<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          October 31, 1997
                                          --------------------------------------
                                     OR
(   )     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                   For the transition period from           to       

                            Commission File Number   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  December 6, 1996.

Common Stock, $0.01 par value                               4,185,913
-----------------------------                          ------------------
           Class                                        Number of Shares


                                          1
<PAGE>

                                 PICO PRODUCTS, INC.

                                        INDEX



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

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets -
         October 31, 1997 and July 31, 1996                            3-4

         Condensed Consolidated Statements
         of Income - Three Months
         Ended October 31, 1997 and 1996                               5

         Condensed Consolidated Statements
         of Cash Flows - Three Months
         Ended October  31, 1997 and 1996                              6

         Notes to Condensed Consolidated Financial
         Statements                                                    7-11

Item 2.  Management's Discussion and Analysis
         of Results of Operations and Financial
         Condition                                                     11-14

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                             15

Item 2.  Changes in Securities                                         15

Item 6.  Exhibits and Reports on Form 8-K                              16-27


                                          2
<PAGE>

                           PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                 PICO PRODUCTS, INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (Unaudited)
                                                    October 31,       July 31,
                                                       1997             1997
                                                    -----------     -----------
ASSETS:
CURRENT ASSETS:
  Cash and cash equivalents                         $    18,932      $   22,286
  Accounts receivable (less allowance
     for doubtful accounts:  October 31, 1997,
     $200,000; July 31, 1997, $200,000)               4,387,681       5,621,232

  Inventories (Note 2)                               11,977,088      11,961,229
  Prepaid expenses and other current
          assets                                        262,679         339,760
                                                    -----------     -----------

     TOTAL CURRENT ASSETS                            16,646,380      17,944,507
                                                    -----------     -----------

PROPERTY, PLANT AND EQUIPMENT:

  Buildings                                             217,255         217,255
  Leasehold improvements                                186,689         279,842
  Machinery and equipment                             2,887,501       2,900,270
                                                    -----------     -----------
                                                      3,291,445       3,397,367
  Less accumulated depreciation
     and amortization                                 2,361,598       2,431,779
                                                    -----------     -----------
                                                        929,847         965,588
                                                    -----------     -----------
OTHER ASSETS:
  Patents and licenses (less accumulated
     amortization: October 31, 1997, $69,650;
     July 31, 1997, $68,156)                            151,560         153,054
  Excess of cost over net assets of
     businesses acquired (less accumulated
     amortization; October 31, 1997, $403,230;
     July 31, 1997, $395,970)                           174,205         181,465
  Deposits and other noncurrent assets                  236,823         235,614
  Debt issuance costs (less accumulated
     amortization; October 31, 1997, $66,405;
     July 31, 1997; $43,760)                            509,198         415,683
                                                    -----------     -----------
                                                      1,071,786         985,816
                                                    -----------     -----------

                                                    $18,648,013     $19,895,911
                                                    -----------     -----------
                                                    -----------     -----------


See notes to condensed consolidated financial statements.


                                          3
<PAGE>

                                 PICO PRODUCTS, INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (continued)
                                     (Unaudited)

                                                    October 31,       July 31,
                                                       1997             1997
                                                    -----------    ------------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Notes payable (Notes 5&6)                           $ 8,306,868      $9,425,299
Current portion of long-term debt                       134,217         132,902
Accounts payable                                      2,463,805       3,348,977
Accrued expenses:
     Legal and accounting                               280,042         212,976
     Payroll and payroll taxes                          378,499         486,397
     Other accrued expenses                             404,086         395,552
     Restructuring costs                                449,725         580,035
                                                    -----------     -----------

     TOTAL CURRENT LIABILITIES                       12,417,242      14,582,138
                                                    -----------     -----------
LONG-TERM DEBT (Note 6)                               5,526,468       4,915,286
                                                    -----------     -----------
RESTRUCTURING COSTS                                     237,959         298,744
                                                    -----------     -----------

COMMITMENTS AND CONTINGENCIES                            -               -
        (Note 4)

REDEEMBABLE PREFERRED STOCK, $.01 par
 value; authorized 500,000 shares; issued
 and outstanding 1,165 shares at October 31,
 1997 and 1,000 shares at July 31, 1997               1,050,973         917,086
                                                    -----------     -----------

SHAREHOLDERS' DEFICIENCY:
 Common shares, $.01 par value; authorized
  15,000,000 shares issued and outstand-
  ing 4,185,913 shares at October 31, 1997
  and July 31, 1997                                      41,859          41,859
  Additional paid-in capital                         22,986,545      22,715,292
 Stock subscriptions receivable                        (105,000)       (105,000)
 Accumulated deficit                                (23,410,767)    (23,381,874)
 Cumulative translation adjustment                      (97,266)        (87,620)
                                                    -----------     -----------
TOTAL SHAREHOLDERS' DEFICIENCY                        (584,629)       (817,343)
                                                    -----------     -----------
                                                    $18,648,013     $19,895,911
                                                    -----------     -----------
                                                    -----------     -----------


See notes to condensed consolidated financial statements.


                                          4
<PAGE>

                                 PICO PRODUCTS, INC.
                     CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                     (Unaudited)

                                                       Three Months Ended
                                                           October 31,
                                                -------------------------------
                                                     1997               1996
                                                -----------         -----------

SALES                                           $ 8,187,390         $ 9,698,188

COSTS AND EXPENSES:
  Cost of sales                                   5,913,564           7,330,072
  Selling and administrative expenses             1,804,471           2,025,788
                                                -----------         -----------

TOTAL COSTS AND EXPENSES                          7,718,035           9,355,860
                                                 ----------         -----------

INCOME FROM OPERATIONS                              469,355             342,328
INTEREST INCOME                                       3,987               3,834
INTEREST EXPENSE                                   (469,323)           (241,075)
                                                -----------         -----------

INCOME BEFORE INCOME TAXES                            4,019             105,087
                                                -----------         -----------

INCOME TAX PROVISION (Note 3)                         -                   4,234
                                                -----------         -----------

NET INCOME                                            4,019             100,853
                                                -----------         -----------

DIVIDENDS ON PREFERRED STOCK                        (32,912)               -
                                                -----------         -----------

NET INCOME (LOSS)
  ATTIBUTABLE TO
  COMMON STOCK                                  $   (28,893)        $   100,853
                                                -----------         -----------
                                                -----------         -----------

NET INCOME (LOSS) PER COMMON AND COMMON
  EQUIVALENT SHARE:

  Primary                                       $     (0.01)        $      0.02
                                                -----------         -----------
                                                -----------         -----------

  Fully diluted                                 $     (0.01)        $      0.02
                                                -----------         -----------
                                                -----------         -----------

WEIGHTED AVERAGE COMMON AND
  EQUIVALENT SHARES OUTSTANDING:
  Common
  Primary                                         4,185,913           4,249,724
                                                -----------         -----------
                                                -----------         -----------
  Fully diluted                                   4,185,913           4,249,724
                                                -----------         -----------
                                                -----------         -----------


See notes to condensed consolidated financial statements.


                                          5
<PAGE>

                                 PICO PRODUCTS, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)

                                                       Three Months Ended
                                                           October 31,
                                               -------------------------------
                                                  1997                1996
                                               -----------         -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                   $     4,019         $   100,853
  Adjustments to reconcile net income
     to net cash provided by (used in)
     operating activities:

     Depreciation and amortization                  98,904              86,378
     Changes in operating assets
       and liabilities                              45,491          (1,022,057)
                                               -----------         -----------
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES                             148,414            (834,826)
                                               -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                             (31,765)            (90,971)
                                               -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (payments) under a
     line of credit agreement                   (1,118,431)            985,588
  Issuance of long-term debt                       985,000                 -
  Issuance of preferred stock                      165,000                 -
  Private placement financing costs               (116,162)                -
  Principal payments on long-term debt             (35,410)            (35,905)
  Proceeds from exercise of stock options             -                  1,800
                                               -----------         -----------
NET CASH PROVIDED BY (USED IN) FINANCING
  ACTIVITIES                                      (120,003)            951,483
                                               -----------         -----------
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                              (3,354)             25,686
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                               22,286             159,669
                                               -----------         -----------
CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                                $    18,932         $   185,355
                                               -----------         -----------
                                               -----------         -----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the fiscal quarter ended October 31, 1996, the Company financed the
purchase of office and test lab equipment totaling approximately  $87,000.


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. Finally, the Company is pursuing 
development and introduction of broadband communications products that will 
support high speed internet transmissions.

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 October 31,
1997, and the results of its operations and its cash flows for the three-month
periods ended October 31, 1997 and 1996. All such adjustments are of a normal
recurring nature.  All significant intercompany accounts and transactions have
been eliminated in consolidation.

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 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


                                          7
<PAGE>

the financial statements and related notes contained in the Company's Annual
Report on Form 10-K for the fiscal year ended July 31, 1997.

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.

NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128") "Earnings per Share."  SFAS
128 replaces the presentation of primary earnings per share with a presentation
of basic earnings per share based upon the weighted average number of common
shares for the period.  It also requires dual presentation of basic and diluted
earnings per share for companies with complex capital structures.  SFAS 128 will
be adopted by the Company for the fiscal quarter ending January 31, 1998 and
earnings per share for all prior periods will be restated upon adoption.

(2)  INVENTORIES

The composition of inventories was as follows:

                              October 31,           July 31,
                                  1997                1997
                              -----------         -----------

Raw materials                 $ 4,584,495         $ 4,634,967
Work in process                   956,065             606,218
Finished goods                  6,436,527           6,720,044
                              -----------         -----------

                              $11,977,087         $11,961,229
                              -----------         -----------
                              -----------         -----------

(3)  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 October 31, 1997 and
1996 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.  However, a provision for U.S. Federal and state alternative
minimum tax has been recorded for the three-month period ended October 31, 1996.


                                          8
<PAGE>

(4)  LITIGATION AND CONTINGENCIES


INFORMATION REQUEST

On March 6, 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 has learned that the EPA added the Onondaga Lake Site to the 
Superfund National Priorities List on December 6, 1994, and has completed an 
onsite assessment of the degree of hazard.  The EPA has indicated that the 
Company is only 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


                                          9
<PAGE>

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 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.  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.

(5)  NEW DEBT COVENANTS

On October 31, 1997, the Company negotiated new, less restrictive covenants
related to Pico Macom's revolving line of credit.  These covenants require a
certain minimum net income for the fiscal year and limit certain financial
ratios.  

As described below, the Company completed a private placement financing.  The
November 21, 1996 and September 12, 1997 financing agreements require the
Company to meet financial covenants which are very similar to the financial
covenants relating to Pico Macom's bank revolving line of credit.  At October
31, 1997, the Company was in compliance with all financial covenants related to
the private placement and the bank revolving line of credit.

(6)  NEW FINANCING

     On September 12, 1997 the Company completed a private placement financing
totaling $1,650,000 with two U.S.-based institutional investors to provide funds
for general working capital requirements.  The private placement provides for an
investment of up to $1,485,000 of three-year 10 percent junior subordinated
debentures and $165,000 of three-year 10 percent redeemable preferred stock.  In
connection with the financing, the Company has agreed to issue to the investors 


                                          10
<PAGE>

warrants for up to 1,442,000 shares of its common stock, of which 300,000 shares
are subject to call provisions.  These call provisions permit the Company at any
time up to 90 days after all of its obligations under the debentures are fully
paid to purchase from the investors up to 300,000 shares of the warrant shares,
at $3.00 per share, or if the warrants have not been exercised, to repurchase
such unexercised warrants subject to call at $3.00 per warrant share less the
per share exercise price.

     As of December 15, 1997 the Company had received cash of $985,000 of the
total subordinated debenture financing facility, with $500,000 still available
to fund the Company's operating needs.  The remaining $150,000 of the private
placement facility represents the refinancing of previously issued subordinated
notes payable by the Company which were purchased by one of the institutional
investors in June 1997. Additionally, the Company issued to the investors
warrants for 1,004,641 shares of its common stock, of which 209,010 shares are
subject to the above call provisions.  Warrants to purchase an additional
437,359 shares, of which 90,990 will be subject to call, will be issued to the
investors when the balance of the financing is funded.

     The warrants issued in conjunction with this financing are exercisable at
any time prior to the later of the date which is (i) three years after the
obligations under the debentures are satisfied in full, or (ii) 6 years from the
date of issuance, at a price equal to the average trading price of the Company's
common stock over the 90-day period commencing December 13, 1997.

     As a condition to the financing, one of the investors requested that the
Company's Board of Directors participate in the financing.  On November 5, 1997,
four members of the Company's Board of Directors executed a participation
agreement with such investor for an amount up to $335,000.


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-month period ended October 31, 1997 with the operations for the
three-month period ended October 31, 1996, as shown by the unaudited condensed
consolidated statements of income included in this quarterly report.


                                          11
<PAGE>

RESULTS OF OPERATIONS

Sales decreased by approximately $1,511,000, or 16%, for the fiscal quarter
ended October 31, 1997 compared to the fiscal quarter ended October 31, 1996. 
This decrease was primarily due to decreased demand for Satellite Master Antenna
Television (SMATV) products in  the Middle East, an industry-wide downturn in
demand for single channel pay TV decoders, partially offset by sales of the
Company's new high pass filter used in two-way interactive communications
systems, and the temporary impact of the closure of the Company's Hong Kong
subsidiary. Management believes that shipments of the new high pass filter will
remain strong throughout fiscal year 1998. In November, 1997 the Company reached
an agreement with a Far East distributor to sell products in China, Honk Kong,
and Southeast Asia.  Management believes sales in China, Honk Kong, and
Southeast Asia will increase during the remainder of fiscal year as a result of
this agreement.

Cost of sales decreased by approximately $1,417,000, or 19%, for the fiscal
quarter ended October 31, 1997 compared with the fiscal quarter ended October
31, 1996.  Cost of sales as a percentage of sales decreased by 4% (from 76% to
72%) for the fiscal quarter ended October 31, 1997 versus the same fiscal
quarter in the previous year.  The dollar decrease in cost of sales was
primarily attributable to the decrease in sales volume.  The decrease in cost of
sales as a percentage of sales was primarily due to better exchange rates with
the Company's Taiwanese vendors and the decrease in sales of high cost products
through the Company's Hong Kong subsidiary.
 
Selling and administrative expenses decreased by approximately $221,000, or 11%,
for the fiscal quarter ended October 31, 1997 compared to the fiscal quarter
ended October 31, 1996.  The primary reason for the decrease in selling and
administrative expenses was the closure the Company's Hong Kong subsidiary in
the fourth quarter of fiscal year 1997.
 
Interest expense increased by approximately $228,000, or 95%, for the fiscal
quarter ended October 31, 1997 compared with the fiscal quarter ended October
31, 1996.  The increase was primarily due to  the interest on the financing
completed in November 1996 and September 1997.

No provision for U.S. Federal and state regular income taxes or foreign income
taxes has been recorded for the three-month periods ended October 31, 1997 and
1996 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.  However, a provision for U.S. Federal and state alternative
minimum


                                          12
<PAGE>

tax has been recorded for the three-month period ended October 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 1997, the Company had working capital of approximately
$4,229,000 and a ratio of current assets to current liabilities of approximately
1.34:1, compared with working capital of approximately $3,362,000 and a ratio of
1.23:1 as of July 31, 1997. The increase in working capital was primarily due to
the  private placement in September 1997(as described below).

During the fiscal quarters ended October 31, 1997 and 1996, cash used for
capital expenditures was approximately $32,000 and $91,000 respectively. 
Capital expenditures for the remainder of fiscal year 1998 are expected to be
under $500,000.

Pico Macom has an $11,000,000 revolving bank line of credit which is secured by
substantially all of Pico Macom's assets, including all trade accounts
receivable and inventories.  The line provides for interest at the prime rate
(8.25% at October 31, 1997) plus 1.25%.  The revolving line of credit is used to
fund operating expenses, product purchases and letters of credit for import
purchases.  The line has a $1,500,000 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, which is subject to review and renewal on December 31, 1998. 
The credit facility is subject to certain financial tests and covenants.  At
October 31, 1997, Pico Macom had approximately $8,307,000 in revolving loans
outstanding and approximately $4,500 in letters of credit outstanding, and the
unused portion of the borrowing base was approximately $309,000.

On September 12, 1997 the Company completed a private placement financing
totaling $1,650,000 with two U.S.-based institutional investors to provide funds
for general working capital requirements.  The private placement provides for an
investment of up to $1,485,000 of three-year 10 percent junior subordinated
debentures and $165,000 of three-year 10 percent redeemable preferred stock.  In
connection with the financing, the Company has agreed to issue to the investors
warrants for up to 1,442,000 shares of its common stock, of which 300,000 shares
are subject to call provisions. These call provisions permit the Company at any
time up to 90 days after all of its obligations under the debentures are fully
paid to purchase from the investors up to 300,000 shares of the warrant shares,
at $3.00 per share, or if the warrants have not been exercised, to repurchase
such unexercised warrants subject to call at $3.00 per share less the per share
exercise price.


                                          13
<PAGE>

As of December 15, 1997 the Company had received cash of $985,000 of the total
subordinated debenture financing facility, with $500,000 still available to fund
the Company's operating needs.  The remaining $150,000 of the private placement
facility represents the refinancing of previously issued subordinated notes
payable by the Company which were purchased by one of the institutional
investors in June 1997. Additionally, the Company issued to the investors
warrants for 1,004,641 shares of its common stock, of which 209,010 shares are
subject to the above call provisions.  Warrants to purchase an additional
437,359 shares, of which 90,990 will be subject to call, will be issued to the
investors when the balance of the financing is funded.

The warrants issued in conjunction with this financing are exercisable at any
time prior to the later of the date which is (i) three years after the
obligations under the debentures are satisfied in full, or (ii) 6 years from the
date of issuance, at a price equal to the average trading price of the Company's
common stock over the 90-day period commencing December 13, 1997.

As a condition to the financing, one of the investors requested that the
Company's Board of Directors participate in the financing.  On November 5, 1997,
four members of the Company's Board of Directors executed a participation
agreement with such investor for an amount up to $335,000.

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.

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.


                                          14
<PAGE>

                              PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

Incorporated by reference from financial statement footnote number 4 of Part I.

ITEM 2.  CHANGES IN SECURITIES

As discussed in Management's Discussion and Analysis of Financial Condition and
Results of Operations, on September 12, 1997 the Company and certain of its
subsidiaries issued (i) subordinated debentures to Allied Capital Corporation
and certain of its affiliates ("Allied") in exchange for Allied's commitment to
lend the Company $1,485,000 ($985,000 of which has been advanced) and (ii)
preferred stock to Sinkler Corporation ("Sinkler") for $165,000.  In connection
with the issuance of the subordinated notes and preferred stock, the Company
issued warrants to purchase 860,441 and 144,200 shares of common stock to Allied
and Sinkler, respectively.  Warrants to purchase an additional 437,359 shares
will be issued to Allied on a pro rata basis as the balance of the loan
commitment is advanced to the Company.  The warrants may be exercised at any
time prior to the later of (i) three years after the obligations under the
debentures are satisfied in full, or (ii) six years from the date of issuance. 
The exercise price of the warrants is equal to the average closing price for the
90 calendar days commencing December 13, 1997.  Certain of the warrants (or the
shares issued upon exercise of the warrants) are subject to call by the Company
at a price per share equal to $3.00 less the exercise price per share (or for
shares that have been issued, $3.00 per share).  No underwriters were involved
in the placement of the foregoing securities and no underwriting discounts or
commissions were paid in connection therewith.  An investment banking fee of
approximately $38,000 was paid in connection with the placement of the foregoing
securities.  The Company believes that the issuance of the foregoing securities
is exempt from registration under the Securities Act of 1933, as amended, by
virtue of the exemption provided by Section 4(2) thereof for transactions not
involving a public offering.  The debentures, preferred stock and warrants were
issued pursuant to the terms of agreements which contain various financial and
other covenants.  These agreements prohibit the distribution of cash, stock or
other property to shareholders (whether characterized as dividends or otherwise)
or the redemption or repurchase of the Company's capital stock or similar
securities, subject to limited exceptions.


                                          15
<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.)

     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.

     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(d)e     Warrant Certificates issued to Scimitar Development Capital Fund
               and Scimitar Development Capital "B" Fund, dated February 10,
               1993.

     4(e)f     Warrant Certificate issued to City National Bank, dated February
               10, 1993.

     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.


                                          16
<PAGE>

     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:

                         Holder                        Amount
               ------------------------------     ---------------

               Allied Investment Corporation             $2,300,000
               Allied Investment Corporation II          $1,450,000
               Allied Capital Corporation II             $  550,000

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

     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:

                         Holder                        Shares    

               ----------------------------------    ------------
               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

     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:

                                                   Percentage of
                         Holder                        Shares
               ------------------------------     ---------------

               Allied Investment Corporation            6.9%
               Allied Investment Corporation II        4.35%
               Allied Capital Corporation II           1.65%
               The Sinkler Corporation                  3.0%


                                          17
<PAGE>

     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:

                         Holder                       Amount
               -----------------------------      -------------
               Allied Investment Corporation         $374,300
               Allied Capital Corporation II         $394,000

     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:

                         Holder                       Shares
               -----------------------------      -------------
               Allied Investment Corporation          258,944
               Allied Capital Corporation II          272,572
               The Sinkler Corporation                114,200


                                          18
<PAGE>

     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:

                         Holder                        Shares
               -----------------------------      --------------

               Allied Investment Corporation           68,024
               Allied Capital Corporation II           71,604
               The Sinkler Corporation                 30,000

     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)     Amendment No. 5 to the Loan and 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.

     11.1      Computation of Per Share Earnings.

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

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


                                          19
<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 as exhibits to Schedule 13D, dated February 16, 1993,
     filed by Standard Chartered Equitor Trustee CI Limited, Scimitar
     Development Capital Fund and Scimitar Development Capital "B" Fund, and
     incorporated by reference.

f    Previously filed by the Company as an exhibit to the Company's Form 10-K
     for the fiscal year ended July 31, 1993 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.

     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.


                                          20
<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:  December 15, 1997           /s/ Todd Fraser
                                   --------------------------------------
                                       Corporate Controller
                                       Principal Accounting Officer



DATE:  December 15, 1997           /s/Charles G. Emley, Jr.
                                   ---------------------------------------
                                       Chairman and Chief Executive Officer
                                       Principal Financial Officer


                                          21
<PAGE>

                               INDEX TO EXHIBITS FILED

     10(q)     Amendment No. 5 to the Loan and 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.

     11.1      Computation of Per Share Earnings.

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


                                          22