SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended                    Commission File number 1-12230
September 30, 1996           



                     ADVANCED DEPOSITION TECHNOLOGIES, INC.
                     --------------------------------------
                     (Exact name of Small Business Issuer as
                            Specified in its Charter)


 
        Delaware                                               04-2865714
        --------                                               ----------
State of Organization)                                       (I.R.S. Employer
                                                          Identification Number)




             580 Myles Standish Blvd., Taunton, Massachusetts 02780
             ------------------------------------------------------
               (Address of principal executive offices, Zip Code)



                                 (508) 823-0707
                                 --------------
                (Issuer's telephone number, including area code)


         Indicate  by check mark  wether the  issuers  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  and Exchange Act
of 1934 during the  preceding  12 months and (2) has been subject to such filing
requirements for the past 90 days. YES [X]  NO [ ]

         As of November 14, 1996,  there were 3,915,084  shares of Common Stock,
$0.01 par value, of the issuer outstanding.







                     ADVANCED DEPOSITION TECHNOLOGIES, INC.

                                      INDEX



                                                                           PAGE
PART I. FINANCIAL INFORMATION                                             NUMBER

         Item 1. Financial Statements

                  Condensed and Consolidated Balance Sheets:                 1
                  September 30, 1996 (Unaudited) and December 31, 1995

                  Condensed and Consolidated Statements of Operations:       2
                  (Unaudited) for the Three and Nine Months
                  ended September 30, 1996 and September 30, 1995

                  Condensed and Consolidated Statements of Cash Flows:       3
                  (Unaudited) for the Nine Months ended September 30, 1996
                  and September 30, 1995

                  Notes to Condensed and Consolidated Financial             4-6
                  Statements

         Item 2. Management's' Discussion and Analysis of Financial
                  Condition and Results of Operations                       7-11

PART II. OTHER INFORMATION

         Item 6. Exhibits and Reports on Form 8-K                            12







                     ADVANCED DEPOSITION TECHNOLOGIES, INC.

              CONDENSED AND CONSOLIDATED BALANCE SHEETS (UNAUDITED)

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                     ASSETS


<TABLE>
<CAPTION>

                                                                          September 30,         December 31,
                                                                               1996                 1995
                                                                         ---------------       ---------------
<S>                                                                      <C>                  <C>  
CURRENT ASSETS
     Cash                                                                    $ 2,828               $   98                    
     Restricted cash                                                            --                    500
     Amounts due from Printpack Enterprises, Inc. (Note 4)                      --                  1,321
     Accounts receivable, net of reserve for doubtful accounts of $137                        
           at September 31, 1996 and  December 31, 1995                        1,756                1,451
     Inventories                                                               1,862                1,492
     Prepaid expenses and other current assets                                    68                   16
                                                                             -------               ------
              Total current assets                                             6,514                4,878
                                                                                           
PROPERTY AND EQUIPMENT, net                                                    5,060                5,279

OTHER ASSETS, net                                                                806                  177
                                                                             -------              -------
                                                                             $12,380              $10,334
                                                                             =======              =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Revolving line of credit                                                $   110               $1,499
     Current maturities of long-term debt                                        526                1,069
     Amounts due to Printpack Enterprises, Inc. (Note 4)                        --                  1,225
     Accounts payable                                                          1,174                2,366
     Accrued liabilities                                                         151                  100
                                                                             -------              -------
               Total current liabilities                                       1,961                6,259

LONG-TERM OBLIGATIONS, net of current maturities                               2,004                   17

STOCKHOLDERS' EQUITY;
     Preferred stock, $0.01 par value
          1,000,000 shares authorized, none issued                               --                    --
     Common stock, $0.01 par value,
          10,000,000 shares authorized, 4,222,694 shares issued,
          3,915,084 and 3,142,828 shares outstanding at
          September 30, 1996, and December 31, 1995, respectively                 42                   32
     Common stock purchase warrants                                               78                   78
Additional paid-in capital                                                    10,814                6.068
Retained deficit                                                              (1,392)              (2,088)
                                                                             -------               -------
                                                                               9,542                4,090
Less treasury stock, 307,610 shares at cost                                    1,127                   32
                                                                             -------               -------
               Total stockholders' equity                                      8,415                4,058
                                                                             -------              -------
                                                                             $12,380              $10,334
                                                                             =======              =======
</TABLE>



  The Condensed and Consolidated Balance Sheet at December 31, 1995, has been
   derived from the audited financial statements of the Company at that date.

          See Notes to Condensed and Consolidated Financial Statements

                                       1




                     ADVANCED DEPOSITION TECHNOLOGIES, INC.

         CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                       Three months ended          Nine Months ended
                                                          September 30                September 30
                                                     -----------------------      ---------------------
                                                        1996        1995            1996        1995
                                                     ----------  -----------      --------- -----------
<S>                                                  <C>          <C>              <C>         <C>
SALES:
         Product sales                                $   1,728    $   2,571       $  6,126    $  6.396
         Royalties, license & other                         800          260          1,350         394
                                                      ---------    ---------       --------    --------
               Net sales                                  2,528        2,831          7,476       6,790

COST OF PRODUCTS SOLD                                     1,706        2,298          5,559       5,878
                                                      ---------    ---------       --------    --------
               Gross profit                                 822          533          1,917         912

SELLING, GENERAL AND ADMINISTRATIVE
     EXPENSES                                               357          372            943         903

RESEARCH AND DEVELOPMENT EXPENSES                            47           54             98         136

ACCU-CRISP(R) DEVELOPMENT EXPENSES                       --               10         --              42
                                                      ---------    ---------       --------    --------
               Operating income (loss)                      418           97            876        (169)

INTEREST EXPENSE, NET OF INTEREST
     INCOME                                                  65           42            180         189
                                                      ---------    ---------       --------    --------
               Net income (loss)                     $      353     $     55      $     696    $   (358)
                                                     ==========     ========      =========    ========
NET INCOME (LOSS) PER SHARE                          $     0.09     $   0.02      $    0.20    $  (0.11)
                                                     ==========     ========      =========    ========
WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING                                      3,948,933    3,239,954      3.508,188   3,126,151
                                                     ==========    =========      =========   =========
</TABLE>

          See Notes to Condensed and Consolidated Financial Statements


                                       2


                     ADVANCED DEPOSITION TECHNOLOGIES, INC.

         CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                   Nine months ended September 30,
                                                                  --------------------------------
                                                                        1996             1995
                                                                  ----------------  --------------
<S>                                                                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
          Net cash used in operating activities                      $(1,360)             $(319)

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of property and equipment                                (190)              (297)
     Decrease in investments in marketable securities                    --               1,133
     Increase in other assets                                            (60)               (47)
                                                                     --------             ------
          Net cash provided by (used in) investing activities           (250)               789

CASH FLOWS FROM FINANCING ACTIVITIES
     Net borrowings under revolving line of credit                       110                130
     Repayment of long term obligations                                 (203)              (192)
     Refinancing of long term debt:
        Original demand note payable                                  (1,499)              --
        Original long term obligation                                   (954)              --
        Issuance of term debt                                          2,600               --
Purchase of treasury stock                                            (1,000)               (32)
Proceeds from redemption of common stock purchase warrants             4,775               --
Exercise of stock options                                                 11                  2
                                                                     --------             ------
           Net cash provided by (used in) financing activities         3,840                (92)

NET INCREASE IN CASH                                                   2,230                378

CASH AND CASH EQUIVALENTS, beginning of period                           598                177
                                                                     --------             ------
CASH AND CASH EQUIVALENTS, end of period                             $ 2,828              $ 555
                                                                     ========             ======


SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING AND FINANCING ACTIVITIES:

Acquisition of Technology Licenses applied against Revenue
     from assignment of Patents                                      $   550              $ --
                                                                                           
Settlement of net amount due to Printpack Enterprises, Inc.       
(Note 4)                                                                  96                --
                                                                     --------             ------
                                                                     $   646              $ --
                                                                     ========             ======
</TABLE>

          See Notes to Condensed and Consolidated Financial Statements

                                       3




                     ADVANCED DEPOSITION TECHNOLOGIES, INC.

      NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                               SEPTEMBER 30, 1996


1.)      GENERAL

         The  accompanying   unaudited  condensed  and  consolidated   financial
statements have been prepared in accordance with generally  accepted  accounting
principles for interim  financial  reporting and with the  instructions  to Form
10-QSB and Item 310 (b) of Regulation SB-2. Accordingly, they do not include all
of the  information  and  footnotes  required by generally  accepted  accounting
principles for complete  financial  statements.  Reference should be made to the
financial  statements and related notes included the Company's  Annual Report on
Form 10-KSB,  which was filed with the  Securities  and Exchange  Commission  on
April 16, 1996.

         In the  opinion of the  management  of the  Company,  the  accompanying
financial  statements  reflect all adjustments  that were of a normal  recurring
nature necessary for a fair  presentation of the Company's results of operations
and changes in  financial  position for the three and nine month  periods  ended
September  30, 1996,  and September  30, 1995.  Operating  results for the three
month and nine  month  periods  ended  September  30,  1996 are not  necessarily
indicative  of the  results  that may be expected  for the year ending  December
31,1996.


2.)      SIGNIFICANT ACCOUNTING POLICIES

         The  accompanying  financial  statements  reflect  the  application  of
certain significant accounting policies, including those described below.

         a.       Principals of consolidation

         The accompanying  consolidated financial statements include the Company
and its wholly  owned  subsidiary.  All  significant  intercompany  balances and
transactions have been eliminated in consolidation.

         b.       Revenue recognition

         The Company recognizes  revenues on its product sales upon shipment and
royalties and license fees as earned.

         c.        Inventories

         Inventories  are stated at the lower of cost  (first-in,  first-out) or
market and consist of the following (in thousands):


                                           September 30,     December 31,
                                               1996              1995
                                          --------------     ------------
Raw materials                                $1,484             $1,234
Work in process and finished goods              378                258
                                              -----              -----
          Total                              $1,862             $1,492
                                              =====              =====


                                       4




         d.       Net Income (Loss) per Common Share

         Net income (loss) per common share has been  determined by dividing net
income  (loss) by the weighted  average  common  shares  outstanding  during the
period.  Common stock  equivalents  have been  calculated in accordance with the
treasury  stock method and are  included  for all periods  where their effect is
dilutive.

3.)      CASH EQUIVALENTS AND INVESTMENT IN MARKETABLE SECURITIES

         The Company  adopted  Statement of Financial  Accounting  Standards No.
115,  "Accounting for Certain  Investments in Debt and Equity Investments" (SFAS
No 115)  effective  January 1, 1994.  As of September  30, 1996,  the  Company's
investments  consist entirely of money market funds,  which are included in cash
and restricted cash in the accompanying balance sheets.

4.)      TERMINATION OF AGREEMENTS WITH PRINTPACK ENTERPRISES, INC.

         In  September   1992,  the  Company   entered  into  three   agreements
(collectively "the Agreements") with Printpack, a flexible packaging supplier to
food  companies.  Under the  Securities  Purchase  Agreement,  the Company  sold
297,610 shares of its common stock to Printpack for $250,000. Under the Purchase
and Tolling  Agreement,  the Company  granted  Printpack the exclusive  right to
purchase and sell certain  flexible  microwave  packaging  products within North
America for five years. Under the Equipment Lease Agreement,  Printpack leased a
vacuum  metallizer  to the Company.  The Company  accounted  for this lease as a
capital  lease.  On July 15, 1996,  the Company and Printpack  consummated a new
agreement under which Printpack  relinquished  its exclusive  purchase rights to
certain  of  the  Company's   patented  products  for  microwave   applications;
transferred  to the Company  title to the new  metallizer it had been leasing to
the Company;  and returned to the Company 297,610 shares of the Company's common
stock it had  purchased as part of the  Agreements.  The Company paid  Printpack
$1,000,000;  granted  Printpack  warrants  to  purchase  200,000  shares  of the
Company's  common stock at $4.00 per share;  and agreed not to pursue any claims
the Company  may have had  pursuant  to the terms of the  Agreements,  including
claims for the  payment of  $1,308,000  of cost  recovery  billings  invoiced to
Printpack in 1995.

         The  Company  accounted  for the  termination  of the  Equipment  Lease
Agreement in accordance with Statement of Financial Accounting Standards No. 13,
"Accounting  for Leases" ("SFAS No 13").  SFAS No 13 states that the termination
of a lease  that  results  in the  acquisition  of the  leased  asset  shall  be
accounted  for as if it were a renewal of the capital  lease whereby a loss only
is  recognized  to the extent that the carrying  value of the asset  exceeds the
purchase price.  The carrying value of the leased  metallizer did not exceed the
purchase price, therefore no loss was recognized.

         The specific accounting  transactions  required to record the effect of
the termination of the Agreements and the transactions of the new agreement were
to record the cash payment to Printpack of $1,000,000: to eliminate the balances
in the accounts for the amounts due from Printpack  ($1,321,000) and the amounts
due to Printpack  ($1,225,000);  to transfer the net book value of the metalizer
($1,400,000)  from equipment  under lease to the Machinery & Equipment  account;
and to record the purchase of 297,610  shares of Treasury  Stock valued,  net of
the market value of the common stock

                                       5





purchase warrants granted,  at $1,096,000 ($3.68 per share). The market value of
the Company's common stock on March 25, 1996, was $6.00 per share.

5.)      EXERCISE OF COMMON STOCK PURCHASE WARRANTS

         In the third quarter of 1995, the Company reduced the exercise price of
the Redeemable Common Stock Purchase  Warrants (the "Redeemable  Warrants") from
$7.00 per share to $5.00 per share.  In addition,  effective  March 8, 1996, the
expiration  of the  Redeemable  Warrants was extended for one year from March 8,
1996, to March 8, 1997,  and the price at which the Company's  Common Stock must
trade for ten (10)  consecutive days in order for the Company to be permitted to
redeem the Redeemable Warrants was reduced from $9.00 to $7.00 per share.

         For the period May 13, 1996 through July 10, 1996, the Company  reduced
the number of Redeemable  Warrants  required to purchase one (1) share of Common
Stock  from  two (2)  Redeemable  Warrants  to one (1)  Redeemable  Warrant.  In
addition,  any holder who exercised one  Redeemable  Warrant  during this period
also  received a Class B Warrant  which  allows the holder to  purchase  one (1)
share of Common Stock at $5.00  through May 12, 1998.  The Company  realized net
proceeds  of  approximately   $4,775,000  upon  the  exercise  of  approximately
1,050,000 Warrants on July 10, 1996.


                                       6




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

GENERAL

         Advanced Deposition Technologies, Inc. (the "Company" or "A.D. TECH" ),
is  a  technology  leader  in  developing  and  manufacturing   high-resolution,
patterned,  vacuum-metallized  coatings  for  a  variety  of  energy  management
applications for use in industrial,  commercial and consumer products.  Included
among these are products  offerings  for  electronic  capacitors,  microwave and
non-microwave food packaging, security holograms, retroreflective films, barrier
packaging,  electronic article surveillance (EAS), and electric static discharge
(ESD).  The  Company's  revenue  to date has been  primarily  from  sales to the
capacitor and packaging markets.

RECENT DEVELOPMENTS

         During July 1996,  the Company raised  approximately  $4,775,000 in net
proceeds through the exercise of approximately 1,050,000 Redeemable Common Stock
Purchase  Warrants  ("the  Redeemable  Warrants") at $5.00 per share and entered
into a new banking  relationship  that  resulted in an increase in its available
line of credit.  In June,  1996,  the Company  also  entered  into an  agreement
involving the assignment of certain of its patented  materials  which includes a
multi-year  supply  agreement  for  certain of the  Company's  products  and, in
addition,  the Company became a licensee for the assigned patents as well as for
26 other  patents owned by the assignee  related to microwave and  non-microwave
packaging materials.  The Company has also filed several patent applications for
hologram  products  that are  designed to increase  the  security and reduce the
counterfeiting of compact discs (CD's),  digital videodisks (DVD's), bank checks
and bank notes.

RESULTS OF OPERATIONS

THREE MONTHS ENDED  SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 1995

         Net Sales.  Net sales  decreased to  approximately  $2,528,000  for the
three months ended  September  30, 1996 from  approximately  $2,831,000  for the
three months ended September 30, 1995. Product sales  to the capacitor  industry
increased  by  approximately  3% over 1995 due to slightly  higher unit  prices.
Microwave food  packaging  product sales,  including the  ACCU-CRISP(R)  product
line,  declined  by  approximately  40%  in  1996  due  to  the  non-reorder  of
ACCU-CRISP(R) Bags from the Company's direct response retailer. Product sales to
new applications  markets  increased by approximately 10% in 1996. Sales in this
category during 1996 were primarily to the  retroreflective  materials  industry
where the Company's  propriatary  Pattern Metalized  Printing ("PMP") process is
used to increase the  retroreflectivity of material used on, among other things,
safety related items such as reflective clothing and highway equipment.  Product
sales to the standard food packaging  market  declined by  approximately  84% in
1996  due  to  the  termination  of  the  Company's  Agreements  with  Printpack
Enterprises,  Inc.  ("Printpack"),  which  called for certain  minimum  purchase
requirements.  The Company does not expect that standard food packaging  product
sales to  Printpack  will  return to the amounts  realized  in 1995.  Royalties,
license fees and other revenue increased in 1996 to approximately  $800,000 from
approximately $260,000 in 1995. Revenue recognized during 1996 resulted from the
Company's entering into an agreement  involving the assignment of certain of its
patented  materials  related to microwave  packaging.  Under the agreement,  the
Company was granted a license for the patents it had  assigned as well as for 26
other  patents  related to microwave  and standard  packaging.  A portion of the
revenue  recognized  under this agreement  reflects the estimated  value of this
license.

         Cost of Products  Sold.  Cost of products  sold  totaled  approximately
$1,706,000 for the three months ended September 30, 1996, compared to $2,298,000
for the three months ended September 30, 1995. This decrease resulted  primarily
from the large decrease in standard  packaging  sales. The cost of


                                       7




product  sales in 1996 as a percentage  of product  sales was 98.7%  compared to
89.4% for 1995.  The  increase  was the  result of higher  manufacturing  costs,
primarily  depreciation  expense,  relative to product sales  volume.  Partially
offsetting  this were  lower raw  material  costs  and  increased  manufacturing
efficiencies.

         Selling,    General   and   Administrative.    Selling,   general   and
administrative expenses decreased to approximately $357,000 for the three months
ended September 30, 1996, (14.1% of total revenue) from  approximately  $372,000
for the three  months  ended  September  30,  1995,  (13.1%  of total  revenue).
Selling,  general and  administrative  expenses during the third quarter of 1995
included  sales  commission  expenses  related  to sales  ACCU-CRISP(R) Bags and
additional  reserves  for bad debt,  which  were not  repeated  during the third
quarter of 1996.

         Research and Development.  Research and development  costs decreased to
approximately  $47,000 for the three  months  ended  September  30,  1996,  from
approximately  $54,000 for the three months ended  September 30, 1995.  Research
and development  expenses have been primarily  related to the development of the
Company's PMP process as well as the development of its microwave food packaging
materials.  The  developmental  stage  of  both  of  programs  is  substantially
complete:  the Company is now  directing  its  resources  to the  marketing  and
distribution of these and other patented materials.

         Development  expenses for the Company's  consumer retail  product,  the
ACCU-CRISP(R)   Browning  and  Crisping  Bag  ("the  ACCU-CRISP(R)  Bag"),  were
insignificant  for the three  months  ended  September  30,  1996 as compared to
approximately $10,000 for the three months ended September 30, 1995. The Company
does  not  expect  any  further   significant   development   expenditures   for
ACCU-CRISP(R)  Bag. In December  1995,  the Company  entered  into an  exclusive
agreement  with the Media Group to market and distribute  ACCU-CRISP(R)  Bags to
the  consumer  market.  Because of the  nature of this  marketing  program,  the
Company can not predict future sales levels of the ACCU-CRISP(R) Bag.

         Operating  Income (Loss).  The Company  generated  operating  income of
approximately  $418,000 for the three months ended September 30, 1996,  compared
to operating  income of $97,000 for the three months ended  September  30, 1995.
The increased income was primarily due to higher royalties and license fees.

         Net Interest  Expense.  Net interest expense increased to approximately
$65,000 for the three month period ended  September  30, 1996,  from $42,000 for
the three month period ended  September 30, 1995. The increase was primarily the
result of non-recurring charges associated with the Company's refinancing of its
bank debt.

         Net Income (Loss).  The Company  generated net income of  approximately
$353,000 for the three months ended September 30, 1996 compared to net income of
approximately $55,000 for the three months ended September 30, 1995, as a result
of the factors discussed above.

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995

         Net Sales. Net sales increased to approximately $7,476,000 for the nine
months ended  September 30, 1996,  from  approximately  $6,790,000  for the nine
months ended September 30, 1995. Product sales to the capacitor market increased
by approximately  27% in 1996 due to increased  volumes and slightly higher unit
prices.  Product sales to the microwave  food  packaging  market,  including the
ACCU-CRISP(R)  Bag,  increased  by  approximately  76% in 1996 due  primarily to
greater market penetration of the Company's Safety  Susceptor(TM)  film. Product
sales to new applications markets increased by approximately 68% in 1996 . Sales
in this category  during 1996 were  primarily to the  retroreflective  materials
industry   where  the   Company's   PMP   process  is  used  to   increase   the
retroreflectivity of material used on, among other things,  safety related items
such as


                                       8




reflective  clothing  and  highway  equipment.  Product  sales  to the  standard
packaging  market  decreased by  approximately  84% in 1996 due to the Company's
termination of its Agreements with  Printpack.  The Company does not expect that
standard  packaging  product  sales to  Printpack  will  return  to the  amounts
realized  in 1995.  Royalties,  license  fees and  other  revenue  increased  to
approximately  $1,350,000  for the nine months  ended  September  30,  1996,  as
compared to approximately $394,000 for the nine months ended September 30, 1995.
Revenue  recognized  during 1996 resulted  from the  Company's  entering into an
agreement  involving  the  assignment  of certain  of its  patents  relating  to
microwave packaging .Under the agreement,  the Company was granted a license for
the patents it had assigned as well as for 26 other patents related to microwave
and standard packaging. A portion of the revenue recognized under this agreement
reflects the estimated value of this license.

         Cost of Products  Sold.  Cost of products  sold  totaled  approximately
$5,559,000  for  the  nine  months  ended  September  30,  1996 as  compared  to
approximately  $5,878,000  for the nine months ended  September  30, 1995.  This
decrease resulted primarily from the large decrease in standard packaging sales.
Partially  offsetting these were increases in manufacturing  supplies,  overhead
expenses and labor costs.  As a percentage  of product  sales,  cost of products
sold decreased to 90.7% in the nine months ended  September 30, 1996, from 91.9%
for the nine months ended  September 30, 1995 This decrease  resulted  primarily
from a favorable  change in product mix and lower raw material costs.  Partially
offsetting  these  were  higher  manufacturing  costs,   primarily  depreciation
expense, relative to product sales volume.

         Selling General and Administrative. Selling, general and administrative
expenses  increased to  approximately  $943,000 (12.6% of total revenue) for the
nine months ended  September 30, 1996,  from  approximately  $903,000  (13.2% of
total  revenue) for the nine months ended  September 30, 1995,  due to increased
selling expenses, payroll expense and professional fees.

         Research and Development.  Research and development  expenses decreased
to  approximately  $98,000 for the nine months ended  September  30, 1996,  from
approximately  $136,000 for the nine months ended  September 30, 1995.  Research
and  development  expenses  during  1996  have  been  primarily  related  to the
development  of the  Company's  PMP  process as well as the  development  of its
microwave food packaging materials.  The developmental stage of both of programs
is  substantially  complete:  the Company is now  directing its resources to the
marketing and distribution of these and other patented materials.

         Development  expenses for the Company's  consumer retail  product,  the
ACCU-CRISP(R)  Bag, were  insignificant  for the nine months ended September 30,
1996 as compared to  approximately  $42,000 for the nine months ended  September
30,  1995.  The  Company  does not expect any  further  significant  development
expenditures  for  ACCU-CRISP(R).  In December 1995, the Company entered into an
exclusive agreement with the Media Group to market and distribute  ACCU-CRISP(R)
Bags to the consumer market.  Because of the nature of this marketing  programs,
the Company can not predict future sales of the ACCU-CRISP(R) Bag.

         Operating  Income (Loss).  The Company  generated  operating  income of
approximately $876,000 for the nine months ended September 30, 1996, as compared
to an operating  loss of $169,000 for the nine months ended  September 30, 1995.
The increased  profits were primarily the result of higher royalties and license
fees.

         Net interest  expense.  Net interest expense decreased to approximately
$180,000  for the nine months  ended  September  30,  1996,  from  approximately
$189,000 for the nine months ended September 30, 1995. Net interest  expense for
the nine months ended September 30, 1995,  included a loss on the liquidation of
investment securities, which was the primary reason for the decrease.


                                       9




         Net Income (Loss).  The Company  generated net income of  approximately
$696,000 for the nine months ended September 30, 1996, as compared to a net loss
of  approximately  $358,000 for the nine months ended  September  30, 1995, as a
result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company  had  working  capital  of  approximately   $4,553,000  at
September  30,  1996,  compared  to working  capital  deficit of  $1,381,000  at
December 31, 1995.  The increase in working  capital is primarily  the result of
the exercise of  approximately  1,050,000  Common Stock  Purchase  Warrants from
which  the  Company  realized  net  proceeds  of  approximately  $4,775,000.  In
addition,  the Company  refinanced  its term debt and  revolving  line of credit
(discussed below) which reduced its current liabilities.

         Cash used in operating  activities for the nine months ended  September
30,  1996,  was  approximately  $1,360,000  compared  to cash used in  operating
activities  during the nine  months  ended  September  30,  1995,  of  $319,000.
Negative  cash flow from  operations  was  primarily the result of a decrease in
accounts  payable due to a decrease in days outstanding and also to increases in
inventory,   due  to  material  purchase  requirements  related  to  the  supply
agreement,  and in accounts  receivable,  due to relatively higher end-of-period
sales.

         In the nine  month  period  ending  September  30,  1996,  the  Company
expended  $99,000 in  capital  investments.  The  investments  during  1996 were
primarily for increasing the capacity and efficiency of existing  equipment.  As
of September 30, 1996,  the Company had no material  commitments  for additional
capital purchases.

         The  Company's  revolving  line of credit with a former bank expired on
December  31,  1995.  Under  the  terms of the  line of  credit  agreement,  the
Company's term note with the same bank also became due. The balance  outstanding
on the term note was classified as a current  liability on the December 31, 1995
balance sheet. The balances  outstanding on the term debt and the line of credit
on December 31, 1995, were $1,062,500 and $1,499,000, respectively.

         On July 14, 1996,  the Company  refinanced  its revolving term debt and
line of  credit of credit  with  another  bank.  The  replacement  term debt and
revolving  line of credit  financing  from the new bank  allowed  the Company to
repay all amounts due the  Company's  former  bank and to  Printpack,  described
below.  The new  financing  agreement  provided  the  Company  with a term  debt
facility of $2,600,000 to be repaid in 35 monthly  installments of approximately
$43,000,  plus interest at the bank's prime rate of interest (8.25% on September
30, 1996) plus 1%, with a balloon  payment of  approximately  $1,083,000  due in
July 1989.  The  revolving  line of credit  allows  the  Company to borrow up to
$3,000,000  based  on  percentages  of its  eligible  accounts  receivable,  raw
materials and finished goods  inventories.  Borrowings  under the line of credit
will bear interest at the bank's prime rate of interest  plus 3/4%.  The Company
had drawn down approximately  $110,000 on the line of credit as of September 30,
1996. The Company's replacement term debt and revolving line of credit financing
agreements require the Company to maintain certain financial ratios and tangible
net worth levels, among others.

         In  September   1992,  the  Company   entered  into  three   agreements
(collectively "the Agreements") with Printpack, a flexible packaging supplier to
food  companies.  Under the  Securities  Purchase  Agreement,  the Company  sold
297,610 shares of its common stock to Printpack for $250,000. Under the Purchase
and Tolling  Agreement,  the Company  granted  Printpack the exclusive  right to
purchase and sell certain  flexible  microwave  packaging  products within North
America for five years. Under the Equipment Lease Agreement,  Printpack leased a
vacuum  metalizer  to the  Company.  The Company  accounted  for this lease as a
capitalized lease. On July 15, 1996, the Company and Printpack consummated a new
agreement under which Printpack  relinquished  its exclusive  purchase rights to
certain  of  the  Company's   patented  products  for  microwave   applications;
transferred to the Company title to the new metallizer it had been leasing to

                                       10




the Company;  and returned to the Company 297,610 shares of the Company's common
stock it had  purchased as part of the  Agreements.  In addition,  under the new
agreement,  the Company paid Printpack $1,000,000;  granted warrants to purchase
200,000 shares of the Company's  Common Stock at $4.00 per share; and agreed not
to pursue any  claims  the  Company  may have had  pursuant  to the terms of the
Agreements,  including  claims for the payment of  $1,308,000  of cost  recovery
billings  invoiced to Printpack  in 1995 (see Note 4 to Notes to  Condensed  and
Consolidated Financial Statements).

         For the  period  May 13,  1996  through  July  10,  1996,  the  Company
temporarily  reduced the number of Redeemable  Warrants required to purchase one
share of Common Stock from two Redeemable Warrants to one Redeemable Warrant. In
addition,  any holder who exercised one  Redeemable  Warrant  during this period
also received a Class B Common Stock  Redeemable  Purchase  Warrant which allows
the holder to purchase one share of Common Stock at $5.00  through May 12, 1998.
On July 10, 1996, the Company realized net proceeds of approximately  $4,775,000
upon the conversion of approximately  1,050,000  Redeemable Warrants (see Note 5
of Notes to Condensed and Consolidated Financial Statements).

         Management  believes  that the  Company's  cash  and  cash  equivalents
together with  anticipated  cash flows from operations  will provide  sufficient
funds to meet the Company's  current cash  requirements and allow the Company to
continue its marketing and product development efforts.

SEASONAL REVENUES

         Historically, the Company has experienced lower sales to the electronic
capacitor market during the third quarter, particularly in July. Based on market
research  conducted by the Company,  it believes  that demand for the  Company's
other  products,   including  microwave  food  packaging,  does  not  experience
similarly timed seasonal variations and could, in the future, offset lower third
quarter sales in the electronic capacitor market.

INFLATION

         Several times during the last two years,  suppliers of the film used in
the Company's products experienced problems meeting demand that led to shortages
and price  increases.  In late 1995, the shortages began to ease and prices have
begun to decrease.

                                       11



                           PART II - OTHER INFORMATION

ITEMS 1 THROUGH 5:         Not applicable

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

         (a)      No Exhibits.

         (b) Reports on From 8-K On August 12, 1996,  the Company filed Form 8-K
related to its change in  accountants.  In that filing it was reported  that, by
mutual  understanding with the Company,  Arthur Andersen LLP ("Arthur Andersen")
would no longer serve as the Company's auditors.

         Arthur  Andersen's  reports on the financial  statements  for the years
ended  December  31,  1995 and  December  31,  1994,  did not contain an adverse
opinion or a disclaimer  of opinion,  and were not  modified as to  uncertainty,
audit scope, or accounting principles.

         Arthur  Andersen  disagreed  with  the  Company's  accounting  for  the
termination  of an  exclusivity  agreement  contained in the Company's Form 10-Q
filed for the quarter  ended March 30, 1996.  In response,  the Company filed an
amended  Form  10-Q for such  quarter  in which  it  restated  its  consolidated
financial  statements  to reverse the gain  recorded on the  termination  of the
exclusivity agreement. Accordingly, Arthur Andersen no longer disagrees with the
Company's accounting for the terminated exclusivity agreement

         Neither the Board of Directors, nor any other committee,  discussed the
disagreement  with Arthur  Andersen.  The change in auditors was approved by the
Board of Directors.

         The  Company has  authorized  Arthur  Andersen to respond  fully to the
successor accountant on any inquiries concerning the foregoing


                                       12



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 of the
undersigned thereunto duly authorized.

                                   Advanced Deposition Technologies, Inc.
                                   Registrant

November 14, 1996                  /s/ Glenn J. Walters
-----------------                  --------------------
                                   (Signature)
                                    Glenn J. Walters
                                    President

November 14, 1996                 /s/ Mark R. Thomas
-----------------                 ---------------------
                                   (Signature)
                                    Mark R. Thomas
                                    Chief Financial Officer


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