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 - December 31, 1996

[ ] 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 February 14, 1997: 2,125,000 shares $ .001 par value common stock.


<PAGE>



                                    CONTENTS

                                                                        Page

Part I : Financial Information for
         Productivity Technologies, Inc. (PTC) and
         Subsidiary Atlas Technologies, Inc. (Atlas)

Item 1.  Interim Financial Statements                                     3

         Consolidated Balance Sheets of PTC and Atlas                    4-5

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

         Consolidated Statements of Stockholders' Equity of the Company   7

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

         Notes to Financial Statements                                  10-15

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.         ( Atlas)                    16-18

Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K                                 19

Signatures                                                                20


                                                 2


<PAGE>


PRODUCTIVITY TECHNOLOGIES CORP. AND SUBSIDIARY

PART I:           FINANCIAL INFORMATION


ITEM 1.           INTERIM 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 six months ended  December 31, 1996, 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. and Subsidiary's 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
Assets                                           December 31, 1996 June 30, 1996
                                                   (Unaudited)      (Audited)
<S>                                                  <C>            <C>
Current Assets
    Cash and cash equivalents ......................   $   447,969   $   512,179
    Short-term investments, including  accrued           4,205,732       965,255
       interest
    Contracts receivable ...........................     7,178,332     7,958,159
    Notes receivable ...............................       201,614       240,606
    Costs and estimated earnings in excess of
      billings on uncompleted contracts ............     8,868,701     7,593,003
    Inventories ....................................       766,247       720,947
    Prepaid expenses and other .....................        78,851       220,494
    Deferred income taxes ..........................       480,000       480,000
--------------------------------------------------------------------------------
Total Current Assets ...............................    22,227,446    18,690,643
--------------------------------------------------------------------------------
Property and Equipment
    Land ...........................................       659,014       216,000
    Buildings and improvements .....................     2,136,796     2,132,388
    Machinery and equipment ........................     2,021,606     1,888,479
    Transportation equipment .......................        31,500        31,500
    Building construction in progress ..............     1,503,830
--------------------------------------------------------------------------------
        Total Fixed Assets .........................     6,352,746     4,268,367
        Less Accumulated Depreciation ..............       222,854        27,928
--------------------------------------------------------------------------------
Net Property and Equipment .........................     6,129,892     4,240,439
--------------------------------------------------------------------------------
Other Assets
    Goodwill, net of accumulated amortization ......     2,542,322     2,593,803
    Noncompetition agreement, net of amortization ..       219,583       228,083
    Other assets ...................................       816,809       270,803
--------------------------------------------------------------------------------
Total Other Assets .................................     3,578,714     3,092,689
--------------------------------------------------------------------------------
Total Assets .......................................   $31,936,052   $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      
                                                December 31, 1996 June 30, 1996
                                                  (Unaudited)       (Audited)
Liabilities and Stockholders' Equity
<S>                                                   <C>           <C>
Current Liabilities
    Accounts payable ...............................   $ 2,166,064   $ 2,444,411
    Line-of-credit  (see pg.17) ....................          --       7,188,558
    Accrued liabilities
    Payroll, executive bonuses and
       related withholdings ........................       815,720     1,192,052
    Federal and State income taxes .................       221,790
    Other accrued liabilities ......................     1,516,699     1,596,485
    Billings in excess of costs and estimated
       earnings on uncompleted contracts ...........       957,382       534,963
    Current maturities of long term debt ...........       271,212       464,393
--------------------------------------------------------------------------------
Total Current Liabilities ..........................     5,727,077    13,642,652
--------------------------------------------------------------------------------
Deferred Income Taxes ..............................       779,000       779,000
Long Term Debt Less Current Maturities .............    15,934,494     2,228,786
--------------------------------------------------------------------------------
Total Liabilities ..................................    22,440,571    16,650,438
--------------------------------------------------------------------------------
Stockholders' Equity
    Preferred Stock, .001 par value, 1,000,000             --            --
       authorized and none 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 ...........................          315,868       193,720
--------------------------------------------------------------------------------
Total Stockholders' Equity .........................     9,495,481     9,373,333
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity .........   $31,936,052   $26,023,771
--------------------------------------------------------------------------------
</TABLE>

    See accompanying notes to Financial Statements.


                                             5

<PAGE>





Consolidated Statements of Operations of PTC and Atlas
and Statements of Operations of the Predecessor (Unaudited)

<TABLE>
<CAPTION>

                                                        Quarter Ended                  Six Months Ended
                                              Consolidated         Predecessor       Consolidated         Predecessor
                                              Dec 31, 1996        Dec 31, 1995       Dec 31, 1996        Dec 31, 1995
<S>                                           <C>                  <C>                <C>                 <C>   
Net Sales                                       $9,386,486          $8,019,804        $17,812,784         $16,918,421
------------------------------------------------------------------------------------------------- -------------------
Cost of Sales                                    7,156,886           5,293,517         13,482,236          11,403,448
------------------------------------------------------------------------------------------------- -------------------
Gross Profit                                     2,229,600           2,726,287          4,330,548           5,514,973
Selling, General and Administrative
  expenses, including officers' bonuses          1,885,507           2,396,004          3,798,125           4,825,924
---------------------------------------------------------------------------------------------------------------------
Income (Loss)  From Operations                     344,093             330,283            532,423             689,049
---------------------------------------------------------------------------------------------------------------------
Other Income ( Expenses)
    Interest income                                 17,877              11,054             37,034              22,826
    Interest expense                             (208,174)           (136,544)          (396,027)           (288,900)
    Miscellaneous                                   14,516              17,300             33,715              21,106
---------------------------------------------------------------------------------------------------------------------
Total Other Expenses                             (175,781)           (108,190)          (325,278)           (244,968)
------------------------------------------------------------------------------------------------- -------------------
Income (Loss)  Before Income Taxes                 168,312             222,093            207,145             444,081
Income Taxes                                        60,500              96,531             85,000             195,315
---------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                                  107,812             125,562            122,145             248,766
------------------------------------------------------------------------------------------------- -------------------
Net Income Per Share of
    Common Stock                                     $0.05               $0.06              $0.06               $0.12
------------------------------------------------------------------------------------------------- -------------------
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 Statements of Stockholders' Equity of the Company (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                           -           -             -               $122,145            $122,145
                              ------------   --------     ------------     ----------         ------------
Balance, December 31, 1996      2,125,000     $2,125      $9,177,488        $315,865          $9,495,478
-------------------------- ----------------------------- --------------- -----------------------------------
</TABLE>

See accompanying notes to financial statements.





                                   7






<PAGE>


    Consolidated Statements of Cash Flows of Atlas and PTC
    and Statement of Cash Flows of the Predecessor (Unaudited)


<TABLE>
<CAPTION>

                                                                     Consolidated                Predecessor
                                                                 Six Months Ended           Six Months Ended
                                                                December 31, 1996          December 31, 1995
<S>                                                                <C>                             <C>
Cash Flow From Operating Activities
    Net Income                                                       $122,148                  $251,063
    Adjustments to reconcile net income to net cash
       provided by (used in ) operating activities:
    Depreciation                                                      194,926                    165,714
    Amortization                                                     (122,561)                     8,500
    Deferred income tax                                              (109,647)                        92
    Changes in operating assets and liabilities
    Contracts receivable                                              779,827                (3,056,733)
    Inventories, prepaid expenses and other                            96,343                   (44,233)
    Costs and estimated earnings in excess of                        (853,279)                1,295,033
      billings on uncompleted contracts
    Accounts payable, accrued expenses and other                     (956,255)                  164,449
------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Operating Activities                  (848,498)               (1,216,115)
------------------------------------------------------------------------------------------------------------

</TABLE>


    See accompaying notes to financial statements.





                                        8




<PAGE>


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

<TABLE>
<CAPTION>
                                                                  Consolidated                Predecessor
                                                                 Six Months Ended           Six Months Ended
                                                                 December 31, 1996          December 31, 1995
                                                                  (Unaudited)                 (Audited)
<S>                                                               <C>                           <C>
Cash Flows From Investing Activities
    Collection of Notes Receivable                                     38,992                    104,159
    Investment of  US Securities                                   (3,240,477)                         0
    Expenditures for property and equipment                        (2,084,378)                  (264,282)
    Increase in notes receivable                                     (253,818)                  (139,824)
-------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Investing Activities                (5,539,680)                  (299,947)
------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
    Net borrowings (payments) - line of credit                     (7,188,558)                 1,896,620
    (Payments) or Borrowings  on long term                           (193,181)                   (14,875)
     debt, capital leases and notes payable
    Proceeds from additional long-term debt                        13,705,708                    413,471
    Distribution to former stockholders                                                         (700,000)
------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Financing Activities                 6,323,969                  1,595,216
------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Cash and Cash                              (64,210)                    79,154
  equivalents
Cash and Cash equivalents at the beginning of                         512,179                     17,253
  the period
------------------------------------------------------------------------------------------------------------
Cash and Cash equivalents at the end of the                           447,969                     96,407
  period
------------------------------------------------------------------------------------------------------------
    Supplemental Cash Flow Information
    Cash Paid during the period for:
    Interest                                                         $396,027                   $288,900
    Income Taxes                                                      $85,000                   $195,315
------------------------------------------------------------------------------------------------------------

</TABLE>


    See accompaying notes to financial statements.


                                          9





<PAGE>



                    Notes to Financial Statements (Unaudited)


1.       Basis of Presentation

     The accompanying  unaudited financial  statements at December 31, 1996 have
and for the three  months  and six  months  then  ended  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 second quarter ended December 31, 1996 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 fiscal year ended June 30, 1996.

2.       Summary of Significant Accounting Policies

Formation of the Company and Basis of Presentation

     The Company was incorporated in June 1993 under the name Production Systems
Acquisition  Corporation  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 second  quarter
ended December 31, 1996 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 second  quarter
ended  December  31,  1995  represent  the  financial  statements  of Atlas (the
"Predecessor").





                                           10






<PAGE>

Nature of Business

     Atlas Technologies, Inc. is Productivity Technologies Corp's sole operating
subsidiary.  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 two manufacturing plants
and three sales and  engineering  offices.  The main plant is 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.




                                             11








<PAGE>

Net Income Per Common Share

     Net income per common share for the second  quarter ended December 31, 1996
has been  computed  based on the weighted  average  number of common and diluted
common equivalent shares outstanding.


3.       Commitments

               (1) In connection  with the merger  agreement,  Atlas has 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, at the end of the fifth  year (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.


                                               12




<PAGE>




          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  Atlas's
          standard terms and conditions.  These terms and conditions  provide in
          pertinent  part that Atlas will not,  in any event,  be liable for any
          incidental  or  consequential  damages,  including  loss  of  profits.
          Further, the Atlas 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  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.  Neither
          Atlas  nor  the  Company  is  involved  as a  defendant  in any  other
          substantial litigation.  The arbitration was initially reported in the
          Companys' Report on Form 10-K for the year ended June 30, 1996.

               (2)  Atlas is  undergoing  a Federal  tax  audit by the  Internal
          Revenue service for the fiscal year ended June 30, 1995 and on January
          21, 1997 received the auditor's  initial  findings.  The main areas of
          review  are  research  and   experimentation  tax  credits  Atlas  has
          calculated  and  filed  over  the  past  several  years.  The  IRS has
          disqualified  $306,600 and assessed $38,700 in interest for the fiscal
          year  ended June 30,  1995.  Atlas also had  additional  research  tax
          credits  which were to be carried  forward and used to reduce  federal
          taxes up to $481,400  and applied  against  1996 and 1997  alternative
          minimum  federal income tax payments.  This has been  disqualified  at
          this time. Atlas believes this issue is a matter of  interpretation of
          the  research  and  experimentation   regulations  and  is  vigorously
          opposing  these findings and will contest the  disqualification.  This
          development  may had an adverse  effect on the Company's cash flow and
          future financial  statements which is dependent on the appeals process
          and its outcome.  Pursuant to the Merger Agreement,  $1,000,000 of the
          merger consideration payable to the two former principal  stockholders
          of Atlas is being  held in escrow to secure  repayment  of  amounts by
          which the net  worth of the  Company  at  December  31,  1995 is below
          $3,196,084.  Any prospective disallowance by the IRS of the credit for
          periods  ending  prior to that date  would be taken  into  account  in
          determining  such net worth. If the amount of all such  adjustments is
          in excess of $1,000,000,  the two former stockholders are obligated to
          refund the excess to the Company.







                                              13


<PAGE>



5.       Pro Forma Condensed Consolidated Statement of Operations

         The following unaudited pro forma condensed statement of operations for
         the second  quarter  ended  December  31, 1995 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. These adjustments include the following:

(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 US 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.



                                                14


<PAGE>





Unaudited Proforma Statement of Operations of the Predecessor

<TABLE>
<CAPTION>

                                                                Pro Forma                Pro Forma
                                                             Consolidated             Consolidated
                                                            Quarter Ended         Six Months Ended
                                                            Dec. 31, 1995            Dec. 31, 1995
<S>                                                           <C>                    <C>

Sales                                                          $8,019,804              $16,918,421
Cost of Sales                                                   5,293,518               11,403,448
--------------------------------------------------------------------------------------------------
Gross Profit                                                    2,726,286                5,514,973
--------------------------------------------------------------------------------------------------
OPERATING EXPENSES                                                                       2,431,477
Officers' Bonus Expense                                           574,347                  954,489
Selling, General and Administrative                             1,704,652                4,312,385
--------------------------------------------------------------------------------------------------
Income from Operations                                            447,287                1,202,588
--------------------------------------------------------------------------------------------------
Other Income ( Expenses)
Interest Income                                                    25,095                   58,926
Interest Expense                                                (136,544)                (288,900)
Miscellaneous                                                      17,300                   21,106
--------------------------------------------------------------------------------------------------
Total Other Income (Expenses)                                    (94,149)                (208,868)
--------------------------------------------------------------------------------------------------
Income Before Income Taxes                                        353,137                  993,719
Income Taxes                                                      170,700                  434,700
--------------------------------------------------------------------------------------------------
Net Income                                                        182,437                  559,019
--------------------------------------------------------------------------------------------------
Net Income per Share of Common Stock                                $0.09                    $0.26
--------------------------------------------------------------------------------------------------
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. Officers' expense calculated using employment contract and
a reduction  of interest  income for PTC's  capital  invested in the purchase of
Atlas.


                                   15



<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  December  31, 1996 were
$9,386,486,  up 17% from the quarter ended December 31, 1995 of $8,019,804,  and
revenues for the six months ended December 31,1996 were $17,812,784,  up 5% from
$16,918,421  for the six months ended  December 31, 1995.  Increased  sales were
primarily due to higher levels of business. The order backlog as of December 31,
1996 was $18.5  million,  down 15% from the  December  31, 1995 backlog of $21.8
million,  mainly due to increased  production for the period and average closing
of new orders. The volume of new business quotes,  both domestic and foreign, is
good.

     Costs of  products  sold for the  quarter  ended  December  31,  1996  were
$7,156,886, up 35% from $5,293,517 for the quarter ended December 31, 1995. Cost
of products sold for the six months ended December 31, 1996 were $13,482,236, up
18% from  $11,403,448  for the six  months  ended  December  31,  1995.  The 18%
increase in cost of sales resulted from significant  development expenses during
the first two periods for a series of new large destackers,  which are estimated
to be 85% complete. Revenues on this specific contract accounted for over 27% of
the sales volume and 34% of the cost of product  sold.  As this order moves into
the final completion phase, cost of sales is expected to improve.

     Higher cost of sales  resulted in an 18%  reduction in gross profit for the
quarter ended  December 31, 1996 of  $2,229,600,  compared to $2,726,287 for the
quarter ended December 31, 1995. Gross profits for the six months ended December
31,1996  were  $4,330,548,  down 21% from  $5,514,973  for the six months  ended
December 31, 1995,  due primarily to the high cost of development on a series of
new large  destackers and development  cost incurred in designing and installing
product for foreign customers.

     Consolidated selling, general and administrative (SG&A) expenses, including
officers'  bonuses during the quarter ended December 31, 1996, were  $1,885,507,
down 21% from  $2,396,004  for the quarter ended December 31, 1995. For the six
months ended  December  31,1996,  SG&A expenses were  $3,798,125,  down 21% from
$4,825,924 for the six months then ended December 31, 1995.  Primary factors for
the SG&A decrease were lower executive compensation expenses and bonus accruals,
as well  as  reduced  legal  and  accounting  expenses  as  compared  to  higher
professional  fees incurred by both PTC and Atlas in the first quarter of fiscal
1995 related to the acquisition of Atlas by PTC.

     Consolidated  earnings  from  operations  (net income  before  interest and
income taxes) for the quarter ended December 31, 1996 were $344,093,  up 4% from
$330,283  for the quarter  ended  December  31,  1995.  For the six months ended
December 31,1996 earnings from operations were $532,423,  down 23% from $689,049
for the six months ended December 31, 1995.  This 23% reduction is due primarily
to the development costs for the new destacker units.

     Net  (consolidated)  income for the  quarter  ended  December  31, 1996 was
$107,812,  down 14% from the  (predecessor's)  net  income of  $125,562  for the
quarter ended  December 31, 1995.  Net income for the six months ended  December
31, 1996 was $122,145,  down 51% from the (predecessor's) net income of $248,766
for the six months then ended  December 31, 1995. The decrease in net income was
partially  caused by increased  interest expense of $107,127 and amortization of
goodwill of $51,480.

                                     16



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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 the quarter  ended  December 31, 1996,  Atlas had 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  which has reduced the  overall  annual  principal  payments
requirements, improving the current ratio and working capital.

     As of December 31, 1996, 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.
Consequently, the floating rate of interest is significantly reduced compared to
conventional construction or real-estate financing.

Terms:   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 December 31, 1996, Atlas had financed debt of $11,637,590 under the line
of credit,  $4,500,000 under the Industrial Revenue Bond, payable over 15 years,
and other debt of $68,155,  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 operation at
current and near-term anticipated sales levels.

     Working  capital at December 31, 1996 was $16,500,369 and the current ratio
was 3.9 to 1, compared to $5,047,991 and 1.4 to 1, respectively, for the company
at June 30, 1996. This improvement resulted from the Company's consolidating the
PTC and Atlas balance sheets,  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 US  securities  until the funds are
completely spent on the 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  early in May of 1997.  The  expansion
will increase  plant  capacity by  approximately  80% and will incur certain one
time relocation and start up expenses in late June through August of 1997 .

                                       17




<PAGE>

Risks and 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,  outcome of the
IRS audit for year ending June 30,  1995 and higher  than  anticipated  start-up
expenses or delays for the new manufacturing facility.



                                         18



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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






                                           19



<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:     February 14, 1997              By:  /s/  Samuel N. Seidman
                                         Samuel N. Seidman, President



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




                                             20

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