U.S. 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:  September 30, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

For the transition period from ____________________  to  ____________________


                         Commission file number 0-24242

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

    Delaware                                      13-3764753
-------------------------------         ------------------------------------
(State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
 Incorporation or Organization)         

 509 Madison Avenue, New York, New York                          10022
---------------------------------------                     ----------------
   (Address of Principal Offices)                              (Zip Code)

Registrant's Telephone Number, Including Area Code:       (212) 843-1480
                                                   ----------------------------

                                       Not Applicable
--------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

     Indicate  by check  whether  the  registrant:  (1) has  filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes   X    No   |_|

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

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes _____ No ______

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock,  as of November 16, 1998:  2,425,000  shares,  $ .001 par value
common stock.


<PAGE>


                                TABLE OF CONTENTS

                                                                      Page

Part I.  Financial Information for
         Productivity Technologies Corp. ("PTC" or "Company") and
         Subsidiary Atlas Technologies, Inc. ("Atlas")

Item 1.  Interim Financial Statements                                   3

         Consolidated Balance Sheets                                    4-5

         Consolidated Statements of Operations                          6

         Consolidated Statement of Stockholders' Equity                 7

         Consolidated Statements of Cash Flows                          8

         Notes to Financial Statements                                  9-10

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                      11-13


Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K                               14

Signatures                                                              14






                                       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 three months ended September 30, 1998, are not necessarily indicative of
the results that may be expected for the year ending June 30, 1999.

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,  1998.  Information  provided  includes  the
consolidated  audited  financial  statements,  including  footnotes for the year
ended June 30,  1998 and  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

                                       3


<PAGE>




Productivity Technologies Corp. and Subsidiary

Consolidated Balance Sheets ( Unaudited)
<TABLE>
<CAPTION>
                                                                                   September 30,           June 30,
                                                                                       1998                  1998
                                                                                      -----                  ----
<S>                                                                                <C>                    <C>       
Assets

Current assets
    Cash and cash equivalents                                                          $55,754             $2,172,457
    Short-term investments and accrued interest                                      1,144,795                482,280
    Contracts receivable                                                             7,385,770              5,217,421
    Notes receivable                                                                         0                 86,415
    Costs and estimated earnings in excess of billings on
       uncompleted contracts                                                         4,687,800              5,435,957
    Inventories                                                                        678,078                628,481
    Prepaid expenses and other                                                         154,006                773,522
    Deferred income taxes                                                              885,239                475,000
Total current assets                                                                14,991,442             15,271,533
                                                                                   -----------             ----------

Property and equipment
    Land                                                                              $591,514               $591,514
    Buildings and improvements                                                       4,856,753              4,854,799
    Machinery and equipment                                                          3,708,933              3,676,415
    Transportation equipment                                                            31,500                 31,500
                                                                                       -------              --------
        Total fixed assets                                                           9,188,700              9,154,228
        Less accumulated depreciation                                                  987,219                865,473
                                                                                      --------              ---------

Net property and equipment                                                           8,201,481              8,288,755
                                                                                    ----------              ---------

Other assets
    Goodwill, net of accumulated amortization  of $263,301 and
    $57,191                                                                          2,609,936              2,587,164
    Other assets                                                                       648,911                661,936
                                                                                      --------              ---------
Total other assets                                                                   3,258,847              3,249,100
                                                                                    ----------              ---------
Total assets                                                                       $26,451,770            $26,809,388
                                                                                   ============           ===========
</TABLE>


See accompanying notes to financial statements.

                                       4

<PAGE>



Productivity Technologies Corp. and Subsidiary
Consolidated Balance Sheets (Unaudited)

<TABLE>
<CAPTION>
                                                                                  September 30,              June 30,
                                                                                      1998                     1998
                                                                                  -------------              ---------
<S>                                                                                <C>                     <C>
Liabilities and stockholders' equity
Current liabilities
    Accounts payable                                                                $2,212,295             $1,970,769
    Accrued expenses
       Executive bonus agreement                                                             0                810,000
       Commissions payable                                                             597,799                482,512
       Payroll and related withholdings                                                 99,049                240,329
       Other                                                                           853,667                770,096
    Billings in excess of costs and estimated
       earnings on uncompleted contracts                                               678,212                580,262
    Current maturities of long term debt                                               615,677                615,677
                                                                                      --------               -------
Total current liabilities                                                           $5,056,699             $5,469,645

Executive deferred compensation                                                      1,436,383              1,436,383
Long-term debt less current maturities                                              11,134,627             11,254,127
                                                                                   -----------            ----------
Total liabilities                                                                   17,627,709             18,160,155
                                                                                   -----------            ----------

Stockholders' equity
    Preferred  Stock, $.001 par value, 1,000,000
      shares  authorized;   none outstanding 
    Common Stock, .$001 par value, 20,000,000
      shares authorized; 2,425,000 and 2,125,000
      shares outstanding                                                                 2,425                  2,125
    Common Stock to be issued                                                                0                695,520
    Additional paid-in capital                                                       9,872,708              9,177,488
    Deficit                                                                         (1,051,072)            (1,225,900)
                                                                                    -----------            -----------
Total stockholders' equity                                                           8,824,061              8,649,233
                                                                                     ----------             ---------
Total liabilities and stockholders' equity                                         $26,451,770            $26,809,388
                                                                                   ============           ===========
</TABLE>



See accompany notes to financial statements.

                                       5

<PAGE>




Productivity Technologies Corp. and Subsidiary
Consolidated Statements of Operations ( Unaudited)
<TABLE>
<CAPTION>

                                                                                    First Quarter Ended
                                                                      --------------------------------------------------
                                                                        September 30,                       September 30,
                                                                             1998                               1997
                                                                        -------------                        -----------
<S>                                                                      <C>                                  <C>       
Net sales                                                                $8,150,682                           $9,352,486
Cost of sales                                                             5,672,750                            6,635,080
                                                                         ----------                            ---------
Gross profit                                                              2,477,932                            2,717,406
Selling, general and administrative expenses                              2,032,424                            2,012,488
Officers' bonuses                                                                 0                              255,066
                                                                          ----------                           ---------
Income (loss) from operations                                               445,508                              449,852
                                                                           --------                             --------

Other income ( expenses)
    Interest income                                                          11,804                               25,498
    Interest expense                                                       (200,272)                            (291,851)
    Miscellaneous                                                             2,788                               92,846
                                                                             ------                             ---------  
Total other expenses                                                       (185,680)                            (173,507)
                                                                           ---------                            ---------
Income before income taxes                                                  259,828                              276,345
Income taxes                                                                 85,000                              110,500
                                                                            -------                              -------
Net income                                                                 $174,828                             $165,845
                                                                           ========                             ========
Net income per share of  Common Stock                                         $0.07                                $0.08
                                                                              =====                                =====
Weighted average number of
    common shares outstanding                                             2,425,000                            2,125,000
</TABLE>



See accompanying notes to financial statements.

                                       6
<PAGE>




Productivity Technologies Corp. and Subsidiary
Consolidated Statement of Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>


                                                                      
                                            Common Stock               Common       Additional                         Total
                                        --------------------          Stock to be     Paid-In                       Stockholders'
                                       Shares          Amount          Issued         Capital        Deficit           Equity
--------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                <C>             <C>          <C>           <C>                <C>       
Balance July 1, 1998                2,125,000          $2,125          $695,520     $9,177,488    ($1,225,900)       $8,649,233

Common Stock issued                   300,000            $300         ($695,520)      $695,220

Net income (unaudited)                                                                               $174,828          $174,828
                                   ----------          -------        ----------     ---------       ---------         --------


Balance as of
September 30, 1998                  2,425,000          $2,425               $0      $9,872,708     ($1,051,072)      $8,824,061
                                   ==========         =======               ===    ===========     ============      ==========

</TABLE>




See accompanying notes to financial statements.

                                       7
<PAGE>





Productivity Technologies Corp. and Subsidiary
Consolidated Statement of Cash Flows  (Unaudited)
<TABLE>
<CAPTION>
                                                                                          First Quarter Ended
                                                                                  -------------------------------------
                                                                                   September 30,          September 30,
                                                                                      1998                    1997
                                                                                     ------                   ----
<S>                                                                                 <C>                     <C>
Cash flows from operating activities
    Net income                                                                        $174,828               $165,845
    Adjustments to reconcile net income to net cash
    Provided by (used in ) operating activities:
         Depreciation                                                                  121,746                107,794
         Amortization                                                                  (22,772)              (417,271)
         Deferred income tax                                                          (410,239)                 5,382
    Changes in operating assets and liabilities:
         Contract receivables                                                       (2,168,349)             3,218,528
         Inventories, prepaid expenses and other                                       569,919                596,335
         Costs and estimated earnings in excess of
            billings on uncompleted contracts                                          846,107             (3,147,804)
         Accounts payable, accrued expenses and other                                 (510,896)              (262,683)
                                                                                    ----------              ---------
Net cash provided by (used in) operating activities                                ($1,399,656)              $266,126
                                                                                   ============              ========

Cash flows from investing activities
    Collection of notes receivable                                                     $86,415               $160,631
    Maturity of US securities in deposited trust fund                                 (662,515)              (537,471)
    Expenditures for property and equipment                                            (34,472)               513,358
    Increase in notes receivable                                                        13,025                103,810
                                                                                      --------               --------
Net cash provided by (used in) investing activities                                  ($597,547)              $240,328
                                                                                     ==========              ========
Cash flows from financing activities
    (Payments) or borrowings on long-term debt                                                                ($1,924)
    Proceeds from additional long-term debt                                          ($119,500)            (1,245,424)
                                                                                     ----------            -----------
Net cash provided by (used in) financing activities                                  ($119,500)           ($1,247,348)
                                                                                     ==========           ============

Net increase (decrease) in cash and cash equivalents                               ($2,116,703)             ($740,894)
Cash and cash equivalents at the beginning of the period                             2,172,457                843,709
                                                                                    ----------               --------

Cash and cash equivalents at the end of the period                                     $55,754               $102,815
                                                                                     =========               =========

Supplemental cash flow Information
    Cash paid during the period for interest                                          $200,272               $291,851
</TABLE>

See accompanying notes to financial statements.

                                       8
<PAGE>

Notes to Financial Statements (Unaudited)

1.       Basis of Presentation

The  accompanying  unaudited  financial  statements  for the first quarter ended
September  30, 1998 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, 1998 has been derived from the audited consolidated  financial
statements at that date. Operating results for the first quarter ended September
30, 1998 are not necessarily  indicative of the results that may be expected for
the  year  ended  June  30,  1999  or any  other  interim  period.  For  further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto  included in the  Company's  Annual Report for the period ended June 30,
1998.


2.       Summary of Significant Accounting Policies

History 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" or the "Company"),  and acquired, through
a merger, Atlas Technologies, Inc. ("Atlas") as a wholly owned subsidiary.

The  accompanying  financial  statements  presented  for the first quarter ended
September  30, 1998  include  the  consolidated  accounts of PTC and Atlas.  All
significant  inter-company  accounts and transactions  have been eliminated upon
consolidation.

Nature of Business

Atlas, PTC's sole operating  subsidiary,  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 in Fenton,  Michigan and has sales and engineering offices
in Michigan, Europe and China.

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 large  construction  equipment.  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.

                                       9
<PAGE>





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 first quarter  ended  September 30, 1998 has
been  computed  based on the weighted  average  number of  2,425,000  common and
diluted common equivalent shares outstanding. In September, 1998, 300,000 shares
were  issued  as  partial  consideration  for  the  restructuring  of the  Atlas
executive bonus program.  The issuance of the 300,000 shares was effective as of
June,  1998.  The bonus  restructuring  agreement  is described in detail in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998.


3.       Commitments

Atlas is a party to  employment  agreements  with  its two  principal  executive
officers.  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  $198,588,  subject  to cost of  living
increases  after  December 31, 1998 under the  agreement  continuing  after that
date. The employment agreements also provide that each executive,  regardless of
future employment, will receive four annual payments of $207,571 commencing July
30, 1999. Each executive also received 150,000 shares of restricted common stock
of the Company which were issued effective as of June, 1998. The following items
related to the employment agreements are included in the accompanying  financial
statements as of and for the year ended June 30, 1998:

Balance Sheet
Executive Deferred Compensation Agreement       $1,436,383
Common stock issued (.001 par value)                   300
Paid in capital                                    696,320
                                                ----------
Statement of Operations
Bonus restructuring expense                     $2,131,903


4.       Contingencies

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  Atlas has  calculated  and filed for over the past six years.  Atlas had
applied  $459,000 of credit  towards  Federal  Taxes due for the fiscal  periods
ended June 1998,  June 1996 and June  1995,  and had a carry  forward of $23,000
expected to be used as a reduction in future tax payments. Atlas' management and
Atlas'  accountants  believe  this  issue is a matter of  interpretation  of the
research and  experimentation  regulations.  Atlas' management believes that the
IRS may seek a reduction in the amount of credit  calculated which may adversely
affect the  financial  statements  of the  Company.  The  Company is entitled to
indemnification  up to $560,000 (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 the audit.

                                       10


<PAGE>




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

Results of Operations

Unaudited  sales  revenues  for  the  quarter  ended  September  30,  1998  were
$8,150,682,  down 13% from the quarter  ended  September  30,  1997  revenues of
$9,352,486.  Decreased  sales were primarily due to lower customer demand during
the quarter. The order backlog as of September 30, 1998 was $16.6 million,  down
11% from the June 30, 1998 backlog of $18.2 million.  The decline in backlog was
mainly due to slower closings of new orders.  The volume of new business quotes,
both domestic and foreign, remains active.

Costs of products sold for the quarter ended September 30, 1998 were $5,672,750,
down 15% from  $6,635,080 for the quarter ended September 30, 1997. The decrease
in cost of sales  from a  quarter a year ago was a slight  improvement  over the
corresponding 13% decrease in quarterly  revenues versus the quarter a year ago.
Cost of  products  sold as a percent of  revenues  decreased  to 69% of revenues
during  the  quarter  compared  to 71% of  revenues  during  the  quarter  ended
September 30, 1997.  The reduction in cost of sales as a percent of revenues was
primarily  due  to  a  more  favorable  product  mix,  and  improved  production
processing during the quarter relative to the quarter one year ago.

Gross  profit for the quarter  ended  September  30, 1998 was  $2,477,932,  a 9%
decrease  compared to $2,717,406 for the quarter ended September 30, 1997. Gross
profit  decreased  primarily due to lower volume and to slightly higher research
and development costs and warranty  expenses.  The Company's gross profit margin
increased  2% relative to the gross  profit  margin one year ago for the reasons
cited in the paragraph  above in connection with the decline in cost of sales as
a percent of revenues.

Consolidated   selling,   general  and   administrative   (SG&A)  expenses  were
$2,032,424,  up 1% from the quarter  ended  September  30,  1997 of  $2,012,488.
Though legal and accounting fees were substantially reduced from the quarter one
year ago, selling expenses for outside representative  commissions and royalties
increased approximately $163,000 versus the first quarter last year.

Officer bonuses were $ -0- during the quarter ended September 30, 1998, compared
to $255,066,  from the quarter ended  September 30, 1997.  Officer  bonuses were
eliminated  as part of the bonus  restructuring  plan  detailed in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998.

Consolidated  earnings from  operations  (net income before  interest and income
taxes) for the quarter ended September 30, 1998 were $445,508,  down 1% from the
quarter  ended a year  ago of  $449,852.  As  adjusted  for the  elimination  of
executive bonuses,  earnings during the period were approximately 36% lower than
the previous  year.  The decrease was the result of slower than  expected  sales
demand combined with increased selling, research and warranty expenses described
above.

Interest  expenses for the quarter ended September 30, 1998 were $200,272,  down
31% from  $291,851for the quarter ended September 30, 1997.  Decreased  interest
costs  were due to  reduced  work in process  and a lower  level of  outstanding
receivables which the Company carried during the quarter.

Net  consolidated  income for the quarter ended September 30, 1998 was $174,828,
up 5% from  $165,845 for the quarter ended  September 30, 1998.  Net profits for
the quarter one year ago  consisted  of income  from  operations  of $88,845 and
$77,000 from a gain on sale of the Argentine facility during the quarter.  Basic
earnings  per share was $0.07 for the first  quarter in fiscal 1999  compared to
$0.08 for the first  quarter  in fiscal  1998.  There  were  2,425,000  weighted
average  common  shares  outstanding  during the first  quarter in fiscal  1999,
compared to 2,125,000  weighted  average common shares  outstanding in the first
quarter 1998.

                                       11

<PAGE>



Liquidity and Capital Resources

Atlas  believes it has  sufficient  capital to meet short and long term  funding
needs.  Management expects financing  facilities  currently in place, along with
anticipated  continued cash available  from  operations,  will be sufficient for
general operations and any required current year asset purchases.

During  the  fiscal  year ended June 30,  1998,  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  inventories,  and other assets.  Interest rates were reduced to
the bank prime rate and a revised  amortization  of certain  asset based debt to
quarterly  payments  of $62,500  reduced the overall  annual  principal  payment
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, most of which have been
spent as of the end of the  first  quarter  of  fiscal  1999,  were used for the
construction,  furnishing and equipping of the new 59,000 sq. ft.  manufacturing
building and the purchase of a new  manufacturing  resource  planning system for
Atlas.  Unused funds have been invested and earn interest until spent. The bonds
are state and  federal  tax  exempt  and,  consequently,  the  floating  rate of
interest is significantly reduced compared to conventional  construction or real
estate financing. IRB terms are as follows for each fiscal year:

1991--2001  $400,000 annual principal payments plus quarterly interest payments.
2001--1012  $300,000 annual principal payments plus quarterly interest payments.

At September 30, 1998,  Atlas had financed (a) debt of $6,536,065 under the line
of credit,  and $4,500,000  under the Industrial  Revenue Bond,  payable over 15
years, (b) deferred  executive  compensation of $1,436,382  scheduled to be paid
over four equal annual  installments  commencing  July 1999, (c) $560,000 due to
Atlas  executives  and held in escrow  awaiting the IRS audit  results,  and (d)
other debt of $154,240. This compares to total combined long term debt financing
and line of credit  current and long term balances of $13,186,687 as of June 30,
1998.

The  Company  believes  that,  as a result of the  current  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 September 30, 1998 was  $9,934,743 and the current ratio was
3.0 to 1, compared to $9,801,888 and 2.8 to 1, respectively,  for the Company at
June 30, 1998.

Year 2000 Compliance

The Company is installing an  "enterprise  resource  planning"  system at Atlas,
which  includes  computer  systems for its  internal  accounting  and  reporting
activities and its  manufacturing  operations and processes which are "Year 2000
compliant"  (which  means  that such  computer  systems  and  other  information
technology will accurately process date/time data regardless of whether the date
is in the twentieth or twenty-first  century).  The acquisition and installation
of  the  system  are  expected  to  cost   approximately   $340,000,   of  which
approximately $210,000 was expensed by September 30, 1998. Because the system is
being  implemented  as  an  overall  upgrade  to  Atlas's   operations  and  not
specifically  to  address  Year 2000  compliance  concerns,  management  has not
estimated  the  portion  of  the  cost  which  may be  allocable  to  Year  2000
compliance.  Management  has not yet  assessed  whether  or not the  failure  of
Atlas's internal  information  technology to be Year 2000 compliant would have a
material  adverse  effect upon the Company's  financial  position,  liquidity or
results of operations  although it is confident that  installation and operation
of the new system will be accomplished in advance of December 31, 1999.

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The Company is also  assessing  its  vendors,  customers,  utilities,  banks and
others with whom it does  business to determine if their failure to be Year 2000
compliant would have a material adverse effect upon the Company or its financial
position,  liquidity or results of operations.  To date, nothing has come to the
attention of management  that leads it to conclude  that the  likelihood of such
adverse effect reasonably  exists.  The Company's and Atlas's operations utilize
relatively little electronic data interchange with vendors,  customers and other
third  parties.  However,  to the extent that such third  parties,  particularly
utilities and banks,  may not be Year 2000 compliant,  the Company and Atlas may
be  adversely  effected,  although  the  magnitude  of  such  effect  cannot  be
estimated.  The  cost  to the  Company  of  making  its  third-party  Year  2000
compliance assessment is not expected to be material.

Certain Atlas products contain  processors  which address and utilize  date/time
data.  Management  believes that such processors  incorporated in equipment sold
within the past five years are virtually all Year 2000 compliant. However, it is
not able to determine the compliance status of processors used in equipment sold
in earlier  periods  with any  reasonable  degree of  certainty.  Although  such
equipment is beyond the warranty periods  applicable to Atlas's products,  it is
possible that  customers who  purchased  equipment  from Atlas which is not Year
2000  compliant  may  nevertheless  assert  claims  against Atlas to correct the
compliance deficiencies or for resulting damages. While management believes that
Atlas would not be legally  responsible  to such persons,  based on the terms of
its purchase orders and warranties, there can be no assurance that this position
would prevail if challenged. Management is unable to estimate the potential cost
that the Company might incur if such claims are made and successfully  sustained
or  whether  or not such cost would  have a  material  adverse  effect  upon its
financial position, liquidity or results of operations.

Forward-Looking Statements

When used in this and in future  filings by the Company with the  Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized  executive officer of the Company,  the words
or phrases "will likely  result,"  "plans," "will  continue," "is  anticipated,"
"estimated,"   "project"  or  "outlook"   or  similar   expressions   (including
confirmations  by an  authorized  executive  officer of the  Company of any such
expressions  made by a third party with  respect to the Company) are intended to
identify  "forward-looking   statements"  within  the  meaning  of  the  Private
Securities  Litigation Reform Act of 1995. The Company wishes to caution readers
not to place undue  reliance  on any such  forward-looking  statements,  each of
which speaks only as of the date made.  Such  statements  are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from historical earnings and those presently  anticipated or projected.  Factors
that may cause actual results to differ  materially  from those  contemplated by
such  forward-  looking  statements   include,   among  others,  the  following:
competitive  pressures  in the  industry  in which the  Company is  engaged;  an
unfavorable outcome of the IRS audit currently underway;  adverse changes in the
Company's banking loan  requirements;  major fluctuations in the strength of the
U.S. dollar versus international currencies;  Year 2000 compliance;  and general
economic  conditions.  The Company  has no  obligation  to publicly  release the
result of any revisions which may be made to any  forward-looking  statements to
reflect anticipated or unanticipated events or circumstances occurring after the
date of such statements.


                                       13
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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




                                   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:    November 20, 1998                By:  /s/  Samuel N. Seidman
                                          ---------------------------
                                          Samuel N. Seidman, President



Date:    November 20, 1998                By:  /s/  Jesse Levine
                                          ----------------------
                                          Jesse Levine, Chief Financial Officer







                                       14

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