<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

                Quarterly Report Pursuant to Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934

For Quarterly Period Ended: October 31, 1996

Commission File Number: 0-26508

                               PURETEC CORPORATION
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                        22-3376449
------------------------------                       -------------------
(State or other jurisdiction of                       (IRS Employer
incorporation or organization)                       Identification No.)

                65 Railroad Avenue, Ridgefield, New Jersey 07657
                ------------------------------------------------
                    (Address of principal executive offices)

Registrant's telephone number, including area code: (201)941-6550

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

                  Yes  X     No___

      As of December 13, 1996, there were 29,339,172 shares of common stock
outstanding.

<PAGE>

                      PURETEC CORPORATION AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                 C O N T E N T S


                                                                 Page
                                                                 ----

Part I FINANCIAL INFORMATION:


      Item 1. Financial Statements:

               Consolidated Balance Sheets as of                    3
               October 31, 1996 and July 31, 1996

               Consolidated Statements of Operations                4
               for the three month periods ended
               October 31, 1996 and 1995

               Consolidated Statements of Cash Flows              5-6
               for the three month periods ended
               October 31, 1996 and 1995

               Notes to Consolidated Financial                    7-9
               Statements

      Item 2.  Management's Discussion and Analysis             10-14
               of Financial Condition and Results of
               Operations

Part II OTHER INFORMATION:

      Item 1 to Item 6.                                         15-17

      Signatures                                                   18


                            * * * * * * * * * * * *

<PAGE>

                      PureTec Corporation and Subsidiaries
                           Consolidated Balance Sheets
                    (Dollars in thousands, except share data)
<TABLE>
<CAPTION>
                                                                           October 31,  July 31,   
                               ASSETS                                         1996        1996     
                                                                           ---------   ---------
                                                                          (Unaudited)
<S>                                                                        <C>             <C>  
CURRENT ASSETS:
  Cash and cash equivalents .............................................  $   1,206   $   5,995
  Accounts receivable, less allowance for doubtful accounts of $1,414
     as of October 31, 1996 and $980 as of July 31, 1996 ................     40,617      53,675
  Inventories ...........................................................     60,620      41,403
  Prepaid expenses and other current assets .............................      4,445       3,955
                                                                           ---------   ---------
       TOTAL CURRENT ASSETS .............................................    106,888     105,028

PROPERTY, PLANT AND EQUIPMENT, net ......................................     83,591      84,206
EXCESS OF COST OF INVESTMENTS OVER NET ASSETS ACQUIRED
  (net of accumulated amortization of $4,190 and $3,168 as of October 31,
    1996 and July 31, 1996, respectively) ...............................     91,548      92,570

OTHER INTANGIBLE ASSETS, net ............................................      1,227       1,344
OTHER ASSETS, net .......................................................     13,095      12,592
                                                                           ---------   ---------
      TOTAL ASSETS ......................................................  $ 296,349   $ 295,740
                                                                           =========   =========

                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Short - term borrowings ...............................................  $  24,536   $  20,170
  Accounts payable ......................................................     29,476      28,974
  Accrued plant closing and disposal costs ..............................      3,172       3,554
  Accrued expenses ......................................................     25,950      24,947
  Current portion of long term debt .....................................      3,567       5,114
                                                                           ---------   ---------
       TOTAL CURRENT LIABILITIES ........................................     86,701      82,759

OTHER LONG TERM LIABILITIES .............................................      2,592       2,923
PENSION AND POSTRETIREMENT LIABILITIES ..................................      7,336       7,882
DEFERRED INCOME TAXES ...................................................      1,251       1,280
LONG-TERM DEBT ..........................................................    130,701     130,162
-------------------------------------------------------------------------  ---------   ---------
            TOTAL LIABILITIES ...........................................    228,581     225,006

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST .......................................................         26          26

STOCKHOLDERS' EQUITY
   Common stock, $.01 par value  50,000,000 authorized; 29,339,172
     and 29,334,551 shares issued and outstanding
    at October  31, 1996 and July 31, 1996, respectively ................        293         293
  Additional paid - in capital ..........................................    129,607     129,606
  Deficit ...............................................................    (61,424)    (58,671)
  Minimum pension liability .............................................       (137)       (137)
  Cumulative foreign currency translation adjustment ....................       (597)       (383)
                                                                           ---------   ---------
    TOTAL STOCKHOLDERS' EQUITY ..........................................     67,742      70,708
                                                                           ---------   ---------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..........................  $ 296,349   $ 295,740
                                                                           =========   =========
</TABLE>

                 See notes to consolidated financial statements


                                       3


<PAGE>

                      PureTec Corporation and Subsidiaries
                      Consolidated Statements of Operations
                    (Dollars in thousands, except share data)


                                                         Three Months Ended
                                                             October 31,
                                                     ---------------------------
                                                         1996          1995
                                                     ------------   -----------
                                                             (Unaudited)

NET SALES .........................................  $     65,960        67,648
                                                     ------------   -----------
COSTS AND EXPENSES:
       Cost of goods sold .........................        53,562        56,125
       Selling, general and administrative ........         8,258         6,244
       Amortization of intangibles ................         1,143         1,152
       Research and development ...................           158           308
                                                     ------------   -----------
                                                           63,121        63,829
                                                     ------------   -----------

INCOME  FROM OPERATIONS ...........................         2,839         3,819

OTHER (INCOME) EXPENSES:
       Interest expense ...........................         4,479         4,579
       Debt issuance cost and discount amortization           580           502
       Equity in loss of affiliates ...............          --             165
       Other, net .................................           (14)         (203)
                                                     ------------   -----------
                                                            5,045         5,043
                                                     ------------   -----------

LOSS  FROM CONTINUING OPERATIONS BEFORE
       INCOME TAXES ...............................        (2,206)       (1,224)
       Provision  for income taxes ................           547           445
                                                     ------------   -----------
LOSS FROM CONTINUING OPERATIONS ...................        (2,753)       (1,669)

DISCONTINUED OPERATIONS:
       Loss from non-woven textiles operations ....            --          (206)

                                                     ------------   -----------
NET LOSS ..........................................  $     (2,753)       (1,875)
                                                     ============   ===========


LOSS  PER COMMON SHARE:
          Loss from continuing operations .........  $      (0.09)        (0.06)
          Loss from discontinued operations .......            --   $     (0.01)
                                                     ------------   -----------
       Net loss ...................................  $      (0.09)        (0.07)
                                                     ============   ===========



WEIGHTED AVERAGE NUMBER OF COMMON
       SHARES OUTSTANDING .........................    29,339,172    27,124,043

                                                     ============   ===========

See notes to consoldiated financial statements


                                       4

<PAGE>

                      PureTec Corporation and Subsidiaries
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                                October 31,
                                                                             1996       1995
                                                                           --------   -------
                                                                               (Unaudited)
<S>                                                                        <C>         <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss from continuing operations .....................................  $ (2,753)   (1,669)
Adjustments to reconcile net loss from continuing operations to net cash
   (used in) provided by operating activities from continuing operations:
          Depreciation and amortization .................................     4,081     3,449
          Loss (gain) on disposal of property and equipment .............        (6)     (286)
          Bad debt allowance ............................................       433       596
          Deferred income tax benefit ...................................       (80)       (9)
          Changes in operating assets and liabilities net of effects from
            acquisition:
          (Increase) decrease in assets:
            Accounts receivable .........................................    12,875     5,571
            Inventories .................................................   (19,091)  (13,335)
            Prepaid expenses and other current assets ...................      (488)   (2,019)
            Other assets ................................................    (2,826)      101
          Increase (decrease) in liabilities:
            Accounts payable ............................................       338     6,100
            Accrued plant closing and disposal costs ....................      (382)     (186)
            Accrued expenses ............................................     2,772     6,350
            Other Liabilities............................................    (1,009)      187
                                                                           --------   -------
NET CASH  (USED IN) PROVIDED BY  OPERATING ACTIVITIES
          FROM CONTINUING OPERATIONS ....................................    (6,136)    4,850
                                                                           --------   -------

          Loss from discontinued operations .............................      --        (206)
NET CASH USED IN OPERATING ACTIVITIES FROM                                 ---------  -------
          DISCONTINUED OPERATIONS .......................................      --        (206)
                                                                           --------   -------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES .....................    (6,136)    4,644
                                                                           --------   -------

</TABLE>

                                                                     (Continued)

                 See notes to consolidated financial statements


                                        5
<PAGE>

                      PureTec Corporation and Subsidiaries
                      Consolidated Statement of Cash Flows
                             (Dollars in thousands)

                                                             Three Months Ended
                                                                 October 31,
                                                               1996       1995
                                                             -------   --------
                                                                 (Unaudited)
NET CASH FLOWS FROM INVESTING ACTIVITIES:                        
    Additions to property, plant and equipment ............   (1,434)    (2,457)
    Additions to intangibles ..............................     --       (1,090)
    Purchase of net assets ................................     --      (22,820)
    Proceeds from the sale of property, plant, & equipment         6        830
    Investment used for Burlington purchase ...............     --       13,500
                                                             -------   --------

NET CASH USED IN INVESTING ACTIVITIES .....................   (1,428)   (12,037)
                                                             -------   --------

NET CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowing (repayments) under revolving credit
         facility and short-term borrowing, net ...........    4,366      4,088
    Proceeds from long-term debt ..........................       92      6,485
    Repayments of long-term debt ..........................   (1,547)      (682)
    Proceeds from warrant/option exercise .................        1       --
                                                             -------   --------
NET CASH PROVIDED BY FINANCING ACTIVITIES .................    2,912      9,891
                                                             -------   --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ...................     (137)       (82)
                                                             -------   --------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ......   (4,789)     2,416
                                                             -------   --------

CASH AND CASH EQUIVALENTS, beginning of the period ........    5,995      7,097
                                                             -------   --------

CASH AND CASH EQUIVALENTS, end of period ..................  $ 1,206   $  9,513
                                                             =======   ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:

     Interest .............................................  $   826   $    915
     Income taxes .........................................      233       --

Non-cash transactions:
     Debenture conversion .................................     --        1,000
     Issuance of note payable to seller - Burlington Resins     --        4,000

                 See notes to consolidated financial statements


                                        6

<PAGE>

                      PureTec Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                  (Dollars in thousands, except per share data)

      1. ORGANIZATION, DESCRIPTION OF BUSINESS AND ACQUISITIONS

      PureTec's principal businesses are the manufacturing of garden hose,
specialty plastic compounds and fabricated precision plastic components for
consumer and industrial markets, the manufacturing of dispersion (plastisol) and
specialty suspension (copolymer and blending) polyvinyl chloride ("PVC") resins
and the recycling of plastics and injection molding of custom parts using both
recycled and virgin plastic materials. The Company services its markets through
its network of 22 manufacturing facilities, located in key points throughout the
United States, with two locations in Europe and one in Canada.

      In September 1996, the recycling operations of PureTec were sold to
Plastic Specialties & Technologies, Inc., an 83% owned subsidiary of the
Company. This sale transaction included the sale of certain fixed assets, raw
material inventory and other assets for $4,400 in cash and a $1,769 contribution
to capital. This transaction had no material effect on consolidated financial
statements of the Company. As PST is a consolidated subsidiary except to the
extent that the operating results of the recycling operations are attributed to
the minority interests in PST, such transaction had no material affect on 
the current operating results herein.

      The statement of operations for the three months ended October 31, 1995
has been restated for the effects of the discontinuance of the Ozite
Manufacturing Division which occurred on December 21, 1995 as disclosed in the
Form 10-Q for the Quarter ended January 31, 1996 and in the Form 10-K/A-1 for 
the year ended July 31, 1996.

2. INTERIM FINANCIAL INFORMATION

      The consolidated balance sheet of the Company as of October 31, 1996, the
consolidated statements of operations for the three month periods ended October
31, 1996 and 1995 and the consolidated statements of cash flows for the three
months ended October 31, 1996 and 1995 are unaudited and have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. In the opinion of management, all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial position, results
of operations and cash flows have been included.


      Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The July 31, 1996 balance sheet data
is derived from the audited consolidated financial statements. The attached
financial statements should be read in connection with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K/A-1 for the year ended July 31, 1996.

3. COMMITMENTS AND CONTINGENCIES

      The Company and certain of its directors are currently defendants in two
proceedings brought by shareholders and former employees who seek, among other
things, injunctive relief, damages, and royalties. The Company has agreed to
indemnify the directors for any final judgments against them in these
proceedings. The Company currently has accrued $150 in connection with settling
this matter.

      Ozite Corporation, a wholly owned subsidiary ("OZITE") has been named as 
 a potentially responsible party ("PRP") by the Texas Natural Resource 
Conservation Commission ("TNRCC") concerning a site near Ranger, Texas, formerly
used as a disposal site for toxic materials. On August 25, 1994, a Proposed
Remedial Action report was distributed by TNRCC that described six alternatives
to remediate the contaminants identified as present in the soil. The monetary
range of the alternatives advanced by the TNRCC was an estimate of $47 on the
low end to $1,392 for the high end. The TNRCC has recommended the remediation
alternative that provides for excavation and off-site disposal of contaminated
soil, backfill of the site with clean fill, possible fence-line ambient air
monitoring and routine sampling and monitoring of the groundwater. The estimated
cost for this remediation alternative is $663. At this time, the approximately
40 PRP's include a significant number of major corporations which will be
involved in the cleanup and will, more likely than not,


                                        7

<PAGE>

significantly participate in the expense of such cleanup. At this time, other
than as indicated above, Ozite cannot assess its ultimate liability. However,
considering the remediation alternative currently being recommended by the TNRCC
and the significant number of major corporations involved in the clean-up, the
Company believes that the ultimate outcome will not have a material adverse
effect on its consolidated financial position or results of operations.

      On February 18, 1993, Ware Chemical Co. ("Ware Chemical"), a former PST
subsidiary (now dormant), was served with a third party complaint in the matter
of United States v. Davis. In Davis, the United States has alleged that certain
private entities are liable, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), for cleanup costs that have
been incurred, and will be incurred in the future, with respect to the
remediation of the Davis Landfill site in Rhode Island. Ware Chemical was 
owned by Dart Industries (now Kraft, Inc.) during the time in question 
(1975-1977), and Kraft has agreed to assume all liability.


      Ozite is also engaged in litigation in which it seeks damages from the
former owner of Dalen, a discontinued segment of Ozite. In December 1987, Ozite
commenced legal proceedings against the seller of Dalen, seeking monetary
damages and other equitable relief from the seller for various
misrepresentations made in its financial statements and other miscellaneous
information presented on which Ozite elected to proceed with the purchase of
such assets. The seller has counterclaimed for the enforcement of the seller's
rights in the subject matter and for recovery of the balance of the purchase
price in an amount approximately equal to $3,000 plus accrued interest, amounts
claimed to be due under a consulting agreement, and punitive damages. The total
amount demanded by the seller is approximately $11,000. The ultimate outcome of
either of these actions is presently undeterminable. However, the Company
believes the ultimate outcome will not have any material adverse effect on its
financial position or results of operations.

4. INVENTORIES:

Inventories consist of the following:

                                                        October 31,   July 31,
                                                           1996         1996
                                                        ----------   ----------
                                                       (Unaudited)

     Raw materials & supplies                           $   18,651   $   16,028
     Recycled material                                         664        1,944
     Work-in-process                                         2,599        2,074
     Finished goods                                         38,706       21,357
                                                        ----------   ----------
                                                        $   60,620   $   41,403
                                                        ==========   ==========

5. INCOME TAXES

      The Company's tax provision for the periods ended October 31, 1996 and
1995 are primarily due to the Company's foreign operations. The tax provisions
do not reflect the expected 34% benefit based on existing Federal tax rates due
to the sizable operating losses experienced in its domestic operations. The
Company has not anticipated the tax benefits of such losses as it is more likely
than not that such deferred tax asset would not be realizable at this time.
Information with respect to net operating losses as reported in Note 12 of
the Company's 10K/A-1 for the year ended July 31, 1996.

6. STYREX TERM AND REVOLVING CREDIT FACILITY

      In connection with the sale of Pure Tech Plastics, Inc. and subsidiaries
("PTP") to PST in September 1996 (see Note 1), the Company repaid the loans
outstanding at that time relating to PTP. Styrex subsequently paid off its loans
to the bank on November 11, 1996 when it signed a new Loan and Security
Agreement (the "Styrex Loan Agreement") with a Finance Company for a period of
three years. The Styrex Loan Agreement provides for



                                        8

<PAGE>

a term loan and revolving loans up to a maximum of $6,000 and letters of credit
of up to $1,000 and is secured by all of the assets of Styrex. Advances under
the agreement bear interest at the rate of prime plus 1 1/2%. The initial term
loan of $1,360 has scheduled repayments of $23 per month beginning December 1,
1996. As of October 31, 1996.

7. ACCOUNTING FOR STOCK BASED COMPENSATION

      In October of 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). SFAS 123 established a fair value-based method of
accounting for compensation cost related to stock options and other stock-based
compensation awards. SFAS 123 is effective for fiscal years beginning after
December 15, 1995 (the Company's 1997 fiscal year) for employee compensation
awards and effective for all transactions entered into after December 15, 1995
for transactions to acquire goods or services from other than employees.
However, SFAS 123 allows an entity to continue to measure employee compensation
costs using the principles of Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees," ("APB No. 25") if certain proforma
disclosures are made. The Company will continue to account for its employee
stock compensation arrangements under the provisions of APB No. 25, and stock
transactions to acquire goods or services from other employees under the
provisions of SFAS 123.


                                        9

<PAGE>

                                     PART I
                              FINANCIAL INFORMATION
                  (Dollars in thousands, except per share data)

Item 1. FINANCIAL STATEMENTS

      See pages 3 through 9.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Results of Operations

      The following table sets forth the percentages of net sales of the Company
represented by the components of income and expense for the three month periods
ended October 31, 1996 and 1995:

                                                             1996          1995
                                                             ----          ----

Net sales ...........................................         100%         100%
Cost of goods sold ..................................       (81.2)       (83.0)
                                                             ----         ---- 
Gross profit ........................................        18.8         17.0

Selling, general and administrative expenses ........       (12.6)        (9.2)
Amortization of intangibles .........................        (1.7)        (1.7)
Research and development ............................        (0.2)        (0.5)
                                                             ----         ---- 
Operating income ....................................         4.3          5.6

Interest expense ....................................        (6.8)        (6.8)
Debt issuance cost and discount amortization ........        (0.9)        (0.7)
Equity in loss of affiliate .........................         --          (0.2)
Other, net ..........................................        (0.0)         0.3
                                                             ----         ---- 
Loss  from continuing operations
     before income taxes ............................        (3.4)        (1.8)
Provision for income taxes ..........................        (0.8)        (0.7)
                                                             ----         ---- 
Loss from continuing operations .....................        (4.2)        (2.5)

Discontinued operations .............................         --          (0.3)
                                                             ----         ----

Net loss ............................................        (4.2)        (2.8)
                                                              ===          ===


                                       10

<PAGE>

Three months ended October 31, 1996  vs. three months ended October 31, 1995:

      Net sales from continuing operations in the three-month period ended
October 31, 1996 were $65,960 compared to $67,648 in the three month period
ended October 31, 1995. The decrease is mainly attributable to price decreases
for PET and decreases in sales volume for specialty resins and garden hose. The
decrease was partially offset by increased sales volume in dip tubing, gaskets,
medical tubing, PVC compound and injection molding. The apparent comparitive 
decline in hose sales volume is directly attributable to a late hose selling 
season in fiscal 1995 which carried over to fiscal 1996. Garden hose sales for 
fiscal 1996, although much higher, did not carry over to fiscal 1997.

      Gross profit for the three months ended October 31, 1996 was $12,398, an
increase of $875, (7.6 %) compared to a gross profit of $11,523, for the three
months ended October 31, 1995. Gross profit as a percentage of sales increased
to 18.8 % from 17.0% for the same period. The increase is principally
attributable to lower raw material costs for most segments and improved
manufacturing efficiencies, partially offset by a sharp decline in selling
prices for PET.

      Selling, general and administrative expenses for the three months ended
October 31, 1996 were $8,258, a $2,014, (32 %) increase compared to the three

months ended October 31, 1995. As a percentage of net sales, these expenses
increased to 12.6 % from 9.2% for the same period. The increase is attributable
to (i) the Company evaluated and reduced certain previously accrued expenses
including management compensation in the last quarter of fiscal 1996,  (ii) an
increase in warehousing costs, and (iii) since the purchase of the  specialty
vinyl resins facility from Oxy Chem in August of 1995, the Company has added to
its technical sales and marketing capabilities in connection with this business.

      Operating income for the three months ended October 31, 1996 and 1995 were
$2,839 and $3,819, respectively. The $980 decrease in operating income is
primarily attributable to the decline in PET prices, decreased sales volume and
higher selling general and administrative expenses.

      Interest expense, net of amortization of deferred financing costs for the
three month periods ended October 31, 1996 and 1995 were $4,479 and $4,579
respectively. This $100 or 2% decrease is primarily attributable to lower
average short term borrowing.

      The income tax provision for the three months ended October 31, 1996 and
1995 is comprised of foreign tax provisions of $547 and $445 respectively.

      The Company had a loss from continuing operations for the three month
period ended October 31, 1996 and 1995 of $ 2,753 and $1,669 respectively.

      The Company sold its Ozite manufacturing division in March of 1996. The
$206 loss recorded by this operation for the three months ended October 31, 1995
is reflected as a discontinued operation for the period.

Liquidity and Capital Resources

      In the past, the Company has expanded its operations through the expansion
of existing activities, acquisitions of new facilities and various business
combinations. Historically, the Company's sources of liquidity and capital
resources have been net cash provided by operations, bank financing, private
placements of the Company's securities and other private and public financial
sources.

      While the management of the Company believes that the Company will be able
to operate on a positive cash flow basis with respect to continuing operations
during the fiscal year ending July 31, 1997, the ability of the Company to
continue to expand its operations may require additional funding.

      Cash and cash equivalents decreased $4,789 for the three months ended
October 31, 1996 compared to a $2,416 increase for the three months ended
October 31, 1995. The changes for these periods were attributable to the factors
discussed below.

      For the three months ended October 31, 1996, net cash used in operating
activities was $6,136. The


                                       11


<PAGE>

Company funded operating activities, repaid $3,003 of its outstanding debt,
disbursed $1,434 on capital improvements by increasing short term borrowings by
$4,366 and decreasing its cash by $4,789.

      For the three months ended October 31, 1995, net cash provided by
operating activities was $4,644. The Company used the $4,644 in cash generated
from operating activities, along with $4,088 from short term borrowings, $6,485
from long term borrowings, and $830 from proceeds on the sale of equipment to
repay $682 of long term debt, disburse $2,457 for capital expenditures and to
purchase the net assets of a resin manufacturing facility for $22,820 (less
$13,500 in cash previously held in escrow).

      The Company had working capital of approximately $20,187 at October 31,
1996 compared to working capital of approximately $22,269 at July 31, 1996. This
decrease in working capital is attributable to a $13,058 decrease in account
receivable, a $4,366 increase in short term borrowing, and aggregate increase in
accrued expenses (including interest) of $2,772, partially offset by a $19,091
increase in inventories.

      The Company's businesses are relatively stable and mature and do not
generally require significant ongoing additions to plant and equipment. Capital
expenditures for the three month period ended October 31, 1996 and 1995 were
$1,434 and $2,457, respectively.

Borrowings, Debt Offerings and Redemptions

      On December 30, 1992, PST entered into a $40,000 Senior Loan Agreement
(the "Agreement") with a commercial lending company ("CLC"). Proceeds of
borrowings under the Agreement were used to repay the Borrowings outstanding
under a prior loan and security agreement with a bank. On November 8, 1993 in
connection with the issuance of $125,000 principal amount of senior secured
notes and the use of the proceeds thereof, the Agreement was amended and
restated to, among other things, provide for revolving credit advances of up to
$40,000 through July 31, 1997 and letters of credit of up to $1,000.

      On February 14, 1995, PST further amended the Agreement with the CLC to,
among other things, increase the maximum revolving credit advances to $50,000
(the "Restated Agreement"). The other terms and covenants contained in the
Restated Agreement are substantially the same as those contained in the original
agreement except that outstanding revolving credit advances shall not exceed
$8,000 for 30 consecutive days during the period from July 1 to September 30 of
each year, and annual domestic capital expenditures are limited to $6,600 per
year (exclusive of up to $1,000 of approved business acquisitions). Prospective
interest rate relief (ranging from 0.25% to 0.50%) is possible if the Company
meets certain defined fixed coverage ratios.

      The Restated Agreement contains covenants, the most restrictive of which
are maintenance of certain financial ratios, prohibition of the incurrence of
additional indebtedness, the payment of dividends, certain related party
transactions and limitations on capital expenditures. At July 31, 1996, the
Company was not in compliance with certain of the covenants of the Restated

Agreement for which waivers have been obtained. Borrowings under the Restated
Agreement are secured by substantially all the domestic current assets of PST.
In addition, the CLC has a security interest in PST's intangible assets, and
this security interest ranks pari passu with the security interest of the Senior
Secured Notes (see below) in PST's intangible assets. Revolving credit advances
under the Agreement are based on eligible receivables and inventory.

      On July 31, 1995, PST further amended its $50,000 Agreement with the CLC
to, among other things, adjust certain ratios and to waive the provision that
outstanding revolving credit advances shall not exceed $8,000 for the 30
consecutive days during the period from July 1 to September 30 for each year.

      On November 8, 1993, PST issued $125,000 principal amount of 11-1/4%
Senior Secured Notes due in 2003. The Senior Secured Notes are senior secured
obligations of PST, ranking pari passu in right of payment with all existing and
future senior indebtedness of PST and senior to all subordinated indebtedness of
PST, if any. The Senior Secured Notes are secured by substantially all real
property, machinery, equipment, general intangibles and other intellectual
property now owned or hereafter acquired by PST and by a pledge of all
outstanding capital stock of Plastic Specialties and Technologies Investments,
Inc., a wholly-owned subsidiary of PST. The indenture for the Senior Secured
Notes contains covenants which restrict, among other matters, the ability of PST
and its subsidiaries to incur additional indebtedness, pay dividends, (except as
defined in the indenture) redeem capital stock, prepay


                                       12

<PAGE>

subordinated indebtedness, create liens, dispose of certain assets, engage in
sale and merger transactions, make contributions, loans or advances and enter
into transactions with affiliates.

      On August 16, 1995, in connection with its acquisition of the Burlington,
New Jersey facility, the Company's Burlington Resins, Inc. subsidiary has
entered into a revolving credit facility with Commercial Bank for up to $5,500
based on levels of inventory and accounts receivable. Interest on this facility
is the prime rate plus 1.25%. The prime rate as of October 31, 1996 was 8.5%. At
October 31, 1996, there was $1,693 outstanding on this loan. The Company has
also received a term loan from Commercial Bank in the principal amount of
$5,500. This term loan is payable in 28 quarterly installments of the Commercial
Bank approximately $196,000 plus interest accrued at the prime rate plus 1.25%.
At October 31, 1996 there was $3,928 outstanding on this term loan. The
Commercial Bank agreement contains covenants, the most restrictive of which are
the maintenance of certain financial ratios, prohibition of the incurrence of
additional indebtedness, the payment of dividends, certain related party
transactions and limitations on capital expenditures. The loans are secured by
the property, plant and equipment, accounts receivable and inventory of
Burlington Resins, Inc. The Company also has a term loan in the amount of $4,000
provided by Occidental Chemical Corporation. This loan is subordinated to the
Commercial Bank debt, and is payable on a quarterly basis beginning after year
two of the loan, interest only, and after year four, interest and principal. At
October 31, 1996 there was $4,000 outstanding on this loan.


      In February 1996, Styrex and PureTech Plastics, Inc. and subsidiaries
("PTP") entered into a Loan and Security Agreement with a bank ("Styrex/PTP
Loan") providing an aggregate revolving credit line of $7,500 and an aggregate
term loan of $5,000. The proceeds of the loan were used to pay off existing
debt. In September 1996 the Company repaid the amount outstanding at that time
relating to PTP. Styrex subsequently paid off its loans to the bank on November
11, 1996 when it signed a new Loan and Security Agreement (the "Styrex Loan
Agreement") with a Finance Company for a period of three years. The Styrex Loan
Agreement provides for a term loan and revolving loans up to a maximum of $6,000
and letters of credit of up to $1,000 and is secured by all of the assets of
Styrex. Advances under the agreement bear interest at the rate of prime plus 1
1/2%. The initial term loan of $1,360 has scheduled repayments of $23 per month
beginning December 1, 1996. As of October 31, 1996 the revolving loan and the
term loan balances were $867 and $1,457 respectively.

      During the period February 1995 to June 1995, the Company received $8,371
and, in exchange, issued Convertible Debentures in the same amount. The
debentures matured at various times from December 1, 1995 to February 1996 and
bore interest at 3% per annum. The holders of the debentures were entitled, at
their option, at any time after a three month holding period, to convert the
principal amount, or any portion of the debenture, into shares of common stock
of the Company at 80% of the market price of the Company's common stock. As of
July 31, 1995, debentures in the amount of $7,371 were converted into 1,714,780
shares of the Company's common stock. In August 1995, $1,000 was converted into
227,273 shares of common stock.

Capital Expenditure Commitments

      As discussed above, the Company's businesses are relatively mature and as
a result do not require significant ongoing additions to plant and equipment.
The Company generally finances its ongoing capital expenditure requirements from
its cash flow provided from operations and borrowings under its Revolving Credit
Facility.

      Construction has commenced on a new plant in Northern Ireland for the
Company's Unichem division. For purposes of this new business venture, a new
subsidiary has been formed, Colorite Europe Limited (a United Kingdom company).
The anticipated total capital costs for the Company in connection with this new
Unichem plant are approximately $3 million. The Company has received commitments
for certain grants, subsidies and other inducements from government authorities
in Northern Ireland. The Company plans to finance a large part of its capital
costs of this new plant by using cash reserves (and possibly some additional
borrowing from a commercial bank) at Action Belgium N.V.

Inflation

      Generally, the Company's operations have benefited from relatively stable
or declining prices for raw materials. In fiscal 1997 the Company benefited
domestically from declining raw material costs except for the significant
decline in PET prices related to supply and demand factors. Foreign operations
saw raw

                                       13


<PAGE>

material costs continue to rise until they stabilized during the second quarter
of 1996. Raw material costs have generally stabilized at this time. In the event
significant inflationary trends were to resume, management believes that the
Company will generally be able to offset the effects thereof through continuing
improvements in operating efficiencies and increasing prices, to the extent
permitted by competitive factors. However, there can be no assurance that all
such cost increases can be passed through to customers.


                                       14

<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

      The Company is party to certain litigation and environmental proceedings
in the ordinary course of business, none of which the Company believes are
likely to have a material adverse effect on its consolidated financial position
or results of operations.

      Ozite is engaged in litigation in which it seeks damages from the former
owner of Dalen, a discontinued segment of Ozite. In December 1987, Ozite
commenced legal proceedings against the seller of Dalen, seeking monetary
damages and other equitable relief from the seller for various
misrepresentations made in its financial statements and other miscellaneous
information, based on which Ozite elected to proceed with the purchase of Dalen.
The seller has counterclaimed for the recovery of the balance of the purchase
price in an amount approximately equal to $4,000,000 plus accrued interest and
punitive damages. The ultimate outcome of either of these actions is presently
undeterminable. However, the Company believes the ultimate outcome will not have
a material adverse effect on its financial position or results of operations.
The amount of the Dalen financial exposure cannot be quantified because of the
uncertainties of litigation.

      PTIP, certain of its directors, three former directors and its President
were defendants in a lawsuit brought in 1989 in New Jersey Superior Court and
are currently defendants in a lawsuit brought in 1989 in New Jersey Superior
Court by Frank Tammera, Sr., a stockholder and former officer and director of
PTIP and Frank Tammera, Jr., a former officer of PTIP. Both Messrs. Tammera were
terminated in June 1989 under circumstances which PTIP believes constituted
"cause" for termination. In his lawsuit, Frank Tammera, Sr. sought (I)
reinstatement as an officer and director, (ii) the repayment of certain debts
allegedly owed to him by PTIP, (iii) damages for breach of contract and
fiduciary duty and fraud, (iv) invalidation of certain restrictive covenants,
(v) payment of certain royalties allegedly due him relating to use of PTIP's
proprietary technology, and (vi) reversal of the deposit in escrow of
approximately 690,000 shares of stock as a condition to an underwriting in 1989
and the issuance of these shares to two members of Mr. Tammera's family and a
third stockholder. Frank Tammera, Jr.'s suit seeks reinstatement, damages for

alleged breach of his employment agreement, damages for the repayment of certain
debts allegedly owed to him and asks for invalidation of certain restrictive
covenants. Trial of the Frank Tammera, Sr. lawsuit commenced in April 1991 and
concluded in 1995. In March 1996, the New Jersey Superior Court decided that
PTIP did not have to reinstate Mr. Tammera, Sr., that his termination had been
for cause, and that PTIP was obligated to pay him only approximately $30,000 of
indebtedness, which PTIP had acknowledged, and $14,377 in royalties. The court
dismissed Tammera Sr.'s claims of fraud and breach of contract and fiduciary
duty. Existing agreements between PTIP and Mr. Tammera, Sr. were upheld
including his escrow agreement with PTIP. Final judgement in the Frank Tammera,
Sr. suit was entered on June 6, 1996. In August 1996, Mr. Tammera, Sr. appealed
the court's decision. The Frank Tammera, Jr. lawsuit has been stayed pending the
resolution of the Frank Tammera, Sr. lawsuit.

      In May 1992, PST and all of its directors (as of 1988), as well as K and B
Liquidating Corp. (a former subsidiary of PST which is being liquidated) were
named in two lawsuits filed in the Minnesota state courts. The plaintiffs are
Douglass Hutchinson (since deceased) and James Czaja, both of whom were former
employees of a former subsidiary of PST, Circuit Chemistry Manufacturing Corp.
("Circuit Chemistry"). The suits allege several causes of action, all of which
center upon a claim that PST and/or other defendants did not adequately disclose
sufficient information to the plaintiffs in connection with the acquisition from
the plaintiffs by PST of their 20% equity interest in Circuit Chemistry, and the
termination of their employment agreements. Each complaint seeks various items
of damage totaling approximately $7,000,000. Counsel has been retained by PST in
Minnesota, and the cases have been removed to the Federal Court in Minnesota.
Only PST, Mr. Fred Broling, Chairman and Chief Executive Officer of PST, and a
former director remain in the suits, as the case against the other defendants
has been dismissed.

      As a result of motions made by the Company, certain issues were resolved
favorable to the Company and discovery is continuing. However, counsel have
advised that evidence received to date warrants a motion for summary judgement
dismissing all claims and the motion will be filed shortly. The matter is being
vigorously defended and management believes the suits have no merit.


                                       15

<PAGE>

      Under the 1984 Agreement of Purchase and Sale between Dart & Kraft and PST
(the "1984 Agreement"), Dart & Kraft retained responsibility for liabilities
resulting from any violation of applicable environmental law or laws and
regulations of the Occupational Safety and Health Administration ("OSHA") prior
to the date of the 1984 Agreement. Dart & Kraft further agreed to indemnify PST,
as of the effective date of the 1984 Agreement, for existing, pending,
threatened, or unasserted action suits, or other claims or proceedings (whether
contingent or otherwise), with respect to certain matters (including
environmental matters). Pursuant to the split-up of Dart & Kraft in 1987, Kraft,
Inc. retained all liability under the 1984 Agreement (accordingly, references to
Dart & Kraft herein include only Kraft after the effective date of the
split-up).


      Under the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") and state laws similar to CERCLA, PST may be subject to liability
for cleanup costs and other damages resulting from past off-site disposal of
hazardous substances by PST or its corporate predecessors, or for the
contamination of property currently owned by PST with respect to such materials.
PST is unaware of any on-site or off-site hazardous substance contamination for
which it is reasonably likely to be liable. There are also several matters
governed by CERCLA resulting from the activities of a former PST division,
Synthetic Products Co. (sold to Cookson America, Inc. ("Cookson") in August
1988) and a PST subsidiary, Ware Chemical Co. ("Ware Chemical"), that is no
longer in operation and whose assets were also sold to Cookson in 1988.

      On February 18, 1993, Ware Chemical Co. ("Ware Chemical"), a former PST
subsidiary (now dormant), was served with a third party complaint in the matter
of United States v. Davis. In Davis, the United States has alleged that certain
private entities are liable, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), for cleanup costs that have
been incurred, and will be incurred in the future, with respect to the
remediation of the Davis Landfill site in Rhode Island.

      Ware Chemical was owned by Dart Industries (now Kraft, Inc.) during the
time in question (1975-1977), and Kraft has agreed to assume all liability.

      PST was also notified by Kraft in October 1989 of the existence of a claim
by the New Jersey Department of Environmental Protection and Energy ("NJDEPE")
with respect to the Chemical Control site in Elizabeth, New Jersey, but PST has
not received any further information regarding this claim. Information produced
in the Davis matter indicated that Ware Chemical used a hazardous waste
transporter that sent hazardous wastes to the Chemical Control site. PST has no
basis at this time to determine whether it will be subject to liability with
respect to the Chemical Control site or the amount of said liability. As noted
above, Ware Chemical is a dormant company with no assets.

      In addition to the above, PST is also subject to certain obligations
pursuant to the New Jersey Environmental Cleanup Responsibility Act ("ECRA")
(which has been amended and renamed the "Industrial Site Recovery Act"). Under
ECRA, the "transferor" of an industrial establishment was required to certify
that no hazardous substances had been discharged or released at the industrial
establishment before a transfer could take place; otherwise, the transferor is
required to prepare a cleanup plan or enter into a consent agreement with the
NJDEPE to investigate and remediate releases of hazardous substances pursuant to
NJDEPE-approved procedures. Dart & Kraft assumed responsibility for compliance
with ECRA in connection with the 1984 sale of its plastic sector to PST, and has
completed all of its obligations, except for the cleanup of Colorite's
Ridgefield, New Jersey facility and possible clean up of the Ware sites
described above. Kraft has an approved cleanup plan for the Colorite facility
and final papers for a negative declaration clearing the site from environmental
liability have been received.

      In August 1995, North York Performing Arts Centre, a Canadian Corporation,
instituted suit against Ozite and PST and others, claiming that certain wall
covering manufactured by Ozite and/or PST was defective, causing damage to a
theater located in Ontario. The plaintiff claims $900,000 in compensatory
damages and $600,000 in additional damages. The matter has been referred to the

insurance carriers for each of the entities. Discovery is just beginning.

      The Company's operations are subject to requirements imposed under certain
federal, state and local environmental and health and safety laws and
regulations, including the federal Clean Water Act, Clean Air Act, Resource
Conservation and Recovery Act ("RCRA"), CERCLA and OSHA and comparable state
laws, relating to waste water discharges, air emissions, solid waste management
and disposal practices, work place safety and real property use and ownership.
The Company believes that it is in substantial compliance with such laws and


                                       16

<PAGE>

regulations. No assurances can be given, however, that the Company will continue
to be able to secure, renew, and maintain compliance with the terms and
conditions of the required environmental permits and approvals, that other
environmental permits or approvals may not be required for the Company's
operations or that penalties will not be imposed by regulatory entities for any
failures to have secured all required environmental permits or approvals.
Further, there can be no assurances that more stringent statutory or regulatory
environmental or work place safety requirements will not be enacted or adopted
in the future which could have a material adverse effect on or materially
restrict the Company's operations or business.

Item 2. CHANGES IN SECURITIES:                                   None

Item 3. DEFAULT 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:                        None


                                       17

<PAGE>

                                   SIGNATURES

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

          PURETEC CORPORATION


          By:/s/ Thomas V. Gilboy
             ___________________________________
          Thomas V. Gilboy
          Chief Financial Officer and Vice President


Dated: December 20, 1996


                                       18