                                        Laurence Winoker
                                        Vice President and Controller
                                        (Chief Accounting Officer)


                                      21
<PAGE>


      Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and of the dates indicated.

      SIGNATURE                       TITLE       DATE
Title Date

            Ronald O. Perelman *      Director    March 21, 1997
--------------------------------------
            Ronald O. Perelman

            Jaymie A. Durnan *        Director    March 21, 1997
--------------------------------------
            Jaymie A. Durnan

            Theo W. Folz *            Director    March 21, 1997
--------------------------------------
            Theo W. Folz

            Howard Gittis *           Director    March 21, 1997
--------------------------------------
            Howard Gittis

            J. Eric Hanson *          Director    March 21, 1997
--------------------------------------
            J. Eric Hanson

            Lance A. Liebman *        Director    March 21, 1997
--------------------------------------
            Lance A. Liebman

            Paul M. Meister *         Director    March 21, 1997
--------------------------------------
            Paul M. Meister

            James G. Roche*           Director    March 21, 1997
--------------------------------------
            James G. Roche

            Bruce Slovin *            Director    March 21, 1997
--------------------------------------
            Bruce Slovin

*  The undersigned by signing his name hereto does hereby execute this Form
   10-K pursuant to powers of attorney filed as exhibits to this Form 10-K.


Dated:  March 21, 1997              By: /s/ Joram Salig
                                       -------------------------------------
                                       Joram Salig
                                       Attorney-in-Fact



                                      22
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                     ITEM 8, ITEM 14 (A)(1) AND (2) AND (D)
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
                          YEAR ENDED DECEMBER 31, 1996



      The following consolidated financial statements of Power Control
Technologies Inc. are included in Item 8:

      As of December 31, 1996 and 1995 and for the years ended December 31,
1996, 1995 and 1994.

                                                                      Pages

Reports of Independent Auditors........................................ F-2

Consolidated Balance Sheets............................................ F-4

Consolidated Statements of Income...................................... F-5

Consolidated Statements of Stockholders' Equity........................ F-6

Consolidated Statements of Cash Flows.................................. F-7

Notes to Consolidated Financial Statements............................. F-8

      The following financial statement schedule of Power Control
Technologies Inc. is included in Item 14(d):

Schedule I - Condensed Financial Information of Registrant............. F-25


      All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.

                                     F-1


<PAGE>

                         REPORT OF INDEPENDENT AUDITORS



The Board of Directors and Stockholders
Power Control Technologies Inc.

We have audited the accompanying consolidated balance sheet of Power Control
Technologies Inc. and subsidiaries as of December 31, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended. Our audit also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Power Control Technologies Inc. and subsidiaries at December 31, 1996, and
the consolidated results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.


                                         Enrst & Young LLP


New York, New York
February 11, 1997


                                     F-2
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS



To the Shareholders of
Power Control Technologies Inc.



We have audited the accompanying consolidated balance sheet of Power Control
Technologies Inc. and subsidiaries as of December 31, 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1995. These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Power Control Technologies Inc. and subsidiaries at December 31, 1995, and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the material set forth therein.

                                                     Arthur Andersen LLP


Detroit, Michigan,
March 11, 1996, except for the first 
paragraph of Note 4, as to which 
the date is February 3, 1997.


                                     F-3

<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                                  YEAR ENDED
                                                                                 DECEMBER 31,
                                                                           -------------------------
                                                                              1996          1995
                                                                           ------------  -----------
<S>                                                                         <C>           <C>
                   ASSETS
Current assets:
     Cash and cash equivalents                                                $   5.7    $        -
     Trade accounts receivable, net of allowance of $0.1                         11.3             -
     Inventories                                                                 46.0             -
     Net assets held for sale                                                     0.8          38.8
     Prepaid expenses and other                                                   2.5           1.2
                                                                           ------------  -----------
               Total current assets                                              66.3          40.0

Property, plant and equipment, net                                               26.3             -
Deferred tax asset, net                                                          38.4             -
Intangibles assets related to business acquired, net                            172.7             -
Other assets                                                                     14.4          11.3
                                                                           ------------  -----------

                                                                              $ 318.1    $     51.3
                                                                           ============  ===========

          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Trade accounts payable                                                   $   5.2    $        -
     Accrued interest                                                             1.3             -
     Accrued compensation and benefits                                            3.1             -
     Taxes payable                                                                1.4             -
     Deferred cash payments due to Mafco                                          7.2             -
     Other accrued expenses                                                       5.5           4.4
                                                                           ------------  -----------
               Total current liabilities                                         23.7           4.4

Long-term debt                                                                  100.1             -
Other liabilities                                                                 8.3           4.4

Redeemable preferred stock                                                       20.0          20.0

Commitments and contingencies

Stockholders' equity:
     Common stock, par value $.01;  250,000,000 shares authorized;
          20,656,502 shares issued and outstanding in 1996 and 1995               0.2           0.2
     Additional paid-in capital                                                  26.7          26.7
     Retained earnings (accumulated deficit)                                    139.3          (4.4)
     Currency translation adjustment                                             (0.2)            -
                                                                           ------------  -----------
               Total stockholders' equity                                       166.0          22.5
                                                                           ------------  -----------

                                                                              $ 318.1    $     51.3
                                                                           ============  ===========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                      F-4

<PAGE>

                POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>


                                                                                                       YEAR ENDED
                                                                                                      DECEMBER 31,
                                                                                         ---------------------------------------
                                                                                            1996          1995         1994
                                                                                         -----------   -----------  ------------

<S>                                                                                       <C>           <C>          <C>
Net sales                                                                                 $    9.5       $     -    $        -
Cost of sales                                                                                 (6.6)            -             -
                                                                                         -----------   -----------  ------------
          Gross profit                                                                         2.9             -             -

Selling, general and administrative expenses                                                  (0.3)        (10.5)        (22.3)
                                                                                         -----------   -----------  ------------
          Operating profit (loss)                                                              2.6         (10.5)        (22.3)

Interest expense                                                                              (0.9)         (0.4)         (9.7)
Interest, investment and other income, net                                                     8.9           6.9           1.9
                                                                                         -----------   -----------  ------------
          Income (loss) from continuing operations before income taxes                        10.6          (4.0)        (30.1)
Provision for income taxes                                                                    (0.2)            -             -
                                                                                         -----------   -----------  ------------
          Income (loss) from continuing operations                                            10.4          (4.0)        (30.1)

Discontinued operations
          Income from operations of discontinued aerospace business, net of tax                4.4          16.9           7.7
          Income from operations of discontinued industrial products business                    -             -          30.2
          Gain on sale of discontinued aerospace business                                    153.7             -             -
          Gain on sale of discontinued industrial products businesses                            -             -         128.4
                                                                                         -----------   -----------  ------------
Income from discontinued operations, net of taxes                                            158.1           16.9        166.3

Income before extraordinary loss                                                             168.5           12.9        136.2
Extraordinary loss                                                                               -           (1.6)        (4.8)
                                                                                         -----------   -----------  ------------
          Net income                                                                         168.5           11.3        131.4
                                                                                         -----------   -----------  ------------

Preferred stock dividend                                                                      (1.6)          (0.9)           -
                                                                                         -----------   -----------  ------------

          Net income available to common stockholders                                      $ 166.9     $     10.4   $    131.4 
                                                                                         ===========   ===========  ============

Income (loss) per common share and common share equivalent:
Continuing operations                                                                      $  0.43     $   (0.24)   $    (1.52)
Discontinued operations                                                                       7.64          0.83          8.41
                                                                                         -----------   -----------  ------------
                                                                                              8.07          0.59          6.89
Extraordinary loss                                                                               -         (0.08)        (0.24)
                                                                                         -----------   -----------  ------------
          Net income                                                                       $  8.07     $    0.51    $     6.65
                                                                                         ===========   ===========  ============

Fully diluted income (loss) per common share:
Continuing operations                                                                      $  0.45     $   (0.19)   $    (1.52)
Discontinued operations                                                                       6.82          0.78          8.41
                                                                                         -----------   -----------  ------------
                                                                                              7.27          0.59          6.89
Extraordinary loss                                                                               -         (0.08)        (0.24)
                                                                                         -----------   -----------  ------------
          Net income                                                                       $  7.27     $    0.51    $     6.65
                                                                                         ===========   ===========  ============

</TABLE>

                See Notes to Consolidated Financial Statements.

                                      F-5

<PAGE>

                POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>

                                                                                     RETAINED
                                                                   ADDITIONAL       EARNINGS/        CURRENCY
                                                       COMMON        PAID-IN     (ACCUMULATED      TRANSLATION
                                                       STOCK         CAPITAL         DEFICIT)       ADJUSTMENT          TOTAL
                                                   ------------- --------------  ---------------  ---------------  ----------------

<S>                                                <C>           <C>             <C>              <C>                <C>
   Balance, December 31, 1993                       $      0.2     $  116.8       $   (146.2)                       $   (29.2)

      Net income                                                                       131.4                            131.4
                                                   ------------- --------------  ---------------  ---------------  ----------------

   Balance, December 31, 1994                              0.2        116.8            (14.8)                -          102.2

      Transfer of assets, liabilities and
           issuance of redeemable preferred stock                     (90.1)                                            (90.1)
      Net income                                                                        11.3                             11.3
      Preferred dividend                                                                (0.9)                            (0.9)
                                                   ------------- --------------  ---------------  ---------------  ----------------

   Balance, December 31, 1995                              0.2         26.7             (4.4)               -            22.5

      Net income                                                                       168.5                            168.5
      Preferred dividend                                                                (1.6)                            (1.6)
      Currency translation adjustment                                                                    (0.2)           (0.2)
      Distribution of VSRs                                                             (23.2)                           (23.2)
                                                   ------------- --------------  ---------------  ---------------  ----------------

   Balance, December 31, 1996                       $      0.2     $   26.7       $    139.3        $    (0.2)       $  166.0
                                                   ============= ==============  ===============  ===============  ================

</TABLE>


                See Notes to Consolidated Financial Statements.

                                      F-6
<PAGE>


                POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                                    YEAR ENDED
                                                                                                   DECEMBER 31,
                                                                                       --------------------------------------
                                                                                          1996          1995         1994
                                                                                       ------------  -----------  -----------
<S>                                                                                     <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                              $   168.5     $   11.3    $   131.4
Adjustments to reconcile net income to total cash provided by (used in)
     operating activities:
          Income from operations of discontinued businesses                                  (4.4)       (16.9)       (37.9)
          Gain on sale of discontinued businesses                                          (153.7)           -       (128.4)
          Extraordinary loss                                                                    -          1.6          4.8
          Depreciation and amortization                                                       0.5          1.1          1.0
Changes in assets and liabilities, net of assets and liabilities
          transferred, sold or acquired:
          Decrease in trade accounts receivable                                               0.9            -            -
          Decrease in net assets held for sale                                                  -          5.2         19.8
          Increase in inventories                                                            (0.1)           -            -
          Increase (decrease) in trade accounts payable and accrued expenses                  0.9        (25.1)       (23.5)
          Other, net                                                                         (4.4)         6.0         (3.2)
                                                                                       ------------  -----------  -----------
          Cash provided by (used in) operating activities                                     8.2        (16.8)       (36.0)
                                                                                       ------------  -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of discontinued operations, net                                          196.8            -        247.2
Capital expenditures                                                                         (0.2)           -            -
Acquisition of Flavors, net of cash acquired                                               (178.4)           -            -
Transfer of cash in Abex Merger                                                                 -       (181.2)           -
                                                                                       ------------  -----------  -----------
          Cash provided by (used in) investing activities                                    18.2       (181.2)       247.2
                                                                                       ------------  -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings                                                                     (25.1)       (31.1)       (81.6)
Proceeds from revolving debt                                                                  7.3            -            -
Preferred dividends                                                                          (1.6)        (0.9)           -
Other, net                                                                                   (1.3)           -            -
                                                                                       ------------  -----------  -----------
          Cash used in financing activities                                                 (20.7)       (32.0)       (81.6)
                                                                                       ------------  -----------  -----------

Net increase (decrease) in cash and cash equivalents                                          5.7       (230.0)       129.6
Cash and cash equivalents at beginning of year                                                  -        230.0        100.4
                                                                                       ------------  -----------  -----------
Cash and cash equivalents at end of year                                                $     5.7     $      -     $  230.0
                                                                                       ============  ===========  ===========

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Interest paid                                                                           $     0.3  $       4.0     $   16.0
Taxes paid                                                                                    2.7          2.3         24.9

</TABLE>
                See Notes to Consolidated Financial Statemetns.

                                      F-7

<PAGE>


               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

1.    BACKGROUND AND BASIS OF PRESENTATION

      Power Control Technologies Inc. ("PCT" or the "Company") was
incorporated in Delaware on June 1, 1988 and is a holding company which
conducts its operations through its wholly-owned subsidiary Pneumo Abex
Corporation ("Pneumo Abex").

      On July 16, 1992, Abex Inc. ("Abex") was spun off (the "Abex
Distribution") from the Henley Group Inc. ("Henley Group"). Following the Abex
Distribution, Abex, through PCT, sold three of its five operating divisions and
combined the two others to form Abex NWL Aerospace Division ("Aerospace").
Prior to July 16, 1992, PCT was an indirect wholly-owned subsidiary of Henley
Group.

      PCT has been a public company since June 15, 1995 when shares of its
common Stock, par value $.01 per share (the "PCT Common Stock"), were publicly
distributed (the "PCT Distribution") to existing stockholders of Abex, PCT's
former parent, in connection with the merger (the "Abex Merger") of Abex and a
wholly-owned subsidiary of Mafco Holdings Inc. ("Holdings") and the related
transfer (the "Transfer") to a subsidiary of Mafco Consolidated Group Inc.
("Mafco") of substantially all of Abex's consolidated assets and liabilities,
other than those relating to Aerospace. The assets of Aerospace were
subsequently sold (the "Aerospace Sale") in April 1996 (see Note 4).

      On June 15, 1995, the Company transferred cash and other assets and
liabilities to Mafco. The assets and liabilities transferred were as follows:

<TABLE>
<CAPTION>
<S>                                <C>
Accounts receivable, net             $   3.3
Working capital items, net               1.6
Property and equipment, net             13.9
Other assets and liabilities, net      (79.3)
Accounts payable                        (0.2)
Accrued liabilities                    (52.1)
Dividend                               (68.4)
                                   ---------
Cash transferred                     $(181.2)
                                   =========
</TABLE>


      In addition to the transfer of cash and other assets and liabilities,
the Company issued $20.0 par value of 8% cumulative, redeemable convertible
preferred stock (the "Preferred Stock") to Mafco (see Note 9).

      On November 25, 1996, Mafco and PCT consummated the transactions
contemplated by a Stock and VSR Purchase Agreement (the "Purchase Agreement").
Pursuant to the Purchase Agreement, among other things, all the issued and
outstanding shares (the "Shares") of capital stock of Flavors Holdings Inc.
("Flavors"), a wholly-owned subsidiary of Mafco were acquired (see Note 3).

      Flavors produces a variety of licorice products from licorice root,
licorice extract produced by others and certain other flavor ingredients at
its facilities in Camden, New Jersey and Gardanne, France. Approximately 72%
of Flavors' licorice sales are to the worldwide tobacco industry for use as

                                     F-8

<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

flavoring and moistening agents in the manufacture of American blend
cigarettes as well as other tobacco products (moist snuff, chewing tobacco and
pipe tobacco). While licorice extract represents a small percentage of the
total cost of manufacturing American blend cigarettes and other tobacco
products, the particular formulation and quantity used by each brand is an
important element in the brand's flavor. Flavors also sells licorice extract
to worldwide confectioners, food processors and pharmaceutical manufacturers
for use as flavoring or masking agents. In addition, Flavors sells licorice
root residue as a garden mulch under the name Right Dress. Flavors
manufactures and sells other non-licorice products which include natural
flavors, spices and botanicals that are used as flavoring ingredients in food
and tobacco products.

      For financial reporting purposes, PCT is considered the successor to
Abex Inc.; therefore, financial information presented for periods prior to
June 15, 1995 represent Abex Inc. results. The historical financial statements
prior to June 15 include in continuing operations expenses related to Abex
Inc.'s former corporate office and other income and expenses related to assets
and liabilities transferred to Mafco. As a result of the sales of Abex
Friction Products ("AFP") and Jetway Systems ("Jetway") in 1994 and the
Aerospace Sale on April 15, 1996 (see Note 4), the Company has classified the
results of the industrial products and aerospace segments as discontinued
operations for all periods presented. From November 25, 1996, the Company's
financial statements reflect the operations of Flavors.

2.    SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

      The consolidated financial statements include the accounts of the
Company and its subsidiaries after elimination of all material intercompany
accounts and transactions.

USE OF ESTIMATES:

      The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

REVENUE RECOGNITION:

      Sales are recorded when title passes to customers.

CASH EQUIVALENTS:

      Cash equivalents with maturities of 90 days or less (primarily short
term money market funds) are carried at cost which approximates market.

                                      F-9

<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

INVENTORIES:

      Inventories are stated at the lower of cost or market value. Cost is
determined principally by the first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT:

      Property, plant and equipment is recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of such assets ranging
from 4 to 20 years. Leasehold improvements are amortized over their estimated
useful lives or the terms of the leases, whichever is shorter. Repairs and
maintenance are charged to operations as incurred, and expenditures for
additions and improvements are capitalized.

INTANGIBLE ASSETS RELATED TO BUSINESSES ACQUIRED:

      Intangible assets, including goodwill and product formulations, relate
to the Flavors Acquisition and are being amortized on a straight-line basis
over 40 years. Accumulated amortization aggregated $0.4 at December 31, 1996.
The Company's accounting policy regarding the assessment of the recoverability
of the carrying value of goodwill is to review the carrying value of goodwill
if the facts and circumstances suggest that they may be impaired. If this
review indicates that goodwill will not be recoverable, as determined based on
the undiscounted future cash flows of the Company, the carrying value of
goodwill will be reduced to its estimated fair value.

INCOME (LOSS) PER COMMON SHARE:

      Income (loss) per common share has been computed based on 20.7 million,
20.3 million and 19.8 million weighted average shares outstanding for 1996,
1995 and 1994, respectively. Fully diluted earnings per share, which assumes
conversion of the Preferred Stock since June 15, 1995, has been computed based
on 23.2 million, 21.6 million and 19.8 million weighted average shares
outstanding for 1996, 1995 and 1994, respectively.

INCOME TAXES:

      The Company computes income taxes under the liability method. Under the
liability method, deferred income taxes are generally determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Net deferred tax assets are recorded when
it is more likely than not that such tax benefits will be realized.

PENSION PLANS:

      The Company has pension plans which cover certain current and former
employees who meet eligibility requirements. Benefits are based on years of
service and, in some cases, the employee's compensation. The Company's policy
is to contribute annually the minimum amount required pursuant


                                 F-10
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

to the Employee Retirement Income Security Act. Plan assets are principally
invested in equity and fixed income securities. The Company also maintains a
401(k) plan for its non-union employees. Subsidiaries outside the United
States have retirement plans under which funds are deposited with trustees.

RESEARCH AND DEVELOPMENT:

      Research and development expenditures are attributable to Flavors and
expensed as incurred. Such expense was not significant for the period since
the Flavors Acquisition.

FOREIGN CURRENCY TRANSLATION:

      Assets and liabilities of foreign operations are translated into U.S.
dollars at the rates of exchange in effect at the balance sheet date. Income
and expense items are generally translated at the average exchange rates
prevailing during the period presented. Gains and losses resulting from
foreign currency transactions are included in the results of operations and
those resulting from translation of financial statements are recorded as a
component of stockholders' equity.

IMPAIRMENT OF LONG-LIVED ASSETS:

      In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. SFAS 121 is effective for financial
statements for fiscal years beginning after December 15, 1995, and therefore
the Company adopted SFAS 121 in the first quarter of 1996. The effect of the
adoption had no impact on the Company's results of operations.

STOCK-BASED COMPENSATION:

      In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123, encourages, but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to account for
stock-based compensation plans using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related Interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock. (See Note 10).

                                     F-11
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

3.    FLAVORS ACQUISITION

      On November 25, 1996, Mafco and PCT consummated the transactions
contemplated by the Purchase Agreement, by and among Mafco, PCT and PCT
International Holdings Inc. ("Purchaser"), a Delaware corporation and
wholly-owned subsidiary of PCT. Pursuant to the Purchase Agreement, Purchaser
acquired from Mafco (the "Flavors Acquisition"), all the shares of Flavors and
23,156,502 Value Support Rights (each a "VSR", and collectively, the "VSRs")
issued pursuant to a Value Support Rights Agreement (the "VSR Agreement"),
dated November 25, 1996 between Mafco and American Stock Transfer & Trust
Company, as trustee.

      In consideration for the Shares and VSRs, Purchaser paid Mafco cash in
the amount of $180.0. In addition, Purchaser will pay Mafco deferred cash
payments of $3.7 on June 30, 1997 and $3.5 on December 31, 1997. The source of
funds for such payments was, and is anticipated to be, available cash.

      Each of the Purchase Agreement and VSR Agreement were unanimously
approved by the Boards of Directors of Mafco and PCT and, in the case of PCT,
by a Special Committee of independent directors formed for the purpose of
considering the transaction. Mafco owns approximately 28.8% of the outstanding
shares of PCT Common Stock and all of the Preferred Stock with an aggregate
liquidation preference of $20.0.

      Immediately following the Flavors Acquisition, Mafco Worldwide, a
wholly-owned subsidiary of Flavors, through a series of transactions merged
with and into Pneumo Abex, with Pneumo Abex being the surviving corporation
and Pneumo Abex becoming a wholly-owned subsidiary of Flavors.

      The Flavors Acquisition was accounted for using the purchase method of
accounting. The allocation of the purchase price to assets and liabilities
based on their estimated respective fair values at November 25, 1996 is
subject to finalization. The purchase price and expenses associated with the
acquisition exceeded the fair value of Flavors' net assets by $96.1 and has
been assigned to goodwill, which is being amortized over forty years on the
straight-line basis. The fair values of the assets and liabilities acquired
are summarized below:

<TABLE>
<CAPTION>
<S>                     <C>
Current assets            $  63.3
Noncurrent assets           261.2
Current liabilities         (22.8)
Noncurrent liabilities     (112.5)
                        ---------
                          $ 189.2
                        =========
</TABLE>


      The following unaudited pro forma consolidated financial information
gives effect to the Flavors Acquisition, the Abex Merger and Transfer and the
Aerospace Sale as if such transactions occurred on January 1, 1995. These pro
forma results include certain adjustments, primarily increased depreciation
and amortization and decreased interest and tax expense, and are not
necessarily indicative of what the results would have been had the acquisition
occurred on January 1, 1995.

                                     F-12
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                      FOR THE YEARS
                                          ENDED
                                       DECEMBER 31,
                                   ------------------
                                      1996      1995
                                   --------  --------
<S>                                <C>       <C>
Net sales                            $103.4    $103.2
Income from continuing operations      20.9      13.8
Net income                             20.9      13.8
Income per share                       0.93      0.59
Fully diluted income per share         0.90      0.60
</TABLE>


4.    DISCONTINUED OPERATIONS

      On April 15, 1996, the Company consummated the Aerospace Sale, pursuant
to which it sold to Parker Hannifin Corporation ("Parker Hannifin") its
Aerospace operations including substantially all of its assets for aggregate
cash consideration of $201.1, before transaction costs of approximately $4.3.
As a result of the Aerospace Sale, the Company has classified the results of
operations of the aerospace segment as discontinued for all periods presented.

      The Company recorded a gain of $153.7 related to this sale, net of
transaction costs. In connection with the Aerospace Sale, Parker Hannifin, the
buyer, assumed the operating liabilities of Aerospace, including the existing
debt of the Company.

      On December 30, 1994, the Company sold substantially all of the
operating assets of AFP to Cooper Industries, Inc. for approximately $207.4
plus the assumption of liabilities. The gain of approximately $114.5 has been
recorded as discontinued operations of the industrial products business for
1994.

      On May 27, 1994, the Company sold to FMC Corporation the assets of
Jetway for cash proceeds of approximately $39.8 plus the assumption of certain
related liabilities. The gain on the sale of Jetway's operations of $13.9,
which includes $0.8 of income from Jetway's operations during the phaseout
period from April 1, 1994 to May 27, 1994, has been recorded as discontinued
operations of the industrial products business for 1994.

5.    INVENTORIES

      Inventories consisted of the following at December 31, 1996:

<TABLE>
<CAPTION>
<S>               <C>
Raw materials       $32.2
Work-in-progress      0.4
Finished goods       13.4
                  -------
                    $46.0
                  =======
</TABLE>

                                     F-13

<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

6.    PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment consisted of the following at December 31,
1996:

<TABLE>
<CAPTION>
<S>                       <C>
Land                        $ 1.7
Buildings                     7.5
Machinery and equipment      16.9
Construction-in-progress      0.4
                          -------
                             26.5
Accumulated depreciation     (0.2)
                          -------
                            $26.3
                          =======
</TABLE>


      Depreciation expense was $0.2 in 1996.

7.    INCOME TAXES

      Information pertaining to the Company's income (loss) from continuing
operations before income taxes is as follows:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -----------------------------
                                                                1996      1995       1994
                                                              -------  ---------  ---------
<S>                                                           <C>      <C>        <C>
Income (loss) from continuing operations before income
 taxes:
 Domestic                                                       $10.2     $(4.0)    $(30.1)
 Foreign                                                          0.4        --         --
                                                              -------  ---------  ---------
                                                                $10.6     $(4.0)    $(30.1)
                                                              =======  =========  =========
</TABLE>


      The Company's tax provision on income from continuing operations for
1996 includes a provision for current foreign income taxes of $0.1 and current
state and local income taxes of $0.1. The tax provision for 1996 also includes
a deferred tax benefit realized on the tax loss associated with discontinued
operations and a tax benefit resulting from the reduction of the valuation
allowance on net deferred tax assets offset by a deferred tax provision. The
Company did not record a benefit on the losses from continuing operations in
1995 and 1994 as it was not assured that it would be able to realize benefit
for such losses in the future.

      There were no income taxes provided in connection with the Aerospace
Sale as the tax bases of the assets and liabilities sold exceeded the net
proceeds and resulted in a tax loss.

      Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and income tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows:

                                     F-14
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                         ------------------
                                                            1996      1995
                                                         --------  --------
<S>                                                      <C>       <C>
Deferred tax assets:                                    
 Accrued expenses and other liabilities                    $  2.1    $  3.1
 Debt                                                         4.6        --
 Net operating loss carryforwards                            67.9      60.2
 Capital loss carryforwards                                   7.0        --
 Net assets held for sale                                      --      36.7
                                                         --------  --------
  Total deferred tax asset                                   81.6     100.0
 Valuation allowance                                        (38.2)    (95.6)
                                                         --------  --------
  Total deferred tax asset net of valuation allowance        43.4       4.4
Deferred tax liabilities:                               
 Property, plant and equipment                                0.9        --
 Pension asset                                                5.1       4.0
 Intangibles                                                  0.7        --
 Other                                                        0.1       0.4
                                                         --------  --------
  Total deferred tax liability                                6.8       4.4
                                                         --------  --------
  Net deferred tax asset                                   $ 36.6    $   --
                                                         ========  ========
</TABLE>


      In connection with the Flavors Acquisition purchase price allocation,
the Company has reduced the valuation allowance on net deferred tax assets.
Based upon the historical results of Flavors projected for a period which
takes into consideration the current operating environment in the tobacco
industry, the Company believes that it is more likely than not that it will 
be able to utilize these benefits.

      The effective tax rate on income from continuing operations before
income taxes varies from the current statutory federal income tax rate as
follows:

                                        1996        1995        1994
                                      ---------    --------    --------
Statutory rate                          35.0%      (35.0%)     (35.0%)
Non-deductible amortization              0.6         --          --
State and local taxes, net               0.6         --          --
(Decrease) increase in valuation        (5.4)       35.0        35.0
allowance
Benefit of tax loss - Discontinued     (28.9)        --          --
Operations
                                      =========    ========    ========
                                         1.9%        -- %        -- %
                                      =========    ========    ========

      At December 31, 1996, the Company had available Federal net operating
loss carryforwards of approximately $194.0, which expires in years 2000
through 2011.

      In order to protect the availability of the Company's net operating loss
carryforwards, the PCT charter prohibits, subject to certain exceptions,
transfers of PCT Common Stock until such date as fixed by the Board of
Directors of PCT to any person who owns, or after giving effect to such
transfer would own, at least 5% of the outstanding PCT Common Stock. The
Company has been advised by counsel that the transfer restriction in the PCT
charter is enforceable. The Company intends to take all 

                                     F-15
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

appropriate action to preserve the benefit of the restriction including, 
if necessary, the institution of legal proceedings seeking enforcement.

      In connection with the Abex Merger and the Transfer, Mafco and the
Company entered into a tax sharing agreement. Under the indemnification
provisions of the tax sharing agreement and with respect to periods ending on
or prior to June 15, 1995, Mafco will generally be required to pay any tax
liabilities of the Company, except for foreign income taxes related to the
Abex NWL Aerospace division.

      The IRS is currently examining the returns for the years 1989, 1990 and
1991. The Company has been notified by the IRS that its 1994 and its short
period 1995 return will be examined. The amount of net operating loss
carryforwards available at December 31, 1996 could be affected by the outcome
of this examination.

8.    AUTHORIZED CAPITAL STOCK

      PCT's authorized capital stock consists of 250,000,000 shares of Common
stock, par value $0.01 per share, of which 20,656,502 shares were outstanding
at December 31, 1996 and 1995 and 250,020,000 shares of preferred stock, par
value $0.01 per share, 20,000 of which were outstanding at December 31, 1996
and 1995.

      The PCT Common Stock is issuable in one or more series or classes, any
or all of which may have such voting powers, full or limited, or no voting
powers, and such designations, preferences and related participating, optional
or other special rights and qualifications, limitations or restrictions
thereof, are set forth in the Company's Certificate of Incorporation or any
amendment thereto, or in the resolution providing for the issuance of such
stock adopted by the Company's Board of Directors, which is expressly
authorized to set such terms for any such issue.

9.    REDEEMABLE PREFERRED STOCK

      In connection with the Abex Merger, as of June 15, 1995, the Company
issued $20 face amount of Preferred Stock. The Preferred Stock has a
liquidation value of $1,000 per share (the "Liquidation Value"), plus an
amount equal to all accrued and unpaid dividends to the date of final
distribution. Dividends on the Preferred Stock are cumulative and payable
quarterly in arrears at an amount per share equal to $20 per $1,000
Liquidation Value from and after June 16, 1995. All dividends are payable in
cash.

      The Preferred Stock is non-voting, except as required by law and as
follows: (i) in the event PCT defaults on the equivalent of six quarterly
dividends, the PCT Board of Directors ("PCT Board") shall be increased by two,
and holders of the Preferred Stock shall have the exclusive right to elect two
directors to the PCT Board, such right to remain in effect until all
accumulated dividends have been paid in full and dividends have been paid
regularly for at least a year; (ii) in the event PCT defaults on its mandatory
redemption obligation, the PCT Board shall be increased by two, and holders of
the Preferred Stock (in addition to all other rights) shall have the exclusive
right to elect two directors to the PCT Board, such right to remain in effect
until such default is cured; and (iii) the affirmative vote

                                     F-16
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

of holders of the Preferred Stock representing at least 662/3% of the
aggregate voting power as a separate class shall be required for (x) the
authorization of any preferred stock having a preference as to dividends or in
liquidation over the Preferred Stock, and (y) the adoption of any amendment to
the PCT Charter if such amendment materially affects any of the rights,
preferences or privileges of the holders of the Preferred Stock.

      The Preferred Stock is convertible, at the option of the holder, at any
time after 90 days from June 16, 1995, into shares of PCT Common Stock at a
rate of 125 shares of PCT Common Stock for each share of Preferred Stock,
subject to adjustment (as so adjusted, the "Common Stock Conversion Rate").
The Common Stock Conversion Rate is subject to appropriate antidilution
adjustment in certain situations including payment of dividends or
distributions in shares of PCT Common Stock, any subdivision, reclassification
or combination of shares of PCT Common Stock, or certain rights offerings and
similar issuances for consideration valued at less than the market value of
the PCT Common Stock.

      PCT, at its sole option at any time after 90 days from June 15, 1995,
may redeem the Preferred Stock for an amount with respect to each share of
Preferred Stock equal to (i) the sum of the Liquidation Value thereof and all
accrued and unpaid dividends thereon to the redemption date plus (ii) an
amount equal to interest on the amount determined in clause (i) at 8% per
annum, compounded on a quarterly basis, from the date the redemption amount is
otherwise due and payable (without regard to whether PCT may legally redeem
such shares) to the date the redemption amount is actually paid. The Preferred
Stock is redeemable at the option of the holder of the Preferred Stock in the
event of a Change of Control, as defined.

10.   STOCK AND OTHER PLANS

       PCT established a stock plan during 1995 (the "Stock Plan") which
provided for the grant of awards covering up to 1,000,000 shares of PCT Common
Stock, which would, if used in full, represent approximately 5% of the
outstanding PCT Common Stock of the Company subject to adjustment in the event
of stock dividends, split-ups, recapitalization and similar transactions.

       During 1995, the Compensation Committee granted non-statutory stock
options (NSO's) covering 590,000 shares at a price of $6.25 per share which
equaled the market price of the underlying stock on the date of grant and as a
result, no compensation cost was recognized. None of the options were
exercised and in connection with the Aerospace Sale in 1996, all outstanding
options under the Stock Plan were canceled.

       During 1994 and 1995, the Company recognized $3.4 and $0.9
respectively, of compensation expense related to the previous Abex Inc. stock
plan. In connection with the Abex Merger, 1,490,000 stock appreciation rights
and 20,000 restricted units held by former Abex employees and directors were
converted into 898,590 shares of PCT Common Stock and the plans under which
such shares were issued were terminated.

       The pro forma impact of accounting for the stock options under the fair
value method prescribed by FAS 123 was not material to net income and income
per share.


                                     F-17

<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

11.   PENSION PLANS

      Certain current and former employees are covered under various
retirement plans. Plans covering salaried employees generally provide pension
benefits based on years of service and compensation. Plans covering hourly
employees and union members generally provide stated benefits for each year of
credited service. Plan assets are invested primarily in common stocks, mutual
funds, fixed income securities and cash equivalents. The Company's funding
policy is to contribute annually the statutory required minimum amount as
actuarially determined.

      The following table reconciles the funded status of the Company's
significant pension plans from continuing operations as of the dates
indicated:

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                              --------------------
                                                                                 1996       1995
                                                                              ---------  ---------
<S>                                                                           <C>        <C>
Actuarial present value of benefit obligation:
 Accumulated benefit obligation includes vested benefits of $119.2 and
 $111.0                                                                         $ 119.4    $ 111.0
Plan assets at fair value                                                       $ 150.3    $ 131.5
Less: Projected benefit obligation for service rendered to date                  (121.1)    (111.0)
                                                                              ---------  ---------
Plan assets in excess of projected benefit obligation                              29.2       20.5
Unrecognized net gain                                                             (15.0)      (9.2)
                                                                              ---------  ---------
Net pension asset                                                               $  14.2    $  11.3
                                                                              =========  =========
</TABLE>


      The Company has an unfunded supplemental benefit plan to provide
salaried employees with retirement benefits which were limited by the
enactment of OBRA 93. In addition, the Company has an unfunded benefit plan
which provides benefits to certain former employees of the Company. The
projected benefit obligation, which is totally vested and included in other
liabilities, was $1.5 at December 31, 1996.

      The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7.5% as of December 31,
1996 and 1995. The rate of increase in future compensation levels reflected in
the determination of the Company's salaried plans was 4.5%-5% as of December
31, 1996 and 4% as of December 31, 1995. The expected long-term rate of return
on assets was 8%-9% for the non-union plans for 1996, 9% in 1995 and 1994 and
9% for the union pension plans for 1996.

      Plan assets and liabilities were primarily measured on October 31 each
year.

      Pension obligations accrued at the date of the sale of AFP remained with
the plan. There are no future benefit accruals for any employee of AFP. The
Company recognized curtailment expense in accordance with Statement of
Financial Accounting Standards No. 88 "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits" ("FAS 88") of $1.2 in 1994 related to the AFP sale which is included
in the gain on sale of discontinued industrial products businesses. In
connection with the Abex Merger and the Transfer, the Company transferred
pension plans with a balance sheet asset value of $39.1 to Mafco at June 15,
1995. In connection with the sale of Aerospace, the Company

                                     F-18


<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

transferred $70.6 in plan assets to Parker Hannifin and recognized curtailment
gain in accordance with FAS 88 of $4.5 in 1996 which is included in the gain
on sale of discontinued aerospace business.

      Net periodic pension (income) expense included in selling, general and
administration expenses consisted of the following components:

<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                                ----------------------------
                                                   1996      1995      1994
                                                --------  --------  --------
<S>                                             <C>       <C>       <C>
Service cost--benefits earned during the
 period                                           $  0.3    $   --    $  1.3
Interest cost on projected benefit obligation        8.8       8.1       8.9
Actual gain on plan assets                         (23.1)    (20.2)    (10.5)
Net amortization and deferrals                      11.3      10.4       0.4
                                                --------  --------  --------
 Net pension (income) expense                     $ (2.7)   $ (1.7)   $  0.1
                                                ========  ========  ========
</TABLE>

12.   LONG-TERM DEBT

      Long-term debt consisted of the following at December 31, 1996:


<TABLE>
<CAPTION>
<S>                                           <C>
Revolving Credit Loans                         $  7.3
11-7/8% Senior Subordinated Notes Due 2002       92.8
                                              -------
                                               $100.1
                                              =======
</TABLE>


      In connection with the Flavors Acquisition, the Company assumed debt
under a term and revolving credit facility (together the "Senior Credit")
totaling $25.1 and 11 7/8% Senior Subordinated Notes due 2002 (the "Senior
Notes") with a principal value of $85.0 and fair value of $92.8.

      The term facility loans were repaid in full on December 31, 1996. The
revolving credit facility is payable in full by June 30, 1999 and there are no
scheduled commitment reductions. In February 1997, the Senior Credit was
amended to reduce the total commitment under the revolving credit facility to
$12.5 from $20.0 and to lower the interest rates. At December 31, 1996, $7.3
was borrowed under the revolving credit facility and $2.3 was reserved for
lender guarantees on outstanding letters of credit. The Senior Credit, as
amended in February 1997, permits Pneumo Abex to choose between various
interest rate options and to specify the interest rate period to which the
interest rate options are to apply, subject to certain parameters. Borrowing
options available are (i) the Base Rate Loans (as defined) and (ii) Eurodollar
Loans (as defined) plus a borrowing margin of 1.0%. The Senior Credit provides
for a commitment fee of one quarter of one percent per annum on the unused
Revolving Credit Loans. Obligations under the Senior Credit are secured by
pledges of substantially all of Pneumo Abex's domestic assets. The Senior
Credit contains various restrictive covenants which include, among other
things, limitations on indebtedness and liens, minimum interest coverage and
fixed charge coverage ratios, operating cash flow maintenance and capital
expenditure limits. The interest rate charged on the Senior Credit at December
31, 1996 was 9.25%.


                                     F-19
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

      The Senior Subordinated Notes, which were issued by Mafco Worldwide in
November 1992, mature on November 15, 2002, and are not subject to redemption
through the operation of a sinking fund. The Senior Subordinated Notes are
subject to redemption at any time after November 15, 1997, at the option of
Pneumo Abex, in whole or in part, at redemption prices (expressed as
percentages of the principal amount) for the 12 month period beginning each
November 15: 1997-105.95%; 1998-103.96%; 1999-101.98% and 100% thereafter.
Interest is payable semiannually in May and November. The Indenture relating
to the Senior Subordinated Notes contains various restrictive covenants, which
include restrictions on the incurrence of additional debt, payments of
dividends and transactions with affiliates. In addition, upon the occurrence
of a change in control whereby any person (as defined in the Indenture)
acquires directly or indirectly more than 35% of the total voting power of all
classes of the voting stock of Pneumo Abex, each holder of the Senior
Subordinated Notes has the right to require Pneumo Abex subject to certain
restrictions in the Senior Credit, to repurchase the Senior Subordinated Notes
at 101% of face value. The Senior Subordinated Notes are subordinate in right
of payment to the existing Senior Credit and all future senior indebtedness of
Pneumo Abex.

      Pneumo  Abex's French  subsidiary  has an agreement  renewable  annually
with a local  bank  whereby  it may  borrow up to six  million  French  francs
(approximately  $1.2 at December 31, 1996) for working  capital  purposes.  At
December 31, 1996, no amounts were borrowed.

      The 1994 and 1995 extraordinary charges of $4.8 and $1.6, respectively,
relate to premiums on debt retired by the Company prior to the Abex Merger.

13.   FINANCIAL INSTRUMENTS

      Financial instruments that potentially subject the Company to
concentrations of credit risk consist of trade accounts receivable. The
Company's customers are geographically dispersed, but are concentrated in the
tobacco industry. Even though seven of the Company's ten largest customers are
in the tobacco industry and accounted for approximately 58% of pro forma net
revenues in 1996, Mafco Worldwide historically has had no material losses on
its trade receivables from customers in the tobacco industry. Probable bad
debt losses have been provided for in the allowance for doubtful accounts.

      From time to time, the Company enters into forward exchange contracts to
hedge certain receivables and firm sales commitments denominated in foreign
currencies. The effects of movements in currency exchange rates on these
instruments are recognized when the related operating revenue is recognized.
Realized gains and losses on foreign currency contracts are included in the
underlying asset or liability being hedged and recognized in There were no
contracts outstanding at December 31, 1996.

      The carrying amounts for cash and cash equivalents, trade accounts
receivable, accounts payable, accrued liabilities and long-term debt
approximate fair value.

                                     F-20
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

14.   RELATED PARTY TRANSACTIONS

      Under the Transfer Agreement, PCT will be reimbursed by Mafco for
amounts spent in excess of $1.5 during each of the years 1995 (after June 15),
1996, 1997 and 1998 in connection with certain public company costs. The
amount spent for such costs in the 1996 and 1995 periods did not exceed $1.5;
therefore, no reimbursement was made.

      On February 5, 1996, the Company, through Pneumo Abex, entered into a
Reimbursement Agreement with Chemical Bank and Mafco. The Reimbursement
Agreement provides for letters of credit totaling $20.8 covering certain
environmental issues, not related to the business of PCT. In connection with
the Transfer, Mafco has agreed to indemnify PCT for these contingent
liabilities, which are generally paid by third party indemnitors and insurers,
including the cost of the letters of credit.

15.   COMMITMENTS AND CONTINGENCIES

      Future minimum rental commitments for operating leases with
noncancelable terms in excess of one year from December 31, 1996 are as
follows:

<TABLE>
<CAPTION>
<S>                    <C>
1997                     $0.5
1998                      0.3
1999                      0.2
2000                      0.2
2001 and thereafter       0.1
                       ------
                         $1.3
                       ======
</TABLE>


      The Company had outstanding letters of credit totaling $2.3 at December
31, 1996. Restricted cash of $1.7 at December 31, 1996 included in other
assets reflects segregated cash held for the benefit of certain parties to
cover certain insurance obligations.

      At December 31, 1996, the Company had obligations to purchase
approximately $14.8 of raw materials.

      The Company is indemnified by third parties with respect to certain of
its contingent liabilities, such as certain environmental and asbestos
matters, as well as certain tax and other matters. In order to implement the
Transfer, a subsidiary of Abex and PCT and certain subsidiaries of PCT entered
into a Transfer Agreement. Under the Transfer Agreement, substantially all of
Abex's consolidated assets and liabilities, other than those relating to the
Aerospace Business, were transferred to a subsidiary of Mafco, with the
remainder being retained by PCT. The Transfer Agreement provides for
appropriate transfer, indemnification and tax sharing arrangements, in a
manner consistent with applicable law and existing contractual arrangements.

                                     F-21
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

      The Transfer Agreement requires such subsidiary of Mafco to undertake
certain administrative and funding obligations with respect to certain
asbestos claims and other liabilities retained by PCT. PCT will be obligated
to make reimbursement for the amounts so funded only when amounts are received
by PCT under related indemnification and insurance agreements. Such
administrative and funding obligations would be terminated as to asbestos
products claims in the case of a bankruptcy of Pneumo Abex or PCT or of
certain other events affecting the availability of coverage for such claims
from third party indemnitors and insurers. The Transfer Agreement further
provides for certain funding indemnification and cooperation arrangements
between PCT and such subsidiary in respect of certain liabilities which may
arise under the Employee Retirement Security Act of 1974 in respect of the
sale of AFP.

      In addition, various legal proceedings, claims and investigations are
pending against the Company and certain subsidiaries, including those relating
to commercial transactions, product liability, safety and health matters and
other matters. PCT is involved in various stages of legal proceedings, claims,
investigations and cleanup relating to environmental natural resource matters,
some of which relate to waste disposal sites. Most of these matters are
covered by insurance, subject to deductibles and maximum limits, and by
third-party indemnities.

      On January 2, 1996, PCT entered into a settlement agreement with the
U.S. Government pursuant to which PCT agreed to pay the U.S. Government $12.5
to settle allegations of labor mischarging and related contract disputes
relating to Aerospace. On January 8, 1996, pursuant to the terms of such
settlement agreement, PCT paid such amount to the U.S. Government. The U.S.
Government had also asserted a claim of non-compliance with Cost Accounting
Standards. In February 1996, PCT entered into a settlement agreement with the
U.S. Government pursuant to which PCT agreed to pay the U.S. Government $0.2
to settle the Cost Accounting Standards non-compliance assertion. On March 11,
1996, pursuant to the terms of such settlement agreement, PCT paid such amount
to the U.S. Government. In addition, the U.S. Government has asserted claims
of defective pricing. Based upon current U.S. Government procurement
regulations, under certain circumstances involving defective pricing a
contractor can incur fines and penalties, as well as be suspended or debarred
from U.S. Government contracts.

      In the opinion of management, based upon the information available at
this time, the outcome of the outstanding defective pricing and other matters
referred to above will not have a material adverse effect on the Company's
financial position or results of operations.

      The Company believes that its facilities are well maintained and are in
substantial compliance with environmental laws and regulations.

16.   SIGNIFICANT CUSTOMER

      The Company has a significant customer in the tobacco industry, Philip
Morris Companies Inc., which accounted for approximately 26% of pro forma net
revenues in 1996.
                                     F-22

<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

17.   GEOGRAPHIC SEGMENTS

      As a result of the sale of Aerospace in 1996 and the industrial products
businesses in 1994, the Company has classified those operations as
discontinued in the consolidated financial statements. The discussion below
reflects the results of operations of Flavor's licorice extract and other
flavoring agents business since November 25, 1996, the date of the Flavors
Acquisition. The results of operations data presented below reflects the
application of the purchase method of accounting for the Flavors Acquisition.

      The Company operates in one business segment. Information related to the
Company's geographic segments are presented below with the following
definitions:

      Operating profit and identifiable assets are classified as domestic and
corporate, respectively, in 1995 and 1994.

      Operating profit, as indicated below, represents net sales less
operating expenses.

      Identifiable assets are those used by each geographic segment. Corporate
assets are principally domestic cash and cash equivalents, a pension asset and
deferred charges.

<TABLE>
<CAPTION>
                                                            YEAR ENDED
                                                         DECEMBER 31, 1996
                                                         -----------------
<S>                                                      <C>
Net Sales:                                             
 Domestic--U.S.                                           $     4.8
         --Export                                               3.2
 Foreign                                                        1.5
                                                         -----------------
                                                          $     9.5
                                                         =================
Operating Profit:                                      
 Domestic                                                 $     2.3
 Foreign                                                        0.3
                                                         -----------------
                                                                2.6
Interest, investment and other income, net                      8.0
                                                         -----------------
Income from continuing operations before income taxes     $    10.6
                                                         =================
                                                         DECEMBER 31, 1996
                                                         -----------------
Identifiable assets:                                   
 Domestic (a)                                             $   262.5
 Foreign                                                       36.5
 Corporate                                                     19.1
                                                         -----------------
                                                          $   318.1
                                                         =================
</TABLE>

---------------
(a) Includes assets located in foreign countries of $1.7 at December 31, 1996.

                                     F-23
<PAGE>

               POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

18.   UNAUDITED QUARTERLY FINANCIAL INFORMATION

      The following is a summary of unaudited quarterly financial information
for 1996 and 1995:

<TABLE>
<CAPTION>
                                                                1996
                                          -----------------------------------------------
                                             FIRST       SECOND       THIRD      FOURTH
                                          ---------  ------------  ---------  -----------
<S>                                       <C>        <C>           <C>        <C>
Net sales (a)                                $  --       $   --       $  --       $ 9.5 (b)
Gross profit (a)                                --           --          --         2.9 (b)
Income from continuing operations              0.3          2.9         3.5         3.7
Income from discontinued operations            4.4        153.7 (c)      --          --
Extraordinary item                              --           --          --          --
Net income                                     4.7        156.6 (c)     3.5         3.7
Income per common share:
 Income from continuing operations           $  --       $ 0.12       $0.15       $0.16
 Income from discontinued operations          0.21         7.44          --          --
 Extraordinary item                             --           --          --          --
 Net income                                   0.21         7.56        0.15        0.16
</TABLE>                                        

<TABLE>
<CAPTION>

                                                                   1995
                                          -----------------------------------------------
                                             FIRST       SECOND       THIRD      FOURTH
                                          ---------  ------------  ---------  -----------
<S>                                       <C>        <C>           <C>        <C>
Net sales (a)                               $   --       $   --      $   --      $   --
Gross profit (a)                                --           --          --          --         
Income from continuing operations             (1.6)        (2.0)       (0.2)       (0.2)
Income from discontinued operations            4.0          4.0         3.9         5.0
Extraordinary item (d)                        (1.6)          --          --          --
Net income                                     0.8          2.0         3.7         4.8
Income per common share:            
 Income from continuing operations          $(0.08)      $(0.10)     $(0.03)     $(0.03)
 Income from discontinued operations          0.20         0.20        0.19        0.24
 Extraordinary item                          (0.08)          --          --          --
 Net income                                   0.04         0.10        0.16        0.21 
</TABLE>                                 

--------------
(a)   Quarterly net sales and gross profit reflect the reclassification of
      Aerospace to discontinued operations.

(b)   Net sales and gross profit reflect the Flavors Acquisition on 
      November 25, 1996.

(c)   Reflects the gain of sale of Aerospace in April 1996.

(d)   Reflects the extraordinary loss related to the early retirement of debt
      in 1995.

                                     F-24
<PAGE>

          SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                          BALANCE SHEET (PARENT ONLY)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>


                                                                         DECEMBER 31,
                                                                             1996
                                                                       -----------------
<S>                                                                    <C>
                   ASSETS
Current assets:
     Cash and cash equivalents                                          $      2.2
     Prepaid expenses and other                                                0.2
                                                                       -----------------
          Total current assets                                                 2.4

Investment in and advances to subsidiaries                                   191.8
                                                                       -----------------

                                                                        $    194.2
                                                                       =================


          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accrued expenses                                                   $      1.0
     Deferred cash payments due to Mafco                                       7.2
                                                                       -----------------
          Total current liabilities                                            8.2

Redeemable preferred stock                                                    20.0

Stockholders' equity:
     Common stock, par value $.01; 250,000,000 shares authorized;
          20,656,502 shares issued and outstanding in 1996 and 1995            0.2
     Additional paid-in capital                                               26.7
     Retained earnings                                                       139.3
     Currency translation adjustment                                          (0.2)
                                                                       -----------------
               Total stockholders' equity                                    166.0
                                                                       -----------------
                                                                        $    194.2
                                                                       =================
</TABLE>


Note: There were no restrictions on the transfer of assets from
      subsidiaries to the parent during 1995 and 1994.


                                     F-25
<PAGE>



           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 CONSOLIDATED STATEMENT OF INCOME (PARENT ONLY)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                             YEAR ENDED
                                                                            DECEMBER 31,
                                                                                1996
                                                                          -----------------

<S>                                                                       <C>   
General and administrative expenses                                        $    1.0
                                                                          -----------------
          Operating loss                                                        1.0

Interest, investment and other income, net                                     (0.9)
                                                                          -----------------
          Loss from continuing operations before taxes                          0.1
Benefit for income taxes                                                       (0.1)
                                                                          -----------------
          Income from continuing operations                                       -

Equity in income of subsidiaries                                              168.5
                                                                          -----------------
          Net income                                                          168.5
                                                                          -----------------

Preferred stock dividend                                                       (1.6)
                                                                          -----------------

          Net income available to common shareholders                      $  166.9
                                                                          =================

</TABLE>


Note: There were no restrictions on the transfer of assets from subsidiaries to
      the parent during 1995 and 1994.




                                     F-26



<PAGE>


           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
               CONSOLIDATED STATEMENT OF CASH FLOWS (PARENT ONLY)
                             (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                          YEAR ENDED
                                                                                         DECEMBER 31,
                                                                                             1996
                                                                                       -----------------
<S>                                                                                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                              $       168.5
Adjustments to reconcile net income to total cash provided by operating
   activities:
         Equity in income of subsidiaries in excess of cash distributions                      (165.5)
Changes in assets and liabilities:
         Other, net                                                                               0.8
                                                                                       -----------------
         Cash provided by operating activities                                                    3.8
                                                                                       -----------------

CASH FLOWS FROM FINANCING ACTIVITIES

Preferred dividends                                                                              (1.6)
                                                                                       -----------------
          Cash used in financing activities                                                      (1.6)
                                                                                       -----------------


Net increase in cash and cash equivalents                                                         2.2
Cash and cash equivalents at beginning of period                                                    -
                                                                                       -----------------
Cash and cash equivalents at end of period                                              $         2.2
                                                                                       =================
</TABLE>


Note: There were no restrictions on the transfer of assets from subsidiaries to
      the parent during 1995 and 1994.


                                     F-27