U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549


                                   Form 10-QSB



 X        Quarterly report under Section 13 or 15(d) of the Securities  Exchange
          Act of 1934 (Fee  required)  for the  quarterly  period ended June 30,
          1998.
         Transition report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934 (No fee required) For the transition period from to
Commission file number 1-11586


                                PTI HOLDING INC.
                 (Name of small business issuer in its charter)


              Delaware                                            13-3590980
---------------------------------                            -------------------
(State or jurisdiction                                         (I.R.S. Employer
of incorporation or organization)                            Identification No.)

c/o 15 East North Street, Dover, DE                                    19901
---------------------------------                            -------------------
(Address of principal executive offices)                            (Zip Code)

                                 (302) 678-0855
                 ----------------------------------------------
                (Issuer's Telephone Number, Including Area Code)



Securities registered under Section 12(b) of the Exchange Act:
Title of each class
----------------------
                                                         Name of each exchange
                                                         on which registered
                                                         -----------------------
Common Stock, par value
-----------------------                                  -----------------------
  $.01 per share                                         None
-----------------------                                  -----------------------
Securities registered under Section 12(g) of the Act:
Title of each class
-----------------------

Common Stock, par value
-----------------------
$.01 per share
-----------------------

         



         Check  whether the issuer:  (1) filed  reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 past 90 days. Yes X No

         State the number of shares  outstanding  of each class of the  issuer's
classes of common equity,  as of the latest  practicable  date. As of August 10,
1998, 4,796,506 shares of the issuer's common equity were outstanding.



<PAGE>




ITEM 1.  Financial Statements.

                                                                      Page
                                                                      -----
Consolidated Balance Sheet as of June 30, 1998                         F-1

Consolidated Statements of Income for the three and six months
ended June 30, 1998 and 1997                                           F-2

Consolidated Statements of Cash Flows for the six months               F-3
ended June 30, 1998 and 1997

Notes to Consolidated Financial Statements                             F-4 to
                                                                       F-6


                               PART I



ITEM 2.  Management's Discussion and Analysis


         Statements  in this  Quarterly  Report on Form  10-QSB  concerning  the
Company's  business outlook or future economic  performance;  or other financial
items;  and plans and objectives  related  thereto;  and  statements  concerning
assumptions   made  or  expectations  as  to  any  future  events,   conditions,
performance or other matters, are  "forward-looking  statements" as that term is
defined  under the  Federal  Securities  Laws.  Forward-looking  statements  are
subject  to risks,  uncertainties  and other  factors  that could  cause  actual
results to differ materially from those stated in such statements.

         PTI  Holding  Inc.  (collectively  with its  wholly-owned  subsidiaries
referred  to herein  as the  "Company"),  manufactures  and  markets  protective
equipment,  primarily  bicycle  helmets and safety ear plugs.  In addition,  the
Company markets and distributes bicycles and bicycle-related products, and other
safety and medical supplies.

         On March 1, 1994, the Company acquired Foam-O-Rama, Inc. ("Foam") a New
York  corporation  which is  principally  engaged in the business of the design,
marketing and sale of bicycle helmets, by merging it with and into the company's
wholly-owed operating subsidiary,  Protective Technologies International Inc., a
New York corporation ("PTI"). From and after March 2, 1994, Foam had no separate
or  independent  existence,  having been merged into PTI. PTI has since expanded
its  product  line  from  bicycle  helmets  to  include   bicycles  and  bicycle
accessories.

         On August 5, 1997, the Company expanded its line of protective products
by acquiring Flents Products Co., Inc., (`Flents"), which is principally engaged
in the business of  manufacturing  wax earplugs  and the  marketing  and sale of
earplugs and other  safety and medical  supplies,  such as an eye drop  delivery
system,  styptic  devices,  and  air-filter  masks.  For  purposes of  financial
accounting  and income  tax,  the Merger was deemed to have  occurred  as of the
opening of business on June 1, 1997.

         On May 12, 1998, Flents acquired certain assets of the Comfees division
of Magnivision,  a subsidiary of American Greetings Corporation,  for a purchase
price of approximately $1,700,000.  Comfees manufactures and distributes contact
lens cases,  liquid  dispensers,  medicine  dispensers,  finger  splints and ear
protectors,  among other health and beauty care items. Comfees products are sold
through several mass merchandisers, including K-Mart and Target.



<PAGE>



Results of Operations:
----------------------

 Three months ended June 30, 1998 Compared to Three months ended June 30, 1997
-------------------------------------------------------------------------------

         The Company's net sales were $19,397,234  during the quarter ended June
30,  1998,  an  increase  of 95% from its net sales of  $9,943,409  for the same
period in 1997. The sales increase from 1997 to 1998 resulted predominantly from
the following:

*Increased sales to existing customers through the addition of new helmet models
*Increased market share at the expense of competitors. 
*Increased sales in existing models due to growth in the overall helmet market.
*Increased sales of the Company's bicycle and bicycle  accessory  products.
*The addition of new retail outlets for the Company's products.
*Introduction of new accessory product lines.
*The Company's license arrangements both with Hasbro, Inc., to manufacture
 and market helmets,  bicycles and bicycle accessories under the PlayskoolTM
 brand name, and with Mattel, Inc. to manufacture and market helmets under
 the Barbie(TM) name.
*Net sales of its Flents subsidiary of $2,187,791, which was acquired June 1,
 1997.

         The cost of sales for the quarter ended June 30, 1998 were  $12,133,171
for PTI and  $1,177,732  for Flents  (resulting in a  consolidated  gross profit
margin  of 31%).  The cost of sales for the  quarter  ended  June 30,  1997 were
$6,681,308 for PTI and $325,855 for Flents  (resulting in a  consolidated  gross
profit margin of 30%).

         Selling, general and administrative expenses for the quarter ended June
30,  1998 were  $3,235,987  compared  to  selling,  general  and  administrative
expenses of $1,163,847 (not including the one-time non cash  accounting  charge)
for the same period in 1997.  SG&A as a percentage of sales were 17% and 12% for
the quarters ended June 30, 1998 and 1997, respectively.  The increased selling,
general and  administrative  costs in 1998 was primarily due to the higher costs
associated with the expansion of the helmet, bicycle and bicycle accessory,  the
acquisition  of Flents,  installation  of new systems,  and the higher costs for
human resources.

         The Company had a net income of  $1,516,244  for the quarter ended June
30, 1998 compared to the Company's net loss of $(2,811,506)  for the same period
in 1997.  The net loss for the quarter  ended June 30, 1997  included a one-time
non  cash  accounting  charge  of  $3,844,531  for the  conversion  of  Series A
Preferred  Stock into Common Stock by the Directors of the Company.  Without the
charge  net  income  for the  quarter  ended  June  30,  1997  would  have  been
$1,033,025.


    Six months ended June 30, 1998 Compared to Six months ended June 30, 1997
--------------------------------------------------------------------------------

         The  Company's net sales were  $31,143,211  during the six months ended
June 30, 1998, an increase of 93% from its net sales of $16,172,915 for the same
period in 1997. The sales increase from 1997 to 1998 resulted predominantly from
the following:

*Increased sales to existing customers through the addition of new helmet
 models.
*Increased market share at the expense of competitors. 
*Increased sales in existing models due to growth in the overall helmet  market.
*Increased sales of the Company's bicycle and bicycle  accessory  products.
*The addition of new retail outlets for the Company's products.
*Introduction of new accessory product lines.
*The Company's license  arrangements both with Hasbro, Inc., to manufacture and
 market helmets, bicycles and bicycle accessories under the PlayskoolTM
 brand name, and with Mattel, Inc. to manufacture and market helmets under the 
 Barbie(TM) name.
*Net sales of its Flents subsidiary of $4,043,904, which was acquired June1,1997

<PAGE>

         The  cost  of  sales  for the six  months  ended  June  30,  1998  were
$19,217,430 for PTI and $2,147,982 for Flents (resulting in a consolidated gross
profit  margin of 31%).  The cost of sales for the  quarter  ended June 30, 1997
were  $10,618,701  for PTI and $325,855 for Flents  (resulting in a consolidated
gross profit margin of 32%).

         Selling,  general and administrative  expenses for the six months ended
June 30, 1998 were $5,617,603  compared to selling,  general and  administrative
expenses of $2,128,683 (not including the one-time non cash  accounting  charge)
for the same period in 1997.  SG&A as a percentage of sales were 18% and 13% for
the six  months  ended  June 30,  1998 and  1997,  respectively.  The  increased
selling,  general  and  administrative  costs in 1998 was  primarily  due to the
higher costs  associated  with the expansion of the helmet,  bicycle and bicycle
accessory business, the acquisition of Flents,  installation of new systems, and
the higher costs for human resources.

         The Company  had a net income of  $2,248,509  for the six months  ended
June 30, 1998 compared to the Company's  net loss of  $(2,052,535)  for the same
period in 1997.  The net loss for the six months ended June 30, 1997  included a
one-time non cash accounting charge of $3,844,531 for the conversion of Series A
Preferred  Stock into Common Stock by the Directors of the Company.  Without the
charge  net  income  for the six  months  ended  June 30,  1997  would have been
$1,791,996.


Capital Resources
-----------------

         The Company has satisfied its capital requirements through the proceeds
of its initial public offering of securities,  which resulted in net proceeds of
approximately  $3,800,000,  through  the  proceeds of a  Regulation  "S" private
placement in November 1994,  which  resulted in gross proceeds of  approximately
$750,000,  through the exercise of certain outstanding options held by employees
and consultants of the Company,  which resulted in net proceeds of approximately
$400,000,  through internal cash flow, through PTI's opening of a revolving line
of credit in May,  1996 and  through the  exercise  of public  warrants in 1997,
which resulted in gross proceeds of approximately $3,000,000.

         The  Company's  working  capital  at June 30,  1998 was  $9,821,708  as
compared to $6,713,029 at June 30, 1997.

         The cash flows of the Company have fluctuated due to capital  spending,
working  capital  requirements,  and bank loans.  The Company  expects that cash
flows in the near  future  will be  primarily  determined  by the  levels of net
income, working capital requirements,  and financings, if any, undertaken by the
Company.  Net cash  (decreased)  increased  by  $(395,987)  and  $589,358 in the
six-months ended June 30, 1998 and 1997, respectively.

         Net cash used in operating  activities was $9,764,361 and $2,189,421 in
the six-months ended June 30, 1998 and 1997, respectively. Net income (loss) was
$2,248,509 and $(2,052,535) for the same periods, respectively.

         Net cash used in investing  activities  was  $4,393,351 and $196,137 in
the  six-months  ended June 30,  1998 and 1997,  respectively.  Net cash used in
investing   activities  pertains  to  capital  expenditures  in  these  periods,
primarily for computer systems and manufacturing  equipment, and for the payment
as consideration for the purchase of the acquired product line.

         Net  cash  provided  by  financing  activities  was  $13,761,725  and $
2,974,916 in the  six-months  ended June 30, 1998 and 1997,  respectively.  Cash
flows from financing activities were primarily affected by the net bank loans of
$13,761,723 and $2,931,574 in these periods, respectively.

         The Company  pays its  employees  and  vendors on a weekly,  monthly or
bimonthly  basis,  while its customers pay for products on an average of 75 days
after  shipment,  and  therefore the Company has  substantial  needs for working
capital.

         On May 6, 1996,  the Company  opened a revolving  line of credit at Key
Bank of New York. The line of credit is collateralized by inventory, receivables
and other assets.  As of June 30, 1998, the Company had $15,829,986  outstanding
pursuant to such line of credit  ($20,000,000  available,  including  $2,000,000
specifically for the future capital expenditures).

         Based on the  Company's  current  plans,  management  anticipates  that
current cash balances,  together with the Company's line of credit and cash flow
generated from  operations,  will be sufficient to continue to fund  production,
purchase of equipment, increased marketing activities and continued research and
development,  as  well as the  rest  of the  Company's  cash  requirements,  for
approximately the next 18 months.

<PAGE>
 
       The  Company's  research and  development  efforts are directed  toward
developing  new  products,   improving   existing   products  and  refining  its
manufacturing  processes.  Such  research  and  development  costs  amounted  to
approximately  $66,000 for the six months ended June 30, 1998 and  approximately
$69,000 for the six months ended June 30, 1997.  It is expected that the Company
will spend  approximately  $150,000 on research and development  during the 1998
year.


Year 2000 Compliance
--------------------

         The Company has  recently  finalized  its  installation  of the SAP R/3
accounting system, which is year 2000 compliant. The Company does not anticipate
any material additional costs with regard to its year 2000 compliance.

         The year 2000  issue is  expected  to affect  the  systems  of  various
entities  with which the Company  interacts,  including  suppliers  and vendors.
However,  there can be no assurance that the systems of other companies on which
the  Company's  systems  rely will be  timely  converted,  or that a failure  by
another  company's  systems to be year 2000 compliant  would not have a material
adverse effect on the Company.







ITEM 6.  Exhibits; List and Reports on Form 8-K.


         (a)      Exhibits

3.1  Registrant's  Articles  of  Incorporation,   as  amended,  incorporated  by
     reference to the like  numbered  exhibit in the  Registrant's  Registration
     Statement on Form SB-2 under the Securities  Act of 1933, as amended,  File
     No. 33-53466

3.2  Registrant's  by-laws,  incorporated  by  reference  to the  like  numbered
     exhibit in the Registrant's  Registration  Statement on Form SB-2 under the
     Securities Act of 1933, as amended, File No. 33-53466


4.4  Form of  Underwriters'  Warrant,  incorporated  by  reference  to the  like
     numbered  exhibit in the Registrant's  Registration  Statement on Form SB-2
     under the Securities Act of 1933, as amended, File No. 33-53466

10.2 Form of Stock Option  granted to  employees,  independent  contractors  and
     consultants,  incorporated  by  reference  to exhibit  number  10.14 in the
     Registrant's  Registration  Statement on Form SB-2 under the Securities Act
     of 1933, as amended, File No. 33-53466

10.3 Agreement  and Plan of Merger  dated  February  14,  1994 among  Protective
     Technologies  International  Inc.,  Foam-O-Rama,  Inc., Ellen Schaeffer and
     Lori Hillsberg,  as amended,  incorporated by reference to exhibit number 2
     in the  Registrant's  Current Report on Form 8-K dated March 16, 1994 under
     the Securities Exchange Act of 1934, as amended

10.4 Noncompetition   Agreement   dated   March  1,  1994   between   Protective
     Technologies  International  Inc. and Ellen  Schaeffer and Lori  Hillsberg,
     incorporated  by  reference  to  exhibit  number  99.1 in the  Registrant's
     Current  Report  on Form 8-K  dated  March 16,  1994  under the  Securities
     Exchange Act of 1934, as amended
<PAGE>


10.5 Noncompetition   Agreement   dated   March  1,  1994   between   Protective
     Technologies  International  Inc. and Warren  Schaeffer and Alan Hillsberg,
     incorporated  by  reference  to  exhibit  number  99.2 in the  Registrant's
     Current  Report  on Form 8-K  dated  March 16,  1994  under the  Securities
     Exchange Act of 1934, as amended

10.6 Form of Promissory Note memorializing  loans from directors and officers as
     authorized  by the Board of Directors on March 13,  1996,  incorporated  by
     reference to exhibit number 10.21 in the Registrant's Annual Report on Form
     10-KSB  for the  period  ended  December  31,  1995,  under the  Securities
     Exchange Act of 1934, as amended

10.7 Guarantee   from  Warren   Schaeffer  and  Alan   Hillsberg  to  Protective
     Technologies  International  Inc.,  incorporated  by  reference  to exhibit
     number 10.21 in the  Registrant's  Quarterly  Report on Form 10-QSB for the
     period ended September 30, 1995, under the Securities Exchange Act of 1934,
     as amended

10.8 Exclusive  License and Purchase  Guarantee  Agreement,  dated July 19, 1994
     between Toy Biz,  Inc.  and the  Registrant,  incorporated  by reference to
     exhibit number 10.22 in the  Registrant's  Quarterly  Report on Form 10-QSB
     for the period ended September 30, 1995, under the Securities  Exchange Act
     of 1934, as amended

10.10Line of Credit  Agreement  (Asset  Based),  dated May 6, 1996,  between Key
     Bank of New York, Protective  Technologies  International Inc., PTI Holding
     Inc. and  Protective  Technologies  of America Inc.,  and  collateral  loan
     documents thereto, incorporated by reference to exhibit number 10.25 in the
     Registrant's  Quarterly  Report on Form 10-QSB dated March 31, 1996,  under
     the Securities Exchange Act of 1934, as amended

10.13Merger Agreement and plan of  Reorganization  dated July 25, 1997 among PTI
     Holding Inc. and Flents  Products Co.,  Inc., as amended,  incorporated  by
     reference to exhibit numbers 1 and 2 in the Registrant's  Current Report on
     Form 8-K date August 20, 1997 under the Securities Exchange Act of 1934, as
     amended.




         (b)  Reports on Form 8-K

                No current  report on form 8-K was filed by the Company during
the quarter ended June 30, 1998.




<PAGE>











                                SIGNATURES

         Pursuant  to the  requirements  of the  Securities  Exchange  Act,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


Dated August 10, 1998


PTI HOLDING INC.



By  /s/ Meredith Birrittella
    ----------------------------
    Meredith W. Birrittella,
    Chairman of the Board
    Chief Executive Officer (authorized signatory)





By /s/ Anthony Costanzo
   -----------------------------
   Anthony Costanzo
   Chief Financial Officer






<PAGE>




                                   PTI HOLDING INC. & SUBSIDIARIES
                                     CONSOLIDATED BALANCE SHEET
                                             (Unaudited)

                                            June 30, 1998
<TABLE>

<S>                                                                                                            <C> 

ASSETS

Current assets:
     Cash and cash equivalents                                                                                   $ 286,173
     Accounts receivable, net of allowance for returns and doubtful collections of $325,500                     15,561,027
     Inventories                                                                                                14,380,906
     Deferred tax asset, net                                                                                       151,620
     Prepaid expenses and other current assets                                                                   1,535,339
                                                                                                           ----------------
     Total current assets                                                                                       31,915,065

Deferred tax asset, net                                                                                            192,780
Equipment and improvements, net of accumulated depreciation of $1,618,255                                        3,174,841
Intangible assets, net of accumulated amortization of $770,369                                                   5,379,004
                                                                                                         ------------------
                                                                                                              $ 40,661,690
                                                                                                         ==================


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Loan payable, bank                                                                                       $ 15,829,986
     Accounts payable and accrued expenses                                                                       5,673,026
     Other current liabilities                                                                                     590,345
                                                                                                          -----------------
     Total current liabilities                                                                                  22,093,357
                                                                                                                                  
Commitments and contingencies

Stockholders' equity:
     Common stock, $.01 par value; authorized 10,000,000 shares, issued and outstanding
          4,796,506 shares                                                                                          47,965
     Note receivable from exercise of stock warrants                                                               (58,322)
     Capital in excess of par                                                                                   16,144,815
     Retained earnings                                                                                           2,433,875

     Total stockholders' equity                                                                                 18,568,333
                                                                                                         ------------------
                                                                                                              $ 40,661,690
                                                                                                         ==================

</TABLE>
<PAGE>


                        PTI HOLDING INC. AND SUBSIDIARIES
                   CONSOLIDATED FINANCIAL STATEMENTS OF INCOME
                                   (Unaudited)

                 THREE & SIX MONTHS ENDED JUNE 30, 1998 AND 1997

<TABLE>



<S>                                                    <C>                      <C>                    <C>                  <C>
                                                    For the Three Months ended June 30,           For the Six Months ended June 30,
                                                   ------------------------------------          ---------------------------------- 
                                                        1998                  1997                    1998                 1997
                                                    -----------             ----------            -----------          -------------
Net sales                                            19,397,234             9,943,409             31,143,211            16,172,915

Cost of sales                                        13,310,903             7,007,163             21,365,412            10,944,556
                                                    ------------            ----------            ------------         -------------
Gross profit                                          6,086,331             2,936,246              9,777,799             5,228,359
                                                    ------------           -----------            ------------         -------------

Selling, general and administrative expenses:
     SG&A - before stock based compensation           3,235,987             1,163,847              5,617,603             2,128,683
     Stock-based compensation expense                         -             3,844,531                      -             3,844,531
                                                    -----------            -----------             -----------          ------------
                                                      3,235,987             5,008,378              5,617,603             5,973,214
                                                    -----------            -----------             -----------          ------------

Income (loss) from operations                         2,850,344            (2,072,132)             4,160,196              (744,855)

Interest expense, net of interest income                227,714                71,303                275,040                85,683
                                                    -----------            -----------             -----------          -----------

Income (loss) before income taxes                     2,622,630            (2,143,435)             3,885,156              (830,538)

Income taxes                                          1,106,386               668,071              1,636,647             1,221,997
                                                    -----------            -----------             ------------         -----------

Net income (loss)                                   $ 1,516,244            (2,811,506)           $ 2,248,509            (2,052,535)
                                                    ==============        ==============         =============       ===============
Net income (loss) per share of common stock
   Basic                                                 $ 0.32               $ (0.78)                $ 0.47               $ (0.58)
   Diluted                                               $ 0.30               $ (0.78)                $ 0.44               $ (0.58)

Weighted  average shares outstanding
   Basic                                              4,796,506             3,616,523              4,796,506             3,555,996
   Diluted                                            5,106,439             3,616,523              5,140,654             3,555,996

</TABLE>

<PAGE>

                     PTI HOLDING INC. & SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF CASH FLOWS
                               (Unaudited)

                 SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>


            <S>                                                                    <C>                    <C>                       
                                                                                  1998                  1997
                                                                             --------------          ------------
Cash flows from operating activities:
     Net income (loss)                                                          $ 2,248,509          $ (2,052,535)
     Adjustments to reconcile net income (loss) to net cash used in operating
       activities:
     Provision for returns and doubtful accounts                                    217,000                     -
     Depreciation and amortization                                                  611,240               294,121
     Amortization of intangible assets                                              115,982                77,982
     Deferred income tax (benefit)                                                  (46,877)               (7,400)
     Stock-based compensation                                                             -             3,844,531
     (Increase) decrease in operating assets:
          Accounts receivable                                                   (10,550,856)           (2,311,445)
          Inventories                                                            (6,222,978)           (1,655,855)
          Prepaid expenses and other current assets                                 339,133               103,989
     Increase (decrease) in operating liabilities:
         Accounts payable and accrued expenses                                    2,991,140               452,744
         Other current liabilities                                                  533,346              (935,553)
                                                                             ---------------          -------------
     Net cash used in operating activities                                       (9,764,361)           (2,189,421)
                                                                             ---------------          -------------


Cash flows from investing activities:
     Cash payments as consideration for purchase of acquired product line        (1,703,809)                    -
     Cash acquired in business combination, net of partial payments of
         acquistionncosts acquisition costs, net of cash acquired                         -                711,969
     Loan to stockholders                                                          (773,369)              (417,220)
     Purchase of equipment and improvements                                      (1,916,173)              (490,886)
                                                                             ---------------           ------------- 
     Net cash (used in) provided by investing activities                         (4,393,351)              (196,137)
                                                                             ---------------           -------------
Cash flows from financing activities:
     Payments of other current liabilities                                                -                (21,832)
     Proceeds from issuance of common stock                                               -                 65,174
     Proceeds from bank loan, net                                                13,761,725              2,931,574
                                                                             ---------------           -------------
    Net cash provided by financing activities                                    13,761,725              2,974,916
                                                                             ---------------           -------------

Net increase (decrease) in cash and cash equivalents                               (395,987)               589,358

Cash and cash equivalents, beginning of year                                        682,160                361,878

                                                                             ---------------        ---------------
Cash and cash equivalents, end of year                                            $ 286,173              $ 951,236
                                                                             ===============        ===============
Supplemental disclosures:
     Interest paid                                                                $ 331,412              $ 124,377
     Income taxes paid                                                              441,000              2,165,000

Non-cash investing and financing activities:
    Common stock issued as partial consideration for the purchase of
         the acquired company                                                             -              2,701,650
     Cash consideration and acquisition costs payable for the purchase
         of the aquired company                                                           -              2,447,258
     Conversion of preferred stock                                                        -                  2,500

  The accompanying  notes are an integral part of these  consolidated  financial
statements.

                                                         F-3
</TABLE>

<PAGE>

                                                   
                                 
                        PTI HOLDING INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.      Basis of presentation:

        The consolidated financial statements included herein have been prepared
        by the Company,  without an audit, pursuant to the rules and regulations
        of the  Securities  and Exchange  Commission.  Certain  information  and
        disclosures  normally  included  in  financial  statements  prepared  in
        accordance  with  generally  accepted  accounting  principles  have been
        condensed  or  omitted  pursuant  to such rules and  regulations.  These
        unaudited   consolidated   financial   statements   should  be  read  in
        conjunction with the consolidated financial statements and notes thereto
        included  in the  Company's  Annual  Report on Form  10-KSB for the year
        ended  December  31,  1997 and filed with the  Securities  and  Exchange
        Commission.

        In the opinion of the Company's management, these unaudited consolidated
        financial  statements  include  all  adjustments,  consisting  solely of
        normal recurring  adjustments,  necessary in order to present fairly the
        Company's  consolidated  financial  position as of June 30, 1998 and the
        results of their  operations  and their cash flows for the three and six
        months ended June 30, 1998 and 1997.  The results of  operations  for an
        interim  period  are not  necessarily  indicative  of the  results to be
        attained in any other fiscal period.


2.      Summary of significant accounting policies:

        Earnings per share:

        In February  1997,  the Financial  Accounting  Standards  Board ("FASB")
        issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
        "Earnings  Per Share".  This  statement  establishes  new  standards for
        computing  and  presenting  earnings  per  share  (EPS),  replacing  the
        presentation  of formerly  required  primary EPS with a presentation  of
        basic EPS. For entities with complex capital  structures,  the statement
        requires dual presentation of both basic EPS and diluted EPS on the face
        of the statement of  operations.  Under this new standard,  basic EPS is
        computed based on weighted  average shares  outstanding and excludes any
        potential  dilution.  Diluted EPS reflects  potential  dilution from the
        exercise or  conversion  of  securities  into common stock or from other
        contracts to issue common  stock.  The Company  adopted SFAS 128 for its
        financial  statements  issued for the year ended  December 31, 1997. The
        Company  restated  its EPS data for the three and six months  ended June
        30, 1997 to conform to the provisions of SFAS 128.

        A  reconciliation  between the numerators and  denominators of the basic
        and diluted EPS computation for net income (loss) is as follows:

<TABLE>

<S>                       <C>            <C>         <C>                <C>            <C>          <C>
                               Six months ended June 30, 1998              Six months ended June 30, 1997
                             ------------------------------------       -----------------------------------
                                                       Per share                                   Per share
                           Net Income      Shares      amounts         Net (loss)      Shares       amounts
                         -------------   ---------   ------------    ------------   ----------    -----------
                           
Basic EPS                   $ 2,248,509    4,796,506         $ 0.47     $(2,052,535)   3,555,996         $ (0.58)
                                                          ===========                                 ============
Dilutive stock options
& warrants                                   344,148                                           -
                                         -----------                                  ----------

Diluted EPS                 $ 2,248,509    5,140,654         $ 0.44     $(2,052,535)   3,555,996         $ (0.58)
                            ============  ============    ===========   ============= ============    ============

</TABLE>

        The potentially diluted shares that were not included in the computation
        of diluted  earnings  per share  because  to do so would be  antidultive
        consist of stock options and warrants as follows:

                     

                                                  Options/Warrants
                                            ------------------------------
          Six months ended June 30, 1998                  -
          Six months ended June 30, 1997              1,117,067

                                      F-4

<PAGE>





        Reclassification:

        For the comparability, certain 1997 amounts have been reclassified where
        appropriate  to conform the  financial  statement  presentation  used in
        1998.


        Recently Issued Accounting Standards

        In  June  1997,  the  FASB  issued  Statement  of  Financial  Accounting
        Standards No. 130 ("SFAS 130"), "Reporting  Comprehensive Income", which
        establishes  standards for reporting and display of comprehensive income
        and its components (revenues, expenses, gains, and losses) in a full set
        of general purpose  financial  statements.  The Company adopted No. SFAS
        130 in the first quarter 1998,  which did not have a material  impact on
        its financial statements.

        In June 1997, the FASB issued SFAS No. 131,  "Disclosures about Segments
        of an Enterprise and Related  Information",  which establishes standards
        for  the  way  public  business  enterprises  report  information  about
        operating segments in interim and annual financial  statements.  It also
        establishes   standards  for  related  disclosures  about  products  and
        services,  geographic areas and major customers.  The Company will adopt
        SFAS No. 131 for the year ending December 31, 1998.

        In June 1998 the FASB issued SFAS No. 133,  "Accounting  for  Derivative
        Instruments   and  Hedging   Activities".   The  Statement   establishes
        accounting  and  reporting  standards  requiring  that every  derivative
        instrument  (including certain derivative  instruments embedded in other
        contracts)  be  recorded  in the  balance  sheet as  either  an asset or
        liability  measured  at its fair  value.  The  Statement  requires  that
        changes  in the  derivative's  fair  value be  recognized  currently  in
        earnings  unless  specific hedge  accounting  criteria are met.  Special
        accounting for qualifying hedges allows a derivative's  gains and losses
        to offset  related  results on the hedged item in the income  statement,
        and  requires  that a company must  formally  document,  designate,  and
        assess the effectiveness of transactions that receive hedge accounting.

        Statement  133 is effective  for fiscal years  beginning  after June 15,
        1999. A company may also  implement the Statement as of the beginning of
        any fiscal quarter after issuance  (that is, fiscal  quarters  beginning
        June  16,  1998  and  thereafter).   Statement  133  cannot  be  applied
        retroactively.   Statement  133  must  be  applied  to  (a)   derivative
        instruments and (b) certain  derivative  instruments  embedded in hybrid
        contracts that were issued,  acquired,  or substantively  modified after
        December 31, 1997 (and, at the  company's  election,  before  January 1,
        1998).

        The  adoption  of SFAS  133  will  not  have a  material  impact  on the
        financial statements.


3.      Contingent liabilities:

        Certain claims,  suits and complaints  arising in the ordinary course of
        business  have been filed or are  pending  against the  Company.  In the
        opinion of management, all matters are without merit or of such kind, or
        involve  such  amounts,  as would  not  have a  material  effect  on the
        financial position and results of operations of the Company if concluded
        unfavorably.

        While the Company has not experienced any product  liability  claims, it
        presently  cannot be  determined if its product  liability  insurance is
        adequate to cover any losses that may arise.


4.      New product line:

        On May 12,  1998,  the Company  acquired  certain  assets of the Comfees
        division of Magnivision, a subsidiary of American Greetings Corporation,
        for a purchase price of approximately  $1,700,000.  Comfees manufactures
        and  distributes  contact  lens  cases,   liquid  dispensers,   medicine
        dispensers,  finger splints and ear  protectors,  among other health and
        beauty  care items.  Comfees  products  are sold  through  several  mass
        merchandisers, including K-Mart and Target. The fair market value of the
        assets acquired was $481,842.


                                      F-5

<PAGE>



5.      Related party transactions:

        At June 30,  1998,  officers/directors  owed the  Company  approximately
        $1,061,000. These loans bear interest at 6% per annum.

        For the six months ended June 30, 1998, the Company recognized  interest
        income of approximately $26,300 from loans to officers/directors.


6.      Line of credit:

        On May 6, 1996,  the Company  established a revolving  line of credit at
        Key Bank of New York. The line of credit is collateralized by inventory,
        receivables and other assets.  During June 1998, the availability on the
        line of credit  increased  from  $7,000,000  to  $20,000,000  (including
        $2,000,000 specifically for the future capital expenditures). As of June
        30, 1998, the Company had $15,829,986  outstanding pursuant to such line
        of credit.