<PAGE>



                                  UNITED STATES
                       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     January 31, 1999    
                                      ------------------------

                                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 1-8342
                                                 ------

                               PICO PRODUCTS, INC.
------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           NEW YORK                                      15-0624701  
----------------------------------                   --------------------
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                       Identification No.)

12500 Foothill Blvd.
Lakeview Terrace, California                                   91342         
-----------------------------------------------------      -------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code: (818) 897-0028

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.

                           YES  X    NO
                               ---      ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of March 17, 1999.

Common Stock, $0.01 par value                             4,215,913          
-----------------------------                        ------------------------
            Class                                      Number of Shares


                                       1
<PAGE>





                               PICO PRODUCTS, INC.

                                      INDEX
                                      -----

                                                                       Page No.
                                                                       --------
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                  Condensed Consolidated Balance Sheets -
                  January 31, 1999 and July 31, 1998                      3-4

                  Condensed Consolidated Statements
                  of Income - Three and Six Months
                  Ended January 31, 1999 and 1998                           5

                  Condensed Consolidated Statements
                  of Cash Flows - Six Months
                  Ended January 31, 1999 and 1998                           6

                  Notes to Condensed Consolidated Financial
                  Statements                                             7-12

Item 2.           Management's Discussion and Analysis
                  of Results of Operations and Financial
                  Condition                                             13-16

Item 3.           Qualitative and Quantitative Disclosure
                  About Market Risk                                        16

PART II           OTHER INFORMATION

Item 1.           Legal Proceedings                                        17

Item 2.           Changes in Securities                                    17

Item 3.           Default on Senior Securities                             17

Item 4.           Submission of Matters to a Vote of Security
                    Holders                                                17

Item 5.           Other Information                                        17

Item 6.           Exhibits and Reports on Form 8-K                      18-23


                                       2
<PAGE>



                                       

                         PART I -- FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS

                                     PICO PRODUCTS, INC.
                           CONDENSED CONSOLIDATED BALANCE SHEETS
                           -------------------------------------
              (Unaudited - in thousands except share and per share amounts)

<TABLE>
<CAPTION>
                                                          January 31,    July 31,
                                                             1999          1998 
                                                          -----------    --------
<S>                                                       <C>            <C>
ASSETS:
CURRENT ASSETS:
  Cash and cash equivalents                                 $    23      $    93
  Accounts receivable (less allowance
    for doubtful accounts: January 31, 1999,
    $141; July 31, 1998, $139)                                3,936        3,871
  Inventories (Note 2)                                        6,891       11,997
  Prepaid expenses and other current
    assets                                                      127          161
                                                            -------      -------

         TOTAL CURRENT ASSETS                                10,977       16,122
                                                            -------      -------
PROPERTY, PLANT AND EQUIPMENT:
  Buildings                                                    --            217
  Leasehold improvements                                        140          187
  Machinery and equipment                                     1,775        2,420
                                                            -------      -------
                                                              1,915        2,824
  Less accumulated depreciation
    and amortization                                          1,315        1,914
                                                            -------      -------
                                                                600          910
                                                            -------      -------
OTHER ASSETS:
  Patents and licenses (less accumulated
    amortization: January 31, 1999, $76
    July 31, 1998, $75                                          144          147
  Excess of cost over net assets of
    businesses acquired (less accumulated
    amortization; January 31, 1999, $440
    July 31, 1998, $429)                                        138          152
  Deposits and other non-current assets                         456          625
                                                            -------      -------

                                                                738          924
                                                            -------      -------

                                                            $12,315      $17,956
                                                            -------      -------
                                                            -------      -------
</TABLE>

                                       
            See notes to condensed consolidated financial statements.

                                       3
<PAGE>




                                        PICO PRODUCTS, INC.
                               CONDENSED CONSOLIDATED BALANCE SHEETS
                               -------------------------------------
                                            (continued)
                   (Unaudited - in thousands except share and per share amounts)

<TABLE>
<CAPTION>

                                                      January 31,           July 31,
                                                         1999                  1998       
                                                    -------------         ----------------
<S>                                                 <C>                   <C>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
----------------------------------------

CURRENT LIABILITIES:

Notes payable (Notes 6 & 7)                         $  6,180              $  9,139
Current portion of long-term debt                      4,381                 5,644
Accounts payable                                       3,345                 3,614
Accrued expenses:
         Legal and accounting                            195                   364
         Payroll and payroll taxes                       331                   491
         Other accrued expenses                          774                   661
         Restructuring costs                             220                   269
                                                    --------              --------

         TOTAL CURRENT LIABILITIES                    15,426                20,182

LONG-TERM DEBT (Note 7)                                   44                   115

COMMITMENTS AND CONTINGENCIES                             --                    --
       (Note 5)

REDEEMABLE PREFERRED STOCK, $.01 par value; 
 authorized 500,000 shares; issued
 and outstanding 1,250 shares at January 31,
 1999 and July 31, 1998                                1,083                 1,070

SHAREHOLDERS' DEFICIENCY:

 Common shares, $.01 par value; authorized 
  15,000,000 shares issued and outstanding 
  4,215,913 shares at January 31, 1999 and
  July 31, 1998                                           42                    42
  Additional paid-in capital                          22,952                22,992
 Stock subscriptions receivable                          (81)                  (81)
 Accumulated deficit                                 (27,044)              (26,253)
 Cumulative translation adjustment                      (107)                 (111)
                                                    --------              --------
TOTAL SHAREHOLDERS' DEFICIENCY                        (4,238)               (3,411)
                                                    --------              --------
                                                    $ 12,315              $ 17,956
                                                    --------              --------
                                                    --------              --------
</TABLE>

               See notes to condensed consolidated financial statements.

                                       4
<PAGE>


                                     PICO PRODUCTS, INC.
                      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      -----------------------------------------------
              (Unaudited - in thousands except share and per share amounts)

<TABLE>
<CAPTION>
                                             Three Months Ended             Six Months Ended
                                                 January 31,                   January 31, 
                                       ----------------------------  --------------------------
                                           1999           1998           1999           1998                              
                                       -----------    -----------    -----------    -----------
<S>                                    <C>            <C>            <C>            <C>
SALES                                  $     5,183    $     6,461         11,077         14,648
COSTS AND EXPENSES:
 Cost of sales                               3,873          4,691          8,315         10,605
 Selling and administrative
  expenses                                   1,443          1,525          2,838          3,330
                                       -----------    -----------    -----------    -----------
TOTAL COSTS AND
  EXPENSES                                   5,316          6,216         11,153         13,935
                                       -----------    -----------    -----------    -----------
INCOME FROM
 OPERATIONS                                   (133)           245            (76)           713

GAIN ON SALE                                   177           --              267

INTEREST INCOME                                  3              4              6              8

INTEREST EXPENSE                              (353)          (468)          (771)          (937)
                                       -----------    -----------    -----------    -----------

INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM                  (306)          (219)          (574)          (216)

INCOME TAX PROVISION                          --             --             --             --   
                                       -----------    -----------    -----------    -----------
INCOME (LOSS) BEFORE EXTRA-
ORDINARY ITEM AND DIVIDENDS
ON PREFERRED STOCK                            (306)          (219)          (574)          (216)
EXTRAORDINARY ITEM -
LOSS RELATED TO EARLY
EXTINGUISHMENT OF DEBT                        --             --             (151)          --   
                                       -----------    -----------    -----------    -----------
NET INCOME (LOSS)                             (306)          (219)          (725)          (216)

DIVIDENDS ON PREFERRED STOCK                   (34)           (35)           (66)           (68)
                                       -----------    -----------    -----------    -----------
                                               
NET LOSS ATTRIBUTABLE TO
  COMMON STOCK                         $      (340)   $      (254)          (791)          (284)
                                       -----------    -----------    -----------    -----------
                                       -----------    -----------    -----------    -----------
BASIC AND DILUTED
 NET INCOME (LOSS) PER COMMON SHARE:
 NET LOSS BEFORE
 EXTRAORDINARY ITEM                    $      (.07)   $      (.05)   $      (.14)   $      (.05)

 EXTRAORDINARY LOSS                           --             --             (.03)          --   
                                       -----------    -----------    -----------    -----------
 NET INCOME (LOSS)                            (.07)          (.05)          (.17)          (.05)
DIVIDENDS ON PREFERRED STOCK           $      (.01)   $      (.01)          (.02)          (.02)
                                       -----------    -----------    -----------    -----------
NET LOSS ATTRIBUTABLE
  TO COMMON STOCK                      $      (.08)   $      (.06)   $      (.19)   $      (.07)
                                       -----------    -----------    -----------    -----------
                                       -----------    -----------    -----------    -----------
  SHARES USED IN PER SHARE
   CALCULATIONS                          4,215,913      4,185,913      4,215,913      4,185,913
                                       -----------    -----------    -----------    -----------
                                       -----------    -----------    -----------    -----------

</TABLE>
               See notes to condensed consolidated financial statements.


                                       5
<PAGE>




                                PICO PRODUCTS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                  (Unaudited in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                               January 31, 
                                                                          --------------------
                                                                            1999        1998    
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) before Extraordinary Item
         and Preferred Dividends                                          $  (574)   $  (216)

  Adjustments to reconcile net income to net 
         cash provided by (used in)
         operating activities:

         Depreciation and amortization                                        193        239
         Gain on Sale                                                        (267)      --
         Changes in operating assets
           and liabilities                                                    240       (665)
                                                                          -------    -------


NET CASH USED IN
  OPERATING ACTIVITIES                                                       (408)      (642)
                                                                          -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                       --          (31)

  Sale of Assets                                                            4,758
                                                                          -------    -------
NET CASH PROVIDED (USED) BY
 INVESTING ACTIVITIES                                                       4,758        (31)
                                                                          -------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net payments under a
         line of credit agreement                                          (2,959)      (163)
  Issuance of long-term debt                                                 --          985
  Issuance of preferred stock                                                --          165
  Private placement financing costs                                          --         (116)
  Retirement of warrants                                                      (40)      --
  Principal payments on long-term debt                                     (1,421)      (150)
                                                                          -------    -------
NET CASH (USED) PROVIDED BY FINANCING
  ACTIVITIES                                                               (4,420)       721
                                                                          -------    -------
NET (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                                        (70)        49

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                                          93         22
                                                                          -------    -------
CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                                                           $    23    $    71
                                                                          -------    -------
                                                                          -------    -------
</TABLE>


                See notes to condensed consolidated financial statements.


                                       6
<PAGE>




                               PICO PRODUCTS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------
                                   (Unaudited)

(1)   GENERAL

Pico Products, Inc. and its subsidiaries (the "Company") design, manufacture and
distribute products and systems for the pay TV and cable TV industry (CATV),
broadband communications and other signal distribution markets. These other
distribution markets include "private" cable TV systems such as those found in
hotels, schools, hospitals and large apartment complexes. Private cable systems
are referred to in the industry as master antenna (MATV) or satellite master
antenna (SMATV) systems. These systems receive satellite and "off-air" (or
broadcast) signals at a single source known as the "headend." The signals are
processed and then distributed by coaxial or fiber optic cable to the consumer.
Also included in other signal distribution markets are wireless cable or MMDS
(multichannel multipoint distribution systems) and business-to-business or
direct-to-home (DTH) communications by satellite. The Company also sells pay TV
security products and home satellite market products.

The accompanying unaudited condensed consolidated financial statements include
the accounts of Pico Products, Inc. and its wholly owned subsidiaries, and
include all adjustments which are, in the opinion of the Company's management,
necessary to present fairly the Company's financial position as of January 31,
1999, and the results of its operations and its cash flows for the three and
six-month periods ended January 31, 1999 and 1998. All such adjustments are of a
normal recurring nature. All significant intercompany accounts and transactions
have been eliminated in consolidation.

The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred continuing
losses from operations and negative cash flows.

At January 31, 1999 the Company was in technical violation of several of the
financial covenants related to both its senior and subordinated debt. These
factors among others may indicate that the Company will be unable to continue as
a going concern. As a result, the Company has reclassified $4,245,000 and
$5,478,000 representing the subordinated long-term debt, as a current liability
at January 31, 1999 and July 31, 1998, respectively. The subordinated lenders,
however, have not requested payment or any acceleration of payment of the
subordinated debentures in connection with these technical violations of these
financial covenants. See Note 8 for a discussion of the repayment of the
subordinated debentures in connection with the sale of the trap and filter
manufacturing operation.

Certain information and footnote disclosures normally included in financial 
statements prepared in accordance with generally accepted accounting 
principles (GAAP) have been condensed or omitted pursuant to the rules and 
regulations of the Securities and Exchange Commission (SEC). The preparation 
of interim financial statements in conformity with GAAP, as modified by SEC 
rules and regulations, requires 

                                       7
<PAGE>

management to make estimates and assumptions that affect the reported amounts 
of assets and liabilities and disclosures of contingent assets and 
liabilities at the date of the financial statements and the reported amounts 
of revenues and expenses during the reporting period. Actual results could 
differ from these estimates. These condensed consolidated financial 
statements should be read in conjunction with the financial statements and 
related notes contained in the Company's Annual Report on Form 10-K for the 
fiscal year ended July 31, 1998.

The results of operations for the interim periods shown in this Report are not
necessarily indicative of the results to be expected for the fiscal year.

(2)   INVENTORIES

The composition of inventories was as follows:

<TABLE>
<CAPTION>
                                       January 31,    July 31,  
                                          1999          1998   
                                       -----------   ---------
                                            (in thousands)
<S>                                    <C>           <C>
Raw materials                           $ 1,495       $ 4,280
Work in process                             112           761 
Finished goods                            5,284         6,956  
                                        -------       ------- 

                                        $ 6,891       $11,997 
                                        -------       ------- 
                                        -------       ------- 
</TABLE>

(3)   INCOME TAXES

No provision for U.S. Federal and state regular income taxes or foreign 
income taxes has been recorded for the three and six-month periods ended 
January 31, 1999 and 1998 due to the Company's U.S. Federal, state, and 
foreign net operating loss carryforward positions.

(4)   EARNING PER SHARE

Due to a Net Loss Attributable to Common Stock, shares issuable upon exercise 
of stock options and warrants have not been included in the calculation of 
Diluted Loss per Share. The Company has used the weighted average shares 
outstanding of 4,215,913 and 4,185,913 at January 31, 1999 and 1998, 
respectively. In addition, the Company had 2,020,678 shares issuable upon the 
exercise of outstanding stock options and warrants at prices ranging from 
$.60 to $3.19 at January 31, 1999.


                                       8
<PAGE>


(5)   LITIGATION AND CONTINGENCIES

INFORMATION REQUEST

In March 1995, a subsidiary of the Company received a Joint Request for 
Information (the "Information Request") from the United States Environmental 
Protection Agency, Region II (the "EPA"), under the Comprehensive 
Environmental Response, Compensation and Liability Act of 1980, as amended 
("CERCLA"), with respect to the release and/or threatened release of 
hazardous substances, hazardous wastes, pollutants or contaminants into the 
environment at the Onondaga Lake Site, Syracuse, Onondaga County, New York. 
The Company learned that the EPA added the Onondaga Lake Site to the 
Superfund National Priorities List in December 1994, and has completed an 
onsite assessment of the degree of hazard. The EPA has indicated that the 
Company is one of 26 companies located in the vicinity of Onondaga Lake or 
its tributaries that have received a similar Information Request.

The Information Request related to the activities of the Company's Printed 
Circuit Board Division, which was sold to a third party in 1992, and which 
conducted operations within the specified area. Under the Agreement of Sale 
with the buyer, the Company retained liability for environmental obligations 
which occurred prior to the sale.

The Company has provided all information requested by the EPA. The 
Information Request does not designate the Company as a potentially 
responsible party, nor has the EPA indicated the basis upon which it would 
designate the Company as a potentially responsible party. The Company is 
therefore unable to state whether there is any material likelihood for 
liability on its part, and, if there were to be any such liability, the basis 
of any sharing of such liability with others.

In March 1997, the Company received a follow-on request for additional 
information in this matter and has provided all information requested.

EAGLE LITIGATION

On July 30, 1997, Eagle Comtronics, Inc. ("Eagle") filed a motion in the 
United States District Court for the Northern District of New York to amend 
the complaint for patent infringement it had filed in 1979 against the 
Company. This 1979 action had been settled by Consent Judgment in 1988, 
pursuant to which the Company and Eagle entered into a License Agreement 
providing for specified royalty payments from Eagle to the Company. Eagle's 
motion sought the District Court's permission to proceed against the Company 
under various legal theories for breach of the License Agreement, based on 
Eagle's allegation that the Company, in violation of the License Agreement's 
"most favored nation" clause, granted a license to a third party (Arrow 
Communication Laboratories, Inc.) on more favorable terms than those provided 
to Eagle. Eagle sought damages of approximately $1,600,000 plus interest and 
attorneys fees. The Company believed that Eagle's


                                       9
<PAGE>


motion was procedurally improper and that, even if the amended complaint were 
allowed by the District Court, it had meritorious defenses to the claims 
stated in the amended complaint.

The Company responded to Eagle's motion, and Eagle promptly withdrew the 
motion to file an amended complaint. At the same time Eagle filed a complaint 
in New York State Supreme Court similar to the proposed amended federal 
complaint. The Company filed a motion to dismiss Eagle's complaint, which has 
been denied. The discovery phase of the case is proceeding. Management 
believes that the Company has meritorious defenses to Eagle's action and that 
such suit will not have any material adverse effect on the Company.

OTHER

The Company is involved, from time to time, in certain other legal actions 
arising in the normal course of business. Management believes that the 
outcome of other litigation will not have a material adverse affect on the 
Company's consolidated financial statements.

(6)   NOTES PAYABLE AND LONG-TERM DEBT

The terms of the Company's senior debt facility were recently revised in 
connection with the sale of the Company's trap and filter manufacturing 
business. As revised the loan agreement provides for a $8,000,000 revolving 
bank line of credit which is secured by substantially all of the Company's 
assets, including all trade accounts receivable and inventories. The line 
provides for interest at the prime rate plus 1.25% (9.25% at January 31, 
1999).

The revolving line of credit is used to fund operating expenses, product 
purchases and letters of credit for import purchases. The line has a 
$1,000,000 sublimit for outstanding letters of credit. The amount available 
to borrow at any one time is based upon various percentages of eligible 
accounts receivable and eligible inventories as defined in the agreement. 
These recent revisions lowered the advance rate for inventory from 63% to 50% 
and reduced the total amount of the line supported by inventory from 
$5,500,000 to $4,000,000. These recent revisions in the senior debt 
availability formulas have adversely affected the Company's ability to 
purchase inventory, which has resulted, and can be expected to continue in 
the near future to result in, reduced sales. The credit facility is subject 
to certain financial tests and covenants continuing through the term of the 
agreement.

The senior lender notified the Company that it had terminated its credit 
facility, effective December 31, 1998. The Company's senior lender has 
continued to advance funds in accordance with the facilities advance rates. 
However, there can be no assurance that the senior lender will continue to 
advance funds. Continuation of the senior debt facility is critical to the 
day-to-day operations of the Company. In the event the senior lender did not 
continue to advance funds, the Company would need to find alternate sources 
of financing. It is highly unlikely that the Company could obtain financing 
at acceptable terms and conditions and consequently would have to consider 
filing for protection under Chapter 11 of the Bankruptcy code. The Company 
has retained an investment banking firm to advise it with respect to the 
exploration of strategic alternatives that could lead to the possible sale or 
merger of the Company. Such a sale or merger might be consummated under 
Chapter 11 of the Bankruptcy code. However, the Company has not determined a 
course of action and may ultimately decide to remain independent.

                                      10
<PAGE>

The Company had approximately $6,180,000 outstanding under the senior 
facility and the Company's had $89,000 of availability under its line of 
credit on January 31, 1999.

At January 31, 1998 the Company was in violation of several of the financial 
covenants under its senior and subordinated debt, including covenants with 
respect to quarterly sales and earnings.

Due to the uncertainty related to the achieving continuing compliance and 
that no waivers have been obtained from either its senior or subordinated 
lender the Company has classified $4,245,000 as a current liability. However, 
the holders of the subordinated debt have not requested payment or any 
acceleration of payment of the subordinated debentures due to the failure to 
meet the various financial tests and covenants.

See Note 8 for a discussion of the repayment of $1,390,000 principal amount 
of the 12% subordinated debt in connection with the sale of the trap and 
filter manufacturing operation.

In addition the senior lender has notified the Company and the subordinated 
lenders that the payment to the subordinated lenders of a portion of the 
proceeds from the sale of the Company's trap and filter manufacturing 
business breached the Subordination Agreement among the senior lender, the 
subordinated lenders and the Company. The Company does not believe it is in 
violation of the subordinated loan agreement having relied upon discussions 
with the senior lender in which the Company had disclosed the proposed 
disposition of the proceeds from the sale of the trap and filter 
manufacturing operation.

In addition, the senior lender exercised rights under the Subordination 
Agreement to prohibit the Company from making any further payments of 
interest or principal to the holders of the subordinated debt for a period of 
120 days. This standstill provision expires on March 17, 1999. The senior 
lender has also demanded repayment by the subordinated lenders of the 
prepayment of principal.

(7)   SALE OF TRAP AND FILTER MANUFACTURING OPERATION

On September 3, 1998, the Company sold its trap and filter manufacturing 
operation and entered into an arrangement to purchase its trap and filter 
requirements exclusively for a five-year term. The Company received gross 
proceeds of $5,200,000 and transferred the inventory and certain 
manufacturing assets, including equipment, technical designs and plans to the 
buyer.

The Company received gross proceeds of $5,200,000, after the deduction of the 
net book value of the inventory and fixed assets sold the Company recorded a 
gain $606,000. This gain was reduced to -0- due to certain contingencies 
related to the reimbursement by the acquirer of expenses incurred in the 
transfer of the operation to the acquirer.

In addition, the Company had entered into a commitment to purchase $4,000,000 
of finished trap and filter inventory, of which approximately $2,200,000 
remains at January 31, 1999.


                                      11
<PAGE>

Subsequent to January 31, 1999 the Company was notified that the supplier 
would no longer provide inventory to the Company until the Company was 
current on its balance due. The Company is attempting to negotiate an 
amendment to the five-year distribution arrangement. The outcome of this 
matter cannot be determined at this time, however, the Company does not 
expect a material, unfavorable impact on its operating results, due to the 
low margins earned on sales of trap and filter product.

Through January 31, 1999, the Company had sales of $1,105,000 and $2,744,000 
for the three and six-months ended January 31, 1999, respectively.

In November 1998, the Company sold its St. Kitts building and in a related 
transaction settled a lawsuit related to the sale of the trap and filter 
business. The Company received gross proceeds of $400,000 and recorded, after 
the deduction of the value of the assets sold and transaction costs, a Gain 
on Sale of $267,000.

(8)   EXTINGUISHMENT OF DEBT

In September 1998 the Company repaid $1,390,000 to its subordinated lender in 
connection with the subordinated lender agreeing to the release of its 
security interest in assets related to the trap and filter manufacturing 
operation. The subordinated lender also agreed to return 265,539 warrants to 
purchase common stock, which had been issued in connection with this debt. 
The Company has estimated the fair value of these warrants to be $40,000.

In connection with this transaction, the Company has recorded an 
Extraordinary Item, a Loss on Extinguishment of Debt of $151,000. This loss 
represents the write off of the unamortized portion of deferred loan costs 
and debt discount, less the amount paid to retire the warrants.

(9)   NEW ACCOUNTING PRONOUNCEMENT

In conformity with generally accepted accounting principles the Company has 
adopted Statement of Financial Accounting Standards No. 131 "Reporting 
Comprehensive Income." Comprehensive Net Income (Loss) was the same as the 
Net Income (Loss) for both the three and six months ended January 31, 1999 
and 1998.


                                      12
<PAGE>




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

The following discussion compares the operations of the Company for the three 
and six-month periods ended January 31, 1999 with the three and six-month 
period ended January 31, 1998, as shown by the unaudited condensed 
consolidated statements of income included in this quarterly report.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

Sales (in thousands):             1999      1998   % Decrease
                                -------   -------  ----------
<S>                             <C>       <C>      <C>
Three Months Ended January 31   $ 5,183   $ 6,461     19.8%
Six Months Ended January 31     $11,077   $14,648     24.4%
</TABLE>

The decrease for the three and six-months ended January 31, 1999 as compared 
to the same periods in 1998 is a result of continuing shortages of select 
inventory items in the U.S. distribution market, lower sales in South America 
due to economic and competitive pressures, and a decrease in proprietary 
sales. Difficulties in obtaining adequate credit resulted in the inability to 
purchase inventory, which contributed to product shortages and adversely 
impacted sales.

Cost of Sales (in thousands):

<TABLE>
<CAPTION>
                                                            % Increase
                                       1999         1998    (Decrease)
                                    ---------    ---------  -----------
<S>                                 <C>          <C>        <C>
Three Months Ended January 31       $   3,873    $   4,691     (17.4%)
  As a percentage of sales               74.7%        72.6%      2.9%
Six Months Ended January 31         $   8,315    $  10,605     (21.6%)
  As a percentage of sales               75.1%        72.4%      3.7%
</TABLE>

The decrease in cost of sales was due to the decrease in sales. Cost of 
sales, as a percentage of sales, increased due to lower overall volume over 
which overhead expenses could be absorbed and an unfavorable, as compared to 
prior period, product mix shift to lower margin product.

Selling and Administration Expenses (in thousands)

<TABLE>
<CAPTION>
                                                             % Increase
                                       1999        1998      (Decrease)  
                                    ---------   ---------    ----------
<S>                                 <C>         <C>          <C>
Three Months Ended January 31       $  1,443    $  1,525      (5.4%)
  As a percentage of sales              27.8%       23.6%     17.8%
Six Months Ended January 31         $  2,838    $  3,330     (14.8%)
  As a percentage of sales              25.6%       22.7%     12.8%
</TABLE>

The decrease in selling and administration costs from 1997 to 1998 is a 
result of on-going cost control efforts, including headcount reductions begun 
in fiscal 1997, continuing through fiscal 1998 and into fiscal 1999. The 
decreases for both the three- and six-months ended January 31, 1999, as 
compared to the same periods in 1998 resulted from the reduction of selling, 
production, and administrative headcount and expenses related to the trap and 
filter business.


                                      13
<PAGE>

Interest expense (in thousands):

The decrease in interest expense is due to the repayment of both senior and 
subordinated debt in September 1998 using proceeds received from the sale of 
the trap and filter manufacturing operation.

Gain on Sale:

Included in Gain on Sale for the six-months ended January 31, 1999 is 
$267,000 from the sale of the St. Kitts facility. During the three-months 
ended January 31, 1999 the Company reversed $80,000 of the Gain related to 
the sale of trap and filter business recorded during the three-months ended 
October 31, 1998. This reversal was due to certain costs incurred in 
completing the transfer of the trap and filter business to the purchaser, for 
which the purchaser may not reimburse the Company.

Income Taxes:

No provision for U.S. Federal and state regular income taxes or foreign 
income taxes has been recorded for the three-month periods ended January 31, 
1999 and 1998 due to the Company's U.S. Federal, state, and foreign net 
operating loss carryforward positions and a tax holiday granted to one of the 
Company's foreign subsidiaries.

Summary:

A return to profitability is contingent upon the Company obtaining adequate 
financing to purchase product inventory.

LIQUIDITY AND CAPITAL RESOURCES

The terms of the Company's senior debt facility were recently revised in 
connection with the sale of the Company's trap and filter manufacturing 
business. See Note 6 to Notes to Condensed Consolidated Financial Statements. 
As revised, the loan agreement provides for a $8,000,000 revolving bank line 
of credit which is secured by substantially all of the Company's assets, 
including all trade accounts receivable and inventories. The line provides 
for interest at the prime rate plus 1.25% (9.25% at October 31, 1998).

The revolving line of credit is used to fund operating expenses, product 
purchases and letters of credit for import purchases. The line has a 
$1,000,000 sublimit for outstanding letters of credit. The amount available 
to borrow at any one time is based upon various percentages of eligible 
accounts receivable and eligible inventories as defined in the agreement. 
These recent revisions lowered the advance rate for inventory from 63% to 50% 
and reduced the total amount of the line supported by inventory from 
$5,500,000 to $4,000,000. These recent revisions in the senior debt 
availability formulas have adversely affected the Company's ability to 
purchase inventory, which has resulted, and can be expected to continue in 
the near future to result in, reduced sales. The credit facility is subject 
to certain financial tests and covenants continuing through the term of the 
agreement.

The senior lender notified the Company that it had terminated its credit 
facility, effective December 31, 1998. The Company's senior lender has 
continued to advance funds in accordance with the facilities advance rates. 
However, there can be no assurance that the senior lender will continue to 
advance funds. Continuation of the senior debt facility is critical to the 
day-to-day operations of the Company. In the event the senior lender did not 
continue to advance funds, the Company would need to find alternate sources 
of financing. It is highly unlikely that the Company could obtain financing 
at acceptable terms and conditions and consequently would have to consider 
filing for protection under Chapter 11 of the Bankruptcy code. The Company 
has retained an investment banking firm to advise it with respect to the 
exploration of strategic alternatives that could lead to the possible sale or 
merger of the Company. Such a sale or merger might be consummated under 
Chapter 11 of the Bankruptcy code. However, the Company has not determined a 
course of action and may ultimately decide to remain independent.

                                      14
<PAGE>

The Company had approximately $6,768,000 outstanding under the senior 
facility and the Company's borrowings exceeded its calculated borrowing base 
by $290,000 on January 31, 1999.

At January 31, 1999, the Company was in violation of several of the financial 
covenants under its senior and subordinated debt, including covenants with 
respect to quarterly sales and earnings.

In addition the senior lender had notified the Company and the subordinated 
lenders that the payment to the subordinated lenders of a portion of the 
proceeds from the sale of the Company's trap and filter manufacturing 
business breached the Subordination Agreement among the senior lender, the 
subordinated lenders and the Company. (See Note 6 to Notes to Condensed 
Consolidated Financial Statements.) The Company does not believe it is in 
violation of the subordinated loan agreement having relied upon discussions 
with the senior lender in which the Company had disclosed the proposed 
disposition of the proceeds from the sale of the trap and filter 
manufacturing operation.

The senior lender notified the Company and the subordinated lender that it 
has exercised its rights under the Subordination Agreement to prohibit the 
Company from making any further payments of interest or principal to the 
holders of the subordinated debt for a period of 120 days. The senior lender 
has also demanded repayment by the subordinated lenders of the prepayment of 
principal.

In addition to obtaining increased liquidity, profitability of operations is 
subject to various uncertainties including general economic conditions and 
the actions of actual or potential competitors and customers. The Company's 
future depends on the growth of the cable TV market in the United States and 
internationally. In the United States, a number of factors could affect the 
future profitability of the Company, including changes in the regulatory 
climate for cable TV, changes in the competitive structure of the cable and 
telecommunications industries or changes in the technology base of the 
industry. Internationally, the Company's profitability depends on its ability 
to penetrate new markets in the face of competition from other United States 
and foreign companies.

YEAR 2000


                                      15
<PAGE>

The Company has developed a plan to address the possible exposure related to 
the impact on its computer systems of the Year 2000. Key financial 
information and operational and product systems have been assessed and plans 
have been developed to address systems modifications required by December 31, 
1999. The financial impact of making the required systems changes is not 
expected to be material to the Company's consolidated financial position, 
results of operations, or cash flow. In addition, the Company will be 
communicating with others with whom it does significant business, including 
but not limited to its suppliers, key customers and lenders, to determine 
their Year 2000 compliance readiness and the extent to which the Company is 
vulnerable to any third party Year 2000 issues. However, there can be no 
guarantee that the systems of other companies on which the Company's systems 
rely will be timely converted or that a failure to convert by another company 
would not have a material adverse effect on the Company. The risk of Year 
2000 issues is mitigated by the fact that the Company does not significantly 
rely upon any one major supplier or customer and that its products do not 
contain date-sensitive computer software or hardware.

FORWARD LOOKING STATEMENTS

Statements which are not historical facts, including statements about our 
confidence, strategies and expectations, technologies and opportunities, 
industry and market segment growth, demand and acceptance of new and existing 
products, and return on investments in products and markets, are forward 
looking statements that involve risks and uncertainties, including without 
limitation, the effect of general economic and market conditions, industry 
market conditions caused by changes in the supply and demand for our 
products, the continuing strength of the markets we serve, competitor 
pricing, maintenance of our current momentum and other factors.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.


                                      16
<PAGE>




                                      PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         Incorporated by reference from financial statement footnote number 5 of
         Part I.


ITEM 2.  CHANGES IN SECURITIES.

         On February 18, 1999 the Company announced that it had notified
         the American Stock Exchange that it was withdrawing its appeal of the
         decision of the Exchange's staff to file an application with the 
         Securities and Exchange Commission to delist the Company's Common 
         Stock. The Exchange's staff decision was based on the Company's 
         failure to meet continuing listing guidelines, arising from past 
         operating losses and a resulting accumulated deficit as well as other 
         factors. The Company's shares have begun to trade on the 
         over-the-counter market under symbol PPIP.


ITEM 3.  DEFAULT ON SENIOR SECURITIES.

         Incorporated by reference from financial statement footnote number 6 of
         Part I.


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

         None.


ITEM 5.  OTHER INFORMATION.

         None.


                                      17
<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.  

(a) Exhibits:     (Note - A Key To Index of Exhibits
                   Incorporated By Reference is provided at the end of
                   this Item 6.)

         2(a)e    Asset Purchase Agreement, dated as of September
                  3, 1998 between Pico Products, Inc., a New York
                  Corporation and Thomas & Betts Corporation.

         3(a)k    Restated Certificate of Incorporation of the Company,
                  as filed on September 5, 1997.

         3(b)c    By-Laws of the Company, as amended on December 17, 1987.

         3(c)     Amendment to By-Laws of the Company, adopted 
                  November 14, 1997.

         4(a)b    1981 Non-Qualified Stock Option Plan

         4(b)a    1982 Incentive Stock Option Plan

         4(c)d    1992 Incentive Stock Plan

         4(f)g    Amendment to 1992 Incentive Stock Plan.

         4(g)h    Amendment to 1981 Non-Qualified Stock Option Plan.

         4(h)i    Investment Agreement between the Company and certain
                  of its subsidiaries, and Allied Capital Corporation
                  and certain of its affiliated companies, dated
                  November 21, 1996.

         4(i)i    Subordinated Secured Debenture issued by the Company
                  and certain of its subsidiaries, payable to Allied
                  Capital Corporation, dated November 21, 1996. The
                  Company has issued subordinated secured debentures in
                  substantially the same form as this debenture to the
                  following parties for the following amounts:

<TABLE>
<CAPTION>

                                Holder                                   Amount
                  ---------------------------------                    ----------
                  <S>                                                  <C>
                  Allied Investment Corporation                        $2,300,000
                  Allied Investment Corporation II                     $1,450,000
                  Allied Capital Corporation II                        $  550,000
</TABLE>

         4(j)i    Letter Agreement covering the issuance and sale by
                  the Company of Preferred Stock to The Sinkler
                  Corporation, dated November 21, 1996.



                                      18
<PAGE>




         4(k)i    Stock Purchase Warrant issued by the Company to
                  Allied Capital Corporation, dated November 21, 1996.
                  The Company has issued warrants in substantially the
                  same form as this warrant to the following parties
                  for the following number of shares:

<TABLE>
<CAPTION>
                                   Holder                                      Shares   
                  ------------------------------------------------       ---------------
                  <S>                                                    <C>
                  Allied Investment Corporation                                358,484
                  Allied Investment Corporation II                             226,001
                  Allied Capital Corporation II                                 85,724
                  The Sinkler Corporation                                      155,863
                  Shipley Raidy Capital Partners, LP                            20,000
</TABLE>

         4(l)i    Stock Purchase Warrant issued by the Company to
                  Allied Capital Corporation, dated November 21, 1996.
                  The Company has issued warrants in substantially the
                  same form as this warrant to the following parties
                  for the following percentage of shares:

<TABLE>
<CAPTION>
                                                                          Percentage of
                                   Holder                                     Shares   
                  --------------------------------------------         -----------------
                  <S>                                                  <C>
                  Allied Investment Corporation                                6.9%
                  Allied Investment Corporation II                            4.35%
                  Allied Capital Corporation II                               1.65%
                  The Sinkler Corporation                                      3.0%
</TABLE>

         4(m)i    Registration Rights Agreement between the Company,
                  Allied Capital Corporation and certain of its
                  affiliated companies, Scimitar Development Capital
                  Fund and Scimitar Development Capital "B" Fund,
                  Shipley Raidy Capital Partners, LP, and The Sinkler
                  Corporation, dated November 21, 1996.

         4(n)j    Amended and Restated 1996 Incentive Stock Plan.

         4(o)k    Investment Agreement between the Company and certain
                  of its subsidiaries, and Allied Capital Corporation
                  and certain of its affiliated companies, dated
                  September 12, 1997.

         4(p)k    Junior Subordinated Secured Debenture issued by the
                  Company and certain of its subsidiaries, payable to
                  Allied Capital Corporation, dated September 12, 1997.
                  The Company has issued junior subordinated secured
                  debentures in substantially the same form as this
                  debenture to the following parties for the following
                  amounts:

<TABLE>
<CAPTION>

                                Holder                        Amount         
                  -----------------------------         -------------------
                  <S>                                   <C>
                  Allied Investment Corporation             $374,300
                  Allied Capital Corporation II             $394,000
                                                                          
</TABLE>


                                      19
<PAGE>




         4(q)k    Letter Agreement covering the issuance and sale by
                  the Company of Preferred Stock and issuance of
                  warrants to purchase shares of Common Stock to The
                  Sinkler Company, dated September 12, 1997.

         4(r)k    Stock Purchase Warrant issued by the Company to
                  Allied Capital Corporation, dated September 12, 1997.
                  The Company has issued warrants in substantially the
                  same form as this warrant to the following parties
                  for the following number of shares:

<TABLE>
<CAPTION>

                             Holder                            Shares    
                  -----------------------------              ----------
                  <S>                                        <C>
                  Allied Investment Corporation                258,944
                  Allied Capital Corporation II                272,572
                  The Sinkler Corporation                      114,200
</TABLE>

          4(s)k   Stock Purchase Warrant -- Subject to Call issued by
                  the Company to Allied Capital Corporation, dated
                  September 12, 1997. The Company has issued warrants
                  in substantially the same form as this warrant to the
                  following parties for the following number of shares:

<TABLE>
<CAPTION>
                             Holder                             Shares  
                  -----------------------------              -----------
                  <S>                                        <C>
                  Allied Investment Corporation                 68,024
                  Allied Capital Corporation II                 71,604
                  The Sinkler Corporation                       30,000
</TABLE>

         4(t)k    First Amendment to Investment Agreement between the
                  Company and Allied Capital Corporation and certain of
                  its affiliated companies (original agreement dated
                  November 21, 1996)- amendment dated September 12,
                  1997.

         10(q)(l) Amendment  No. 5 to the Loan and0 Security Agreement between
                  Pico Macom, Inc. and HSBC Business Loans, Inc., as successor
                  to Marine Midland Business Loans, Inc., dated May 25, 1994 --
                  Amendment dated October 31, 1997.

         10(r)f   Employment agreement dated January 8, 1998 between the Company
                  and Charles G. Emley, Jr.

         10(s)m   Amendments No 6, 7, 8, and 9 to the Loan and Security
                  Agreement between Pico Macom, Inc. and HSBC Business
                  Loans, Inc., dated December 12, 1997, June 1, 1998,
                  October 11, 1998 and November 13, 1998, respectively.

         11.1     Computation of Per Share Earnings. Incorporated by reference
                  from financial statement footnote Number 4 of Part 1

         27       Financial Data Schedule (included only in the EDGAR filing).

         28
         (b)      Reports on Form 8-K:
 
                  None.

 

                                      20
<PAGE>




KEY TO INDEX OF EXHIBITS INCORPORATED BY REFERENCE

a   Previously  filed by the Company as an exhibit to the  Company's  
    Registration  Statement  on Form S-1, File No. 2-77439 and incorporated 
    by reference.

b   Previously  filed by the Company as an exhibit to the  Company's  
    Registration  Statement  on Form S-18, File No. 2-72318 and incorporated 
    by reference.

c   Previously filed by the Company as an exhibit to the Company's Form 10-K 
    for the fiscal year ended July 31, 1988 and incorporated by reference.

d   Previously filed by the Company as an exhibit to the Company's Form 10-Q 
    for the fiscal quarter ended January 31, 1993 and incorporated by 
    reference.

e   Previously filed by the Company as an exhibit to the Company's Form 8-K
    filed on September 18, 1998 and incorporated by reference.

f   Previously filed by the Company as an exhibit to the Company's Form
    10-Q for the fiscal quarter ended January 31, 1998 and incorporated by
    reference.

g   Previously filed by the Company as an exhibit to the Company's Form
    10-K for the fiscal year ended July 31, 1994 and incorporated by
    reference.

h   Previously filed by the Company as an exhibit to the Company's Form
    10-Q for the fiscal quarter ended January 31, 1996 and incorporated by
    reference.

i   Previously filed by the Company as an exhibit to the Company's Form
    10-Q for the fiscal quarter ended October 31, 1996 and incorporated by
    reference.

j   Previously filed as an appendix to the Company's definitive proxy
    statement dated December 4, 1996 and incorporated by reference.

k   Previously filed by the Company as an exhibit to the Company's Form
    10-K for the fiscal year ended July 31, 1997 and incorporated by
    reference.

l   Previously filed by the Company as an exhibit to the Company's Form
    10-Q for the fiscal quarter ended October 31, 1997 and incorporated by
    reference.

m   Previously filed by the Company as an exhibit to the Company's Form
    10-K for the fiscal year ended July 31, 1998.

    Copies of all exhibits incorporated by reference are available at no
    charge by written request to Assistant Corporate Secretary, Pico
    Products, Inc., 12500 Foothill Blvd., Lakeview Terrace, California
    91342.


                                      21
<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.

                                          PICO PRODUCTS, INC.


DATE: March 22, 1999                      /s/ Mike Gavigan
                                          ------------------------------------
                                          Chief Financial Officer


DATE: March 22, 1999                      /s/ Charles G. Emley, Jr. 
                                          ------------------------------------
                                          Chairman and Chief Executive Officer


                                      22
<PAGE>




                             INDEX TO EXHIBITS FILED


   11.1    Computation of Per Share Earnings. Incorporated by reference
           from financial statement footnote number 4 of Part 1.

   27      Financial Data Schedule (included only in the EDGAR filing).



                                      23