<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     April 30, 1998      
                                          -----------------------
                                         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 June 5, 1998.

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 -
          April 30, 1998 and July 31, 1997                       3-4

          Condensed Consolidated Statements
          of Income - Three and Nine Months
          Ended April 30, 1998 and 1997                          5 

          Condensed Consolidated Statements
          of Cash Flows - Nine Months 
          Ended April 30, 1998 and 1997                          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

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                       18-24


                                         2


<PAGE>

                          PART I -- FINANCIAL INFORMATION
     
ITEM 1.  FINANCIAL STATEMENTS
                                          
                                PICO PRODUCTS, INC.
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                       -------------------------------------
                  (Unaudited - in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                        April 30,      July 31,
                                                           1998          1997
                                                        ---------      --------
ASSETS:

CURRENT ASSETS:
<S>                                                     <C>            <C>
  Cash and cash equivalents                             $     15       $     22
  Accounts receivable (less allowance
    for doubtful accounts:  April 30, 1998,
    $181; July 31, 1997, $200)                             4,482          5,621
  
  Inventories (Note 2)                                    13,611         11,961
  Prepaid expenses and other current
    assets                                                   286            340
                                                        ---------      --------
    TOTAL CURRENT ASSETS                                  18,394         17,944
                                                        ---------      --------
PROPERTY, PLANT AND EQUIPMENT:
  
  Buildings                                                  217            217
  Leasehold improvements                                     187            280
  Machinery and equipment                                  2,927          2,900
                                                        ---------      --------
                                                           3,331          3,397
  Less accumulated depreciation
    and amortization                                       2,463          2,431
                                                        ---------      --------
                                                             868            966
                                                        ---------      --------
OTHER ASSETS:
  Patents and licenses (less accumulated
    amortization: April 30, 1998, $73
    July 31, 1997, $68                                       148            153
  Excess of cost over net assets of 
    businesses acquired (less accumulated
    amortization; April 30, 1998, $418
    July 31, 1997, $396                                      160            181
  Deposits and other non-current assets                      215            236
  Debt issuance costs (less accumulated     
    amortization; April 30, 1998, $117;
    July 31, 1997; $44                                       460            416
                                                        ---------      --------
                                                             983            986
                                                        ---------      --------
                                                        $ 20,245        $19,896
                                                        ---------      --------
                                                        ---------      --------
</TABLE>

              See notes to condensed consolidated financial statements


                                         3

<PAGE>

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

<TABLE>
<CAPTION>

                                                        April 30,      July 31,
                                                          1998          1997
                                                        ---------      --------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
<S>                                                     <C>            <C>
Notes payable (Notes 6&7)                               $   9,144      $  9,425

Current portion of long-term debt                             131           133
Accounts payable                                            4,197         3,349
Accrued expenses:
  Legal and accounting                                        177           213
  Payroll and payroll taxes                                   504           486
  Other accrued expenses                                      440           396
  Restructuring costs                                         270           580
                                                        ---------      --------

  TOTAL CURRENT LIABILITIES                                14,863        14,582

LONG-TERM DEBT (Note 7)                                     5,526         4,915

RESTRUCTURING COSTS                                            50           299

COMMITMENTS AND CONTINGENCIES                                   -             -
       (Note 5)

REDEEMABLE PREFERRED STOCK, $.01 par 
 value; authorized 500,000 shares; issued
 and outstanding 1,165 shares at April 30,
 1998 and 1,000 shares at July 31, 1997                     1,064           917
SHAREHOLDERS' DEFICIENCY: 
 
Common shares, $.01 par value; authorized
  15,000,000 shares issued and outstanding
  4,185,913 shares at April 30, 1998 and
  July 31, 1997                                                42            42
  Additional paid-in capital                               22,987        22,715
 Stock subscriptions receivable                              (105)         (105)
 Accumulated deficit                                      (24,060)      (23,382)
 Cumulative translation adjustment                           (122)          (87)
                                                        ---------      --------
TOTAL SHAREHOLDERS' DEFICIENCY                             (1,258)         (817)
                                                        ---------      --------
                                                        $  20,245      $ 19,896
                                                        ---------      --------
                                                        ---------      --------
</TABLE>
                                          
              See notes to condensed consolidated financial statements


                                         4

<PAGE>

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

<TABLE>
<CAPTION>
                                                 Three Months Ended        Nine Months Ended
                                                      April 30,                 April 30,
                                              ----------------------   -----------------------
                                                 1998         1997         1998         1997 
                                              ---------    ---------   ----------   ----------
<S>                                           <C>          <C>         <C>          <C>
SALES                                         $   7,089    $   7,771   $   21,737   $   26,336
COSTS AND EXPENSES:
 Cost of sales                                    5,200        6,090       15,805       20,122
 Selling and administrative expenses              1,784        2,317        5,113        6,524
                                              ---------    ---------   ----------   ----------

TOTAL COSTS AND EXPENSES                          6,984        8,407       20,918       26,646
                                              ---------    ---------   ----------   ----------

INCOME (LOSS) FROM  OPERATIONS                      105         (636)         819         (310)

INTEREST INCOME                                       4            4           12           12

INTEREST EXPENSE                                   (470)        (370)      (1,407)        (929)
                                              ---------    ---------   ----------   ----------

LOSS BEFORE INCOME TAXES                           (361)      (1,002)        (576)      (1,227)
                                              ---------    ---------   ----------   ----------

INCOME TAX PROVISION                                -0-          -0-          -0-         -0-


NET LOSS                                           (361)      (1,002)        (576)      (1,227)
                                              ---------    ---------   ----------   ----------

DIVIDENDS ON PREFERRED STOCK                         34           30          102           54
                                              ---------    ---------   ----------   ----------

NET LOSS ATTRIBUTABLE TO COMMON STOCK        $     (395)  $   (1,032)  $     (678)   $  (1,281)
                                              ---------    ---------   ----------   ----------
                                              ---------    ---------   ----------   ----------

BASIC AND DILUTED NET LOSS PER COMMON  
 SHARE (NOTE 4)                              $     (.09)        (.25)  $     (.16)   $    (.31)
                                              ---------    ---------   ----------   ----------
                                              ---------    ---------   ----------   ----------
</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>

                                                         Nine Months Ended
                                                             April 30,   
                                                  --------------------------
                                                      1998           1997
                                                  ----------     -----------

<S>                                               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                        $    (576)     $   (1,227)
  Adjustments to reconcile net income
     to net cash provided by (used in) 
     operating activities:

     Depreciation and amortization                      353             344
     Changes in operating assets
     and liabilities                                   (256)         (5,023)
                                                  ----------     -----------

NET CASH USED IN OPERATING ACTIVITIES                  (479)         (5,906)
                                                  ----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                 (127)           (232)
                                                  ----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (payments) under a 
     line of credit agreement                          (281)           566
  Issuance of long-term debt                            985          5,000
  Issuance of preferred stock                           165          1,000
  Private placement financing costs                    (120)          (453)
  Principal payments on long-term debt                 (150)          ( 78)
  Proceeds from exercise of stock options                 -             28
  Dividend paid on preferred stock                        -            (14)
                                                  ----------     -----------

NET CASH PROVIDED BY FINANCING 
  ACTIVITIES                                            599          6,049
                                                  ----------     -----------
NET (DECREASE) IN CASH AND 
  CASH EQUIVALENTS                                       (7)           (89)
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                    22            160
                                                  ----------     -----------
CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                                    $     15       $     71
                                                  ----------     -----------
                                                  ----------     -----------
</TABLE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the nine months ended April 30, 1998 and 1997, the Company financed the
purchase of office and test lab equipment totaling approximately $401 and $339
respectively.


              See notes to condensed consolidated financial statements


                                         6

<PAGE>

                                PICO PRODUCTS, INC.
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                ----------------------------------------------------
                  (Unaudited - in thousands except share amounts)

(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 April 30, 1998, and the results of its operations and its cash 
flows for the three and nine-month periods ended April 30, 1998 and 1997. All 
such adjustments are of a normal recurring nature. All significant 
inter-company 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 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.

                                         7

<PAGE>

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 was
adopted by the Company in the fiscal quarter ending January 31, 1998. Earnings
per share for all prior periods have been restated to conform to the
requirements of SFAS 128.

(2)  INVENTORIES

The composition of inventories was as follows:
<TABLE>
<CAPTION>
                               April 30,            July 31,
                                  1998                1997 
                               ---------           ----------
<S>                            <C>                  <C>
Raw materials                  $  5,325             $  4,635
Work in process                   1,393                  606
Finished goods                    6,893                6,720
                               ---------           ----------
                               $ 13,611             $ 11,961
                               ---------           ----------
                               ---------           ----------
</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 nine-month periods ended 
April 30, 1998 and 1997 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.


                                         8

<PAGE>

(4) EARNING PER SHARE - SFAS 128 Disclosures.

Note 4. EARNINGS PER SHARE:

<TABLE>
<CAPTION>
                          Three Months Ended              Nine Months Ended
                               April 30,                       April 30,
                     ---------------------------     --------------------------
                         1998             1997            1998           1997
                     ---------       -----------     -----------    -----------
<S>                  <C>             <C>             <C>            <C>
Basic and
Diluted Loss
per Share:

Net Loss             $   (361)       $ (  1,002)     $     (576)    $   (1,227)

Plus Dividends
on Preferred
Stock                $     34        $       30      $      102     $       54

Net Loss
Attributable to      $   (395)       $   (1,032)     $     (678)    $   (1,281)
Common Stock
                                                           
Weighted
Average Shares      4,185,913         4,157,486       4,185,913      4,090,493
Outstanding

Basic and
Diluted Loss       $     (.09)       $     (.25)     $     (.16)    $     (.31)
per Share:
</TABLE>

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.  At April 30, 1998, the Company had 2,290,215 shares 
issuable upon the exercise of outstanding stock options and warrants at 
prices ranging from $1.10 to $3.19.    

(5)  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. 


                                         9

<PAGE>

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 (Update for recent activities)
     
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 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.  The Company filed a motion to dismiss Eagle's complaint, 
which has been denied.  The Company intends to appeal such denial and has 
asked for a stay on discovery pending the outcome of such appeal.  In the 
event that such request is denied, the case will proceed to the discovery 
phase.

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.

                                         10

<PAGE>

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)  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 April 30, 1998 the Company was in technical violation of several of the 
financial covenants related to the subordinated debt issued in connection 
with the private placement financing.  These covenants provided for achieving 
certain quarterly sales, earnings and related ratio tests.  The holders of 
the subordinated debt have agreed to waive these violations as of April 30, 
1998. 

The Company is in compliance with all of the loan covenants held by its 
senior lender and anticipates continuing in compliance.
          
(7)  NEW FINANCING

On September 12, 1997 the Company completed a private placement financing 
totaling $1,650 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 of three-year 10 percent junior subordinated 
debentures and $165 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 warrant share less the per share exercise price.

The Company has received cash of $985 of the total subordinated debenture 
financing facility, with $500 still available to fund the Company's operating 
needs.  The remaining $150 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 


                                         11

<PAGE>

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 $335.  On March 1, 1998, an 
officer of the Company entered into the participation agreement with such 
investors for an additional $200.


                                         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 nine-month periods ended April 30, 1998 with the operations for the three 
and nine-month periods ended April 30, 1997, as shown by the unaudited 
condensed consolidated statements of income included in this quarterly report.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                  1998         1997        %Decrease
                                 -------      -------      ---------
<S>                              <C>          <C>           <C>
Sales (in thousands):                                          
Nine Months Ended April 30       $21,737      $26,336       (17.5%)
Three Months Ended April 30        7,089        7,771       ( 8.8%)
</TABLE>

The decrease in sales for the three and nine-months ended April 30, 1998 
compared to the same periods in 1997 was primarily due to decreased demand 
for Satellite Master Antenna Television (SMATV) products in the Middle East 
and a decrease in prices charged for its product. In addition, the lack of 
availability of product for certain high demand product sourced from Taiwan 
adversely impacted sales performance. 

Cost of Sales (in thousands):                               
<TABLE>
<CAPTION>
                                   1998         1997       %Decrease
                                 --------     --------     ---------
<S>                              <C>          <C>          <C>
Nine Months Ended April 30       $15,805      $20,122       (21.5%)
 As a percentage of sales           72.7%        76.4%      ( 4.8%)
Three Months Ended April 30        5,200        6,090       (14.6%)
 As a percentage of sales           73.4%        78.4%      ( 6.4%) 
</TABLE>

The dollar decrease in cost of sales for the three and nine month periods in 
1997 compared to the same periods in 1998 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, lower prices for purchased product and the decrease in sales of high 
cost products through the Company's Hong Kong subsidiary, which was closed in 
the fourth fiscal quarter of 1997.
 
Included as a reduction to cost of sales, for both the three and nine-months 
ended April 30, is a favorable adjustment to inventory valuation reserves due 
to the disposition of certain inventory items at a higher than expected sales 
value.


                                         13

<PAGE>

Selling and Administration
Expenses (in thousands)
<TABLE>
<CAPTION>
                                   1998         1997      %Decrease  
                                 --------     --------    ---------
<S>                              <C>          <C>         <C>
Nine Months Ended April 30       $ 5,113      $ 6,524       (21.6%)
   As a percentage of sales         23.5%        24.8%      ( 5.2%)
Quarter Ended April 30             1,784        2,317       (23.0%)
   As a percentage of sales         25.2%        29.8%      (15.4%) 
</TABLE>

The decrease in selling and administration costs from 1997 to 1998 is a 
result of the closure of the Company's Hong Kong, Thailand and Taiwan 
subsidiaries during the fourth quarter of Fiscal 1997 and first quarter of 
Fiscal 1998. 

Interest expense (in thousands):                          
<TABLE>
<CAPTION>
                                   1998         1997      %Increase  
                                 --------     --------    ---------
<S>                              <C>         <C>          <C>
Nine Months Ended April 30       $1,407      $   929         51.5%
Quarter Ended April 30              470          370         27.0%
</TABLE>

The increase in interest expense is due to increased borrowing levels under 
the Company's bank line of credit and private placement financing completed 
in September 1997 and November 1996.

Income Taxes:

No provision for U.S. Federal and state regular income taxes or foreign 
income taxes has been recorded for the three and nine-month periods ended 
April 30, 1998 and 1997 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:

The Company has recorded a net loss for three and nine-months ended April 30, 
1998 of $395 and $678.  A return to profitability is contingent upon a 
resurgence of demand for the Company's product coupled with effective 
inventory management, cost control and accurate forecasting of demand for the 
Company's product.

LIQUIDITY AND CAPITAL RESOURCES

As of April 30, 1998, the Company had working capital of approximately $3,500 
and a ratio of current assets to current liabilities of approximately 1.24:1, 
compared with working capital of approximately $3,400 and a ratio of 1.23:1 
as of July 31, 1997.


                                         14

<PAGE>

The increase in working capital was primarily due to the private placement in 
September 1997 (as described below). During the nine months ended April 30, 
1998 and 1997, cash used for capital expenditures was approximately $127 and 
$232 respectively.  No significant capital expenditures for the remainder of 
fiscal year 1998 are expected at this time.

Pico Macom has an $11,000 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 
plus 1.25% (9.75% at April 30, 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 $1,500 
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 April 30, 1998, Pico 
Macom had approximately $9,200 million in revolving loans outstanding, and 
the unused portion of the borrowing base was approximately $273.

On September 12, 1997 the Company completed a private placement financing 
totaling $1,650 million 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 of three-year 10 percent 
junior subordinated debentures and $165 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.

As of December 15, 1997 the Company had received cash of $985 of the total 
subordinated debenture financing facility, with $500 still available to fund 
the Company's operating needs.  The remaining $150 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.


                                         15

<PAGE>

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 $335.  On March 1, 1998, an 
officer of the Company entered into the participation agreement with such 
investors for an additional $200.  

As discussed in Note 6 to the Financial Statements, the Company was in 
technical violation of several financial covenants related to the 
subordinated debt. 

As pointed out above, the Company has recorded a net loss for the three-and 
nine-months ended April 30, 1998.  A return to profitability is contingent 
upon a resurgence of demand for the Company's product coupled with effective 
inventory management, cost control and accurate forecasting of demand for the 
Company's product.  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.


                                         16
<PAGE>

                             PART II OTHER INFORMATION
                                          

ITEM 1.   LEGAL PROCEEDINGS.

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


ITEM 2    None.


ITEM 3.   DEFAULT ON SENIOR SECURITIES
          
          None.

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.)

     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)m     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.


                                         20

<PAGE>

     10(q)(l)  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.

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

     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).

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


                                         21


<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    Not used.

f    Not used.

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-Q
     for the fiscal quarter ended January 31, 1998 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.


                                         22

<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:  June 10, 1998                         /s/ E. James Selzer
                                             ------------------------------
                                             Chief Financial Officer



DATE:  June 10, 1998                         /s/Charles G. Emley, Jr.
                                             ------------------------------
                                             Chairman and Chief Executive
                                             Officer 
                                          
                                          
                                         23

<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).

     
                                         24