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 - March 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
    ACT

For the transition period from ________ to _________


                         Commission File Number 0-24242

                        PRODUCTIVITY TECHNOLOGIES CORP.
        (Exact name of small business issuer as specified in its charter)

          Delaware                                      13-3764753
-------------------------------              ---------------------------------
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

                 520 Madison Avenue, New York, New York 10022
           -----------------------------------------------------------
                    (Address of principal executive offices)

                                 (212) 843-1480
                                 --------------
                           (Issuer's telephone number)

                               Not Applicable
                 ----------------------------------------------
                 (Former name, former address and former fiscal
                          if changed since last report)

Check  whether the issuer (1) filed all reports  required to be filed by Section
12, 13 or 15 (d) of the  Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.  Yes  No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 14, 1997: 2,125,000 shares $ .001 par value common stock.


<PAGE>

                                    CONTENTS
<TABLE>
<CAPTION>


                                                                                 Page
<S>                                                                               <C>   
Part I :          Financial Information for                                        3
         Productivity Technologies Corp. (PTC) and
         Subsidiary Atlas Technologies, Inc. (Atlas)

Item 1.           Financial Statements

         Consolidated Balance Sheets of PTC and Atlas                              4-5

         Consolidated Statement of Operations of PTC and Atlas                     6
         Company and Statement of Operations of the Predecessor (Atlas)

         Consolidated Statement of Stockholders' Equity of the Company             7

         Consolidated Statement of Cash Flows of PTC and Atlas and                 8-9
         Statement of Cash Flows of the Predecessor (Atlas)

         Notes to Financial Statements                                             10-13

         Unaudited Proforma Statement of Operations of the Predecessor             14

Item 2.  Management's Discussion and Analysis of Financial Condition               15-17
         and Results of Operations.

Item 3   Management's Outlook for the remaining fiscal year ending
         June 30, 1997 and uncertainties.                                          17

Part II. Other Information

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

Signatures                                                                         19

</TABLE>


                                        2


<PAGE>





PRODUCTIVITY TECHNOLOGIES CORP. AND SUBSIDIARY

PART I:           FINANCIAL INFORMATION


ITEM 1.           FINANCIAL STATEMENTS


The  consolidated  financial  statements  have been prepared in accordance  with
generally accepted accounting  principles for interim financial  information and
in accordance  with  instruction to Form 10-Q and Article 10 of Regulation  S-X.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  omitted  from the  accompanying  interim  financial  statements.  The
information  furnished  in  the  accompanying  balance  sheets,   statements  of
operations,  stockholders'  equity and cash flows, reflect all adjustments which
are, in the opinion of  management,  necessary  for a fair  presentation  of the
aforementioned  financial statements for the interim periods.  Operation results
for the nine months ended March 31, 1997 are not  necessarily  indicative of the
results that may be expected for the year ending June 30, 1997.

The  aforementioned   consolidated   financial  statements  should  be  read  in
conjunction  with  Productivity  Technologies  Corp. Report on Form 10-K for the
fiscal year ended June 30, 1996.  Information provided includes the consolidated
audited financial  statements,  including  footnotes for the year ended June 30,
1996 and Management's Discussion and Analysis of Financial Condition and Results
of Operations.




                                        3



<PAGE>
 Consolidated Balance Sheet of PTC and Atlas and
 the Balance Sheet of the Predecessor
<TABLE>
<CAPTION>
                                                                         Consolidated            Predecessor
                                                                           Unaudited               Audited
 Assets                                                                 March 31, 1997           June 30, 1996
<S>                                                                          <C>                      <C>
 Current Assets

   Cash and cash equivalents                                               $400,746                $512,179
   Short-term investments, including accrued interest                     3,036,305                 965,255
   Contracts receivable                                                   6,165,910               7,958,159
   Notes receivable                                                                                 240,606
   Costs and estimated earnings in excess of
   billings on uncompleted contracts                                      8,609,712               7,593,003

   Inventories                                                              781,628                 720,947
   Prepaid expenses and other                                               295,922                 220,494
   Deferred income taxes                                                    479,790                 480,000

 Total Current Assets                                                    19,770,013              18,690,643
------------------------------------------------------------------------------------------------------------
 Property and Equipment

   Land                                                                     659,014                 216,000
   Buildings and improvements                                             2,136,795               2,132,388
   Machinery and equipment                                                2,437,917               1,888,479
   Transportation equipment                                                  31,500                  31,500
   Building construction in progress                                      2,486,564

   Total Fixed Assets                                                     7,751,790               4,268,367
   Less Accumulated Depreciation                                            327,663                  27,928
------------------------------------------------------------------------------------------------------------
 Net Property and Equipment                                               7,424,127               4,240,439
------------------------------------------------------------------------------------------------------------
 Other Assets
   Goodwill, net of accumulated amortization                              2,516,582               2,593,803
   Non-competition agreement, net of amortization                           215,333                 228,083

   Investment in subsidiary
   Merger related expenses net of amortization

   Deferred income taxes
   Other assets                                                             871,883                 270,803

 Total Other Assets                                                       3,603,798               3,092,689
------------------------------------------------------------------------------------------------------------
 Total Assets                                                           $30,797,938             $26,023,771
------------------------------------------------------------------------------------------------------------
</TABLE>

                 See accompanying notes to financial statements.




                                        4

<PAGE>

 Consolidated Balance Sheet of PTC and Atlas and
 the Balance Sheet of the Predecessor
<TABLE>
<CAPTION>

                                                                         Consolidated            Predecessor
                                                                           Unaudited                Audited
                                                                        March 31, 1997          June 30, 1996
<S>                                                                          <C>                       <C> 
 Liabilities and Stockholders' Equity

 Current Liabilities
    Accounts payable                                                      $1,236,683             $2,444,411
    Line-of-credit                                                             --                 7,188,558
    Accrued liabilities
    Payroll, executive bonuses and
    related withholdings                                                   1,112,082              1,192,052
    Federal and State income taxes                                           455,672                221,790
    Other accrued liabilities                                                893,561              1,596,485
    Billings in excess of costs and estimated
    earnings on uncompleted contracts                                      1,305,724                534,963
    Current maturities of long term debt                                     312,216                464,393

 Total Current Liabilities                                                 5,315,938             13,642,652
 Deferred Income Taxes                                                       779,000                779,000
 Long Term Debt Less Current Maturities                                   15,059,205              2,228,786
 Total Liabilities                                                        21,154,143             16,650,438
---------------------------------------------------------- ------------------------- -- -------------------
 Stockholders' Equity

    Preferred Stock, .001 par value, 1,000,000 authorized                      --                     --
    authorized and non outstanding
    Common Stock, .001 par value, 20,000,000
    shares authorized and 2,125,000 outstanding                                2,125                  2,125
    Additional paid-in capital                                             9,177,488              9,177,488
    Retained earnings                                                        464,183                193,720

 Total Stockholders' Equity                                                9,643,796              9,373,333
---------------------------------------------------------- ------------------------- -- -------------------
 Total Liabilities and Stockholders' Equity                              $30,797,939            $26,023,771
---------------------------------------------------------- ------------------------- -- -------------------

</TABLE>

                 See accompanying notes to financial statements.

                                        5

<PAGE>

 Consolidated Statement of Operations of PTC and Atlas (unaudited)
 and Statements of Operations of the Predecessor (audited)
<TABLE>
<CAPTION>

                                                                 Quarter Ended                         Nine Months Ended
                                              Consolidated         Predecessor       Consolidated         Predecessor
                                               Mar 31,1997         Mar 31,1996        Mar 31,1997         Mar 31,1996
                                             ---------------    ---------------     ---------------   ---------------
<S>                                                <C>                 <C>                <C>               <C> 
 Net Sales                                     $7,565,805          $8,922,629        $25,378,589         $25,841,050
------------------------------------------------------------------------------------------------- -------------------
 Cost of Sales                                  5,206,821           6,610,439         18,689,057          18,013,887
------------------------------------------------------------------------------------------------- -------------------
 Gross Profit                                   2,358,984           2,312,190          6,689,532           7,827,163
 Selling, General and Administrative
 Expenses, including officers' bonuses          1,888,519           1,877,302          5,686,644           6,703,226
------------------------------------------------------------------------------------------------- -------------------
 Income (Loss)  From Operations                   470,465             434,888          1,022,888           1,123,937
------------------------------------------------------------------------------------------------- -------------------
 Other Income ( Expenses)
    Interest income                                73,057               9,479            110,091              32,305
    Interest expense                             (310,132)           (122,009)          (706,159)           (410,910)
    Miscellaneous                                   5,928              18,001             39,643              39,107
------------------------------------------------------------------------------------------------- -------------------
 Total Other Expenses                            (231,147)            (94,529)          (556,425)           (399,497)
------------------------------------------------------------------------------------------------- -------------------
 Income (Loss)  Before Income taxes               239,318             340,359            446,463             784,440
 Income Taxes                                      91,000             182,620            176,000             375,637
------------------------------------------------------------------------------------------------- -------------------
 Net Income (Loss)                                148,318             157,739            270,463             408,802
------------------------------------------------------------------------------------------------- -------------------
 Net Income Per Share of
    Common Stock                                    $0.07               $0.07              $0.13               $0.19
------------------------------------------------------------------------------------------------- -------------------
 Weighted Average Common
    Shares Outstanding                          2,125,000           2,125,000          2,125,000           2,125,000
------------------------------------------------------------------------------------------------- -------------------
</TABLE>


                 See accompanying notes to financial statements.

                                        6

<PAGE>

  Consolidated Statement of Stockholders' Equity of PTC (unaudited)
<TABLE>
<CAPTION>



                                                                  Additional                                Total
                                              Common Stock         Paid-In            Retained           Stockholders'
                                Shares           Amount            Capital            Earnings              Equity
                               ---------      --------------      ------------       -----------         -------------
<S>                              <C>               <C>                <C>            <C>                     <C> 
Balance, July 1, 1996          2,125,000          $2,125           $9,177,488         $193,720             $9,373,333

Net Income                                                                            $270,463               $270,463
----------------------------------------------------------------------------------------------------------------------
Balance,                       2,125,000          $2,125           $9,177,488         $464,183             $9,643,796
March 31, 1997
----------------------------------------------------------------------------------------------------------------------
</TABLE>


                 See accompanying notes to financial statements.




                                        7

<PAGE>

 Consolidated  Statement of Cash Flows of Atlas and PTC (unaudited)
 and  Statement of Cash Flows of the Predecessor (audited)

<TABLE>
<CAPTION>

                                                                     Consolidated                Predecessor
                                                                   Nine Months Ended          Nine Months Ended
                                                                    March 31, 1997             March 31, 1996
<S>                                                                      <C>                          <C>  
 Cash Flow From Operating Activities
    Net Income                                                         $270,463                   $251,063
    Adjustments to reconcile net income to net cash
    provided by (used in ) operating activities:
    Depreciation                                                        299,735                    265,152
    Amortization                                                       (386,304)                    12,750
    Deferred income tax                                                     210                    (12,564)

    Changes in operating assets and liabilities:
    Contracts receivable                                              1,792,249                 (1,586,267)
    Inventories, prepaid expenses and other                            (136,109)                  (329,120)
    Costs and estimated earnings in excess of                          (245,948)                (1,036,334)
    billings on uncompleted contracts
    Accounts payable, accrued exp. and other                         (1,756,740)                   602,812
 Net Cash Provided by (Used In) Operating Activities                   (162,444)                (1,832,508)
------------------------------------------------------------------------------------------------------------
</TABLE>


                 See accompanying notes to financial statements.



                                        8



<PAGE>

 Consolidated  Statement of Cash Flows of Atlas and PTC (unaudited)
 and  Statement of Cash Flows of the Predecessor (audited)
<TABLE>
<CAPTION>


                                                                   Consolidated               Predecessor
                                                                Nine Months Ended          Nine Months Ended
                                                                  March 31, 1997             March 31, 1996
<S>                                                                     <C>                         <C>    
 Cash Flows From Investing Activities
    Collection of Notes Receivable                                      240,606                    346,119
    Investment of  US Securities                                     (2,071,050)                         0
    Expenditures for property and equipment                          (3,483,422)                  (357,611)
    Increase in notes receivable                                       (124,806)                  (121,506)
 Net Cash Provided by (Used In) Investing Activities                 (5,438,672)                  (132,998)
------------------------------------------------------------------------------------------------------------

 Cash Flows From Financing Activities
    Net borrowings (payments) - line of credit                       (7,188,558)                 2,307,820
    (Payments) or Borrowings  on long term                             (152,177)                   (14,875)
    debt, capital leases and notes payable

    Proceeds from additional long-term debt                          12,830,419                    278,790
    Distribution to former stockholders                                                           (542,260)
-------------------------------------------------------------------------------------------------------------
 Net Cash Provided by (Used In) Financing Activities                  5,489,684                  2,029,475
------------------------------------------------------------------------------------------------------------

 Net Increase (Decrease) In Cash and Cash equivalents                  (111,433)                    63,969
 Cash and Cash equivalents at the beginning of the period               512,179                     17,253
------------------------------------------------------------------------------------------------------------
 Cash and Cash equivalents at the end of the period                     400,746                     81,222
------------------------------------------------------------------------------------------------------------
    Supplemental Cash Flow Information
    Cash Paid during the period for:
    Interest                                                           $706,159                   $410,909
    Income Taxes                                                       $176,000                   $375,637
------------------------------------------------------------------------------------------------------------

</TABLE>


                 See accompanying notes to financial statements.


                                        9



<PAGE>

                    Notes to Financial Statements (Unaudited)


1.       Basis of Presentation

The  accompanying  unaudited  financial  statements  for the third quarter ended
March  31,  1997  have been  prepared  in  accordance  with  generally  accepted
accounting   principles  for  interim   financial   information   and  with  the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  The consolidated  balance
sheet at June 30, 1996 has been derived from the audited consolidated  financial
statements at that date. Operating results for the third quarter ended March 31,
1997 are not necessarily  indicative of the results that may be expected for the
year ended June 30, 1997 or any other interim period.  For further  information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the period ended June 30, 1996.

2.       Summary of Significant Accounting Policies

Formation of the Company and Basis of Presentation

The Company,  Production Systems  Acquisition  Corporation,  was incorporated in
June 1993 with the objective of acquiring an operating  business  engaged in the
production  systems industry.  The Company  originally  selected March 31 as its
fiscal year-end.  The Company completed an initial public offering  ("Offering")
of common  stock in July 1994 and  raised net  proceeds  of  approximately  $9.0
million. In May 1995, the Company changed its name to Productivity  Technologies
Corp. (PTC), and acquired through merger Atlas Technologies, Inc. ( Atlas ) as a
wholly owned subsidiary.

The  accompanying  financial  statements  presented  for the third quarter ended
March  31,  1997  include  the  consolidated  accounts  of PTC  and  Atlas.  All
significant  inter-company  accounts and transactions  have been eliminated upon
consolidation.

The  accompanying  financial  statements  presented  for the third quarter ended
March 31, 1996 represent the financial statements of Atlas (the "Predecessor").


                                       10



<PAGE>

                    Notes to Financial Statements (Unaudited)

Nature of Business

Atlas  Technologies,  Inc.  is  Productivity   Technologies  Corporation's  sole
operating  subsidiary at this time. Atlas is a leading innovator and supplier of
quick die change, flexible transfer, and  stacking/destacking  equipment used to
automate  automotive  and appliance  metal stamping  operations.  Atlas operates
three manufacturing plants and three sales and engineering offices. The two main
plants are located in Fenton,  Michigan  with an additional  plant  operating in
nearby Linden, Michigan.

Sales of products have  principally  been to  automobile  and  automotive  parts
manufacturers and appliance manufacturers. Other customers include manufacturers
of garden and lawn equipment,  office  furniture,  heating,  ventilation and air
conditioning equipment and aircraft.  Sales to automotive related customers have
accounted for the majority of sales during the past two years.

Revenue and Cost Recognition

Contract  revenues from fixed price  contracts,  and the related contract costs,
are    recognized    using    the    percentage-of-completion     method.    The
percentage-of-completion  method  measures  the  percentage  of  contract  costs
incurred to date and compares these costs to the total  estimated costs for each
contract. The Company estimates the status of individual contracts when progress
reaches a point where  experience is  sufficient to estimate  final results with
reasonable accuracy.

Contract  costs include all direct  material and labor costs and those  indirect
costs related to contract performance, such as indirect labor, supplies, repairs
and depreciation costs. Provisions for estimated losses on uncompleted contracts
are made in the  period in which  such  losses  are  determined.  Changes in job
performance,  job  condition,   estimated  profitability,   and  final  contract
settlement  may result in revisions to costs and income,  and are  recognized in
the period the revisions are determined.

Revenues from  time-and-material  contracts are recognized currently as the work
is performed.


Net Income Per Common Share

Net income per common share for the third  quarter ended March 31, 1997 has been
computed  based on the  weighted  average  number of common and  diluted  common
equivalent shares outstanding.



                                       11



<PAGE>




                    Notes to Financial Statements (Unaudited)

3.       Commitments

     In connection  with the merger  agreement,  Atlas  entered into  employment
     agreements  which changed the  compensation  of two  executive  officers of
     Atlas.  The  employment  agreements in regards to annual  compensation  are
     identical,  except that one agreement expires on December 31,1998,  and the
     other expires on December 31, 2001.  Each agreement  requires the executive
     to devote  substantially  all of his  business  time and  attention  to the
     affairs  of the  Company.  Annual  compensation  under  each  agreement  is
     $195,052, subject to cost of living increases after December 31, 1997.

     The Employment  agreements also provide for two bonus calculations based on
     the earnings of Atlas before interest and taxes (as defined).  Under one of
     the bonus arrangements,  each of the two executives  mentioned in the above
     paragraph will be paid $208,333 for each of the six years beginning January
     1, 1996 in which  the  "Adjusted  Earnings"  of Atlas  (as  defined  in the
     related agreements) exceeds $2,000,000.

     Under the second  bonus  arrangement,  if during  the five years  beginning
     January 1, 1996, the "Average Adjusted Earnings" (as defined in the related
     agreements)  are at  least  $2,626,000,  each  executive  will  be  paid on
     December  31,  2000,  an amount  equal to the amount by which such  average
     earnings exceed  $2,626,000.  Both bonus  arrangements  are also subject to
     various  conditions   described  in  the  related  agreements.   The  bonus
     arrangements  do not terminate in the event of death of the executive,  but
     payments  will be reduced by the amount of insurance  benefits  paid to the
     executive's estate pursuant to life insurance in effect.


 4.      Contingencies

     (1) Atlas has received a "Demand For Arbitration"  dated October 1, 1996 by
a former  customer who alleges,  among other  issues,  a  $15,400,000  claim for
damages resulting from a breach of contract and breach of warranties  related to
the design and manufacture of certain industrial  equipment.  Atlas believes the
lawsuit is without merit and will vigorously defend its position.  Further, with
respect to the alleged  damages,  the total purchase amount on this contract was
$1,360,000.  The  former  customer  has  acknowledged  receiving  the  Company's
standard terms and conditions.  These terms and conditions  provide in pertinent
part that the Company will not, in any event,  be liable for any  incidental  or
consequential damages,  including loss of profits. Further, the Company warranty
policy  states  that the  buyer's  sole  remedy is limited  to either  repair or
replacement  of  the  equipment  or  defective   parts,   or,  after  negotiated
settlement,  return of the goods to the seller.  While the final  outcome of the
litigation  cannot  be  determined  at  this  early  date  in  the  proceedings,
management  believes  that the final  outcome  will not have a material  adverse
effect on the Company's results of operations or its financial position. Initial
arbitration  was reported in PTC's 10-K for the year ended June 30, 1996.  Atlas
is not involved as a defendant in any other substantial litigation.





                                       12



<PAGE>

                    Notes to Financial Statements (Unaudited)

     (2) Atlas is  undergoing an Internal  Revenue  Service audit for the fiscal
year  ended  June  30,  1995.  The  main  area  of  review  is  a  research  and
experimentation  tax credit the  Company has  calculated  and filed for over the
past six years. The Company had applied $383,000 of credit towards Federal Taxes
due for the fiscal  period  ended June 1995 and had a carry  forward of $481,400
expected  to be  used  as a  reduction  in the  calculation  of  1996  and  1997
alternative minimum tax payments. Management and Atlas' accountants believe this
issue  is a  matter  of  interpretation  of  the  research  and  experimentation
regulations. Management believes that the IRS may seek a reduction in the amount
of  credit  calculated  which  may  have  an  adverse  effect  to the  financial
statements of the Company.  The Company is entitled to indemnification  (subject
to certain exclusions and limitations) from the former principal stockholders of
Atlas for amounts it may be required to pay as a result of such audit.  Also, to
the extent any such  amounts  have the effect of reducing the net worth of Atlas
at  December  31,  1995 below a  specified  amount,  the  Company is entitled to
reimbursement  from the  former  stockholders  of  Atlas  and has  secured  such
reimbursement obligation through a $1,000,000 escrow account.

5.       Pro Forma Condensed Consolidated Statement of Operations

     The following  unaudited pro forma  condensed  statement of operations  for
last year's  third  quarter  ended March 31, 1996 is presented as if the Company
had completed the merger of Atlas on July 1, 1995.

     This unaudited pro forma financial statement is not necessarily  indicative
of the actual  results if  operations of Atlas would have been merged on July 1,
1995.  In  management's  opinion,  all  adjustments  necessary  to  reflect  the
formation of the Company and the effects of the Offering have been made.


6.       Historic Pro Forma Operations of the Predecessor

     (1)  The  unaudited  pro  forma  consolidated  statement  of  operation  is
     presented  assuming that no PTC  stockholders  would request  conversion of
     their shares. No such requests were made.

     (2) The  excess  of the  purchase  price  over  the book  value  of  Atlas'
     stockholders  equity is  allocated to property  and  equipment  (based on a
     recent  appraisal) and to goodwill.  Additional  depreciation  of property,
     plant and equipment  based on a 20-year life, and  amortization of goodwill
     based on a 25-year life, has been charged to operations.

     (3) Pro  forma  amounts  payable  to  Atlas  senior  management  under  new
     employment agreements after the merger (based on Atlas operating income, as
     adjusted).

     (4) The elimination of interest  income on the portion of PTC's  investment
     in U.S. government security bonds.

     (5)  Consolidated  income  tax  provision  at an  effective  rate of 40% on
     taxable income after adding back non-deductible amortization of goodwill.





                                       13



<PAGE>

 Unaudited Proforma Statement of Operations of the Predecessor
<TABLE>
<CAPTION>

                                                              Pro Forma               Pro Forma
                                                            Consolidated             Consolidated
                                                            Quarter Ended          Nine Months Ended
                                                            Mar. 31, 1996            Mar. 31, 1996
<S>                                                               <C>                      <C> 
Sales                                                          $8,922,629              $25,841,050
Cost of Sales                                                   6,610,439               18,013,887
--------------------------------------------------------------------------------------------------
Gross Profit                                                    2,312,190                7,827,163

OPERATING EXPENSES
Officers' Bonus Expense                                           164,745                1,119,234
Selling, General and Administrative                             1,905,342                5,263,238
Income from Operations                                            242,103                1,444,691
--------------------------------------------------------------------------------------------------
Other Income ( Expenses)
Interest Income                                                    26,179                   85,105
Interest Expense                                                 (122,009)                (410,909)
Miscellaneous                                                      18,001                   39,107
Total Other Income (Expenses)                                     (77,829)                (286,697)
--------------------------------------------------------------------------------------------------
Income Before Income Taxes                                        164,274                1,157,994
Income Taxes                                                       40,700                  475,400
Net Income                                                        123,574                  682,594
--------------------------------------------------------------------------------------------------
Net Income per Share of Common Stock                                $0.06                    $0.33
--------------------------------------------------------------------------------------------------
Weighted Average Number  of Common Shares
                                             
Outstanding                                                     2,125,000                2,125,000
--------------------------------------------------------------------------------------------------
</TABLE>


Proforma  illustrates the acquisition of Atlas (Predecessor) having been made at
July 1, 1995.  Officer's bonus expense was calculated using employment contracts
and a reduction of interest income for PTC's capital invested in the purchase
of Atlas.


                                       14



<PAGE>

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

Effective May 23, 1996, the Company  entered into a Merger  Agreement with Atlas
Technologies,  Inc.  whereby  Atlas  became  a  wholly-owned  subsidiary  of the
Company.  Financial  statements  after that date are those of the new  reporting
entity and are not fully comparable to pre-merger periods.

Unaudited  sales revenues for the quarter ended March 31, 1997 were  $7,565,805,
down 15% from  $8,922,629  for the quarter ended March 31, 1996. The decrease in
sales revenue was due to customer delays in accepting shipments of a new line of
large  destackers,  which has reduced  production  capacity  and new unit builds
until the new facility is opened in the fourth quarter of fiscal 1997.  Revenues
for the  nine  months  ended  March  31,  1997  were  $25,378,589,  down 2% from
$25,841,050  for the nine months then ended March 31, 1996. The order backlog as
of March 31, 1997 was $20.4  million,  up 9% from the March 31, 1996 back-log of
$18.7  million.  The increase in backlog was due to  decreased  shipments in the
third quarter and new orders.  Foreign  (non-US) net new order  bookings for the
nine month period increased to 34% of total orders, a significant  increase over
the previous  nine month  period's  14%.  This  significant  increase in foreign
orders is due to several  contracts  that were  awarded  to Atlas  from  various
foreign companies primarily located in the U.K. Business activity remains strong
in both domestic and foreign markets.

Cost of products sold for the quarter ended March 31, 1997 were $5,206,821, down
21% from  $6,610,439  for the quarter  ended  March 31,  1996.  The  significant
reduction in cost was primarily due to the 15% lower revenues, but a significant
improvement in gross margin also helped to reduce costs during the quarter. Cost
of products sold for the nine months ended March 31, 1997 were  $18,689,057,  up
4% compared to  $18,013,887  for the nine months  ended March 31,  1996.  The 4%
increase in cost resulted from significant development expenses during the first
two quarters for a series of new large destackers.

The reduction in cost of products sold  resulted in an 2%  improvement  in gross
profit  for the  quarter  ended  March  31,  1997  of  $2,358,984,  compared  to
$2,312,190  for the quarter  ended March 31,  1996.  Gross  profits for the nine
months ended March 31, 1997 were  $6,689,532,  down 14% from  $7,827,163 for the
nine months  ended March 31,  1996,  primarily  due to  significant  development
expense in the first two quarters for a series of new large destackers.

Consolidated  selling,  general and  administrative  (SG&A) expenses,  including
officers' bonuses,  during the quarter ended March 31, 1997, were $1,888,519,  a
modest change from $1,877,302 for the quarter ended March 31, 1996. For the nine
months  ended March 31,  1997,  SG&A  expenses  were  $5,686,644,  down 15% from
$6,703,226  for the nine months then ended March 31, 1996.  Primary  factors for
the year-to-date  SG&A decrease were lower executive  compensation  expenses and
bonus  accruals,  as well as the  elimination  of certain  legal and  accounting
expenses associated with the acquisition of Atlas by PTC.

Consolidated  earnings from  operations ( net income before  interest and income
taxes ) for the quarter ended March 31, 1997 were $470,465,  up 8% from $434,888
for the quarter  ended March 31, 1996.  The 8% increase  this quarter was due to
reduced charges  associated with the new large  destacker  development.  For the
nine months ended March 31, 1997 earnings from operations were $1,022,888,  down
11% from  $1,123,937 for the nine months ended March 31, 1996. This 11% decrease
is due to significant development expenses during the first two quarters of this
fiscal year for a series of new large destackers.

                                       15

<PAGE>

Interest  expenses for the quarter ended March 31, 1997 were  $310,132,  up 154%
from  $122,009 for the quarter  ended March 31, 1996.  For the nine months ended
March 31, 1997  interest  expenses were  $706,159,  up 72% from $410,910 for the
nine months ended March 31, 1996. The significant  increase in interest  expense
for both  periods  was  caused  by higher  utilization  of the line of credit to
finance   work-in-process,   increased  accounts   receivable,   and  new  asset
acquisitions associated with the new plant construction.

Unaudited  net  (consolidated)  income for the quarter  ended March 31, 1997 was
$148,318,  down 6% from $157,739 for the  predecessor's  quarter ended March 31,
1996. For the nine months ended March 31, 1997,  earnings from  operations  were
$270,463,  down 33% from the  predecessor's  net income of $408,802 for the nine
months ended March 31, 1996.


Liquidity and Capital Resources

Atlas  believes its  principal  long-term  capital  requirement  has been and is
expected to continue  to be the funding of capital  expenditures  to improve and
expand  Atlas'  facility and  marketing  efforts and the financing of day-to-day
Atlas operations.

During this fiscal year ending  June 30,  1997,  Atlas  entered  into a new debt
financing  agreement  with First of Chicago  NBD. The bank  consolidated  all of
Atlas' long and short term debts, bundling the various notes and lines of credit
into one new two year  committed  line of credit,  with  increased  maximum debt
usage  of  $14,500,000  based  on  collateral  of  the  company's   receivables,
work-in-process,  and assets. Interest rates have been reduced to the bank prime
rate and a  revised  amortization  of  certain  asset  based  debt to  quarterly
payments  of  $62,500  has  reduced  the  overall  annual   principal   payments
requirements, improving the current ratio and working capital.

Atlas also  entered  into an  agreement  with  First of Chicago  NBD to fund the
construction of the new building and equipment through the sale of $4,500,000 in
tax exempt  Industrial  Revenue Bonds (IRB). The proceeds are being used for the
construction,  furnishing and equipping of the new 59,000 sq. ft.  manufacturing
building.  The unused  portion has been invested and earns interest until spent.
The bonds are state and federal tax exempt,  so the floating rate of interest is
significantly  reduced  compared to  conventional  construction  or  real-estate
financing. Terms are as follows:

         1997   Interest only
         1998   $400,000 annual payment plus quarterly interest payments.
         1999   $400,000 annual payment plus quarterly interest payments
         2000   $400,000 annual payment plus quarterly interest payments
         2001 - 2011  $300,000 annual payment plus quarterly interest payments

IRB closing  costs of $184,409 have been incurred and were booked as a long term
asset. These are being amortized over the 15 year life of the Industrial Revenue
Bonds.

At March 31, 1997,  Atlas had  financed  debt of  $10,808,665  under the line of
credit and $4,500,000 under the Industrial  Revenue Bond, payable over 15 years,
and other debt of $62,756,  compared to the June 30,  1996 total  combined  long
term debt financing and line of credit balance of $9,881,737.

The Company believes that, as a result of the new loan facility,  its short-term
credit  availability  is adequate to support its business  operations at current
and near-term anticipated sales levels.

                                       16



<PAGE>

Working  capital at March 31, 1997 was $14,454,075 and the current ratio was 3.7
to 1, compared to $5,047,991 and 1.4 to 1, respectively, for the Company at June
30, 1996.  This  improvement  was possible by the  consolidation  of the balance
sheets of PTC and Atlas,  securing a committed  line of credit for 24 months and
reclassifying  the total debt as long term debt. Atlas has retained the proceeds
from the Industrial Revenue Bond. Under certain arbitrage  guidelines,  Atlas is
able to  invest  the IRB  proceeds  in  U.S.  securities  until  the  funds  are
completely spent on the new building and equipment.

Management  believes  Atlas is reaching  capacity  at its present  manufacturing
facilities.  Construction on Atlas' third manufacturing  plant, located near its
main  manufacturing  facility  in  Fenton,   Michigan,  is  presently  underway.
Construction  is expected to be completed  in May of 1997.  The  expansion  will
increase plant capacity by approximately 80%.

Building  construction  in process at March 31, 1997  resulted in an increase in
fixed assets of $2,486,564.  While under  construction no depreciation  has been
charged.

Uncertainties

Except for any historical information contained herein, the matters discussed in
this  10-Q  contain   forward-looking   statements   that   involve   risks  and
uncertainties  that could cause actual results to differ  materially  from those
set  forth in the  forward-looking  statements.  Such  risks  and  uncertainties
include the  possibility  that changes in economic  conditions  could  adversely
affect the demand for the Company's  products by its  customers,  an unfavorable
outcome of the IRS audit for year ending June 30, 1995,  potentially higher than
anticipated start-up expenses or delays for the new manufacturing  facility, and
potential unforeseen other factors.


                                       17



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Item 6.  Exhibits and Reports on Form 8-K

        A. Exhibits

             27     Financial Data Schedule (filed electronically only).

        B.     Reports on Form 8-K - None



                                       18



<PAGE>

                                   Signatures

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                            PRODUCTIVITY TECHNOLOGIES CORP.


Date:     May 14, 1997                    By:  /s/  Samuel N. Seidman
                                          ---------------------------
                                          Samuel N. Seidman, President



Date:    May 14, 1997                     By:  /s/  Jesse Levine
                                          ----------------------
                                          Jesse Levine, Chief Financial Officer




                                       19



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