<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   FORM 10-Q
 
(Mark One)
 
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
For the quarterly period ended September 30, 1996
 
                                       OR
 
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934
 
For the transition period from _______________________ to ______________________
 
Commission file number 0-11965
 
                  PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)
 
California                                                           13-3179284
--------------------------------------------------------------------------------
(State or other jurisdiction                                    (I.R.S. Employer
of incorporation or organization)                            Identification No.)
 
440 Mission Court, Suite 250, California                                   94539
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)
 
Registrant's telephone number, including area code (510) 656-1855
 
                                      N/A
--------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)
 
   Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_  No __
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<PAGE>
 
                         Part I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
                  PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
                            (a limited partnership)
                            STATEMENT OF NET ASSETS
                          (in process of liquidation)
                               September 30, 1996
                                  (Unaudited)
 
<TABLE>
------------------------------------------------------------------------------------------------
<S>                                                                                 <C>
Assets
Cash and cash equivalents                                                            $1,422,161
Royalty receivable                                                                      130,000
Investment in joint venture at net realizable value                                     550,000
                                                                                    ------------
Total assets                                                                          2,102,161
                                                                                    ------------
Liabilities
Estimated liquidation costs                                                             226,027
Accrued expenses and other liabilities                                                   69,704
                                                                                    ------------
Total liabilities                                                                       295,731
                                                                                    ------------
Contingencies
Net assets in liquidation                                                            $1,806,430
                                                                                    ------------
                                                                                    ------------
Net assets in liquidation
Limited partners (73,903 units issued and outstanding)                               $1,577,638
General partner                                                                         228,792
                                                                                    ------------
Total net assets in liquidation                                                      $1,806,430
                                                                                    ------------
                                                                                    ------------
------------------------------------------------------------------------------------------------
</TABLE>
 
                       STATEMENT OF CHANGES IN NET ASSETS
                          (in process of liquidation)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                              LIMITED       GENERAL
                                                              PARTNERS      PARTNERS       TOTAL
---------------------------------------------------------------------------------------------------
<S>                                                          <C>            <C>          <C>
Net assets in liquidation--June 30, 1996                     $  901,269     $153,640     $1,054,909
Changes in estimated liquidation values of assets and
  liabilities                                                   676,369       75,152        751,521
                                                             ----------     --------     ----------
Net assets in liquidation--September 30, 1996                $1,577,638     $228,792     $1,806,430
                                                             ----------     --------     ----------
                                                             ----------     --------     ----------
---------------------------------------------------------------------------------------------------
</TABLE>
                The accompanying notes are an integral part of these statements
 
                                       2
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<PAGE>
 
                  PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
                            (a limited partnership)
                        STATEMENT OF FINANCIAL CONDITION
                             (going concern basis)
                               December 31, 1995
                                  (Unaudited)
 
<TABLE>
------------------------------------------------------------------------------------------------
<S>                                                                                 <C>
ASSETS
Cash and cash equivalents                                                            $1,308,343
Royalties receivable                                                                    105,564
                                                                                    ------------
Total assets                                                                         $1,413,907
                                                                                    ------------
                                                                                    ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued expenses and other liabilities                                               $  250,281
                                                                                    ------------
Contingencies
Partners' capital
Limited partners (73,903 units issued and outstanding)                                  999,114
General partner                                                                         164,512
                                                                                    ------------
Total partners' capital                                                               1,163,626
                                                                                    ------------
Total liabilities and partners' capital                                              $1,413,907
                                                                                    ------------
                                                                                    ------------
</TABLE>
--------------------------------------------------------------------------------
        The accompanying notes are an integral part of these statements
 
                                       3
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<PAGE>
 
                  PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
                            (a limited partnership)
                            STATEMENTS OF OPERATIONS
                             (going concern basis)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                         Six Months       Nine Months      Three Months
                                                            Ended            Ended             Ended
                                                          June 30,       September 30,     September 30,
                                                            1996             1995              1995
--------------------------------------------------------------------     -------------------------------
<S>                                                      <C>             <C>               <C>
REVENUES
Royalty income                                            $ 311,819       $   767,576        $ 300,008
Gain on sale of investments in equity securities                 --            65,707            1,965
Interest and other income                                    32,126           281,565           23,044
                                                         -----------     -------------     -------------
                                                            343,945         1,114,848          325,017
                                                         -----------     -------------     -------------
GENERAL AND ADMINISTRATIVE EXPENSES                         223,662           301,444          121,830
                                                         -----------     -------------     -------------
Net operating income                                        120,283           813,404          203,187
Estimated liquidation costs                                 229,000                --               --
                                                         -----------     -------------     -------------
Net income (loss)                                         $(108,717)      $   813,404        $ 203,187
                                                         -----------     -------------     -------------
                                                         -----------     -------------     -------------
ALLOCATION OF NET INCOME (LOSS)
Limited partners                                          $ (97,845)      $   732,064        $ 182,868
                                                         -----------     -------------     -------------
                                                         -----------     -------------     -------------
General partner                                           $ (10,872)      $    81,340        $  20,319
                                                         -----------     -------------     -------------
                                                         -----------     -------------     -------------
Net income (loss) per limited partnership unit            $   (1.32)      $      9.91        $    2.47
                                                         -----------     -------------     -------------
                                                         -----------     -------------     -------------
--------------------------------------------------------------------------------------------------------
</TABLE>
 
                   STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                             (going concern basis)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                               LIMITED      GENERAL
                                                               PARTNERS     PARTNER        TOTAL
---------------------------------------------------------------------------------------------------
<S>                                                            <C>          <C>          <C>
Partners' capital--December 31, 1995                           $999,114     $164,512     $1,163,626
Net loss                                                        (97,845)     (10,872)      (108,717)
                                                               --------     --------     ----------
Net assets in liquidation--June 30, 1996                       $901,269     $153,640     $1,054,909
                                                               --------     --------     ----------
                                                               --------     --------     ----------
---------------------------------------------------------------------------------------------------
                The accompanying notes are an integral part of these statements
</TABLE>
 
                                       4
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<PAGE>
 
                  PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
                            (a limited partnership)
                            STATEMENT OF CASH FLOWS
                             (going concern basis)
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                                      Six Months      Nine Months
                                                                        Ended            Ended
                                                                       June 30,      September 30,
                                                                         1996            1995
--------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Royalty income received                                               $  203,199     $     644,845
Interest and other income received                                        32,126         2,095,453
General and administrative expenses paid                                (235,763)          (91,747)
                                                                      ----------     -------------
Net cash (used in) provided by operating activities                         (438)        2,648,551
                                                                      ----------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Collection of note receivable                                                 --         1,842,393
Proceeds from the sale of investments in equity securities                    --         1,757,897
                                                                      ----------     -------------
Net cash provided by investing activities                                     --         3,600,290
                                                                      ----------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution                                                                  --        (7,061,842)
                                                                      ----------     -------------
Net decrease in cash and cash equivalents                                   (438)         (813,001)
Cash and cash equivalents at beginning of period                       1,308,343         2,010,931
                                                                      ----------     -------------
Cash and cash equivalents at end of period                            $1,307,905     $   1,197,930
                                                                      ----------     -------------
                                                                      ----------     -------------
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES
Net income (loss)                                                     $ (108,717)    $     813,404
                                                                      ----------     -------------
Adjustments to reconcile net income to net cash (used in) provided
  by operating activities:
Gain on sale of investments in equity securities                              --           (65,707)
Changes in:
  Royalties receivable                                                  (108,620)         (122,731)
  Interest receivable                                                         --         1,813,888
  Estimated liquidation costs                                            229,000                --
  Accrued expenses and other liabilities                                 (12,101)          209,697
                                                                      ----------     -------------
Total adjustments                                                        108,279         1,835,147
                                                                      ----------     -------------
Net cash (used in) provided by operating activities                   $     (438)    $   2,648,551
                                                                      ----------     -------------
                                                                      ----------     -------------
--------------------------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
1995
Converted holdings in The Allen Group Inc. Series B convertible debenture (principal of $84,478)
into 6,047 shares of common stock of The Allen Group Inc.
--------------------------------------------------------------------------------------------------
</TABLE>
                The accompanying notes are an integral part of these statements
 
                                       5
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<PAGE>
 
                  PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
                            (a limited partnership)
                         NOTES TO FINANCIAL STATEMENTS
                               September 30, 1996
                                  (Unaudited)
 
A. General
 
   These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments necessary to
fairly present the financial statements of the PruTech Research and Development
Partnership (the ``Partnership'') as of September 30, 1996 subject to the
effects of any further liquidation accounting adjustments that would have been
required had the realizable values of assets and the amounts of liabilities been
known when the Partnership first adopted the liquidation basis of accounting.
(See discussion below.)
 
   Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1995.
 
   R&D Funding Corp (the ``General Partner'') mailed to all limited partners a
consent solicitation statement dated April 10, 1996 (the ``Statement'') asking
for their written consent to approve a plan of dissolution and liquidation of
the Partnership (the ``Plan''), as more fully described in the Statement.
Holders of 68.5% of the limited partnership units approved the Plan on June 10,
1996 and accordingly, the Plan was adopted.
 
   In accordance with the terms of the Plan, the General Partner will attempt to
sell or otherwise dispose of the Partnership's remaining investments and
distribute the resulting proceeds (reduced by a working capital reserve to
satisfy any liabilities or contingencies of the Partnership) to the partners in
an amount equal to their respective capital account balances at the time of
liquidation under the terms of the Partnership Agreement. It is not expected
that the Partnership's eventual total distributions will equal the partners'
initial investment.
 
   As a result of the adoption of the Plan, the Partnership adopted the
liquidation basis of accounting effective June 30, 1996, whereby assets are
valued at their estimated net realizable values and liabilities are stated at
their estimated settlement amounts. However, due to the nature of the
Partnership's remaining investments, the General Partner was not able to predict
with any degree of certainty the amounts which will be realized from these
investments and therefore, such assets were carried at zero. Accruals totaling
$229,000 were recorded as of June 30, 1996 for the estimated future costs of
liquidating the Partnership which include, but are not limited to, costs of
selling or otherwise disposing of the Partnership's remaining investments and
general and administrative costs through the estimated conclusion of
liquidation. The General Partner estimates that the final liquidation of the
Partnership's remaining investments will occur by December 31, 1996; however,
due to the nature of these investments, liquidation may take longer.
 
   During the three months ended September 30, 1996, the Partnership reflected
an increase of $752,000 in the estimated net liquidation value of its assets and
liabilities. This increase is a result of valuing the Partnership's interest in
a joint venture with American Software, Inc. at $550,000 as further discussed in
Note D. In addition, the Partnership accrued an additional $130,000 for
royalties due from Syntro Corporation, received an additional $59,000 of
royalties from the joint venture with American Software, Inc. and earned
interest on its cash and cash equivalents. No significant adjustments to
previously recorded liability amounts were required.
 
   Direct costs incurred during 1996 in connection with the preparation,
printing and mailing of the Statement and the solicitation of votes of the
limited partners were $94,000 and are included in general and administrative
expenses on the statements of operations for the six months ended June 30, 1996.
 
B. Related Parties
 
   The General Partner and its affiliates perform services for the Partnership
which include, but are not limited to: accounting and financial management;
registrar, transfer and assignment functions; asset management; investor
communications; printing and other administrative services. The General Partner
and its
                                       6
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<PAGE>
affiliates receive reimbursements for costs incurred in connection with these
services, the amount of which is limited by the provisions of the Partnership
Agreement. These costs and expenses were $104,000 and $165,000 for the six
months ended June 30, 1996 and the nine months ended September 30, 1995,
respectively. General and administrative expenses payable to the General Partner
and its affiliates (which are included in accrued expenses and other
liabilities) at September 30, 1996 and December 31, 1995 were $48,000 and
$159,000, respectively.
 
   Additionally, in conjunction with the adoption of the liquidation basis of
accounting, the Partnership recorded an accrual for the estimated future costs
expected to be incurred to liquidate the Partnership, as discussed in Note A
above. Included in these liquidation cost estimates as of September 30, 1996 are
approximately $202,000 expected to be charged by the General Partner and its
affiliates during the anticipated remaining liquidation period. The actual
charges will depend primarily upon the length of time required to liquidate the
Partnership and may differ from the amount accrued.
 
   The Partnership maintains an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of the General Partner, for investment of
its available cash in short-term instruments pursuant to the guidelines
established by the Partnership Agreement.
 
   Prudential Securities Incorporated, an affiliate of the General Partner,
owned 145 limited partnership units at September 30, 1996.
 
   The Partnership has engaged in research and development co-investment
projects with PruTech Research and Development Partnership II, PruTech Research
and Development Partnership III, and PruTech Project Development Partnership
(collectively, the ``PruTech R&D Partnerships'') for which R&D Funding Corp
serves as the general partner. The allocation of the co-investment projects'
profits or losses among the PruTech R&D Partnerships is consistent with the
costs incurred to fund the research and development projects.
 
C. Contingencies
 
   On April 15, 1994 a multiparty petition entitled Mack et al. v. Prudential
Securities Incorporated et al. (Cause No. 94-17695) was filed in the 80th
Judicial District Court of Harris County, Texas, purportedly on behalf of
investors in the Partnership against the Partnership, the General Partner,
Prudential Securities Incorporated, The Prudential Insurance Company of America
and a number of other defendants. The petition alleges common law fraud and
fraud in the inducement and negligent misrepresentation in connection with the
offering of the Partnership units; negligence and breach of fiduciary duty in
connection with the operation of the Partnership; civil conspiracy; and
violations of the Federal Securities Act of 1933 (sections 11 and 12), and of
the Texas Securities and Deceptive Trade Practices statutes. The suit seeks
among other things, compensatory and punitive damages, costs and attorneys'
fees. The ultimate outcome of this litigation as well as the impact on the
Partnership cannot presently be determined.
 
   The General Partner, Prudential Securities Incorporated and the Partnership
believe they have meritorious defenses to the complaint and intend to vigorously
defend themselves against this action. Additionally, the General Partner
believes that the litigation discussed above will not have an adverse impact on
its ability to liquidate the Partnership in accordance with the Plan and in the
time frame currently contemplated by the General Partner.
 
D. Subsequent Event
 
   Pursuant to an agreement dated October 31, 1996 between the Partnership and
American Software, Inc., the Partnership assigned to American Software, Inc. its
right, title and interest in and to PruTech American Joint Venture, a joint
venture with American Software, Inc., in exchange for $550,000 in cash. No
further royalty payments will be received by the Partnership from PruTech
American Joint Venture as a result of this agreement. In accordance with the
liquidation basis of accounting, the Partnership recorded the $550,000 on its
statement of net assets as of September 30, 1996.
 
                                       7
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<PAGE>
 
                  PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
                            (a limited partnership)
      ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
Liquidity and Capital Resources
 
   The Partnership's cash and cash equivalents at September 30, 1996 totalled
approximately $1,422,000. This amount is approximately $114,000 greater than the
Partnership's cash and cash equivalents at December 31, 1995 principally due to
the collection of royalty and interest amounts partially offset by payments of
the Partnership's liabilities.
 
   As more fully discussed in Note A to the financial statements, the General
Partner mailed to all limited partners a consent solicitation statement dated
April 10, 1996 (the ``Statement'') asking for their written consent to approve a
plan of dissolution and liquidation of the Partnership (the ``Plan''), as more
fully described in the Statement. Holders of 68.5% of the limited partnership
units approved the Plan on June 10, 1996 and accordingly, the Plan was adopted.
In accordance with the terms of the Plan, the General Partner will attempt to
sell or otherwise dispose of the Partnership's remaining investments and
distribute the resulting proceeds (reduced by a working capital reserve to
satisfy any liabilities or contingencies of the Partnership) to the partners in
accordance with the terms of the Partnership Agreement. Due to the nature of the
Partnership's remaining investments, the General Partner is not able to predict
with any degree of certainty the timing of any sales, the proceeds that will be
received or the cash amounts that may ultimately be available for distribution
by the Partnership. It is not expected that the Partnership's eventual total
distributions will equal the partners' initial investment.
 
   During the three months ended September 30, 1996, the Partnership reflected
an increase of $752,000 in the estimated net liquidation value of its assets and
liabilities. This increase is a result of valuing the Partnership's interest in
a joint venture with American Software, Inc. at $550,000 as further discussed in
Note D to the financial statements. In addition, the Partnership accrued an
additional $130,000 for royalties due from Syntro Corporation, received an
additional $59,000 of royalties from the joint venture with American Software,
Inc. and earned interest on its cash and cash equivalents. No significant
adjustments to previously recorded liability amounts were required.
 
Results of Operations
 
   The Partnership adopted the liquidation basis of accounting as of June 30,
1996 in accordance with generally accepted accounting principles and no longer
reports results of operations. As such, there is no management's discussion
comparing the corresponding 1996 and 1995 periods.
 
                                       8
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<PAGE>
 
                           PART II. OTHER INFORMATION
 
Item 1. Legal Proceedings--
 
        This information is incorporated by reference to Note C to the financial
        statements filed herewith in Item 1 of Part I of the Registrant's
        Quarterly Report
 
Item 2. Changes in Securities--None
 
Item 3. Defaults Upon Senior Securities--None
 
Item 4. Submission of Matters to a Vote of Security Holders--None
 
Item 5. Other Information--None
 
Item 6. Exhibits and Reports on Form 8-K--
 
        (a) Exhibits:
 
            PruTech Research and Development Partnership Amended and Restated
            Agreement of Limited Partnership (incorporated by reference to
            Exhibit 3.1 included with Registrant's Form S-1 Registration
            Statement, File No. 2-86528, filed on November 16, 1983)
 
            First Amendment to the Amended and Restated Agreement of Limited
            Partnership of PruTech Research and Development Partnership
            (incorporated by reference to Exhibit 3 included with Registrant's
            Annual Report on Form 10-K filed March 28, 1992)
 
            Second Amendment to the Amended and Restated Agreement of Limited
            Partnership of PruTech Research and Development Partnership
            (incorporated by reference to Exhibit 3 included with Registrant's
            Annual Report on Form 10-K filed March 31, 1994)
 
            Joint Venture Interest Purchase Agreement between the Registrant and
            American Software, Inc. dated October 31, 1996 (filed herewith)
 
            Financial Data Schedule (filed herewith)
 
         (b) Reports on Form 8-K--None
 
                                       9
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<PAGE>
 
                                   SIGNATURES
 
   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
PruTech Research and Development Partnership
 
By: R&D Funding Corp
    A Delaware corporation, General Partner
     By: /s/ Michael S. Hasley                    Date: November 14, 1996
     ----------------------------------------
     Michael S. Hasley
     President for the Registrant
By: R&D Funding Corp
    A Delaware corporation, General Partner
     By: /s/ Steven Carlino                       Date: November 14, 1996
     ----------------------------------------
     Steven Carlino
     Vice President
     Chief Accounting Officer for the
     Registrant
 
                                       10