SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

[X]       Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  and
          Exchange Act of 1934 For the fiscal year ended June 30, 2003

OR

[ ]       Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
          and Exchange Act of 1934 For the  transition  period from  ________ to
          _______

                         Commission file number 0-24242

                         PRODUCTIVITY TECHNOLOGIES CORP.
             (Exact name of registrant as specified in its charter)

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

                   3100 Copper Avenue, Fenton, Michigan 48430
                    (Address of Principal Offices)(Zip Code)

        Registrant's Telephone Number, Including Area Code (810) 714-0200

                 Securities registered pursuant to Section 12(b)
                 of the Exchange Act: None Securities registered
                 pursuant to Section 12(g) of the Exchange Act:

                     Common Stock, par value $.001 per share
                                (Title of class)

Indicate by check mark 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 No _X_

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  registrant's   knowledge,  in  the  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

State  the  approximate  aggregate  market  value of the  voting  stock  held by
nonaffiliates of the registrant at January 20, 2004: $1,600,000

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

               Class                            Outstanding at January 20, 2004
   -----------------------------                --------------------------------
   Common stock, $.001 par value                       2,475,000 shares

Documents Incorporated by Reference: Not applicable



<PAGE>



                                                          PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General

Productivity  Technologies  Corp. (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  completed an initial  public  offering  ("IPO") of common stock in July
1994 and raised net proceeds of  approximately  $9.0 million.  In May 1996,  the
Company  changed  its name to  Productivity  Technologies  Corp.  and  acquired,
through  a  merger,  Atlas  Technologies,  Inc.  ("Atlas")  as  a  wholly  owned
subsidiary. On February 23, 2000, the Company purchased,  through a wholly owned
subsidiary formed for this purpose,  substantially all of the assets of Westland
Control Systems,  Inc.  ("Westland").  The Company has no other  subsidiaries or
operations.  The Company,  which produces  industrial  machinery,  operates in a
single segment through its Atlas and Westland subsidiaries.

Atlas sells  products to  automobile  and  automotive  parts  manufacturers  and
appliance  manufacturers.  Other  customers  include steel  service  centers and
manufacturers  of  lawn  and  garden  equipment,   office  furniture,   heating,
ventilation and air conditioning  equipment,  and large construction  equipment.
Automotive  related  customers  account for the  majority  of sales.  Westland's
customers participate in the automotive, food processing,  adhesive and sealant,
and other industries.

Atlas is a  leading  innovator  and  supplier  of  quick  die  change,  flexible
transfer,  and  stacking/destacking  equipment  used to automate  automotive and
other metal  stamping  operations.  Atlas operates two  manufacturing  plants in
Fenton,  Michigan and has sales and engineering offices in Michigan,  Europe and
China.

Metal stamping presses are used to form a wide variety of sheet metal components
used in  automobiles,  appliances and other  consumer and  industrial  products.
Atlas offers a complete range of products  within three  categories  critical to
the operation of metal stamping  presses:  quick die changing  equipment,  press
automation equipment,  and stacking and destacking equipment,  which,  together,
have historically  accounted for approximately 85% to 90% of its sales revenues.
It also sells,  on a turnkey basis,  fully  integrated  metal  stamping  systems
comprised of components provided by Atlas and other manufacturers.  During 1998,
Atlas  began  producing  and selling  finger  tooling for use with its and third
party transfer press automation equipment.  Atlas offers standard transfer press
cells where Atlas acts as the systems integrator.

Metal  stamping  involves  setting pieces of flat sheet metal over a shaped die,
which is set in a press,  and then  lowering a matching die onto the sheet metal
to form it into the desired shape. The sheet metal pieces typically pass through
several stamping press operations, each performing a different forming function.
Atlas' products stack cut sheet metal blanks for feeding into the presses,  move
components  from one press station to another  within a  multi-station  transfer
press or  between  presses  within  a tandem  line of  presses,  facilitate  the
changing of dies on a press and  subsequent  die handling  operations  (storage,
retrieval,  and  maintenance)  and handle  stamped parts at the end of the press
lines.


In recent years,  the increasing  complexity  and precision  required in stamped
metal components,  such as automobile body and appliance parts, coupled with the
large variety of such  components  necessary to meet consumer  preferences,  has
required  manufacturers  of  such  products  to  increase  the  flexibility  and
efficiency  of the  machinery  used  in  their  manufacture.  The  presses  must
accommodate rapid changes in production  schedules and produce  profitable batch
runs of varying sizes. Equipment such as that made by Atlas is important to meet
the needs of the manufacturers.

Westland  designs,  manufactures  and field installs custom  electrical  control
panels  primarily for use in production  machinery and machine tools utilized in
automotive,   adhesive  &  sealant,   food  processing,   and  other  industrial
applications.  Westland operates one manufacturing plant in Westland,  Michigan,
which is located one hour from  Atlas'  plants in Fenton,  Michigan.  Westland's
plant  comprises  approximately  34,000 square feet of  manufacturing  space and
4,000  square feet of offices.  Its Westland  location is  centrally  located in
Southeastern Michigan nearby numerous machinery manufacturers.

The manufacture of control panels for industrial  machinery often but not always
occurs in the latter stages of construction.  Machinery typically is first built
and subsequently  wired.  Machine wiring is conducted through the control panel.
While machine wiring and control panels are manufactured in the latter stages of
machine production,  they are essential to effective machinery operation as they
turn stationary metal into functional machines. As a result, management believes
control panels are considered a higher value added machinery module.

Management  believes  the  Company  has been a leader in the  refinement  of the
processes by which custom electrical panels are built. In particular, management
believes it has  effective  internal  processes to convert the  production  of a
custom panel into more of a mass production process. At many stages in the panel
build process,  Westland has reduced or eliminated  certain  steps,  which incur
costs or extend production time.  Management believes Westland's  processes help
its customers.  A number of Westland's customers seek to outsource a substantial
portion of their panel building requirements.  Often, machinery builders,  which
outsource  the  production  of their  control  panels,  are focused on machinery
construction first, while the outsourcing of panel design and production remains
a secondary  concern.  This can lead to a situation  where  panels are  required
within shorter lead times. Management believes Westland's streamlined production
processes allow the Company to satisfy rapid delivery requirements of customers.

Customers and Marketing

Sales  of  Atlas  products  have  principally  been to two  customer  markets  -
automobile  and  automotive  parts  manufacturers,  and,  to  a  lesser  extent,
appliance  manufacturers.  Other customers  include  manufacturers of garden and
lawn equipment,  office  furniture,  heating,  air  conditioning and ventilation
(HVAC) equipment and aircraft. Westland's products are utilized in machinery for
automotive  adhesive and sealant,  engine part  machining,  food  processing and
other industrial applications.

In the 2001, 2002 and 2003 fiscal years,  automotive  industry customers for the
Company accounted for approximately 68%, 84% and 89% of sales, respectively. For
such fiscal years,  sales by the Company to the Ford Motor  Company  represented
24%, 22% and 31%,  respectively,  of total sales. Sales are predominantly in the
United States and Canada but, in recent years and especially for the second half
of fiscal  year 2001,  the Company  targeted  sales  efforts in Mexico,  Brazil,
Europe and Asia.  International  sales for the 2001,  2002 and 2003 fiscal years
represented approximately 24%, 23% and 17%, respectively, of total sales in such
years.

Atlas  uses  three  marketing  channels:  direct  sales,  with  offices  at  its
headquarters in Fenton,  Michigan,  Porthcawl,  South Wales,  U.K., and Beijing,
China; commissioned sales representatives;  and original equipment manufacturers
(OEMs) specializing in metal presses and related equipment. Westland's sales are
primarily  direct and on occasion it has utilized outside  manufacturers'  sales
representatives.

Atlas expects to incorporate and establish offices in Brazil and Germany in late
2003 and early 2004.

The order backlogs were  approximately  $17.0  million,  $15.7 million and $14.9
million at June 30,  2001,  2002 and 2003,  respectively.  The Company  believes
substantially  all of the June 30, 2003 backlog will be produced  during  fiscal
2004.

Products

Management  believes that Atlas offers  production  critical,  higher technology
products  based  on  proven  designs  and  engineering,   which  offer  superior
technology, engineering and features compared to certain products offered by its
competitors. Atlas products are modular and may be used with existing systems as
well as with  completely  new systems.  As a result of their modular  design,  a
variety of pieces of equipment can be combined to form an  appropriate  solution
for a  customer's  metal  stamping  needs.  Virtually  all of its  products  are
manufactured on a  made-to-order  basis.  Because of their  desirable  features,
Atlas  products are  positioned at an  above-average  price  comparative  to its
competitors. The raw materials and components used by Atlas in the manufacturing
process are readily available and, generally,  there are numerous suppliers that
are capable of providing these materials and components.

Atlas   personnel   perform   applications   engineering,   product   design  or
customization,  procurement, fabrication, machining, assembly, testing, shipping
and installation of the products and systems it sells.  Atlas continues  seeking
to achieve greater modularity in the engineering and design of its products.  To
date, this focus has resulted in faster order  fulfillment  and production,  and
improved fabrication.  Atlas believes that meaningful cost-reducing improvements
can  still  be made in the  manufacturing  process,  particularly  from  further
development of configurable modules.

Quick die change  equipment  made by Atlas  includes  automated  die carts,  die
tables  and high  rise  automated  storage-retrieval  systems  which are used to
maneuver  stamping  press  dies and  molds  weighing  up to 100 tons  each.  The
Atlas-developed  products  allow die swapping to be  accomplished  in minutes as
compared to hours if  conventional  equipment is used.  Atlas  storage-retrieval
systems  permit dies not in use to be stored in multiple level racks and readily
accessible to die carts for die swapping. Atlas' equipment can be configured for
use with either manually  controlled or fully automated presses.  Atlas believes
that its equipment is  instrumental in increasing the "up-time" of presses while
also facilitating short run capability,  gentle die handling, safer and improved
ergonomics and easier and more efficient die maintenance.

Transfer press automation  equipment is sold by Atlas under the names Flex 2000,
Flex 3000, and Flex 5000(R).  Transfer  presses use as many as ten dies within a
single press to progressively form the component (typically including tasks such
as drawing or forming,  trimming,  piercing and  flanging).  Unlike tandem press
lines,  which use  multiple  presses  arranged  in a line and  require  multiple
devices to move a component, transfer presses move the component being processed
from one die station to another using a single  automation  device.  Compared to
tandem presses,  transfer presses  generally operate at higher production rates,
require less floor space, consume less energy and allow more component processes
per press.  Because of this,  and because they have fewer parts and require less
expensive quick die change equipment than tandem presses,  transfer presses have
become  the  preferred  type of press for new  purchases  although  many  tandem
presses  will remain in use for many years and can be refitted  with  automation
equipment.  Atlas offers standard Transfer Press Cells as a systems  integrator,
comprised of Atlas  equipment  and presses made by other  manufacturers  to more
aggressively pursue the transfer press process market segment.

Stacking and destacking  automation  equipment is used to handle the sheet metal
in the initial  stages of the stamping  process.  Stackers stack flat blanks cut
from the coiled  rolls,  which are  delivered  to the  manufacturer.  Destacking
equipment  feeds the flat blanks into the press and includes  functions to clean
or  lubricate  the metal blanks (or strips) and to queue them to assure a steady
flow.  Atlas also  produces and sells  precision  steel pallets for handling the
stacks of sheet metal so as to reduce  handling damage and to eliminate the need
for strapping the stack of sheets together.

Westland  designs,  manufactures  and field installs custom  electrical  control
panels  primarily for use in production  machinery and machine tools utilized in
automotive,   adhesive  and  sealant,  food  processing,  and  other  industrial
applications.  The  design and  manufacture  of  control  panels  for  machinery
occasionally occurs in the later stages of the machinery design and construction
process.  Machinery must first be constructed,  and then wired, where the wiring
is  conducted  through the  control  panel.  The wiring and  control  panels are
essential to effective machinery  operation,  as the wiring and controls convert
the machinery from stationary metal to functional machines.

Westland's  products range from small,  single door electrical  panels to larger
six door panels.  Selling  prices for  Westland's  products range from less than
$5,000 to more than $100,000 per unit. The electrical control panels are used by
customers to control the  mechanical  functions  of  machinery  used in applying
adhesives and sealants in automobile production, material handling equipment for
metal forming for automobiles and appliances, the machining of cylinders for the
manufacture of vehicle  engines,  and the fabrication of containers for food and
juice packaging.

Competition

Atlas management  believes Atlas' products are sold in specialized  markets that
have limited  customers and competitors.  In any case, in many instances,  Atlas
products are procured through competitive  bidding.  Because of the capital cost
and the need for skilled personnel, such as engineers,  designers, mechanics and
sales  persons,  entry into this  industry is expensive and difficult to achieve
and Atlas does not expect  competition  to increase  significantly  over present
levels.  Primary competitors of Atlas include ABB Flexible Automation  (Sweden),
Automatic Feed Company (U.S.A.), Binar (Sweden),  Orchid International (Canada),
Linear Transfer Systems (Canada),  Gudel/Rapindex  (Switzerland,  U.S.A.), Wayne
Trail (U.S.A.),  HMS Products Co. (U.S.A.),  Schuler Automation Group (Germany),
Strothmann GmbH (Germany),  and Aisaku (Japan).  Each of these companies  offers
components, which compete with certain components manufactured or sold by Atlas.
A number of the  competitors are well  established  with  substantial  financial
resources,  recognized  brand names,  customer  loyalty and  established  market
positions,  capable engineering,  strong distribution networks and comprehensive
manufacturing capabilities.

Westland  management   believes  Westland's   competitors  sell  their  products
primarily  regionally,  and there are numerous  competitors  both regionally and
nationally.  Typically,  custom-built control panels are commodity type products
purchased by customers on the basis of quality and reliability, delivery timing,
and pricing.  Westland's  major  competitors  in the Southeast  Michigan  region
include Stegnar  Electric,  K-R Automation,  Con-Syst-Int,  JIC Electric,  X-Bar
Automation and Control Technique.

In contrast to the possible regional focus of certain  competitors,  Westland is
focused on customers  both within and outside its local  region.  Westland  also
seeks to sell more than control  panel  building  services.  It seeks to educate
customers on how they can reduce their internal labor costs by having  Westland,
at a cost lower than the  customers'  labor  expenses,  more fully  prepare  the
control  panels  for  final,  and more  rapid,  installation  on the  customers'
machinery.

Trademarks and Patents

Atlas owns exclusive rights to U.S. and foreign patents  previously owned by the
deceased inventor, Mr. John H. Maher, having acquired assignment of these rights
in April 2002 from Mr.  Maher's trust in a cash  transaction  in April 2002. The
patents are associated with the manufacture, sale, and use of Atlas FLEX 5000(R)
and related transfer press automation  equipment products.  The relevant patents
registered  with the United States  Patent and  Trademark  Office will expire on
June 23, 2008.  As a result of the purchase of the patent  rights in April 2002,
Atlas no longer pays any  royalties to the former  owner of the patents,  but is
now fully responsible for all associated  patent defense and maintenance  costs.
The  exclusive  rights  agreement  covers  three U.S.  patents  for a system for
transferring  work pieces through a series of  workstations,  a fourth US patent
for a synchronized  dual axis actuator,  and a fifth U.S.  patent for a transfer
system. The system for transferring work pieces through a series of workstations
is  protected  by foreign  patents  in Canada,  China,  France,  Germany,  Great
Britain,  Japan,  Republic of Korea, Russian Federation,  Spain and Sweden. This
license  agreement also  encompasses  rights to transfer system patents that are
pending in  several  foreign  countries  covered  under the Patent  Coordination
Treaty.  A royalty  bearing  sub-license has been granted by Atlas to the Orchid
Automation Group (Canada).


Atlas has  registered  with the  United  States  Patent and  Trademark  Office a
trademark  on  "FLEX  5000(R)"  that it  uses to  market  its  line of  transfer
equipment.


Atlas owns and has registered with the United States Patent and Trademark Office
eight (8) patents,  one for an  asynchronous  conveyer  construction,  one for a
transfer arm for  supporting  work pieces,  one for a magnetic  sheet  separator
construction, one for a workpiece transfer support apparatus, one for a magnetic
sheet fanner, one for an apparatus for supporting a workpiece for transfer,  one
for a pallet  cover,  and one for apparatus and methods for forming work pieces.
Foreign patents for the latter are held in Australia,  China,  France,  Germany,
Italy, Great Britain,  Poland, Spain and Sweden with patent applications pending
in Canada,  Korea, and Mexico.  Atlas has applied for five United States patents
for an articulating  work piece transfer  apparatus,  a magnetic sheet fanner, a
tooling gage, a finger tooling receiver for transfer press automation  equipment
and a pin pallet  cover.  Foreign  patent  applications  have been filed for the
articulating work piece transfer apparatus.

Atlas holds an exclusive license agreement that covers two more U.S. patents for
a system for  transferring  work pieces through a series of  workstations  and a
synchronized dual axis actuator. The system for transferring work pieces through
a series of  workstations  is  protected  by foreign  patents in Canada,  China,
France,  Germany,  Great Britain,  Japan, Republic of Korea, Russian Federation,
Spain and Sweden.  This license  agreement also  encompasses  rights to transfer
system  patents  that are  pending in the U.S.  and  several  foreign  countries
covered under the Patent Coordination Treaty.

Management and Employees

The Company employs approximately 190 persons. None of these persons is a member
of a union.  The Company  believes  that its employee  relations  are good.  The
Company's facilities are located in highly industrialized areas that benefit the
Company by reason of their proximity to customers and a skilled labor force.

ITEM 2.  PROPERTIES

Atlas owns and operates two  manufacturing  facilities  in Fenton,  Michigan and
Westland leases and operates one manufacturing  facility in Westland,  Michigan.
The two Fenton  facilities have an aggregate of 94,200 square feet of space. One
of these  facilities,  built in 1997,  has higher  roofs and  heavier  cranes to
facilitate  manufacturing of larger equipment and provides  approximately 51,000
square feet of manufacturing  space and 8,000 square feet of office space.  This
facility also is capable of expanding at a later date to  approximately  130,000
square feet of manufacturing and 25,000 square feet of office space.  Operations
performed in the two Fenton facilities include fabrication, machining, assembly,
electrical panel  construction  and testing.  Project  management,  engineering,
finance/human resources, service, quality, purchasing and sales offices are also
located in Fenton.

The Westland plant,  which is leased,  has  approximately  34,000 square feet of
manufacturing  and assembly space and 4,000 square feet for offices.  Operations
performed in the Westland facility are manufacturing, assembly, quality control,
testing,  field  installation  and  service.  Sales,  operations,   finance  and
administration are all located in Westland, Michigan.

The  principal  executive  offices of the  Company  are  located at 3100  Copper
Avenue, Fenton, Michigan 48430.

ITEM 3.  LEGAL PROCEEDINGS

The Company is a party to routine  litigation  matters in the ordinary course of
its business.  No such pending  matters,  individually  or in the aggregate,  if
adversely determined,  are believed by management to be material to the business
or financial  condition of the Company.  The Company maintains general liability
insurance,  workers'  compensation  insurance,  property  insurance,  automobile
insurance,   employee  benefit  liability  insurance,   fidelity  insurance  and
directors' and officers' liability insurance.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of fiscal 2003.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

In 2001,  the  Company's  common stock was  de-listed  for trading on the NASDAQ
Small Cap Market.  At that time,  the  Company's  common stock became listed for
quotation on the NASD's electronic over the counter  quotation  system,  the OTC
Bulletin Board (the "OTCBB"). In October,  2003, due to a delay in the Company's
filing this annual  report on Form 10-K for the fiscal year ended June 30, 2003,
the Company's  quotation on the OTCBB was  suspended.  Currently,  the Company's
common stock is traded  through the Pink Sheets LLC. The Company  expects  that,
with the filing of this 10-K and the forthcoming  quarterly  report on Form 10-Q
for the quarter ended September 30, 2003,  which report is also  delinquent,  it
will once  again be listed for  quotation  on the OTCBB.  The  over-the  counter
quotations of the Company's common stock reflect  inter-dealer  prices,  without
retail mark-up,  mark-down or commission and may not necessarily  reflect actual
transactions. The de-listing from the OTCBB could have a material adverse effect
upon the Company in a number of ways,  including its ability to raise additional
capital.  In addition,  the absence of a trading system may adversely affect the
ability of  broker-dealers  to sell the Company's common stock, and consequently
may limit the public  market for such stock and have a negative  effect upon its
trading price. There can be no assurance that the Company's common stock will be
re-listed on the OTCBB.

The following  table sets forth the range of high and low closing bid prices for
common  stock as reported on the OTCBB.  Within the last two fiscal  years there
has been  extremely  limited  trading in the  Company's  Units and Warrants and,
therefore, no trading information is provided. The Warrants expired effective on
June 24, 2002.

                                                         High        Low
                                                          ($)         ($)

          Year ended June 30, 2002:
             First Quarter                               0.50       0.20
             Second Quarter                              0.40       0.13
             Third Quarter                               0.35       0.20
             Fourth Quarter                              0.45       0.25

          Year ended June 30, 2003:
             First Quarter                               0.17       0.07
             Second Quarter                              0.11       0.05
             Third Quarter                               0.15       0.05
             Fourth Quarter                              0.34       0.05

As of  September  30,  2003,  the Company had 16 holders of record of its common
stock. The Company  believes that there are in excess of 300 beneficial  holders
of the  Company's  common  stock.  The  Company  has not  declared  or paid  any
dividends on its common stock since its inception.

ITEM 6.  SELECTED FINANCIAL DATA

The following  selected  financial data have been derived from the Company's and
its predecessor's  consolidated  financial statements which have been audited by
BDO Seidman, LLP, independent  certified public accountants,  as of and for June
30, 1999 and 2000;  by Doeren Mayhew as of and for the years ended June 30, 2001
and 2002;  and by  Follmer  Rudzewicz  PLC as of and for the year ended June 30,
2003.  The  following  data  should be read in  conjunction  with  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
Item 7 of this  Report  and the  Consolidated  Financial  Statements  and  notes
thereto  referenced in Item 8 of this Report included herein. See also Item 9 of
this Report.

<TABLE>
<CAPTION>

                                  (Dollars in thousands, except per share data)

Consolidated Statement of Operations Data
                                                                 Year ended June 30,
                                       ----------- -- ------------ -- ----------- -- ------------ -- --------------
                                          2003           2002            2001           2000             1999
                                       ----------- -- ------------ -- ----------- -- ------------ -- --------------

<S>                                     <C>            <C>             <C>            <C>              <C>
Revenues earned                         $ 29,051       $ 24,768        $ 27,992       $ 33,230         $ 34,001
Cost of revenues earned                   22,197         18,261          22,155         26,235           24,610
Gross profit                               6,853          6,507           5,837          6,895            9,391
Selling, general and                       6,004          6,453           8,004          6,333            7,526
administrative
Impairment of intangible assets               --          2,087              --             --               --
Bonus restructuring expense                   --             --              --             --               --
Income (loss) from operations                849         (2,033)         (2,167)           562            1,865

Net income (loss)                            361         (4,128)         (3,114)          (256)             974

Net income per share of common
     stock                              $   0.15         ($1.67)         ($1.26)        ($0.10)           $0.40
Weighted average common shares             2,475          2,475           2,475          2,475            2,432

Consolidated Balance Sheet Data

                                                                       June 30,
                                       ----------- -- ------------ -- ----------- -- ------------ -- --------------
                                          2003           2002            2001           2000             1999
                                       ----------- -- ------------ -- ----------- -- ------------ -- --------------

Current assets                          $ 10,521       $ 11,639        $  15,822      $ 22,972         $ 19,148
Current liabilities                       16,388         18,474           17,355         8,155            5,330
Working capital                           (5,867)        (6,835)          (1,533)       14,817           13,818
Property, plant and equipment, net         6,159          6,711            7,231         7,708            7,844
Total assets                              20,703         24,494           31,757        39,238           30,108
Long-term debt, less current
maturities                                 1,735          3,800            7,710        20,862           13,951
Total liabilities                         18,123         22,274           25,410        29,777           20,391
Stockholders' equity                       2,580          2,220            6,347         9,461            9,717

</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Overview

Revenues  at Atlas are  recognized  using the  percentage-of-completion  method,
which  measures the  percentage of contract  costs incurred to date and compares
these costs to the total estimated costs for each contract.  Atlas 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 in which such
revisions are  determined.  Sales at Westland are  recognized  when products are
shipped.

Recent Developments

Effective as of December 12, 2003,  Merrill Lynch  Business  Financial  Services
Inc.  ("MLB")  entered  into a new credit  facility  with Atlas (the "MLB Credit
Facility") providing for borrowing  availability of up to $8.0 million, of which
$7.4 million was funded at closing. The MLB Credit Facility consists of :

     o    a seven-year real estate term loan in the original principal amount of
          $3.5 million,  bearing  interest at a variable per annum rate equal to
          3.15% in excess of one-month LIBOR, payable in monthly installments of
          interest plus 1/180th of principal (a 15-year  amortization  schedule)
          with the balance of principal  due at maturity in December  2010,  and
          secured by substantially all of the assets of Atlas;

     o    a three-year  equipment term loan in the original  principal amount of
          $500,000, bearing interest at a variable per annum rate equal to 3.15%
          in excess of  one-month  LIBOR,  payable  in monthly  installments  of
          interest  plus 1/36th of principal  (full  amortization),  maturing in
          December  2006,  and  secured  by  substantially  all of the assets of
          Atlas; and

     o    a one-year  revolving  working capital credit  facility  providing for
          borrowing  availability  of up to $4.0  million  based  upon  eligible
          accounts  receivable,  bearing  interest at a variable  per annum rate
          equal to 2.85% in  excess  of  one-month  LIBOR,  payable  in  monthly
          installments  of interest  only,  maturing  on  December  31, 2004 and
          secured by substantially all of the assets of Atlas.

The MLB Credit  Facility is  guaranteed  by the Company  and, in  addition,  the
Company has pledged  all of the capital  stock of Atlas to secure the  guaranty.
The proceeds of the MLB Credit Facility were used to retire the revolving credit
facility  and  commercial  mortgage  loan  from  Bank  One,  NA to  Atlas in the
aggregate  outstanding  principal amount of $7.4 million.  Atlas continues to be
responsible  for  legal and  professional  field  audit  fees of Bank One in the
amount of approximately $60,000. As part of these financing  transactions,  Bank
One also agreed to release the liens on the assets of Atlas and the Company.  In
addition,  Bank One agreed to subordinate  its rights with respect to Westland's
new lender, Spectrum Commercial Services, Inc. ("Spectrum"),  in connection with
Bank One's term loan in the outstanding  principal amount of approximately  $2.2
million, bearing interest at 1.25% over Bank One's prime rate, which the Company
incurred in February 2000 to purchase Westland (the "Westland Loan").

In addition,  also  effective as of December 12, 2003,  Spectrum  entered into a
two-year  credit  facility  with  Westland  (the  "Spectrum  Credit   Facility")
providing for borrowing  availability of up to $1.25 million based upon eligible
accounts  receivable,  bearing  interest  at a variable  per annum rate equal to
5.25% in excess of the prime rate of Wells Fargo Bank,  NA,  (subject to certain
minimum  payments  of $5,575 per month,  and  subject  to  reduction  by 0.5% if
specified  profitability  thresholds  are met),  maturing in  December  2005 and
secured by substantially all of the assets of Westland.

Bank One agreed to  subordinate  its rights under the Westland Loan to Spectrum,
subject to restating the  obligations  under a new Guarantor  Payment  Agreement
effective  as of December 12, 2003 under which Bank One will look to Westland to
repay the  remaining  obligations  owed to Bank One (which  continues to be $2.2
million in principal).  Although the Company continues to be the primary obligor
under the  Westland  Loan as  restated,  the Company is  prohibited  from making
payments  to Bank One so long as the MLB Loan to Atlas (as to which the  Company
is a guarantor) remains outstanding, and, accordingly, Westland entered into the
new Guarantor Payment Agreement.  Under the terms of the restated Westland Loan,
Westland is required to pay to Bank One $10,000 per month plus  interest as well
as 25% of excess  cash flow (as defined in the  restated  loan  agreement)  from
Westland's  operations.  Under the restatement,  without  expressly  waiving the
previously  existing  covenant defaults under Westland Loan, Bank One has agreed
to honor the scheduled  maturity  date of the Westland Loan  (February 23, 2005)
absent any further  defaults.  As restated,  the Westland Loan bears interest at
the per  annum  rate of 3.0% in  excess  of Bank  One's  prime  rate.  Bank  One
continues to hold a lien on substantially all of Westland's assets, subordinated
to the lien of Spectrum.

In connection with these financing transactions, the Company, Atlas and Westland
retired the remaining  obligations to the former owner of Westland,  Thomas Lee,
in  consideration  of a  payment  of  $525,000,  resulting  in  a  gain  on  the
extinguishment of debt of approximately $125,000.  Under agreements entered into
with Bank One in January  1999,  Ronald  Prime,  formerly an owner and executive
officer of Atlas, and Michael Austin, formerly an owner and executive officer of
Atlas and  currently  a director of the  Company,  agreed to  subordinate  their
rights to receive payments for deferred  executive  compensation  obligations of
approximately  $974,000 (which were  originally  scheduled to be paid during the
period from July 2000 through July 2002). These executives agreed to continue to
subordinate their right to payment to MLB.

Impact of Recently Issued Accounting Standards

In December 2002, the FASB issued Statement No. 148,  Accounting for Stock-Based
Compensation--Transition   and  Disclosure   ("SFAS  148").  SFAS  148  provides
alternative  methods  of  transition  for a  voluntary  change to the fair value
method  of  accounting  for  stock-based  employee  compensation  as  originally
provided by Statement No. 123,  Accounting for Stock-Based  Compensation  ("SFAS
123"). Additionally,  SFAS 148 amends the disclosure requirements of SFAS 123 to
require prominent disclosure in both the annual and interim financial statements
about the method of accounting for  stock-based  compensation  and the effect of
the method used on reported results.  The transitional  requirements of SFAS 148
are  effective  for all  financial  statements  for fiscal  years  ending  after
December 15, 2002. The Company adopted the disclosure  portion of this statement
for the quarter  ended  December 31, 2002.  The  application  of the  disclosure
portion of this standard did not have any impact on the  Company's  consolidated
financial position or results of operations.

In May 2003,  the FASB issued  Statement of Financial  Accounting  Standards No.
150, Accounting for Certain Financial  Instruments with  Characteristics of both
Liabilities  and Equity  ("SFAS  150").  This  accounting  standard  establishes
standards for  classifying  and measuring  certain  financial  instruments  with
characteristics  of both  liabilities  and  equity.  It  requires  that  certain
financial  instruments  that  were  previously  classified  as  equity,  now  be
classified as a liability.  This accounting  standard is effective for financial
instruments  entered into or modified  after May 31, 2003,  and otherwise at the
beginning  of the first  interim  period  beginning  after  June 15,  2003.  The
adoption of this  statement did not have a material  impact on the  consolidated
financial statements.

FIN No. 45, "Guarantor's  Accounting and Disclosure Requirements for Guarantees,
Including  Indirect  Guarantees of Indebtedness of Others an  interpretation  of
SFAS No. 5, 57 and 107 and rescission of FASB  Interpretation No. 34" was issued
in November 2002. FIN 45 clarifies the  requirements of SFAS No. 5, " Accounting
for Contingencies," relating to a guarantor's accounting for, and disclosure of,
the issuance of certain types of  guarantees.  The adoption of FIN 45 related to
initial  recognition and measurement of guarantees did not have an impact on the
net income or equity of the Company.

FIN No. 46,  "Consolidation of Variable Interest Entities,  an interpretation of
ARB 51," was issued. The primary objectives of FIN 46 are to provide guidance on
the identification  and consolidation of variable interest  entities,  or VIE's,
which are  entities  for which  control is  achieved  through  means  other than
through voting  rights.  The Company has completed an analysis of FIN 46 and has
determined that it does not have any VIE's.

Results of Operations

Fiscal Year 2003 Compared to Fiscal Year 2002

Revenues earned for the year ended June 30, 2003 were $29,050,542 as compared to
$24,767,655  for the year ended  June 30,  2002,  an  increase  of 17%.  Atlas's
revenues  were up 13%  principally  as a result  of  slightly  greater  business
activity. Westland's revenues increased 39% due to the addition of new customers
that began ordering from Westland, or ordered in greater volume, compared to one
year earlier.

Gross profit for the year ended June 30, 2003 was $6,853,324,  representing a 5%
increase from the $6,506,891  gross profit for the year ended June 30, 2002. The
increase in gross  profit was  principally  due to the volume  increases at both
Atlas and Westland. Gross profit as a percentage of revenues earned for the year
ended June 30,  2003 as compared to prior  fiscal year  decreased  from 26.3% to
23.6%,  principally  as the  result of a change in the mix of  products  sold by
Westland and to continued  competitive  pricing pressures in the segments served
by Westland.

Consolidated  selling,   general  and  administrative   (SG&A)  expenses,   were
$6,003,959,  down 7% as compared to SG&A  expenses  of  $6,452,908  for the year
ended June 30, 2002. The decrease was  principally  due to continued  efforts by
management to contain expenses.

Income from  operations  for the year ended June 30,  2003  amounted to $849,365
compared  to a loss  from  operations  for  the  year  ended  June  30,  2002 of
$2,033,325.  The  loss  in  fiscal  2002  was  principally  attributable  to the
write-off of $2,087,308 for impairment of intangible assets, including a patent.
The  improvement in income from  operations  for fiscal 2003 resulted  primarily
from higher sales volume and lower SG&A expenses  noted above and the absence of
a write-off for impairment of intangible assets.

Interest  expense for fiscal 2003 was  $639,822 a decrease of 62% as compared to
$1,668,519 for fiscal 2002. The improvement was due principally to the Company's
continued focus on collections of receivables  and inventory  management at both
Atlas and Westland,  which reduced  borrowing  needs.  Interest also declined in
comparison as the 2002 figure  included a one-time  interest rate swap unwinding
fee of $388,000.  Further,  Westland's  interest costs were lower in fiscal 2003
due to its  litigation  settlement on September 3, 2002,  which  resulted in the
extinguishment  of $1.8  million of  indebtedness  owed to the  former  owner of
Westland.

The net income for fiscal 2003 was $360,574 as compared to net loss for the year
ended June 30, 2002 of  $4,127,502.  This  improvement  was due to the  numerous
factors  cited  above  including  the  absence  of a charge  for  impairment  of
intangible  assets in 2003,  higher sales  volume,  lower SG&A expense and lower
interest expenses.

Fiscal Year 2002 Compared to Fiscal Year 2001

Revenues earned for the year ended June 30, 2002 were $24,767,655 as compared to
$27,992,387 for the year ended June 30, 2001, a decrease of 12%,  principally as
a result of lower  order  volume  during  fiscal  2002.  The decline in revenues
earned  was  primarily  due to the  softness  in  capital  goods  demand  in the
automotive  industry.  In addition,  management believes the terrorist events of
September 11, 2001 adversely affected demand for Atlas' and Westland's products.

Gross  profit for the year ended June 30, 2002 was  $6,506,891,  an 11% increase
from the $5,837,396  gross profit for the year ended June 30, 2001. Gross profit
increased  during  fiscal  2002  principally  due to the  restructuring  efforts
undertaken  at Atlas during the 2001 and 2002 fiscal years and to improved  cost
controls and inventory management.

Consolidated  selling,   general  and  administrative   (SG&A)  expenses,   were
$6,452,908,  down 19% as compared to SG&A  expenses of  $8,004,219  for the year
ended June 30, 2001. The decrease was principally due to  restructuring  efforts
undertaken at Atlas during the 2001 and 2002 fiscal years.

The impairment of intangible  assets  amounted to  $2,087,308,  all of which was
attributable to Westland.

The loss from  operations  for the year ended  June 30,  2002 of  $2,033,325  is
principally  attributable  to the  write-off of  $2,087,308  for  impairment  of
intangible  assets,  including  a  patent.  The  Company  recorded  a loss  from
operations of $2,166,823  for the year ended June 30, 2001.  The  improvement in
income from operations  resulted  primarily from the  restructuring  initiatives
discussed above, offset by the write-off for impairment of intangible assets.

Interest  expense for fiscal 2002 was  $1,668,519 as compared to $1,605,164  for
fiscal  2001.  This  increase in  interest  expense for fiscal 2002 was due to a
one-time $388,000 expense charged to the Company by its existing bank lender for
unwinding an interest  rate swap entered into in 2000.  The  remaining  interest
expense for fiscal 2002 was  $1,280,519,  which was $324,645 less than the total
interest  expense for fiscal  2001,  principally  as a result of lower  interest
rates and  management's  focus on  accelerating  receivables  collections and on
improving other cash and inventory management procedures.

At  June  30,  2002,  the  Company  had  aggregated  net  operating   losses  of
approximately $6,309,000 for income tax purposes, which begin to expire in 2020.
In addition, the Company had tax research credit carry forwards of approximately
$1,165,000,  which  will  begin to  expire  in  2012.  For  financial  reporting
purposes, due to prior year operating losses, and uncertainty in realization the
Company has  increased  its valuation  allowance  from  $1,412,600 to $2,957,500
against the net operating loss  carryforwards and other deferred tax assets. The
amount of the  remaining  deferred  tax  asset  considered  realizable  could be
reduced  in the near term if  estimates  of future  taxable  income  during  the
carryforward period are reduced.

For the year ended June 30, 2002, the Company  incurred a net loss of $4,127,502
as compared to net loss for the year ended June 30, 2001 of $3,113,741.  The net
loss during fiscal 2002  includes  $2,087,308  for the  impairment of intangible
assets,  $588,000 for the  write-down of the Company's  deferred tax asset,  and
$388,000 for the swap fee charged by Bank One,  which had been senior  lender to
both Atlas and Westland prior to December 12, 2003.  Excluding these write-downs
and  non-recurring  expenses,  the  Company's  net loss  for  fiscal  year  2002
approximated  $1,064,194,  an  improvement  of $2,049,547 as compared to the net
loss  reported in fiscal 2001 of  $3,113,741.  This  improvement  was due to the
numerous  factors cited above,  including  lower  interest  rates;  considerable
management  focus  on  accelerating  receivables  collections  and on  improving
inventory and cash management  procedures;  and restructuring efforts undertaken
at Atlas  during  fiscal  years  2001  and 2002  which  provided  operating  and
financial benefits in fiscal 2002.

Liquidity and Capital Resources

At  June  30,  2003,  the  Company  had (1)  $2.7  million  outstanding  under a
commercial  mortgage  loan from Bank One, (2) $4.5 million  outstanding  under a
revolving credit facility with Bank One (the "Old Atlas Revolver"), (3) $974,933
due to Messrs. Prime and Austin under a deferred compensation  arrangement,  (4)
$2.2 million  outstanding  under the Westland  Loan, and (5) $775,000 due to the
former owner of Westland,  Thomas Lee. This total of $11.1 million compares to a
total combined  indebtedness  of $17.0 million as of June 30, 2002. The decrease
in indebtedness at June 30, 2003 is principally due to repayment of a portion of
the  obligations  to Bank One and Mr.  Lee as well as the  discharge  of certain
indebtedness  owed to Mr. Lee under the terms of a settlement  agreement entered
into with him in September  2003.  Under the terms of the  settlement  agreement
entered into with Mr. Lee, (i) $1,800,000 of the $3,200,000 of the principal and
accrued  interest   outstanding   under  the  Company's  note  to  Mr.  Lee  was
extinguished,  (ii) the Company  paid  $458,000 of the  obligation  in September
2002,  and  (iii)  the  Company  agreed  to pay  the  remaining  $950,000  on an
installment basis over a 40 month period.

Working capital deficit at June 30, 2003 was  ($5,866,497) and the current ratio
was (.64) to 1, as compared to working  capital  deficit of  ($6,835,443)  and a
current ratio of (.63) to 1 for the Company at June 30, 2002.

Prior to the  expiration of the Old Atlas  Revolver in January 2002, the Company
was not in  compliance  with certain  financial  covenants  and  borrowing  base
limitations  thereunder.  The Company  also was not in  compliance  with certain
financial  covenants under the Westland Loan.  During fiscal year ended June 30,
2003,  Bank One did not  demand  that the  Company  repay  either  the Old Atlas
Revolver or the Westland Loan. In the period following the January 2002 maturity
of the Old Atlas  Revolver,  the  Company  and Bank One  engaged in  discussions
concerning  possible  terms  of  forbearance,  and  Bank  One  consented  to the
settlement  with Mr.  Lee;  however,  no formal  forbearance  arrangements  were
entered  into by the  Company  and Bank One.  While  Bank One was under no legal
obligation  to  continue  to  forbear  in  demanding   payment  of   outstanding
obligations owed to it, it continued to do so through the Company's  refinancing
of  its  various  obligations  in  December  2003  as  described  under  "Recent
Developments" in this Item 7.

Since the expiration of the revolving  credit  facility with Bank One on January
31, 2002,  and during  fiscal year ended June 30, 2003,  the Company was able to
meet its working  capital  needs from cash  generated  from  operations  without
borrowing additional funds under a line of credit In addition,  since such time,
the Company sought to pay down its borrowings from Bank One when and as cash was
available from operations.  However, during the fiscal year ended June 30, 2003,
the Company did not have funds  available to it from its operations or otherwise
to repay the  amounts  it owed to its  creditors.  As a result of the  financing
transactions  described under "Recent Developments" in this Item 7, and assuming
no  adverse  developments,  management  believes  that it has  sufficient  funds
available to it under the various  facilities  and  operations to provide for it
working capital needs at least through the end of the 2004 fiscal year.

Off Balance Sheet Arrangements

During  fiscal 2003, the Company had no off-balance  sheet  arrangements  other
than  operating  leases  entered  into in the  normal  course  of  business.

Forward-Looking Statements

Various  statements  in this Report  concerning  the manner in which the Company
intends to conduct its future  operations  and potential  trends that may affect
future results of operations are forward-looking  statements. The Company may be
unable to realize its plans and  objectives  due to various  important  factors.
These  factors  include but are not  limited to general  economic  and  business
conditions,  particularly in light of the recent economic malaise which has been
exacerbated  by the war with Iraq,  and high profile  accounting  scandals which
have raised  questions  as to the  integrity  of the stock  markets,  and in the
automotive and other  industries  principally  served by the Company,  including
continued  volatile  demand in the domestic and foreign  markets for automobiles
and  automotive  parts  resulting in reduced or uncertain  demand for the Atlas'
automation equipment;  potential technological developments in the metal forming
and handling  automation  equipment  markets which may render Atlas'  automation
equipment  noncompetitive or obsolete; the risk that Atlas or Westland customers
may be  unwilling  or  unable  to  continue  ordering  products;  the  potential
inability of the Company to achieve adequate  operating results or the continued
volatility of credit and capital markets which could affect the Company's credit
and financing arrangements in the future.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Of the Company's  indebtedness of $11.1 million at June 30, 2003, obligations in
the amount of $2.7 million were fixed rate or fixed rate based  obligations  and
the balance of  approximately  $ 8.4 million,  were variable  rate  obligations.
Assuming an immediate 10% increase,  as of June 30, 2003, in the interest  rates
on all of the Company's  variable rate  obligations,  management  has calculated
that the impact to the Company in annualized  interest payable would approximate
$70,000.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements and Schedules as listed on page F-1.


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

As reported in the  Company's  current  report on Form 8-K filed March 31, 2003,
Doeren Mayhew, then the Company's  independent auditor ("Doeren") terminated its
client-auditor  relationship with the Company effective March 24, 2003. Doeren's
resignation was based upon its decision to terminate its audit  engagements with
all public companies.  Doeren's report on the Company's financial  statements as
of and for the year  ended  June 30,  2002  included  an  explanatory  paragraph
regarding the Company's  ability to continue as a going concern.  The report did
not contain an adverse  opinion or a disclaimer of opinion and was not qualified
or  modified  as to  any  uncertainty  or  as  to  audit  scope,  or  accounting
principles.  In connection with the audits of the Company's financial statements
for fiscal year 2001 or fiscal year 2002 (the two most recent fiscal years prior
to its  resignation),  there have been no disagreements  between the Company and
Doeren on any matter of accounting principles or practices,  financial statement
disclosure,  or  auditing  scope or  procedure  which,  if not  resolved  to the
satisfaction of Doeren, would have caused Doeren to make reference to the matter
in its report.  As reported in the Company's current report on Form 8-K filed on
July 23, 2003,  the Company  engaged  Follmer  Rudzewicz PLC  ("Follmer") as its
independent auditor.

In addition,  as reported in the Company's  current  report on Form 8-K filed on
July 31,  2001,  the  Company,  in a  cost-saving  move,  dismissed  its  former
auditors,  BDO  Seidman,  LLP ("BDO") and  appointed  Doeren as its  independent
auditor  effective  July 24,  2001.  This  change  in  auditors  was made at the
recommendation  of the Company's  board.  In  connection  with the audits of the
Company's  financial  statements  for fiscal year 1999 and fiscal year 2000 (the
two most  recent  fiscal  years  prior to its  dismissal),  there  have  been no
disagreements between the Company and BDO on any matter of accounting principles
or practices,  financial  statement  disclosure,  or auditing scope or procedure
which, if not resolved to the satisfaction of BDO, would have caused BDO to make
reference to the matter in its report.  BDO's report on the financial statements
for fiscal  year 1999 and  fiscal  year 2000,  contained  no adverse  opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.

In its annual letter to management  issued in November  2000, BDO identified two
material  weaknesses in the Company's internal controls related to the timing of
the  recordation  of  transactions  and the  need of the  Company  to take  full
physical inventories. In its annual letter to management issued in October 1999,
BDO identified one material weakness in the Company's  internal controls related
to general ledger  accounts  receiving  little  critical review during the year.
Management  readily  agreed with the  recommendations  of BDO and has eliminated
these weaknesses by taking the steps recommended by BDO.


ITEM 9A.  CONTROLS AND PROCEDURES

The  company's  management  evaluated,  with  the  participation  of  the  chief
executive  officer  and  chief  financial  officer,  the  effectiveness  of  the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation,  the chief executive officer and chief
financial  officer have  concluded  that the Company's  disclosure  controls and
procedures  were  effective as of the end of the period  covered by this report.
There  has been no change  in the  Company's  internal  control  over  financial
reporting  that  occurred  during the period  covered  by this  report  that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

Set  forth  below  is  information  concerning  each  director  of the  Company,
including  his  business  experience  during at least the past five  years,  his
positions with the Company,  and certain  directorships  held by him.  Except as
hereinafter  described,  there  are no  family  relationships  among  any of the
directors or any arrangements or understandings between any director and another
person pursuant to which he was selected as a director.

<TABLE>
<CAPTION>
                                                          Director
                  Director                        Age       Since    Current Position

       Class I Director

<S>                                                <C>      <C>      <C>
       Jesse A. Levine                             36       1993     Director, Chief Financial Officer,
                                                                     Vice President, Secretary and
                                                                     Treasurer
       Class II Director
       Michael D. Austin                           52       1999     Director, President of the Company's
                                                                     Atlas Technologies, Inc. subsidiary
                                                                     and Senior Vice President of Strategic
                                                                     Planning and Marketing of the Company
       Class III Directors
       Samuel N. Seidman                           69       1993     Director, Chairman of the Board,
                                                                     President and Chief Executive Officer
       Alan H. Foster                              78       1993     Director
</TABLE>



The Company's  Board of Directors is divided into three  classes,  each of which
serves for a term of three years, with only one class of directors being elected
in each year.  The term of office of the Class II director will  continue  until
the next annual  meeting of the Company,  which is expected to be held in fiscal
2004.  The term of office of the Class III  directors  will  continue  until the
annual  meeting of the Company in fiscal 2005. The term of office of the Class I
directors  will continue until the annual meeting of the Company in fiscal 2006.
A director  will hold office until the next annual  meeting of  stockholders  at
which his class of directors is to be elected.

Class I Director

Jesse A.  Levine has been  Secretary,  Treasurer  and a Director  of the Company
since  its  inception,  Chief  Financial  Officer  since  June  1995  and a Vice
President since May 1996. Since January 1992, Mr. Levine has been Vice President
and then Senior Vice President of Seidman & Co., Inc., specializing in financial
and business analysis,  corporate finance,  private placement financing,  merger
and acquisition, and corporate advisory services.  Previously, Mr. Levine served
as a commercial credit analyst for Society Bank,  Michigan.  Mr. Levine earned a
B.A. degree, with highest honors  distinction,  in economics from the University
of Michigan and obtained a chartered  financial  analyst  certification in 1995.
Samuel N. Seidman,  the President,  Chief Executive Officer, and Chairman of the
Company, is Mr. Levine's uncle.

Class II Director

Michael  D.  Austin  is  currently  the   President  of  the   Company's   Atlas
Technologies,  Inc.  subsidiary and Senior Vice President of Strategic  Planning
and Marketing of the Company. From 1998 to 2000, Mr. Austin held the position of
CEO and President of Atlas Technologies, Inc. From 1996 to 1998, Mr. Austin held
the  position  of  President  of Atlas  Technologies,  Inc.,  and was  primarily
responsible for directing the marketing and sales  activities of the company for
determining  the overall  product  directions,  managing  product  research  and
development,  and managing the application engineering department.  From 1977 to
1996, Mr. Austin held various other management  positions at Atlas Technologies,
Inc.,  including  Vice  President  of  Operations,  Vice  President of Sales and
Marketing,  Sales Manager,  and Controls Manager.  From 1973 to 1977, Mr. Austin
held various controls  engineering and management  positions at Fluid & Electric
Control  Co.,  including  Chief  Engineer.  Mr.  Austin  serves  on the board of
directors or board of advisors of the  Flint-Genesee  Economic Growth  Alliance,
the Manufacturers  Innovation Council,  Kettering University,  Baker College and
Mott Community  College.  Mr. Austin holds U.S. and foreign  patents for certain
apparatus and methods for forming work pieces.

Class III Directors

Samuel N.  Seidman has been  President  and a Director of the Company  since its
inception.  In 1970,  Mr.  Seidman  founded  Seidman & Co.,  Inc., an investment
banking firm, and serves as its President.  In this capacity,  he has provided a
broad range of investment  banking services,  including  financial  analysis and
valuations,   private  financings,  and  corporate  recapitalizations  and  debt
restructurings.  Mr. Seidman also serves as a director of AMREP  Corporation,  a
real estate development  corporation  listed on the New York Stock Exchange.  He
has acted as financial  advisor to  manufacturers of various kinds of production
systems and components for a number of industries,  including ASM International,
N.V., and a multi-national  producer of automated  equipment and systems for the
production of semiconductor  traded on the NASDAQ National  Market.  Mr. Seidman
advised in the sale of ASM Fico Tooling,  Inc., a European-based  multi-national
manufacturer of specialized tooling for the semiconductor  industry. Mr. Seidman
was Co-Chairman of the Creditors'  Committee in the Chapter 11 reorganization of
Sharon Steel Corp., an integrated  manufacturer of finished steel products,  and
served as  financial  advisor  in  Chapter  11 to Chyron  Corp.,  a  specialized
producer of television  character  generation  equipment  for video  productions
listed on the New York Stock  Exchange,  and Mr. Gasket Co., a  manufacturer  of
automobile  aftermarket  products.  Prior to founding Seidman & Co., Mr. Seidman
worked in corporate finance at Lehman Brothers. Mr. Seidman earned a B.A. degree
from Brooklyn College and a Ph.D. in economics from New York University.  He was
a Fulbright  Scholar and a member of the graduate faculty of the City University
of New York. Mr. Seidman's  nephew,  Jesse A. Levine,  is Vice President,  Chief
Financial Officer, Secretary, Treasurer and a Director of the Company.

Alan H. Foster has been a Director of the Company since its inception. From 1986
until September 2001, he served as an Adjunct Professor of Finance and Corporate
Strategy at the  University  of Michigan.  Since 1978,  Mr.  Foster has been the
principal  of A.H.  Foster &  Company,  a  consulting  firm,  which  serves as a
consultant  in  corporate  finance  to foreign  governments,  and  domestic  and
international clients. Currently, Mr. Foster is a director of Code-Alarm,  Inc.,
a manufacturer of automobile security systems. For the last 12 years, Mr. Foster
has served  numerous times as a  court-appointed  trustee in bankruptcy for both
Chapter  7 and  Chapter  11  cases.  He  was  employed  by the  American  Motors
Corporation  from 1963 to 1978,  where he first  served as  Director,  Financial
Planning and Analysis and then as Vice  President and Treasurer for the last ten
of those  years.  From 1953 to 1963,  Mr.  Foster  worked at  Sylvania  Electric
Products  in various  capacities,  including  Manager,  Corporate  Planning  and
Control. Mr. Foster is the author of Practical Business Management, published in
1962.  Mr.  Foster  earned a B.S.B.A.  degree from Boston  College and an M.B.A.
degree from Harvard Business School.

Executive Officers

The following  table sets forth certain  information  concerning each individual
who currently serves as an executive officer of the Company.  Executive officers
are  appointed  by the Board of  Directors  and serve at the  discretion  of the
Board. Except as specifically described, there are no family relationships among
any of the executive officers or any arrangements or understandings  between any
executive  officer and another  person  pursuant to which he was  selected as an
executive officer.

Executive Officers      Current Position

Samuel N. Seidman       Chairman of the Board, President and
                             Chief Executive Officer
Jesse A. Levine         Chief Financial Officer, Vice President,
                             Secretary and Treasurer
James A. Kolinski       Vice President, Operations of the Company and
                             Chief Executive Officer of Atlas Technologies, Inc.
Michael D. Austin       Senior Vice President of Strategic Planning and
                             Marketing of the Company and President of
                             Atlas Technologies, Inc.
Robert J. Cuccaro       Vice President, Corporate Controller of the
                             Company and President of Westland Control
                             Systems, Inc.


See  "Directors"  in this  Item  10  above  for a  description  of the  business
experience  during at least the past five years of Messrs.  Seidman,  Levine and
Austin.

Robert J. Cuccaro,  48 years of age,  joined the company on May 26, 2000 as Vice
President,  Corporate  Controller.  In January 2001, Mr. Cuccaro was promoted to
President of Westland Control Systems,  Inc. From 1998 to 2000, Mr. Cuccaro held
positions  of General  Manager and  Controller  for the Ring Group and  Karmazin
Products  Corporation and was responsible for directing sales,  human resources,
production control,  accounting and finance. From 1996 to 1998, Mr. Cuccaro held
the  position  of  Chief  Financial  Officer/Division   Controller  for  Stewart
Connectors  Division,  Inc. a subsidiary  of Insilco  Corporation.  From 1994 to
1996,  Mr.  Cuccaro  held  various  positions  including  Plant  Controller  and
Corporate Controller with Clark Material Handling  Corporation,  a subsidiary of
Terex  Corporation.  Previously,  from 1982 to 1994,  Mr.  Cuccaro  held various
financial  positions  at  UNISYS  Corporation  including  Controller  and  Sales
Director.  Mr.  Cuccaro has extensive  international,  manufacturing,  financial
reporting  and  systems  experience.  Mr.  Cuccaro  earned his B.S.  degree from
Rutgers University and attended graduate studies classes at Fairleigh  Dickinson
University in New Jersey.


James A.  Kolinski,  62 years of age,  was hired by the  Company on October  16,
2000,  as Vice  President -  Operations.  In November  2000,  Mr.  Kolinski  was
promoted  to CEO of Atlas  Technologies,  Inc.  in  addition  to being  the Vice
President - Operations for the Company.  Mr.  Kolinski had been Chief  Executive
Officer  and  President  of HPM  Corporation,  a $110  million  manufacturer  of
equipment for plastic injection  molding,  metal extrusion and metal die-casting
applications.  Previously,  for 6 years,  Mr.  Kolinski was  President and Chief
Operating Officer at Grove Worldwide LLC, a leading  manufacturer of aerial work
platforms with operations in the United States,  United Kingdom, and France. Mr.
Kolinski  assisted in the development of Grove's  strategic plan, which resulted
in sales  growth from $56 million to $205  million per annum.  Mr.  Kolinski had
full Profit and Loss Statement  responsibility  at HPM, Grove, and previously as
President  and  Director  of Simon  Aerials,  a $55 million  subsidiary  of a $1
billion dollar per annum parent company, and before that with AAR Corporation, a
$25 million per annum producer of powered industrial sweepers and scrubbers, and
material handling  equipment.  Mr. Kolinski's  employment  arrangements  provide
incentives  for Mr.  Kolinski if the Company  reaches  certain  higher levels of
sales, sales growth, and earnings targets.

Section 16(a) Beneficial Ownership Reporting Compliance

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors,  certain of its  officers  and  persons  who own more than 10% of the
Company's  common stock to file  reports of  ownership  and changes in ownership
with the SEC.  Such  persons  are  required  by SEC  regulations  to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on review
of the copies of such forms furnished to the Company,  the Company believes that
all Section 16(a) filing requirements  applicable to persons who are officers or
directors  of the Company or holders of 10% of the  Company's  common stock were
complied with in fiscal 2003.

ITEM 11. EXECUTIVE COMPENSATION

Director Compensation and Arrangements

During  fiscal  2003,  the  Company's  non-employee  director,  Alan H.  Foster,
received $18,000 per annum, payable quarterly.

Executive Officer Compensation

The following  table shows all  compensation  paid by the Company for the fiscal
years ended June 30, 2001, 2002 and 2003 to (1) the person who has served as the
chief  executive  officer of the  Company at all times  since the  beginning  of
fiscal 2003 (Samuel N. Seidman),  and (2) each executive officer of the Company,
other than the chief executive  officer,  who served as an executive  officer at
any time  during  fiscal  2003 and  whose  income  exceeded  $100,000  (James A.
Kolinski and Robert J. Cuccaro) (collectively,  the "Named Executive Officers").
Summary Compensation Table

<TABLE>
<CAPTION>


                                Annual Compensation Long Term Compensation
 ------------------------------------------------------------------------------------------------------
                                                                  Restricted      Securities
 Name and               Fiscal Year                               Stock Awards    Underlying Options
 Principal Position     ended June 30,   Salary ($)   Bonus ($)        (#)                (#)
 ------------------------------------------------------------------------------------------------------

<S>                           <C>          <C>           <C>           <C>               <C>
 Samuel N. Seidman,           2003         120,000       ---           ---                --
 Chairman of the              2002         120,000       ---           ---                ---
 Board, President and         2001         120,000       ---           ---                ---
 Chief Executive
 Officer

 James A. Kolinski,           2003         170,000       ---           ---                ---
 Vice President,              2002         170,000     8,333           ---                ---
 Operations of the            2001         170,000       ---           ---                ---
 Company and Chief
 Executive Officer of
 Atlas

 Robert J. Cuccaro,           2003         103,000       ---           ---                ---
 Vice President,              2002         103,000       ---           ---                ---
 Corporate Controller         2001          95,000       ---           ---                ---
 of the Company and
 President of Westland
---------------
</TABLE>

Option Awards and Values. No options or stock  appreciation  rights were awarded
to any of the Named Executive  Officers in fiscal 2003. The following table sets
forth information  concerning the aggregate number and values of options held by
the Named  Executive  Officers as of June 30, 2003.  None of the Named Executive
Officers holds stock appreciation  rights and none of such persons exercised any
options in fiscal 2003.

On July 16, 2003, the Company's  board of directors  authorized and directed the
Company to issue  options to purchase  256,000  shares of the  Company's  common
stock in replacement  of options,  which had been granted in 1997 and expired in
2002 under the Company's  Performance  Equity Plan (PEP). The board approved for
256,000 options to be reissued under the continuing  Performance  Equity Plan by
the Company at an exercise  price equal to the current  market closing price for
the  Company's  common  shares.  The options  granted to directors and executive
officers were  allocated as follows:  97,000 options were reserved for Atlas and
Westland  operating and management  personnel;  49,000 options were allocated to
Mr. Seidman,  39,000 options each were allocated to Messrs. Kolinski and Levine;
29,000  options  were  allocated  to Mr.  Cuccaro;  and 6,500  options each were
allocated to Messrs. Austin and Foster.

<TABLE>
<CAPTION>

                                Aggregate Year-End Option Values at June 30, 2003

                                    Number of unexercised options       Value of unexercised in the money
                                        at fiscal year end (#)           options at fiscal year end ($)

         Name                        Exercisable     Unexercisable      Exercisable        Unexercisable

<S>                                    <C>                                   <C>
         Samuel N. Seidman             158,833            ---               -$0-                ---
         James A. Kolinski               ---              ---               ---                 ---
         Robert J. Cuccaro               ---              ---               ---                 ---

</TABLE>

Compensation Committee Interlocks and Insider Participation

The  full  Board of  Directors  of the  Company  serves  as both  the  Company's
Compensation  Committee and, since January 1, 2002, the Audit  Committee.  There
have not been since the beginning of fiscal 2003 any interlocking relationships,
as  defined  in the  regulations  of the  Securities  and  Exchange  Commission,
involving  any person who has served on the Company's  Board of Directors  since
that  time.  See  Item  13  for  a  description  of  certain   transactions  and
relationships  of the Company with  directors of the Company since the beginning
of fiscal 2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and accompanying  footnotes set forth certain information as
of January 20, 2004 with respect to the stock ownership of (1) each  stockholder
known by the Company to be a beneficial  owner of more than 5% of the  Company's
common stock,  (2) each  director and nominee of the Company,  (3) the Company's
Chief  Executive  Officer,  and (4) all directors and executive  officers of the
Company as a group (based upon information furnished by such persons). Shares of
common stock  issuable upon exercise of options which are currently  exercisable
or  exercisable  within 60 days of the date of this report have been included in
the following table. See Item 11 for additional  information regarding the stock
options granted to the indicated  persons.  The business  address of the persons
listed below is Productivity  Technologies  Corp.,  3100 Copper Avenue,  Fenton,
Michigan 48430.

Name of Beneficial Owner          Number of Shares         Percentage of Shares
                                 Beneficially Owned        Beneficially Owned(3)
Michael D. Austin                   319,100 (1)                    12.9%
Samuel N. Seidman                   245,250 (1)                     9.5%
Jesse A. Levine                     139,500 (1)(2)                  5.4%
Alan H. Foster                       43,250 (1)                     1.7%
Ronald Prime                        153,000                         6.2%
Robert J. Cuccaro                    29,000 (1)                     1.2%
James A. Kolinski                    45,000 (1)                     1.8%
All directors and
executive officers as a
group (4)                           974,100 (4)                    35.1%

(1)  Includes  shares of common  stock  issuable  upon  immediately  exercisable
     warrants and options at prices  ranging  from $0.15 to $1.37 per share,  as
     follows:  Mr.  Austin - 6,500 shares,  Mr.  Seidman - 107,000  shares;  Mr.
     Levine - 97,000 shares;  Mr. Kolinski - 39,000 shares, Mr. Cuccaro - 29,000
     shares, and Mr. Foster - 18,500 shares.

(2)  Includes 4,000 shares gifted by Mr. Levine to a related minor.

(3)  The  percentage  in this column is  calculated  by  dividing  the number of
     shares  beneficially  held by the individual or group shown on each line by
     the sum of (i) the number of  outstanding  shares of common  stock and (ii)
     any shares of common  stock  issuable  upon the exercise of options held by
     such individual or group members, but for no other person.

(4)  Includes  shares of common  stock  issuable  upon  immediately  exercisable
     warrants and options to all executive officers and directors.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Seidman & Co., Inc., an affiliate of the Company, makes available to the Company
office space, as well ascertain office,  administrative and secretarial services
as may be  required  by the  Company.  The  Company  paid  Seidman  & Co.,  Inc.
approximately  $20,000 in the fiscal year ended June 30, 2003 for such services.
Samuel N. Seidman,  a director and the Chairman,  President and Chief  Executive
Officer  of the  Company,  is  President  of Seidman & Co.,  Inc.,  and Jesse A.
Levine,  a director,  Chief Financial  Officer,  Vice  President,  Secretary and
Treasurer of the Company, is Senior Vice President of Seidman & Co., Inc.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

For  fiscal  2002  and  2003,  the  Company's  principal   accountants,   billed
approximately  $48,000 and  $45,500,  respectively,  for  professional  services
rendered  by for the audit of the  Company's  annual  financial  statements  and
review of financial  statements  included in the Company's  quarterly reports on
Form 10-Q or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal years.

Audit-Related Fees

For fiscal 2002 and 2003, the Company's  principal  accountants did not bill for
any assurance and related services related to the professional services rendered
by for the audit or review of the Company's annual financial statements.

Tax Fees

For  fiscal  2002  and  2003,  the  Company's  principal   accountants,   billed
approximately $14,000 and $14,000,  respectively, for tax compliance, tax advice
and tax planning  services.  These services  consisted of preparation of federal
and state tax returns.

All Other Fees

For  fiscal  2002  and  2003,  the  Company's  principal   accountants,   billed
approximately $25,000 and $0, respectively, for all other non-audit services and
products provided by these  accountants.  These services  consisted of assisting
the Company in preparation of detailed consolidated and consolidating  financial
schedules and projections in support of the Company's  refinancing  efforts.  In
addition,  the accountants assisted in helping both operating  subsidiaries with
accounting systems,  software,  and other items,  including optimizing charts of
accounts.

Approval of Non-Audit Services

In the  absence  of a separate  Audit  Committee,  the full  Board of  Directors
intends to pre-approve  all non-audit fees going forward.  No such services were
provided since the date the  Commission's  regulations on  pre-approval  of fees
were adopted and, therefore, none were pre-approved.


                                     PART IV

ITEM 16.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)       Financial Statements

          1.   Financial Statements as listed on page F-1.

          2.   Financial Statement Schedules as listed on page F-1.

          3. Exhibits as listed on the Exhibit Index.

(b)       Reports on Form 8-K.
          None during the fourth quarter of fiscal 2003.

(c)       Exhibits
          The exhibits filed herewith are listed on the Exhibit Index.

(d)       Other Financial Statement Schedules
          None


<PAGE>



                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
herewith duly authorized.

January 20, 2004

PRODUCTIVITY TECHNOLOGIES CORP.

By:  /s/ Samuel N. Seidman
     --------------------------
         Samuel N. Seidman
         Chairman, Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>

<S>      <C>                                           <C>                                                <C> <C>
         /s/  Samuel N. Seidman                        Chairman, Chief Executive Officer,          Jauary 20, 2004
         Samuel N. Seidman                             President and Director (Principal
                                                       Executive Officer)

         /s/  Michael D. Austin                        Director, Senior Vice President of          January 20, 2004
         Michael D. Austin                             Strategic Planning and Marketing,
                                                       President of Atlas

         /s/  Jesse A. Levine                          Senior Vice President, Secretary,           January 20, 2004
         Jesse A. Levine                               Treasurer and Director and Chief Financial
                                                       Officer (Principal Financial Officer)

         /s/ Robert J. Cuccaro                         Vice President, Corporate Controller        January 20, 2004
         Robert J. Cuccaro                             (Principal Accounting Officer)

         /s/ James A. Kolinski                         Vice President, Operations of the           January 20, 2004
         James A. Kolinski                             Company and Chief Executive Officer
                                                       of Atlas
</TABLE>



<PAGE>



                            PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES

                              FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


                                    CONTENTS


                                                                        Page


INDEPENDENT AUDITORS' REPORTS:

  Report of Follmer Rudzewicz PLC                                      F-2

  Report of Doeren Mayhew                                              F-3

FINANCIAL STATEMENTS:

  Consolidated Balance Sheets as of June 30, 2003 and 2002             F-4

  Consolidated Statements of Operations for each of the years
    in the three-year period ended June 20, 2003                       F-6

  Consolidated Statements of Shareholders' Equity for each of
     the years in the three-year period ended June 30, 2003            F-7

  Consolidated Statements of Cash Flows for each of the years
      in the three-year period ended June 30, 2003                     F-8

  Notes to Consolidated Financial Statements                        F-9 to F-22


                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Shareholders of
    Productivity Technologies Corp. and Subsidiaries


We have audited the  accompanying  consolidated  balance  sheet of  Productivity
Technologies Corp. and Subsidiaries (the "Company") as of June 30, 2003, and the
related  consolidated  statement of  operations,  shareholders'  equity and cash
flows for the year then ended. These consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Productivity
Technologies  Corp. and  Subsidiaries as of June 30, 2003, and the  consolidated
results  of their  operations  and their  cash  flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.


/s/ Follmer Rudzewicz PLC
---------------------------
FOLLMER RUDZEWICZ PLC
Southfield, Michigan
August 29, 2003, except as to note 5,
    which is as of December 22, 2003



                                      F-2
<PAGE>



                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
    Productivity Technologies Corp. and Subsidiaries


We have audited the  accompanying  consolidated  balance  sheet of  Productivity
Technologies Corp. and Subsidiaries (the "Company") as of June 30, 2002, and the
related  consolidated  statements of operations,  shareholders'  equity and cash
flows  for the two  years  ended  June 30,  2002 and  2001.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  consolidated  financial  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Productivity
Technologies  Corp.  and  Subsidiaries  as of June 30, 2002,  and the results of
their  operations and their cash flows for the two years ended June 30, 2002 and
2001 in conformity with accounting  principles  generally accepted in the United
States of America.

Our previous report on the June 30, 2002 financial statements,  dated August 23,
2002  (except  for Note 5,  which the date is  October  11,  2002)  included  an
explanatory  paragraph that described the uncertainty of the Company  continuing
as a going concern.  Due to the Company operating currently in January 2004, the
going concern uncertainty as related to our report does not apply.



                                        /s/ Doeren Mayhew
                                        -------------------------
                                        Doeren Mayhew


August 23, 2002 (Except for Note 5,
   which the date is the October 11, 2002)
Troy, Michigan
                                      F-3
<PAGE>


                            PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                          ASSETS


                                                                                                  June 30,
                                                                                   ----------------------------------------
                                                                                         2003                  2002
                                                                                   ------------------    ------------------

CURRENT ASSETS:
<S>                                                                                      <C>                   <C>
Cash and cash equivalents                                                                $ 1,163,187           $ 4,971,837
Short-term investments, including accrued interest                                           540,582               149,720
Contract receivables, net of allowance for doubtful accounts
of $227,663 in 2003 and $250,198 in 2002 (note 2)                                          3,620,852             2,898,107
Costs and estimated earnings in excess of billings on
uncompleted contracts (note 3)                                                             3,423,457             1,773,141
Inventories                                                                                1,154,512             1,211,249
Prepaid expenses and other current assets                                                    328,517               352,542
Deferred income taxes (note 8)                                                               290,000               282,000
                                                                                   ------------------    ------------------

Total current assets                                                                    $ 10,521,107          $ 11,638,596
                                                                                   ------------------    ------------------


PROPERTY AND EQUIPMENT:
Land                                                                                      $  591,514            $  591,514
Buildings and improvements                                                                 4,962,690             4,917,459
Machinery and equipment                                                                    4,215,036             4,223,506
Transportation equipment                                                                      21,000                21,000
                                                                                   ------------------    ------------------

                                                                                         $ 9,790,240           $ 9,753,479
Less:  Accumulated depreciation                                                            3,631,717             3,042,568
                                                                                   ------------------    ------------------

Net property and equipment                                                               $ 6,158,523           $ 6,710,911
                                                                                   ------------------    ------------------


OTHER ASSETS:
Goodwill (note 4)                                                                        $ 2,985,909           $ 4,926,448
Patents (note 4)                                                                             354,384               451,875
Deferred income taxes (note 8)                                                               430,000               468,000
Other assets                                                                                 252,955               297,959
                                                                                   ------------------    ------------------

Total other assets                                                                       $ 4,023,248           $ 6,144,282
                                                                                   ------------------    ------------------

Total assets                                                                            $ 20,702,878          $ 24,493,789
                                                                                   ==================    ==================
</TABLE>


                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                                                       LIABILITIES


                                                                                                  June 30,
                                                                                   ----------------------------------------
                                                                                         2003                  2002
                                                                                   ------------------    ------------------

CURRENT LIABILITIES:

<S>                                     <C>                                              <C>                  <C>
Current portion of long-term debt (note 5)                                               $ 8,385,918           $12,190,338
Accounts payable                                                                           3,784,778             2,193,920
Accrued expenses:
Commissions payable                                                                          310,000               189,000
Warranty reserve                                                                             250,000               315,000
Payroll and related withholdings                                                              62,464               370,178
Interest                                                                                     610,957             1,122,552
Other                                                                                        143,574               367,198
Billings in excess of costs and estimated earnings on
uncompleted contracts (note 3)                                                             1,864,980               750,970
Current maturitites of executive deferred compensation
agreements (note 11)                                                                         974,933               974,933
                                                                                   ------------------    ------------------

Total current liabilities                                                                $16,387,604           $18,474,089
                                                                                   ------------------    ------------------

LONG-TERM DEBT, LESS CURRENT MATURITIES (NOTE 5)                                         $ 1,735,000           $ 3,800,000
                                                                                   ------------------    ------------------

</TABLE>
<TABLE>
<CAPTION>



                                                   SHAREHOLDERS' EQUITY


COMMON STOCK; $.001 par value; 20,000,000 shares
<S>         <C>                                                                          <C>                   <C>
authorized; 2,475,000 shares issued and outstanding                                      $     2,475           $     2,475

ADDITIONAL PAID-IN CAPITAL                                                                 9,966,408             9,966,408

DEFICIT                                                                                   (7,388,609)           (7,749,183)
                                                                                   ------------------    ------------------

Total shareholders' equity                                                               $ 2,580,274           $ 2,219,700
                                                                                   ------------------    ------------------

Total liabilities and shareholders' equity                                               $20,702,878           $24,493,789
                                                                                   ==================    ==================
</TABLE>



                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                               PRODUCTIVITY TECHNOLOGIES
                                                 CORP. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF OPERATIONS

-------------------------------------------------------------------------------------------------------------------------

                                                                                  Year ended June 30,
                                                                 --------------------------------------------------------
                                                                      2003                 2002                  2001
                                                                 --------------------------------------------------------
<S>                                                              <C>                  <C>                   <C>
REVENUES EARNED                                                  $ 29,050,542         $ 24,767,655          $ 27,992,387

COST OF REVENUES EARNED                                            22,197,218           18,260,764            22,154,991
                                                                 ------------         ------------          ------------
GROSS PROFIT                                                     $  6,853,324         $  6,506,891          $  5,837,396

SELLING, GENERAL AND ADMINISTRA-
TIVE EXPENSES                                                       6,003,959            6,452,908             8,004,219

IMPAIRMENT OF INTANGIBLE ASSETS
(NOTE 4)                                                                    -            2,087,308                     -
                                                                 ------------         ------------          ------------
INCOME (LOSS) FROM OPERATIONS                                    $    849,365         $ (2,033,325)         $ (2,166,823)
                                                                 ------------         ------------          ------------
OTHER INCOME (EXPENSES):
Interest expense                                                 $   (639,822)        $ (1,668,519)         $ (1,605,164)
Loss on disposal of equipment                                               -               (8,629)                    -
Interest income                                                        10,019               56,912                53,705
Miscellaneous income                                                  111,031               74,387                32,491
                                                                 ------------         ------------          ------------

Total other expenses                                             $   (518,772)        $ (1,545,849)         $ (1,518,968)
                                                                 ------------         ------------          ------------
INCOME (LOSS) BEFORE INCOME
TAX EXPENSE (BENEFIT)                                            $    330,593         $ (3,579,174)         $ (3,685,791)

INCOME TAX EXPENSE (BENEFIT) (NOTE 8)                                 (29,981)             548,328              (572,000)
                                                                 ------------         ------------          ------------
NET INCOME (LOSS)                                                $    360,574         $ (4,127,502)         $ (3,113,791)
                                                                 ============         ============          ============

BASIC INCOME (LOSS) PER SHARE                                    $       0.15         $      (1.67)         $      (1.26)
                                                                 ============         ============          ============
DILUTED INCOME (LOSS) PER SHARE                                  $       0.15         $      (1.67)         $      (1.26)
                                                                 ============         ============          ============

</TABLE>


                                      F-6
<PAGE>

<TABLE>
<CAPTION>

                            PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                For the years ended June 30, 2003, 2002 and 2001

--------------------------------------------------------------------------------------------------------------------------------


                                           Common                           Additional
                                            Stock          Common            Paid-in
                                            Shares          Stock            Capital           Deficit              Total
                                        ---------------  -------------   ----------------  -----------------   -----------------

<S>            <C>                           <C>                <C>          <C>                 <C>                 <C>
BALANCE - July 1, 2000                       2,475,000          2,475        $ 9,966,408         $ (507,890)         $9,460,993

NET LOSS                                             -              -                  -         (3,113,791)         (3,113,791)
                                        ---------------  -------------   ----------------  -----------------   -----------------

BALANCE - June 30, 2001                      2,475,000          2,475        $ 9,966,408        $(3,621,681)         $6,347,202

NET LOSS                                             -              -                  -         (4,127,502)         (4,127,502)
                                        ---------------  -------------   ----------------  -----------------   -----------------

BALANCE - June 30, 2002                      2,475,000          2,475        $ 9,966,408        $(7,749,183)         $2,219,700

NET INCOME                                           -              -                  -            360,574             360,574
                                        ---------------  -------------   ----------------  -----------------   -----------------

BALANCE - June 30, 2003                      2,475,000          2,475        $ 9,966,408        $(7,388,609)         $2,580,274
                                        ===============  =============   ================  =================   =================

</TABLE>



                                      F-7
<PAGE>


                            PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------


                                                                                 For the years ended June 30,
                                                                                ----------------------------------------------------
                                                                                    2003              2002              2001
                                                                                ----------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                <C>               <C>               <C>
Net income (loss)                                                                  $   360,574       $(4,127,502)      $(3,113,791)
Adjustments to reconcile net income (loss) to net cash provided
from operating activities:
Depreciation                                                                           589,149           619,653           664,849
Amortization                                                                           142,444           103,119           387,011
Loss on disposal of property and equipment                                                   -             8,629                 -
Provisions for losses on contract receivables                                          (22,535)          (89,802)          237,500
Impairment of intangible assets                                                              -         2,087,308                 -
Inventory net realizable value reserve                                                  50,000           (50,000)           50,000
Deferred income taxes                                                                   30,000           588,000          (572,000)
Changes in assets and liabilities:
Decrease (increase) in contract receivables                                           (700,210)        2,725,468         4,159,640
Decrease in inventories, prepaid expenses and other current
assets, and other assets                                                                30,762           407,420           317,369
Decrease (increase) in costs estimated earnings in excess of
billings on uncompleted contracts - net                                               (536,306)        5,898,754         2,776,873
Decrease (increase) in accounts payable and accrued expenses                           603,975        (2,083,739)         (248,435)
                                                                                   ------------      ------------      ------------
Total adjustments                                                                  $   187,279       $10,214,810       $ 7,772,807
                                                                                   ------------      ------------      ------------
Net cash provided from operating activities                                        $   547,853       $ 6,087,308       $ 4,659,016
                                                                                   ------------      ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                                 $   (36,761)      $  (108,378)      $  (187,386)
Purchase of patent                                                                                      (315,000)                -
Proceeds from sale of (purchases of) short-term investments - net                      (390,862)           93,416            66,949
                                                                                   ------------      ------------      ------------
Net cash (used in) investing activities                                            $  (427,623)      $  (329,962)      $  (120,437)
                                                                                   ------------      ------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on revolving credit agreement                                         $(2,712,568)      $  (677,662)      $(3,880,148)
Payments on long-term debt                                                          (1,216,312)         (873,899)         (431,004)
                                                                                   ------------      ------------      ------------
Net cash (used in) financing activities                                            $(3,928,880)      $(1,551,561)      $(4,311,152)
                                                                                   ------------      ------------      ------------
NET (DECREASE) INCREASE IN CASH                                                    $(3,808,650)      $ 4,205,785       $   227,427

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                        4,971,837           766,052           538,575
                                                                                   ------------      ------------      ------------
CASH AND CASH EQUIVALENTS - END OF YEAR                                            $ 1,163,187       $ 4,971,837       $   766,002
                                                                                   ============      ============      ============

                                SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for interest                                             $ 1,037,915       $   960,502       $ 1,624,558
                                                                                   ============      ============      ============
Noncash investing and financing activities:
Note payable reduced by purchase price adjustment                                  $(1,940,539)      $         -       $         -
                                                                                   ============      ============      ============
Write-down of goodwill based on purchase price adjustment                          $ 1,940,539       $         -       $         -
                                                                                   ============      ============      ============
</TABLE>


                                      F-8
<PAGE>





                            PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the years ended June 30, 2003, 2002 and 2001

--------------------------------------------------------------------------------


NOTE 1         NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

               Nature of Business

               The Company is a manufacturer  of automated  industrial  systems,
               machinery,  equipment,  custom  electrical  control  panels and a
               provider  of  engineering   services.   It  operates  with  three
               manufacturing  plants,  sales and engineering offices. Two of the
               manufacturing  plants are  located in  Fenton,  Michigan  and the
               third plant is located in Westland, 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 total annual sales.  Sales are
               predominantly  in the United  States  but, in recent  years,  the
               Company has targeted sales efforts in Canada,  Mexico, Europe and
               Asia. Export sales during the years ended June 30, 2003, 2002 and
               2001, amounted to approximately 17%, 23% and 24% of annual sales,
               respectfully.

               Company Operations

               The Company  operates in one  segment.  This is based on the fact
               that the Company's chief operating  decision maker, the Company's
               Chief Executive  Officer,  regularly reviews  operating  results,
               assesses  performance  and makes decisions about resources at the
               parent company level.

               Use of Estimates

               The  preparation  of the  consolidated  financial  statements  in
               conformity with accounting  principals  generally accepted in the
               United States of America  requires  management to make  estimates
               and  assumptions  that affect the reported  amounts of assets and
               liabilities   and  the   disclosure  of  contingent   assets  and
               liabilities at the date of the consolidated  financial statements
               and the  reported  amounts of revenues  and  expenses  during the
               reporting   period.   Actual  results  could  differ  from  those
               estimates.  Such  management  estimates  include an allowance for
               doubtful  accounts   receivable,   recognition  of  profit  under
               long-term contracts, valuation allowances against deferred income
               taxes,  estimates  related to recovery  of long lived  assets and
               accruals of product warranty and other liabilities.

               Principals of Consolidation

               The accompanying  consolidated  financial  statements include the
               accounts  of  PTC  and  its  wholly  owned  subsidiaries,   Atlas
               Technologies,  Inc. ("Atlas") and Westland Control Systems,  Inc.
               ("Westland")  (collectively,   the  "Company").  All  significant
               intercompany  balances and transactions have been eliminated upon
               consolidation.


                                      F-9
<PAGE>



               Cash Equivalents

               Cash  equivalents  are  money  market   investments.   Short-term
               investments,  representing U.S. Treasury Bills with maturities of
               twelve months or less,  are carried at cost,  which  approximates
               market value.

               Concentrations of Credit Risk

               Financial  instruments which  potentially  subject the Company to
               concentrations  of credit risk consist  principally of cash, cash
               equivalents,  short-term  investments  and contract  receivables.
               While a significant  portion of the Company's accounts receivable
               is concentrated  with a few customers as shown below, the Company
               attempts to minimize its credit risk by reviewing all  customers'
               credit  histories  before  extending  credit  and  by  monitoring
               customers  credit  exposure on a continuing  basis.  In addition,
               sales to  customers  in South  America  and China  typically  are
               supported by Export-Import  Bank (EXIM) guarantees and letters of
               credit,  respectively.  The Company  establishes an allowance for
               possible losses on contract receivables, if necessary, based upon
               factors  surrounding  the  credit  risk  of  specific  customers,
               historical trends and other information.  The Company's inability
               to  collect  on its  contract  receivables  could have a material
               adverse effect on the Company's operations.

               Two customers accounted for 39%, 38% and 47% of total revenue for
               the  fiscal   years   ended  June  30,   2003,   2002  and  2001,
               respectively.

               The following  individual  customers accounted for 10% or more of
               total accounts receivable for the fiscal years ended:


                                                     June 30,
                                                -----------------
                                                2003         2002
                                                -----------------

                        Ford Motor Company      19%           35%
                        Dana Corporation         1%           17%
                        GKN Aerospace           15%            0%
                        Veltri Modular          18%            0%

               Fair Values of Financial Instruments

               The  carrying   amounts  of  the   Company's   cash,   short-term
               investments,  contract receivables,  accounts payable and accrued
               expenses  approximate  fair value. The long-term debt pursuant to
               the  Company's  bank  credit  agreements  approximate  fair value
               because  the  interest   rates  on  the  majority  of  the  loans
               outstanding change with market rates.

               Advertising

               The Company expenses advertisement costs as incurred.

               Revenue and Cost Recognition

               Atlas  Technologies,  Inc. - Revenues earned consist primarily of
               contract  revenues  from fixed price  contracts,  and the related
               contract costs, are recognized using the percentage-of-completion
               method,  measured by the percentage of contract costs incurred to
               date to 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.



                                      F-10
<PAGE>



               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   conditions,   estimated
               profitability,  and  final  contract  settlement  may  result  in
               revisions to costs and income,  and are  recognized in the period
               the revisions are determined.

               The amount of earnings, which the Company will ultimately realize
               would  differ in the near term from the amounts  estimated in the
               accompanying  consolidated  financial  statements if total actual
               costs upon  completion  of a contract are either  higher or lower
               than the amount estimated.

               Westland  Control  Systems,  Inc. - Revenues are recognized  upon
               product shipment.

               Shipping and Handling

               The  Company  classifies  amounts  billed to  customers  in sales
               transactions  related to  shipping  and  handling  as revenue and
               costs  incurred by the Company for  shipping and handling as cost
               of revenues earned.

               Inventories

               Inventories are stated at the lower of cost (first-in, first-out)
               or market and primarily include raw materials and spare parts.

               Property and Equipment

               Property  and  equipment  are  stated  at cost.  Depreciation  is
               computed on the straight-line and accelerated methods,  generally
               using the following estimated useful lives:


                Building and improvements       20-40 years
                Machinery and equipment          3-10 years
                Transportation equipment         2-5  years

               Goodwill and Intangible Assets

               The Company evaluates the recoverability of goodwill on an annual
               basis or in certain  circumstances as required under Statement of
               Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other
               Intangible Assets".

               Intangible  assets are  evaluated  whenever  events or changes in
               circumstances  indicate that the carrying  value of the asset may
               be impaired. An impairment loss is recognized when the fair value
               or the  estimated  future cash flows  expected to result from the
               use of  the  asset,  including  disposition,  is  less  than  the
               carrying value of the asset.

               The patents are amortized  over their  estimated  useful lives of
               six to seventeen years using the straight-line method.




                                      F-11
<PAGE>



               Warranty

               The  Company  warrants  under  certain   circumstances  that  its
               products  meet  certain  agreed-upon  manufacturing  and material
               specifications. The Company records a warranty liability based on
               anticipated future claims.

               Health Insurance

               Atlas was  self-insured  for certain losses  relating to employee
               medical  benefits.  Atlas  discontinued its self-insured plan for
               the  majority of health  benefits  during the year ended June 30,
               2002 and now uses a third party  insurer.  Atlas  continues to be
               self-insured for vision and dental insurance.

               Income Taxes

               The Company follows the assets and liability method of accounting
               for income taxes  specified by Statement of Financial  Accounting
               Standards  (SFAS) No. 109,  "Accounting for Income Taxes".  Under
               the asset and liability  method of  accounting  for income taxes,
               deferred tax assets and liabilities  are recognized  based on the
               estimated  future tax  consequences  attributable  to differences
               between the consolidated  financial statement carrying amounts of
               existing assets and  liabilities  and their  respective tax bases
               and operating  loss and tax credit carry  forwards.  Deferred tax
               assets and  liabilities  are measured  using enacted tax rates in
               effect  for the year in which  those  temporary  differences  are
               expected to be recovered  or settled.  The effect on deferred tax
               assets and  liabilities of a change in tax rates is recognized in
               the period that includes the enactment date.

               Income (Loss) Per Share

               Income (Loss) per share reflected in the  consolidated  statement
               of  operations  is  presented  in  accordance  with SFAS No. 128,
               "Earnings per Share".  The  following  presents the income (loss)
               per share calculations:

<TABLE>
<CAPTION>

                                                                          June 30,
                                                        --------------------------------------------
                                                           2003             2002            2001
                                                        ----------      ------------    -------------
                Numerator for basic and diluted
                  earnings per share:
<S>                                                     <C>             <C>             <C>
                    Net income (loss)                   $  360,574      $(4,127,502)    $(3,113,791)

                Denominator for basic and diluted
                  earnings per share:
                    Weighted aveage shares
                      outstanding, basic                 2,475,000        2,475,000       2,475,000
                    Weighted average shares
                      outstanding, diluted               2,475,000        2,475,000       2,475,000
</TABLE>


               Options to purchase  shares of common stock were  outstanding  at
               June 30,  2003,  2002 and  2001  but  were  not  included  in the
               computation  of diluted  earnings  per share  because  the shares
               would be antidilutive.

               Long-Lived Assets

               Long-lived  assets,  such as  goodwill,  patent and  property and
               equipment, are evaluated for impairment when events or changes in
               circumstances indicate that the carrying amount of the assets may
               not be recoverable through the estimated undiscounted future cash
               flows  from the use of  these  assets.  When any such  impairment
               exists,  the related  assets will be written  down to fair value.


                                      F-12

<PAGE>

               Recent Accounting Pronouncements

               In December 2002, the FASB issued  Statement No. 148,  Accounting
               for Stock-Based  Compensation - Transition and Disclosure  ("SFAS
               148"). SFAS 148 provides  alternative methods of transition for a
               voluntary  change  to the fair  value  method of  accounting  for
               stock-based  employee  compensation  as  originally  provided  by
               Statement No. 123, Accounting for Stock-Based Compensation ("SFAS
               123"). Additionally,  SFAS 148 amends the disclosure requirements
               of SFAS 123 to require  prominent  disclosure  in both the annual
               and interim  financial  statements about the method of accounting
               for stock-based compensation and the effect of the method used on
               reported results.  The transitional  requirements of SFAS 148 are
               effective  for all financial  statements  for fiscal years ending
               after  December  15,  2002.  The Company  adopted the  disclosure
               portion of this  statement  for the quarter  ended  December  31,
               2002. The application of the disclosure  portion of this standard
               did not have any impact on the Company's  consolidated  financial
               position or results of operations.

               In May 2003,  the FASB issued  Statement of Financial  Accounting
               Standards No. 150,  Accounting for Certain Financial  Instruments
               with Characteristics of both Liabilities and Equity ("SFAS 150").
               This accounting  standard  establishes  standards for classifying
               and measuring certain financial  instruments with characteristics
               of  both  liabilities  and  equity.   It  requires  that  certain
               financial  instruments that were previously classified as equity,
               now be classified  as a liability.  This  accounting  standard is
               effective  for  financial  instruments  entered  into or modified
               after May 31, 2003,  and  otherwise at the beginning of the first
               interim  period  beginning  after June 15, 2003.  The adoption of
               this statement did not have a material impact on the consolidated
               financial statements.

               FIN No. 45, "Guarantor's  Accounting and Disclosure  Requirements
               for Guarantees,  Including Indirect Guarantees of Indebtedness of
               Others an interpretation of SFAS No. 5, 57 and 107 and rescission
               of FASB  Interpretation  No. 34" was issued in November 2002. FIN
               45 clarifies  the  requirements  of SFAS No. 5, " Accounting  for
               Contingencies,"  relating to a  guarantor's  accounting  for, and
               disclosure of, the issuance of certain types of  guarantees.  The
               adoption of FIN 45 related to initial recognition and measurement
               of guarantees  did not have an impact on the net income or equity
               of the Company.

               FIN No. 46,  "Consolidation  of Variable  Interest  Entities,  an
               interpretation of ARB 51," was issued.  The primary objectives of
               FIN  46  are  to  provide  guidance  on  the  identification  and
               consolidation of variable interest entities,  or VIE's, which are
               entities for which  control is achieved  through means other than
               through voting  rights.  The Company has completed an analysis of
               FIN 46 and has determined that it does not have any VIE's.


NOTE 2        CONTRACT RECEIVABLES

               The contract receivables consist of the following:
<TABLE>
<CAPTION>

                                                                June 30,
                                                        ----------------------------
                                                           2003             2002
                                                        ----------       -----------

                Billed
<S>                                                     <C>              <C>
                  Completed contracts                   $1,514,981       $1,400,790
                  Uncompleted contracts                  2,333,534        1,747,515
                                                        ----------       -----------
                     Total contract receivables         $3,848,515       $3,148,305
                Less: Allowance for doubtful accounts     (227,663)        (250,198)
                                                        ----------       -----------
                     Total                              $3,620,852       $2,898,107
                                                        ===========      ===========
</TABLE>


                                      F-13
<PAGE>



NOTE 3        COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

<TABLE>
<CAPTION>

                                                                              June 30,
                                                                -----------------------------------
                                                                    2003                    2002
                                                                -----------             -----------
<S>                                                             <C>                     <C>
                Costs incurred on uncomplted contracts          $28,839,346             $24,633,492

                Estimated earnings on uncompleted contracts      12,501,450               9,187,627
                                                                -----------             -----------
                  Total coss and estimated earnings incurred
                     on uncompleted contracts                   $41,340,796             $33,821,119

                Less: Billings to date                           39,782,319              32,798,948
                                                                -----------             -----------
                  Total                                         $ 1,558,477             $ 1,022,171
                                                                ============            ============


               Included in the accompanying consolidated balance sheet under the
               following captions:


                Costs and estimated earnings in excess of
                  billings on uncompleted contracts             $ 3,423,457             $ 1,773,141

                Billings in excess of costs and estimated
                  earnings on uncompleted contracts              (1,864,980)               (750,970)
                                                                -----------             -----------
                  Total                                         $ 1,558,477             $ 1,022,171
                                                                ============            ============
</TABLE>


NOTE 4         GOODWILL AND OTHER INTANGIBLE ASSETS

               Goodwill

               The Company adopted SFAS No. 142,  Goodwill and Other  Intangible
               Assets,  on July 1, 2001. As defined by SFAS No. 142, the Company
               has  identified  two reporting  units:  1) Atlas and 2) Westland,
               which  constitute  components  of  the  Company's  business  that
               includes goodwill.

               The  write-down  of  goodwill  for the fiscal year ended June 30,
               2003 was due to a reduction  of the  purchase  price of Westland,
               thus the  write-down  was  recognized  as a reduction in the note
               payable to the prior shareholder.

               For the fiscal year ended June 30,  2002,  the Company  completed
               the  transitional   and  annual   impairment  test  resulting  in
               Productivity  Technologies  Corp.  and  Subsidiaries  recording a
               charge to earnings of $1,595,440, or $0.65, per diluted share for
               the  write-down  of goodwill  related to its  Westland  reporting
               unit.   The   impairment   charge  is  included  in  the  caption
               "Impairment of Intangible  Assets" in the statement of operations
               for the year ended June 30, 2002.

               This  write-down  resulted  from  management's  consideration  of
               factors  related to the  performance  of the  Westland  reporting
               unit, including lower than projected sales,  operating losses and
               negative cash flows.  Based on these  considerations  and others,
               the Company  updated its operating and cash flow  projections for
               the Westland  business.  An analysis of the projected  discounted
               future  cash  flows  indicated  that  future   recoverability  of
               goodwill  related  to  the  Westland  operations  was  uncertain.
               Accordingly,  an  impairment  charge was recorded for fiscal year
               ended June 30, 2002.



                                      F-14
<PAGE>


               The changes in the  carrying  amount of goodwill  for fiscal 2003
               are as follows:

<TABLE>
<CAPTION>


                                                  Westland          Atlas           Total
                                                ----------      -----------     -----------

<S>                                <C> <C>      <C>             <C>             <C>
                Balance as of June 30, 2001     $ 4,273,690     $ 2,248,198     $ 6,521,888
                Impairment adjustment            (1,595,440                      (1,595,440)
                                                ----------      -----------     -----------
                Balance as of June 3, 2002      $ 2,678,250     $ 2,248,198     $ 4,926,448
                Purchase price adjustment        (1,940,539)             --      (1,940,539)
                                                ----------      -----------     -----------
                Balance as of June 30, 2003     $   737,711     $ 2,248,198     $ 2,985,909
                                                ============    ============    ============
</TABLE>

               Patents and Other Intangible Assets

               Intangible assets excluding goodwill consist of the following:
<TABLE>
<CAPTION>


                                                      June 30, 2003                                   June 30, 2002
                                        ------------------------------------------      --------------------------------------------
                                           Gross                            Net            Gross                            Net
                                         Carrying      Accumulated         Book          Carrying      Accumulated         Book
                                          Amount       Amortization        Value          Amount       Amortization        Value
                                        ----------     ------------     ----------      ----------     ------------     ----------
<S>                                     <C>             <C>             <C>             <C>             <C>             <C>
                Patent - Atlas          $  315,000      $   65,625      $  249,375      $  315,000      $   13,125      $  301,875
                Patent - Westland          258,132         153,123         105,009         258,132         108,132         150,000
                                        ----------      ----------      ----------      ----------      ----------      ----------
                  Total patents         $  573,132      $  218,748      $  354,384      $  573,132      $  121,257      $  451,875
                                        ----------      ----------      ----------      ----------      ----------      ----------
                Non-compete
                  agreements            $  348,750      $  230,292      $  118,458      $  348,750      $  194,542      $  154,208
                IRB closing fees           138,785          62,194          76,591         138,785          52,940          85,845
                                        ----------      ----------      ----------      ----------      ----------      ----------
                  Total other           $  487,535      $  292,486      $  195,049      $  487,535      $  247,482      $  240,053
                                        ----------      ----------      ----------      ----------      ----------      ----------

                    Total               $1,060,667      $  511,234      $  549,433      $1,060,667      $  368,739      $  691,928
                                        ==========      ==========      ==========      ==========      ==========      ==========
</TABLE>


               At June 30, 2003 and 2002, the Company  evaluated its patents and
               other  intangible  assets for  impairment.  At June 30, 2002, the
               Company  determined  that the Westland  patent carrying amount is
               not  recoverable  and its carrying amount exceeds its fair value.
               The impairment loss is a result of a lack of sales  opportunities
               afforded  by the  patent and a lack of  corresponding  cash flows
               generated  by the  patent.  As a result,  an  impairment  loss of
               $491,868 has been  recognized  in the  statement of operations in
               the caption  "Impairment of Intangible Assets" for the year ended
               June 30, 2002. No impairment  charge was  recognized for the year
               ended June 30, 2003.

               All of the  Company's  patents  and other  intangible  assets are
               subject to amortization.  Amortization  expense totaled $142,444,
               $103,119 and $387,011,  respectively for the years ended June 30,
               2003, 2002 and 2001.


NOTE 5         NOTES PAYABLE AND LONG-TERM DEBT

               At June 30,  2003,  the  Company had (1)  $2,700,000  outstanding
               under a commercial  mortgage  loan from Bank One, (2)  $4,467,770
               outstanding  under a revolving credit facility with Bank One (the
               "Old Atlas  Revolver"),  (3)  $974,933  due to former  executives
               under a deferred compensation arrangement, (4) $2,178,148 million
               outstanding  under the Westland Loan, and (5) $775,000 due to Mr.
               Thomas Lee,  former owner of Westland.  This total of $11,095,851
               compares to a total  combined  indebtedness  of $16,965,271 as of
               June 30, 2002.

               The  amounts of  long-term  debt as of June 30,  2003  coming due
               during the five years ending June 30, 2008 and thereafter,  based
               on the terms of the new debt  arrangements,  as described in this
               Note 5, are as follows:

                                2004          $  4,370,918
                                2005          $  2,550,000
                                2006          $    400,000
                                2007          $    233,333
                                2008          $    233,333
                                Thereafter    $  3,308,267

                                Total         $ 11,095,851


                                      F-15


<PAGE>


               Prior to the  expiration  of the Old Atlas  Revolver  in  January
               2002,  the Company was not in compliance  with certain  financial
               covenants and borrowing base limitations there under. The Company
               also was not in compliance with certain financial covenants under
               the Westland Loan.  During fiscal year ended June 30, 2003,  Bank
               One did not demand  that the Company  repay  either the Old Atlas
               Revolver  or the  Westland  Loan.  In the  period  following  the
               January 2002 maturity of the Old Atlas Revolver,  the Company and
               Bank One  engaged in  discussions  concerning  possible  terms of
               forbearance,  and Bank One consented to the  settlement  with Mr.
               Lee;  however,  no formal  forbearance  arrangements were entered
               into by the Company  and Bank One.  Since the  expiration  of the
               revolving  credit facility with Bank One on January 31, 2002, and
               during  fiscal year ended June 30, 2003,  the Company was able to
               meet  its  working   capital  needs  from  cash   generated  from
               operations  without  borrowing  additional  funds under a line of
               credit.

               Effective  as  of  December  12,  2003,  Merrill  Lynch  Business
               Financial  Services  Inc.  ("MLB")  entered  into  a  new  credit
               facility  with Atlas (the "MLB Credit  Facility")  providing  for
               borrowing  availability  of up to $8.0  million,  of  which  $7.4
               million was funded at closing.  The MLB Credit Facility  consists
               of:

               o    a seven-year real estate term loan in the original principal
                    amount of $3.5 million,  bearing  interest at a variable per
                    annum  rate  equal to 3.15% in  excess of  one-month  LIBOR,
                    payable in monthly  installments of interest plus 1/180th of
                    principal (a 15-year amortization schedule) with the balance
                    of principal due at maturity in December  2010,  and secured
                    by substantially  all of the assets of Atlas;

               o    a three-year  equipment term loan in the original  principal
                    amount of $500,000, bearing interest at a variable per annum
                    rate equal to 3.15% in excess of one-month LIBOR, payable in
                    monthly  installments  of interest  plus 1/36th of principal
                    (full amortization),  maturing in December 2006, and secured
                    by substantially all of the assets of Atlas; and

               o    a  one-year   revolving   working  capital  credit  facility
                    providing for borrowing  availability  of up to $4.0 million
                    based upon eligible accounts receivable, bearing interest at
                    a  variable  per  annum  rate  equal to 2.85% in  excess  of
                    one-month LIBOR, payable in monthly installments of interest
                    only,   maturing  on  December   31,  2004  and  secured  by
                    substantially  all of the  assets  of Atlas.  For  financial
                    reporting purposes beginning with reports for the quarter to
                    end  December  31,  2004,  the one  year  revolving  working
                    capital credit facility will be considered by the Company as
                    a current liability.

               The MLB Credit  Facility is  guaranteed  by the  Company  and, in
               addition,  the Company  has  pledged all of the capital  stock of
               Atlas to secure  the  guaranty.  The  proceeds  of the MLB Credit
               Facility  were used to retire the revolving  credit  facility and
               commercial  mortgage  loan  from  Bank  One,  NA to  Atlas in the
               aggregate  outstanding  principal  amount of $7.4 million.  Atlas
               continues  to be  responsible  for legal and  professional  field
               audit fees of Bank One in the amount of approximately $60,000. As
               part of these  financing  transactions,  Bank One also  agreed to
               release  the liens on the  assets of Atlas  and the  Company.  In
               addition,  Bank One agreed to subordinate its rights with respect
               to Westland's  new lender,  Spectrum  Commercial  Services,  Inc.
               ("Spectrum"),  in  connection  with Bank  One's  term loan in the
               outstanding  principal  amount  of  approximately  $2.2  million,
               bearing  interest at 1.25% over Bank One's prime rate,  which the
               Company  incurred in  February  2000 to  purchase  Westland  (the
               "Westland Loan").

               In addition,  also  effective  as of December 12, 2003,  Spectrum
               entered  into a two-year  credit  facility  with the Company (the
               "Spectrum Credit Facility") providing for borrowing  availability
               of up to $1.25 million based upon eligible  accounts  receivable,
               bearing  interest  at a variable  per annum rate equal to 5.2% in
               excess of the prime rate of Wells  Fargo  Bank,  NA,  (subject to
               certain  minimum  payments  of $5,575 per month,  and  subject to
               reduction by 0.5% if specified profitability thresholds are met),
               maturing in December 2005 and secured by substantially all of the
               assets of Westland.



                                      F-16
<PAGE>



               Bank One agreed to subordinate its rights under the Westland Loan
               to Spectrum,  subject to restating  the  obligations  under a new
               Guarantor  Payment  Agreement  effective  as of December 12, 2003
               under which Bank One will look to Westland to repay the remaining
               obligations  owed to Bank One (which continues to be $2.2 million
               in principal).  Although the Company  continues to be the primary
               obligor  under the  Westland  Loan as  restated,  the  Company is
               prohibited  from  making  payments to Bank One so long as the MLB
               Loan to Atlas (as to which the  Company is a  guarantor)  remains
               outstanding,  and,  accordingly,  Westland  entered  into the new
               Guarantor  Payment  Agreement.  Under the  terms of the  restated
               Westland  Loan,  Westland  is required to pay to Bank One $10,000
               per month plus  interest  as well as 25% of excess  cash flow (as
               defined  in  the  restated  loan   agreement)   from   Westland's
               operations. Under the restatement,  without expressly waiving the
               previously  existing  covenant defaults under Westland Loan, Bank
               One has  agreed  to  honor  the  scheduled  maturity  date of the
               Westland Loan (February 23, 2005) absent any further defaults. As
               restated,  the Westland Loan bears interest at the per annum rate
               of 3.0% in excess of Bank One's prime rate. Bank One continues to
               hold  a  lien  on   substantially   all  of  Westland's   assets,
               subordinated to the lien of Spectrum.

               In connection  with these  financing  transactions,  the Company,
               Atlas and Westland  retired the remaining  obligations  to Thomas
               Lee, in  consideration  of a payment of $525,000,  resulting in a
               gain on the  extinguishment  of debt of  approximately  $125,000.
               Under  agreements  entered  into with Bank One in  January  1999,
               Ronald Prime,  formerly an owner and executive  officer of Atlas,
               and Michael  Austin,  formerly an owner and executive  officer of
               Atlas  and  currently  a  director  of  the  Company,  agreed  to
               subordinate   their  rights  to  receive  payments  for  deferred
               executive  compensation  obligations  of  approximately  $974,000
               (which  were  originally  scheduled  to be paid during the period
               from July 2000 through  July 2002).  These  executives  agreed to
               continue to subordinate their right to payment to MLB.


NOTE 6         SHAREHOLDERS' EQUITY

               On July 5, 1994,  PTC (under  its prior name  Production  Systems
               Acquisition  Corp.)  consummated  its Offering of 1,700,000 units
               ("Units")   (425,000  shares  had  been  previously   issued  for
               $25,000). Each Unit consisted of one share of PTC's common stock,
               $0.001  par  value,  and two  Redeemable  Common  Stock  Purchase
               Warrants  ("Warrants").  Each  Warrant  entitled  the  holder  to
               purchase from PTC one share of common stock at an exercise  price
               of $5.00 during the period  commencing  May 25, 1996,  and ending
               June 24, 2002. The expired Warrants would have been redeemable at
               a price of $.01 per Warrant upon 30 days notice at any time, only
               in the event that the last sale  price of the common  stock is at
               least $8.50 per share for 20  consecutive  trading days ending on
               the  third day prior to date on which  notice  of  redemption  is
               given.

               PTC also issued 300,000 warrants to certain investors,  which are
               identical to the Warrants  discussed above. No Warrants have been
               exercised  or  granted  subsequent  to May  23,  1996  and  these
               warrants expired June 22, 2002.

               The Company is authorized to issue 1,000,000  shares of preferred
               stock ($.001 par value) with such designations,  voting and other
               rights and preferences as may be determined from  time-to-time by
               the Board of Directors.  As of June 30, 2003, no preferred  stock
               has been issued by the Company.

               Effective  as of the  close  of  business  on May  4,  2001,  the
               Company's  Common  Stock was  delisted  for trading on the NASDAQ
               SmallCap Market.  Trading in the Company's Common Stock, Warrants
               and Units is now conducted in the over-the-counter markets on the
               NASD  Electronic  Bulletin  Board.  The OTC Bulletin  Board is an
               inter-dealer automated quotation system sponsored and operated by
               the NASD for equity  securities  not included in the NASDAQ Stock
               Market. Such over-the-counter



                                      F-17
<PAGE>



               market quotations  reflect  inter-dealer  prices,  without retail
               mark-up,  mark-down or commission and may not necessarily reflect
               actual transactions.  The delisting could have a material adverse
               effect  upon the  Company  in a number  of  ways,  including  its
               ability to raise additional capital. In addition,  the absence of
               a  trading   system  may   adversely   affect   the   ability  of
               broker-dealers   to  sell  the  Company's   Common   Stock,   and
               consequently  may limit the public market for such Stock and have
               a  negative  effect  upon  its  trading  price.  There  can be no
               assurance that the Company's Common Stock will be relisted on the
               NASDAQ National Market at any future date or that such stock will
               be relisted or traded on any market or trading system.


NOTE 7         EMPLOYEE BENEFIT AND OPTION PLANS

               The  Company  has  a  401(k)  plan  covering   substantially  all
               employees.  The Plan  allows for  eligible  employees  to defer a
               portion of their salary. In addition, discretionary contributions
               may be made by the Company. The Company made no contributions for
               the years ended June 30, 2003, 2002 and 2001.

               PTC  adopted a  Performance  Equity  Plan in 1996 to  enable  the
               Company to offer to selected  personnel an opportunity to acquire
               an equity interest in the Company through the award of incentives
               such as stock  options,  stock  appreciation  rights and/or other
               stock-based  awards.  The total  number of shares of common stock
               reserved and available for distribution under the Plan is 530,000
               shares.   The  Company   has   adopted   SFAS  No.  148  and  the
               disclosure-only  provisions  of SFAS  No,  123,  "Accounting  for
               Stock-Based Compensation".  Accordingly, no compensation cost has
               been recognized for the Plan in 2003, 2002 and 2001.

               At June 30, 2003,  2002 and 2001, the Company has selected not to
               perform a  Black-Scholes  valuation  of the  options  granted and
               outstanding to management and employees.  The lowest strike price
               of these options granted to management  approximate  $1.375 which
               is considerably  above the Company's share price trading range in
               the past two years. Given the strike price is considerably higher
               the last year's trading range, relatively short time to maturity,
               relatively  low  volatility  in  comparison  to strike  price and
               thinly  traded  quantity of the stock.  The  Black-Scholes  model
               would  indicate only a nominal  option value.  Thus,  the Company
               elected  to  not  perform  the  Black-Scholes   analysis  of  the
               outstanding options.

               A summary of the status of the  Company's  stock  options for the
               years ended June 30, 2003, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>

<S>                                                 <C> <C>             <C>             <C>
                Outstanding and exercisable at June 30, 2001            289,167         $  3.00
                Granted                                                      --              --
                Expired                                                      --              --
                Exercised                                                    --              --
                                                                        -------         -------

                Outstanding and exercisable at June 30, 2002            289,167         $  3.00
                Granted                                                      --              --
                Expired                                                  98,167             4.25
                Exercised                                                    --              --
                                                                        -------         -------

                Outstanding and exercisable at June 30, 2003            191,000         $  1.40
                                                                        =======         ========
</TABLE>



                                      F-18
<PAGE>

               The  following  summarizes  information  regarding  stock options
               outstanding and exercisable at June 30, 2003, 2002 and 2001:


<TABLE>
<CAPTION>

                                                             Weighted Average
                                                        ---------------------------
                                          Options        Remaining
                   Range of           Outstanding and   Contractual      Exercise
                Exercise Prices         Exercisable        Life            Price
                ---------------       ---------------   -----------     -----------

<S>             <C>      <C>              <C>             <C>              <C>
                $1.375 - $1.50             191,000         1 year           $  1.40

</TABLE>


NOTE 8         INCOME TAXES

               Deferred  income  taxes  reflect the net tax effects of temporary
               differences   between   the   carrying   amounts  of  assets  and
               liabilities  for  financial  reporting  and the amounts  used for
               income tax purposes.

               Significant  components of the Company's  deferred tax assets and
               liabilities are as follows:

<TABLE>
<CAPTION>

                                                                          June 30,
                                                                --------------------------
                                                                   2003             2002
                                                                ----------      ----------

                Current
<S>                                                             <C>             <C>
                  Warranty accrual                              $   85,000      $  107,100
                  Inventory net realizable value reserve            51,000          34,000
                  Other                                            154,000         140,900
                                                                ----------      ----------
                    Net current deferred tax asset              $  290,000      $  282,000
                                                                ==========      ==========
                Non-Current
                  Depreciation and basis of assets              $ (796,000)     $ (796,000)
                  Impairment of intangible assets                  542,500         570,000
                  Research credit carryforward                   1,165,000       1,165,000
                  Net operating loss carryforwards               2,024,400       2,145,000
                  Executive deferred compensation agreement        331,500         302,800
                  Other                                             38,700          38,700
                  Valuation allowance                           (2,876,100)     (2,957,500)
                                                                ----------      ----------
                    Net non-current deferred tax asset          $  430,000      $  468,000
                                                                ==========      ==========
</TABLE>


               At June 30, 2003, the Company had aggregated net operating losses
               of approximately  $5,954,000 for income tax purposes, which begin
               to expire in 2020.  In  addition,  the Company  had tax  research
               credit  carry  forwards of  approximately  $1,165,000  which will
               begin to expire in 2012.

               For financial  reporting  purposes,  due to prior year  operating
               losses,  and uncertainty in realization the Company has decreased
               its valuation allowance from $2,957,500 to $2,876,100 against the
               net operating loss  carryforwards  and other deferred tax assets.
               The  amount  of  the  remaining  deferred  tax  asset  considered
               realizable  could be  reduced  in the near term if  estimates  of
               future taxable income during the carryforward period are reduced.



                                      F-19
<PAGE>



               The significant  components of income tax expense (benefit) is as
               follows:
<TABLE>
<CAPTION>

                                                                          June 30,
                                                        --------------------------------------------
                                                            2003            2002            2001
                                                        ----------      -----------     ------------
                Federal
<S>                                                     <C>             <C>             <C>
                  Current                               $    8,000      $  (39,672)     $         --
                  Deferred                                 (37,981)        588,000          (572,000)
                                                        ----------      -----------     ------------
                    Total income tax expense (benefit)  $  (29,981)     $  548,328         (572,000)
                                                        ===========     ===========     ============

</TABLE>

               The   reconciliation  of  income  tax  computed  at  the  federal
               statutory rate (34%) to income tax expense benefit is as follows:


<TABLE>
<CAPTION>

                                                                                  June 30,
                                                                --------------------------------------------
                                                                   2003             2002            2001
                                                                ---------       ------------    ------------

<S>                                                             <C>             <C>             <C>
                Tax expense (benefit) at statutory rate         $ 112,402       $(1,217,000)    $(1,253,000)
                Valuation allowance, tax research credit
                  valuation and other non-deductible items       (146,206)        1,781,000         699,000
                Other - net                                         3,823           (15,672)        (18,000)
                                                                ---------       ------------    ------------
                    Total income tax expense (benefit)          $ (29,981)      $   548,328     $  (572,000)
                                                                ==========      ============    ============
</TABLE>


NOTE 9         OPERATING LEASE COMMITMENTS

               The Company  entered  into a new  building  leasing  agreement in
               April 2001 with the term beginning July 2001 and ending June 2006
               for its  Westland  Subsidiary.  Rent  expense for the years ended
               June 30,  2003,  2002 and 2001,  totaled  $214,867,  $275,486 and
               $244,862,  respectively.   Minimum  rental  payments  under  this
               non-cancelable  lease, which contains a five-year renewal option,
               at June 30, 2003, are as follows:


                                2004            $ 214,867
                                2005              214,867
                                2006              215,867
                                2007                   --
                                2008                   --





                                      F-20
<PAGE>



NOTE 10        EXPORT SALES

               A breakdown of export sales, based on shipment destination, is as
               follows:
<TABLE>
<CAPTION>

                                                          June 30,
                                        -------------------------------------------
                                            2003            2002            2001
                                        -----------     -----------     -----------

<S>                                     <C>             <C>             <C>
                United States           $24,202,585     $19,053,264     $21,313,623
                France                      535,831       1,217,595              --
                Brazil                      206,074       1,569,391              --
                China                     1,455,650       1,464,331       1,109,200
                Mexico                       45,977         769,624       1,371,605
                England                      46,989         443,691       2,746,052
                Germany                      25,051         136,726       1,073,016
                Canada                    2,529,235         109,586         290,023
                Other foreign countries         450           3,447          88,868
                                        -----------     -----------     -----------
                  Total                 $29,050,542     $24,767,655     $27,992,387
                                        ===========     ===========     ===========
</TABLE>

NOTE 11        BONUS RESTRUCTURING

               During fiscal 1998, the Company amended the employment agreements
               of two executive  officers of Atlas that were previously  entered
               into in connection with the  acquisition of Atlas.  These amended
               employment  agreements  are  identical  except that one agreement
               expired on December 31, 1998,  and other  expired on December 31,
               2001.

               Each executive also received 150,000 shares of restricted  common
               stock of the Company  issued during fiscal 1999.  The  restricted
               common  stock had been valued at market value less a 30% discount
               for  lack  of   marketability.   Included  in  the   accompanying
               consolidated  financial  statements  for the years ended June 30,
               2003  and  2002  related  to  these  amended  agreements  are the
               following:


                                                             June 30,
                                                    -------------------------
                                                      2003             2002
                                                    ---------       ---------
                Current maturities of executive
                  deferred compensation agreements  $ 974,933       $ 974,933
                                                    =========       =========


NOTE 12        LEGAL PLEADINGS

               The  Company  is a party to  routine  litigation  matters  in the
               ordinary  course  of  its  business.  No  such  pending  matters,
               individually or in the aggregate,  if adversely  determined,  are
               believed  by  management  to  be  material  to  the  business  or
               financial condition of the Company.


NOTE 13        QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

               The following tables present Productivity  Technologies Corp. and
               Subsidiaries  condensed  operating  results for each of the eight
               fiscal quarters for the period ended June 30, 2003. The


                                      F-21
<PAGE>



               information  for  each of these  quarters  is  unaudited.  In the
               opinion of management, all necessary adjustments,  which consists
               only of normal and  recurring  accruals,  have been  included  to
               fairly present the unaudited quarterly results.  This data should
               be  read  together  with  Productivity   Technologies  Corp.  and
               Subsidiaries  consolidated  financial  statements  and the  notes
               thereto,   the  Independent   Auditors  Report  and  Management's
               Discussions  and Analysis of Financial  Condition  and Results of
               Operations.

<TABLE>
<CAPTION>

                                                                Three months ended (In thousands)
                                -----------------------------------------------------------------------------------------------
                                June 30    March 31,    Dec. 31,    Sept. 30,    June 30,    March 31,    Dec. 31,    Sept. 30,
                                 2003        2003         2002        2002         2002        2002         2001         2001
                                -------    ---------    --------    ---------    --------    ---------    --------    ---------

<S>                              <C>        <C>          <C>         <C>          <C>         <C>          <C>         <C>
        Revenues                 $8,034     $6,663       $7,617      $6,737       $5,414      $5,837       $6,057      $7,460
        Cost of revenues          6,179      4,955        5,900       5,163        3,604       4,512        4,591       5,554
        Net income (loss)           194        107          153         (93)      (3,396)       (325)        (324)        (83)
        Net Income (loss)
          per chare:
            Basic                  0.08       0.04         0.06       (0.04)       (1.37)      (0.13)       (0.13)      (0.03)
            Diluted                0.08       0.04         0.06       (0.04)       (1.37)      (0.13)       (0.13)      (0.03)
        Shares used in
          computing per
          share amounts:
            Basic                2,475       2,475        2,475       2,475        2,475      2,475         2,475       2,475
            Diluted              2,475       2,475        2,475       2,475        2,475      2,475         2,475       2,475
</TABLE>

               During  the  fourth  quarter  ended  June 30,  2002  the  Company
               recorded  material fourth quarter  adjustments for the impairment
               of  intangibles  ($2,087,308),  the  increase  in  the  valuation
               allowance  for deferred  taxes  ($588,000)  and the  recording of
               additional  interest expense  ($388,000) related to the unwinding
               of a swap agreement.


NOTE 14        SUBSEQUENT EVENTS

               On July 16, 2003, the Company's board of directors authorized and
               directed the Company to issue options to purchase  256,000 shares
               of the Company's  common stock in replacement  of options,  which
               had been granted in 1997 and expired in 2002 under the  Company's
               Performance  Equity Plan (PEP).  The board  approved  for 256,000
               options to be reissued  under the continuing  Performance  Equity
               Plan by the  Company at an  exercise  price  equal to the current
               market closing price for the Company's common shares. The options
               granted to directors  and executive  officers  were  allocated as
               follows:  63,000  options  were  reserved  for Atlas and Westland
               operating and management personnel; 49,000 options were allocated
               to Mr.  Seidman,  39,000  options each were  allocated to Messrs.
               Kolinski  and  Levine;  29,000  options  were  allocated  to  Mr.
               Cuccaro; and 6,500 options each were allocated to Messrs.  Austin
               and Foster.

               Effective December 12, 2003, the Company refinanced substantially
               all of its bank debt. The details of the  refinancing and certain
               terms of the new agreements have been disclosed in Note 5 above.




                                      F-22

<PAGE>


                                  EXHIBIT INDEX

3.1  Certificate of Incorporation of the Company. (1)

3.2  Amendment to  Certificate  of  Incorporation  of the Company  filed May 28,
     1996. (2)

3.3  By-laws of the Company. (1)

4.1  Form of common stock Certificate of the Company. (1)

10.1 1996 Performance Equity Plan of the Company. (3)

10.2 WCMA Loan and  Security  Agreement  dated as of November  25, 2003  between
     Atlas Technologies, Inc. and Merrill Lynch Business Financial Services Inc.
     (4)

10.3 Term Loan and  Security  Agreement  dated as of November  25, 2003  between
     Atlas Technologies, Inc. and Merrill Lynch Business Financial Services Inc.
     (4)

10.4 Term Loan and  Security  Agreement  dated as of November  25, 2003  between
     Atlas Technologies, Inc. and Merrill Lynch Business Financial Services Inc.
     (4)

10.5 General Credit and Security  Agreement dated as of December 3, 2003 between
     WCS Acquisition Corp. and Spectrum Commercial Services Company. (4)

10.6 Guarantor  Payment  Agreement  dated as of December  10,  2003  between WCS
     Acquisition Corp. and Bank One, NA. (4)

16.1 Letter regarding change in BDO Seidman, LLP as certifying accountant. (5)

16.2 Letter regarding change in Doeren Mayhew as certifying accountant. (6)

21.1 List of Subsidiaries. (4)

31.1 Certification  of  chief  executive   officer  under  section  302  of  the
     Sarbanes-Oxley Act of 2002. (4)

31.2 Certification  of  chief  financial   officer  under  section  302  of  the
     Sarbanes-Oxley Act of 2002. (4)

32.1 Certification  of  chief  executive   officer  under  section  906  of  the
     Sarbanes-Oxley Act of 2002. (4)

32.2 Certification  of  chief  financial   officer  under  section  906  of  the
     Sarbanes-Oxley Act of 2002. (4)

   -----------------------------

     (1)  Filed  as an  exhibit  to  Registration  Statement  on Form  S-1,  No.
          33-78188, and incorporated herein by reference.

     (2)  Filed as an  exhibit  to  Report  on Form 8-K  filed  June 7, 1996 and
          incorporated herein by reference.

     (3)  Filed as an exhibit to Report on Form 10-K for fiscal year ended March
          31, 1996 and incorporated herein by reference.

     (4)  Filed herewith.

     (5)  Filed as an  exhibit  to Report on Form 8-K  dated  July 31,  2001 and
          incorporated herein by reference.

     (6)  Filed as an  exhibit  to Report on Form 8-K dated  March 31,  2003 and
          incorporated herein by reference.