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, 2004

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 of             (I.R.S. Employer Identification No.)
 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 X No __

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. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes __ No X

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which common equity was
last sold, or the average bid and asked price of such common  equity,  as of the
last  business day of the  registrant's  most recently  completed  second fiscal
quarter: $1,100,000

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest  practicable date. At October 8, 2004, there were
2,747,500 shares of common stock outstanding.

     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.
Sales to  automotive  related  customer's  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.  In March 2004,  Atlas formed a German  subsidiary,  Atlas  Technologies,
GmbH, in order to facilitate its operations in Europe.

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.  During fiscal 2000, Atlas also began
to  offer  standard  transfer  press  cells  where  Atlas  acts  as the  systems
integrator for its customers.

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).  Certain Atlas products also handle stamped parts
after  they  have  passed  through  the  stamping  presses,  functions  known as
"End-of-Line" applications.

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


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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 2002, 2003 and 2004 fiscal years,  automotive  industry customers for the
Company accounted for approximately 84%, 89% and 83% of sales, respectively. For
such  fiscal  years,   sales  by  the  Company  to  General  Motors  Corporation
represented  5%, 8% and 21%  respectively  and sales to The Ford  Motor  Company
represented  22%,  31%  and  23%,  respectively,   of  total  sales.  Sales  are
predominantly  in the United  States and Canada but, in recent years the Company
targeted sales efforts in Mexico,  Brazil, Europe and Asia.  International sales
for the 2002, 2003 and 2004 fiscal years represented  approximately 23%, 17% 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.   Atlas  also
established  offices in Brazil and Germany in the fiscal  year 2004.  Westland's
sales  are   primarily   direct  and  on  occasion  it  has   utilized   outside
manufacturers' sales representatives.

The order backlogs were approximately $9.2 million and $8.5 million at September
30,  2003  and  September   30,  2004,   respectively.   The  Company   believes
substantially  all of the  September  30, 2004 backlog  will be produced  during
fiscal 2005.

Products

Atlas offers production  critical,  higher  technology  products based on proven
designs  and   engineering,   which  it  believes  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


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<PAGE>

products  are  manufactured  on a  made-to-order  basis.  Because  of their many
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  recently began  offering  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
wash/scrub  or  roll-coat  the metal blanks 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.  While the wiring of machinery may occur
later in the construction  process,  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


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<PAGE>

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 Bentech, K-R Automation,  Con-Syst-Int,  JIC Electric,  X-Bar Automation
and Control Technique, Incorporated.

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 patents owner, 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 work  piece  transfer  support  apparatus,  one  for a
magnetic  sheet  fanner,  one for an apparatus  for  supporting a work piece 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


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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.

Management and Employees

The Company employs approximately 160 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 2004.

                                     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 Over the Counter  Bulletin  Board  (OTCBB).  In October
2003, due to a delay in the Company's  filing its annual report on Form 10-K for
the fiscal year ended June 30, 2003,  the  Company's  quotation on the OTCBB was
suspended.  The Company's  common stock then was traded  through the Pink Sheets
LLC. In August 2004,  the  Company's  common stock was relisted for quotation on
the OTCBB.

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The following  table sets forth the range of high and low closing bid prices for
common stock as reported through both the Pink Sheets LLC and on the OTCBB.


                                                        High        Low

          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

          Year ended June 30, 2004:
             First Quarter                              0.40       0.15
             Second Quarter                             1.25       0.54
             Third Quarter                              1.15       0.70
             Fourth Quarter                             1.01       0.27


As of June 30, 2004, the Company had  approximately  20 holders of record of its
common stock.  The Company  believes that there are in excess of 140  beneficial
holders of the Company's common stock.

The Company has not declared or paid any dividends on its common stock since its
inception.


Recent Sales of Unregistered Securities

In June 2004,  Cornell  Capital  Partners  ("Cornell  Capital")  entered  into a
securities  purchase  agreement  with the Company  under which  Cornell  Capital
agreed to purchase $300,000 face amount of the Company's convertible debentures.
Cornell Capital purchased $200,000 face amount of convertible debentures in June
2004. Cornell Capital subsequently  purchased $50,000 face amount of convertible
debentures in July 2004 and $50,000 of face amount of convertible  debentures in
September  2004. In each case,  the purchase  price of the debentures was 90% of
their face amount,  so that Cornell  Capital paid  $270,000 in the aggregate for
$300,000 face amount of the Company's convertible debentures.

The debentures are convertible at the holder's option any time up to maturity at
a  conversion  price equal to the lower of (i) $0.48 or (ii) 100% of the average
of the three  lowest  closing  bid  prices of the  common  stock for the  thirty
trading days  immediately  preceding the  conversion  date.  The  debentures are
secured by a second  mortgage  on real  property  owned by the  Company's  Atlas
subsidiary.  The debentures have a three-year term and accrue interest at 5% per
year.  Interest  accrues and must be paid at or prior to maturity.  At maturity,
the  Company has the option to either pay the holder the  outstanding  principal
balance and accrued  interest or to convert the debentures into shares of common
stock at a conversion  price equal to the lower of (i) $0.48 or (ii) 100% of the
average of the three  lowest  closing  bid  prices of the  common  stock for the
thirty  trading days  immediately  preceding the  conversion  date. No principal
payments are due prior to maturity.

The Company can redeem the debentures by paying Cornell Capital Partners 120% of
the face  amount of the  debentures  to be redeemed  and by issuing  warrants to
Cornell Capital Partners to purchase 50,000 shares of the Company's common stock
for every  $100,000  of  debentures  redeemed.  Cornell  Capital  purchased  the
convertible  debentures from the Company in a private placement in reliance upon
the exemption from  registration  available under Section 4(2) of the Securities
Act of 1933.

In connection with Cornell Capital's  investment in the convertible  debentures,
in July 2004,  the Company  issued to Cornell  247,500  shares of the  Company's
common stock as a commitment fee, valued at $0.40 per share.  The Company issued
to Newbridge Security  Corporation  ("Newbridge") an additional 25,000 shares of
its common stock as a placement agent fee. These shares were valued at $0.40 per
share, or $109,000 in the aggregate.  Cornell Capital and Newbridge received the
shares of common stock from the Company in a private  placement in reliance upon
the exemption from  registration  available under Section 4(2) of the Securities
Act of 1933.  The Company has agreed to file a  registration  statement with the
Securities  and  Exchange  Commission  to register  for resale the shares of its
common stock issued or issuable (upon conversion of the convertible  debentures)
to Cornell Capital or Newbridge.



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ITEM 6.  SELECTED FINANCIAL DATA

The  following  selected  financial  data have been derived  from the  Company's
consolidated  financial statements which have been audited by BDO Seidman,  LLP,
independent certified public accountants, as of and for June 30, 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 and 2004. 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.

                  (Dollars in thousands, except per share data)

Consolidated Statement of Operations Data
<TABLE>
<CAPTION>
                                                                 Year ended June 30,
                                       ------------------------------------------------------------------------
                                          2004           2003            2002           2001             2000
                                       ------------------------------------------------------------------------

<S>                                     <C>            <C>             <C>            <C>              <C>
Revenues earned                         $ 28,155       $ 29,051        $ 24,768       $ 27,992         $ 33,230
Cost of revenues earned                   21,537         22,197          18,261         22,155           26,235
Gross profit                               6,618          6,853           6,507          5,837            6,895
Selling, general and                       5,497          6,004           6,453          8,004            6,333
administrative
Impairment of intangible assets              --              --           2,087             --               --
Extraordinary gain on                       125              --              --             --               --
extinguishment of debt
Income (loss) from operations             1,121             849          (2,033)        (2,167)             562

Net income (loss)                           721             361          (4,128)        (3,114)            (256)

Net income per share of common
     stock:
     Basic                              $  0.29        $   0.15          ($1.67)        ($1.26)          ($0.10)
     Diluted                            $  0.26        $   0.15          ($1.67)        ($1.26)          ($0.10)
Weighted average common shares:
     Basic                                2,475           2,475           2,475          2,475            2,475
     Diluted                              2,731           2,475           2,475          2,475            2,475

Consolidated Balance Sheet Data
                                                                       June 30,
                                       ------------------------------------------------------------------------
                                          2004           2003            2002           2001             2000
                                       ------------------------------------------------------------------------

Current assets                          $10,516        $ 10,521        $ 11,639       $ 15,822         $ 22,972

Current liabilities                      12,460          16,388          18,474         17,355            8,155

Working capital                          (1,944)         (5,867)         (6,835)        (1,533)           14,817

Property, plant and equipment, net        5,569           6,159           6,711          7,231            7,708

Total assets                             20,350          20,703          24,494         31,757           39,238
Long-term debt, less current
maturities                                3,613           1,735           3,800          7,710           20,862

Total liabilities                        17,049          18,123          22,274         25,410           29,777
Stockholders' equity                      3,301           2,580           2,220          6,347            9,461
</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


                                       8
<PAGE>

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

In June 2004, Cornell Capital entered into a securities  purchase agreement with
the Company under which Cornell Capital agreed to purchase  $300,000 face amount
of the Company's convertible debentures. Cornell Capital purchased $200,000 face
amount of  convertible  debentures in June 2004.  Cornell  Capital  subsequently
purchased $50,000 face amount of convertible debentures in July 2004 and $50,000
face amount of  convertible  debentures  in September  2004.  In each case,  the
purchase price of the  debentures was 90% of their face amount,  so that Cornell
Capital paid $270,000 in the aggregate for $300,000 face amount of the Company's
convertible debentures.

The debentures are convertible at the holder's option any time up to maturity at
a  conversion  price equal to the lower of (i) $0.48 or (ii) 100% of the average
of the three  lowest  closing  bid  prices of the  common  stock for the  thirty
trading days  immediately  preceding the  conversion  date.  The  debentures are
secured by a second  mortgage  on real  property  owned by the  Company's  Atlas
subsidiary.  The debentures have a three-year term and accrue interest at 5% per
year.  Interest  accrues and must be paid at or prior to maturity.  At maturity,
the  Company has the option to either pay the holder the  outstanding  principal
balance and accrued  interest or to convert the debentures into shares of common
stock at a conversion  price equal to the lower of (i) $0.48 or (ii) 100% of the
average of the three  lowest  closing  bid  prices of the  common  stock for the
thirty  trading days  immediately  preceding the  conversion  date. No principal
payments are due prior to maturity.

The Company can redeem the debentures by paying Cornell Capital Partners 120% of
the face  amount of the  debentures  to be redeemed  and by issuing  warrants to
Cornell Capital Partners to purchase 50,000 shares of the Company's common stock
for every $100,000 of debentures redeemed.


Critical Accounting Policies and Estimates


Management's  discussion  in this Item 7 addresses  the  Company's  consolidated
financial  statements  which have been  prepared in conformity  with  accounting
principles  generally  accepted in the United States.  The  preparation of these
financial  statements  requires us to make estimates and assumptions that affect
the reported amounts of assets,  liabilities,  revenues and expenses reported in
those financial  statements.  These judgments can be subjective and complex, and
consequently  actual results could differ from those estimates.  A discussion of
the  more   significant   estimates   follows.   Management  has  discussed  the
development,  selection and disclosure of these estimates and  assumptions  with
the full Board of Directors.

Results of Operations

Fiscal Year 2004 Compared to Fiscal Year 2003

Revenues earned for the year ended June 30, 2004 were $28,155,198 as compared to
$29,050,542 for the year ended June 30, 2003, a decrease of 3%. Atlas's revenues
were  down 6%  principally  as a result  of slower  order  activity.  Westland's
revenues  increased 7% due to the addition of new customers which began ordering
from Westland, or ordered in greater volume, compared to previous years.

Gross profit for the year ended June 30, 2004 was $6,617,834,  representing a 3%
decrease from the $6,853,324  gross profit for the year ended June 30, 2003. The
decrease in gross profit was due to the Company's overall volume decrease. Gross
profit as a  percentage  of revenues  earned for the year ended June 30, 2004 as
compared to prior fiscal year remained constant at 23%.

                                       9
<PAGE>

Consolidated selling, general and administrative (SG&A) expenses for fiscal 2004
were $5,497,191, down 9.0% as compared to SG&A expenses of $6,003,959 for fiscal
2003.  The decrease was  principally  due to continued  efforts by management to
contain expenses.

Income from  operations  for the year ended June 30, 2004 amounted to $1,120,643
compared to the income from  operations  of $849,365 for the year ended June 30,
2003. The  improvement in income from operations  resulted  primarily from lower
SG&A expenses noted above which was offset in part by the decreased gross profit
due to lower volume.

Interest  expense for fiscal 2004 was $695,702,  which was $55,880  greater than
fiscal year 2004.  The increase was due in part to  Westland's  higher costs for
borrowing  funds from its new senior lender  effective as of December 2003 and a
slightly higher Company debt level compared to one year ago.

The Company  recognized  in fiscal  2004 an  increase in its long term  deferred
income tax asset of  $175,000  as a result of  profitability  in fiscal 2003 and
2004.  Based upon the level of historical  taxable  income and  projections  for
future  taxable  income  over the periods in which the  deferred  tax assets are
deductible, management believes it is more likely than not that the Company will
realize  the  benefits  of these  deductible  differences,  net of the  existing
valuation allowance at June 30, 2004. As a result, the deferred income tax asset
was increased at the end of fiscal 2004 by $175,000 to $895,000,  as compared to
the Company's total net operating loss  carryforwards  which  approximated $2.39
million at June 30,  2004.  The  amount of the  deferred  tax assets  considered
realizable,  however,  could be reduced in the near term if  estimates of future
taxable income during the carryforward period are reduced.

The net income for fiscal  2004 was  $720,536  as compared to net income for the
year  ended June 30,  2003 of  $360,574.  Net  income  for the fiscal  year 2004
included a $125,000 gain on extinguishment of debt.

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  order and
business activity.  Westland's revenues increased 39% due to the addition of new
customers  who 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  year  2003  resulted
primarily  from higher sales volume and lower SG&A expenses  noted above and the
absence of a write-off for 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


                                       10
<PAGE>

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 higher sales volume,  lower SG&A expense and lower
interest expenses.

Liquidity and Capital Resources

General

At  June  30,  2004,  the  Company  had (1)  $3.4  million  outstanding  under a
commercial mortgage loan for Atlas as part of the MLB Credit Facility,  (2) $0.4
million  outstanding  under an equipment  term loan for Atlas as part of the MLB
Credit Facility,  (3) debt of $4.0 million  outstanding under a revolving credit
facility for Atlas as part of the MLB Credit  Facility,  (4) deferred  executive
compensation  obligations of approximately $0.95 million originally scheduled to
be paid over three equal  annual  installments  during the period from July 2000
through  July 2002,  (5) $0.7  million  outstanding  under the  Spectrum  Credit
Facility, (6) $2.2 million outstanding under the Westland Loan, and (7) $200,000
outstanding in convertible  subordinated  debentures  which mature in June 2007.
This total of  approximately  $11.9  million as of June 30,  2004  compares to a
total combined indebtedness of $11.1 million as of June 30, 2003.

The Company's  working capital deficit at June 30, 2004 was $(1,913,000) and the
current  ratio  was 0.85 to 1, as  compared  to a  working  capital  deficit  of
($5,866,497) and a current ratio of 0.64 to 1 for the Company at June 30, 2003.

Effective as of December 12, 2003,  Merrill Lynch  Business  Financial  Services
Inc.  ("Merrill  Lynch") entered into new credit facilities with Atlas (the "MLB
Credit  Facility")  which  provides  for  borrowing  availability  of up to $8.0
million (based in part upon eligible accounts receivable), of which $7.4 million
was funded at closing.  Effective  on March 4, 2004,  Merrill  Lynch agreed to a
modification  of the terms of the MLB Credit  Facility  under  which in which it
increased  the borrowing  availability  by $750,000  under the revolving  credit
facility for a 60-day period (the "overline  period") and increased the interest
rate by 0.5% per annum  during this period.  As of April 10,  2004,  the Company
paid back all amounts over the original $4.0 million revolver,  and the overline
period  expired  in early May  2004.  At June 30,  2004,  the  weighted  average
interest payable under the MLB Credit Facility approximated 4.75%.

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


                                       11
<PAGE>

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.

In  addition,  also  effective  as of December  12,  2003,  Spectrum  Commercial
Services,  Inc.  ("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 5.25% 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, N.A.  agreed to subordinate  its rights to 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").  As a
condition to agreeing to subordinate to Spectrum,  Bank One required the Company
to restate the obligations under a new Guarantor Payment Agreement  effective as
of December 12, 2003. Under these terms, Bank One will look to Westland to repay
the  remaining  obligations  owed to Bank One  (which  continues  to be the $2.2
million  principal  amount  that  was  outstanding  prior  to the  restatement).
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 Credit Facility remains outstanding.  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.  The Westland Loan bears interest at the
per  annum  rate of 3.0% in  excess  of Bank  One's  prime  rate.  Westland  has
suspended payments to Bank One under the Guarantor Payment Agreement (as part of
the Westland Loan) and Bank One has made no demand for payment thereunder.  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 (now  deceased),  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.

With the  availability  of funds under the MLB Credit  Facility and the Spectrum
Credit Facility, and the proceeds from the sale of its convertible debentures to
Cornell Capital (described in "Recent Developments" in this Item 7) and assuming
no adverse  business  or economic  developments,  management  believes  that the
Company will have  sufficient  funds available to it to meet its working capital
needs for the next 12 months.

Off Balance Sheet Arrangements

During fiscal 2004, the Company had no off-balance sheet arrangements other than
operating leases entered into in the normal course of business,  as indicated in
the table below.

Summary of Contractual Commitments

The following table represents contractual commitments associated with operating
agreements  (excluding interest on debt obligations) for the periods ending June
30th in the years  indicated.  With  respect to the lines of credit  borrowed by
Atlas and Westland,  at June 30, 2004, these amounted to $4.0 million in maximum
revolving  commitments  for Atlas which will be up for renewal in December  2004
and $1.25 million in maximum revolving commitments for Westland which will be up
for renewal in December 2005.

                                       12
<PAGE>
<TABLE>
<CAPTION>
                               2005             2006          2007           2008           2009        Thereafter          Total
                           --------------    -----------    ----------    -----------    -----------   --------------    -----------
<S>                              <C>            <C>           <C>            <C>            <C>            <C>             <C>
Real estate term loan            233,342        233,333       233,333        233,333        233,333        2,236,105       3,402,780
Equipment term loan              166,667        166,667        97,222             --             --               --         430,555
Revolver - Atlas               3,998,177             --            --             --             --               --       3,998,177
Revolver - Westland              695,167                                                                                     695,167
Subordinated term loan         2,212,583             --            --             --             --               --       2,212,583
Debentures                            --             --            --        180,000             --               --         180,000
                           --------------    -----------    ----------    -----------    -----------   --------------    -----------
         Total debt            7,305,936        400,000       330,555        413,333        233,333        2,236,105      10,739,262

Building lease                   214,867        214,867                                                                      429,734
                           --------------    -----------    ----------    -----------    -----------   --------------    -----------
          Total                7,520,803        614,867       330,555        413,333        233,333        2,236,105      11,168,996
                           ==============    ===========    ==========    ===========    ===========   ==============    ===========
</TABLE>

Recently Issued Accounting Standards

In December 2003, the Securities and Exchange Commission issued Staff Accounting
Bulletin  ("SAB")  No.  104,  "Revenue  Recognition."  SAB No. 104  revises  and
rescinds  certain  sections  of SAB No.  101 in order to make this  interpretive
guidance consistent with current authoritative  accounting and auditing guidance
and SEC rules and regulations.  Accordingly  there is no impact to the Company's
results  of  operations,  financial  position  or cash  flows as a result of the
issuance of SAB No. 104.

On December 23, 2003, the FASB issued SFAS No. 132 (revised  2003),  "Employers'
Disclosures about Pensions and Other  Postretirement  Benefits,  an amendment of
FASB  Statements  No. 87, 88 and 106, and a revision of FASB  Statement No. 132"
("FAS 132 (revised 2003)"). This statement revises employers'  disclosures about
pension plans and other  postretirement  benefit  plans.  It does not change the
measurement or  recognition of those plans required by SFAS No. 87,  "Employers'
Accounting for Pensions,"  SFAS No. 88,  "Employers'  Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination Benefits",
and SFAS No. 106, "Employers' Accounting for Postretirement  Benefits Other Than
Pensions."  The new rules  require  additional  disclosures  about  the  assets,
obligations,  cash  flows,  and net  periodic  benefit  cost of defined  benefit
pension  plans  and  postretirement  benefit  plans.  The  new  disclosures  are
generally  effective for 2003 calendar year-end  financial  statements of public
companies, with a delayed effective date for certain disclosures and for foreign
plans.  The  adoption  of SFAS No.  132 did not have an effect on the  Company's
consolidated financial statements.

SFAS No. 149, "Amendments of Statement 133 on Derivative Instruments and Hedging
Activities"  amends  and  clarifies   accounting  for  derivative   instruments,
including  certain  derivative  instruments  embedded  in other  contracts,  and
hedging  activities.  The Statement is effective  for contracts  entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30,  2003.  The  adoption of this  standard  had no effect on the  Corporation's
financial condition or results of operations

In December 2003, the FASB issued Interpretation No. 46R ("FIN 46R"), a revision
to FIN 46, "Consolidation of Variable Interest Entities." FIN 46R clarifies some
of the provisions of FIN 46 and exempts certain entities from its  requirements.
FIN 46R is effective at the end of the first  interim  period ending after March
15, 2004.  Entities  that have adopted FIN 46 prior to this  effective  date can
continue to apply the  provisions of FIN 46 until the effective date of FIN 46R.
The  adoption  of FIN 46R did not have an effect on the  Company's  consolidated
financial statements.


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 economic and business  conditions,
particularly in the automotive,  machine tool and other  industries  principally
served by the Company,  including the ongoing and permanent  (non-cyclical) loss
of manufacturing  capabilities in the United States to foreign competition,  and
continued  volatile  demand in the domestic and foreign  markets for automobiles
and automotive  parts, in each case resulting in reduced or uncertain demand for
the Atlas' automation  equipment;  potential


                                       13
<PAGE>

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 obtain  needed  access to the credit and capital
markets to finance future operations or plans for capital improvement or growth.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Of the Company's  indebtedness of $11.7 million at June 30, 2004,  almost all of
the indebtedness comprises variable rate obligations.  Assuming an immediate 10%
increase,  as of June 30, 2004,  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 $120,000.

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  was  qualified  as to  uncertainty
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 other  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 Doeren's  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.

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.  The chief executive  officer and chief  financial  officer have
concluded  that,  to  their  knowledge  on the  basis  of that  evaluation,  the
Company's disclosure controls and procedures were effective as of the end of the
period covered by this report except as to deficiencies  described below.  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;  however,  management intends to implement the
changes described below.

In connection with its audit of the Company's  consolidated financial statements
as of and for the year ended June 30, 2004,  the Company's  auditor  advised the
Company's management and its Audit Committee that it had identified deficiencies
which were  designated as "reportable  conditions"  but which did not constitute
"material  weaknesses."  Areas  requiring  improvement  include (1)  reconciling
intercompany   accounts  and  balances  between   consolidated   entities,   (2)
recordkeeping  over  property,   plant  and  equipment,  (3)  recordkeeping  and
evaluation  of deferred  tax assets and  liabilities  and  analysis of valuation
allowance against net deferred tax assets, and (4) reviewing accounting activity
performed  on  amounts  appearing  in  the  Company's   consolidated   financial
statements. In addition, in the past the Company has not filed on a timely basis
certain of its  quarterly  Forms 10-Q and annual  Form 10-K with the  Securities
Exchange Commission (SEC) within the required due dates. An extension of time to
file has been requested for the 10-K as of June 30, 2004,  which,  under Section
404 of the Sarbanes  Oxley Act,  constitutes a deficiency  in internal  controls
over financial reporting.  The Company has assigned a high priority to the short
and long term correction of these internal control  deficiencies and believes it
can make significant progress toward correction of these matters in fiscal 2005.


ITEM 9B.  OTHER INFORMATION

None

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

                                       14
<PAGE>

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 Directors

<S>                                                <C>      <C>      <C>
       Jesse A. Levine                             37       1993     Director, Chief Financial Officer,
                                                                     Vice President, Secretary and
                                                                     Treasurer
       Class II Director
       Michael D. Austin                           53       1999     Director, President of the Company's
                                                                     Atlas Technologies, Inc. subsidiary
                                                                     and Vice President of Strategic
                                                                     Planning and Marketing of the Company
       Class III Directors
       Samuel N. Seidman                           70       1993     Director, Chairman of the Board,
                                                                     President and Chief Executive Officer
       Alan H. Foster                              79       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  expected in fiscal 2005.  In turn,  the
term of office of the Class III and Class I directors  will  continue  until the
annual  meetings  of the  Company  expected  to be held in fiscal 2006 and 2007,
respectively.  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 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


                                       15
<PAGE>

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  Society  of  Manufacturing  Engineers,  the  Flint-Genesee
Economic  Growth  Alliance,  the Genesee Area Focus Council,  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.

                                       16
<PAGE>
<TABLE>
<CAPTION>

           Executive Officers                                        Current Position

<S>                                           <C>
Samuel N. Seidman                             Chairman of the Board, President and Chief Executive Officer

Jesse A. Levine                               Chief Financial Officer, Vice President, Secretary and
                                              Treasurer

Michael D. Austin                             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 and Chief Executive Officer of Westland Control
                                              Systems, Inc.

William G. Rogner                             Chief Executive Officer of Atlas Technologies, Inc.
</TABLE>

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,  49 years of age,  joined the company on May 26, 2000 as Vice
President,  Corporate  Controller.  In January 2001, Mr. Cuccaro was promoted to
President and Chief Executive  Officer 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.

William G. Rogner,  53 years of age, is Chief  Executive  Officer of Atlas.  Mr.
Rogner has  approximately  18 years  experience  with  Atlas,  including  having
previously   served  as  its  Executive  Vice   President,   Vice  President  of
Engineering,  Director of Contract  Management and Project Manager. In these and
other  capacities,  Mr. Rogner has at various times had direct  responsibilities
for  sales,  manufacturing,   engineering,  and  mechanical  engineering,  fluid
engineering,  and electrical controls.  As Executive Vice President,  Mr. Rogner
assisted in development  and  implementation  of the Company's  strategic  plan,
including the reduction of Atlas' financial break-even point by approximately 35
percent.  He initiated a value analysis and value engineering (VA/VE) program to
reduce  costs  at  least  5  percent  while  maintaining  or  improving  product
functionality.

Mr. Rogner also had direct  responsibility  for  establishing  Atlas'  Brazilian
subsidiary,  which  was  profitable  in  its  first  year,  and he  assisted  in
developing  sales and  service  in Europe and Asia and sales  representation  in
India. As part of a continuous focus on costs,  Mr. Rogner reduced  headcount by
over 40% in  approximately  three  years and sought to level load  (smooth  out)
manufacturing  schedules  and direct  labor  manpower  by  utilizing  production
outsourcing.  He also supervised the implementation of the Company's  enterprise
resource  planning  (ERP)  system.  From 1984 to 1997,  as  Director of Contract
Management at Atlas,  Mr. Rogner had direct  responsibility  for major projects,
customer  service,  and  warranty.  He also was a Project  Manager  with  direct
responsibility  for the mechanical design and building of machines and projects.
During  this time,  he managed  some of the  largest  projects in the history of
Atlas,  including an $18 million system which included an engineering  study and
implementation  of a  Greenfield  project  for an entire  press room for a major
appliance  manufacturer,  including  sheet  metal dies for a new  product.  This
project employed 18 presses,  three coil lines,  more than 130 tools, as well as
equipment automation, and quick die change capabilities.

Mr.  Rogner  spent two  years  away  from  Atlas in the past 20  years,  when he
co-founded an engineering  design and consulting  firm. As a company  principal,
Mr. Rogner  arranged the firm's line of credit,  more than doubled firm revenues
in its first two years of  operations,  broadened  the firm's  initial  customer
base,  enabling the firm to report net earnings of 10 percent of its sales.  Mr.
Rogner  received his B.S. from Michigan  State  University  and he also recently
completed an immersion  course at the Wharton  School of Business in finance for
non-financial executives.


                                       17
<PAGE>

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 its
review of the copies of such forms furnished to it, and written  representations
that no other reports were required, the Company believes that during the fiscal
year ended June 30, 2004, each of its officers,  directors and 10%  stockholders
complied with the Section 16(a) reporting requirements.

ITEM 11. EXECUTIVE COMPENSATION

Director Compensation and Arrangements

During  fiscal  2004,  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, 2002, 2003 and 2004 to (1) the person who has served as the
chief  executive  officer of the  Company at all times  since the  beginning  of
fiscal 2004 (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 2004 and whose  income  exceeded  $100,000  (William G.
Rogner and Robert J. Cuccaro) (collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>

                                                  Summary Compensation Table


                                            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>
 Samuel N. Seidman,            2004          120,000      ---           ---                ---
 Chairman of the Board,        2003          120,000      ---           ---                ---
 President and Chief           2002          120,000      ---           ---                ---
 Executive Officer

 William G. Rogner             2004          150,000      ---           ---                ---
 Chief Executive Officer       2003          150,000      ---           ---                ---
 of Atlas                      2002          150,000      ---           ---                ---

 Robert J. Cuccaro, Vice       2004          103,000      ---           ---                ---
 President, Corporate          2003          103,000      ---           ---                ---
 Controller of the             2002          103,000      ---           ---                ---
 Company and President
 and Chief Officer of
 Westland
</TABLE>
_______________

                                       18
<PAGE>

Option Awards and Values. No options or stock  appreciation  rights were awarded
to any of the Named Executive  Officers in fiscal 2004. The following table sets
forth information  concerning the aggregate number and values of options held by
the Named  Executive  Officers as of June 30, 2004.  None of the Named Executive
Officers holds stock appreciation  rights and none of such persons exercised any
options in fiscal 2004.

<TABLE>
<CAPTION>

                                          Aggregated Year-End Option Values at June 30, 2004

                                    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>
         Samuel N. Seidman             107,000            ---               ---                 ---
         Bill Rogner                   34,000             ---               ---                 ---
         Robert J. Cuccaro             19,000             ---               ---                 ---
</TABLE>

Compensation Committee Interlocks and Insider Participation

The full Board of Directors of the Company serves as the Company's  Compensation
Committee.  Mr.  Foster as the outside  director  serves as the  Chairman of the
Audit  Committee  which in turn  reports to the full Board of  Directors  of the
Company. There have not been since the beginning of fiscal 2004 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 2004.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and accompanying  footnotes set forth certain information as
of October 8, 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                    312,600 (1)                11.4%
Cornell Capital Partners             247,500 (4)                 9.0%
Samuel N. Seidman                    258,250 (1)                 9.0%
Jesse A. Levine                      143,500 (1)(2)              5.0%
Alan H. Foster                        39,750 (1)                 1.4%
Estate of Ronald Prime               163,000                     5.9%
William Rogner                        59,000 (1)                 2.1%
Robert J. Cuccaro                     29,000 (1)                 1.0%

All directors and executive
officers as a  group (4)
                                     842,100 (5)                 27.9%

                                       19
<PAGE>

(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. Rogner - 34,000  shares,  Mr. Cuccaro - 19,000
     shares, 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)  In July 2004,  Cornell  Capital was paid a $99,000  fee,  which was paid in
     restricted  shares of the Company,  in  consideration  for Cornell  Capital
     entering into a Structured  Equity  Distribution  Agreement (SEDA) with the
     Company.  At the time of this  payment,  the closing price of the Company's
     common stock shares was $0.40.  The $99,000 fee equaled 247,500  restricted
     shares.

(5)  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 as certain  office  services  as may be  required by the
Company.  The Company paid Seidman & Co.,  Inc.  approximately  $10,000 for such
services plus  reimbursements  for third party  administrative  and  secretarial
services in the fiscal year ended June 30, 2004.  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 each of fiscal 2003 and 2004,  the Company's  principal  accountants  billed
$45,500 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.

Audit-Related Fees

For each of fiscal 2003 and 2004,  the Company's  principal  accountants  had no
billings for assurance and related  services that are reasonably  related to the
professional  services  rendered  by for the audit or  review  of the  Company's
annual financial statements.

Tax Fees

For each of fiscal 2003 and 2004,  the Company's  principal  accountants  billed
$14,000 for tax compliance, tax advice and tax planning services. These services
consisted of preparation of federal and state tax returns.

                                       20
<PAGE>

All Other Fees

For each of fiscal 2003 and 2004,  the Company's  principal  accountants  had no
billings  for all  other  non-audit  services  and  products  provided  by these
accountants.

Approval of Non-Audit Services

In accordance with the  requirements  of the Securities and Exchange  Commission
and the Company's  policies,  the Company's Audit Committee must pre-approve all
non-audit services proposed to be provided by the Company's auditor,  except for
non-audit services within the permitted exceptions.  All such services performed
in fiscal 2004 were pre-approved by the Audit Committee.


                                     PART IV

ITEM 15.  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 2004.

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

(d)      Other Financial Statement Schedules
         None

                                       21
<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.

October 8, 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>
         /s/  Samuel N. Seidman                        Chairman, Chief Executive Officer,           October 8, 2004
         Samuel N. Seidman                             President and Director (Principal
                                                       Executive Officer)

         /s/  Michael D. Austin                        Director                                     October 8, 2004
         Michael D. Austin

         /s/  Jesse A. Levine                          Vice President, Secretary, Treasurer         October 8, 2004
         Jesse A. Levine                               and Director and Chief Financial
                                                       Officer (Principal Financial Officer)

         /s/ Robert J. Cuccaro                         Vice President, Corporate Controller         October 8, 2004
         Robert J. Cuccaro                             (Principal Accounting Officer)


</TABLE>


                                       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 Doeren Mayhew as certifying accountant. (5)

21.1 List of Subsidiaries. (6)

31.1 Certification  of  chief  executive   officer  under  section  302  of  the
     Sarbanes-Oxley Act of 2002. (6)

31.2 Certification  of  chief  financial   officer  under  section  302  of  the
     Sarbanes-Oxley Act of 2002. (6)

32.1 Certification  of  chief  executive   officer  under  section  906  of  the
     Sarbanes-Oxley Act of 2002. (6)

32.2 Certification  of  chief  financial   officer  under  section  906  of  the
     Sarbanes-Oxley Act of 2002. (6)

_____________________________

(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 as an exhibit  to Report on Form 10-K for fiscal  year ended June 30,
     2003 and incorporated herein by reference.

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

(6)  Filed herewith.



                                       23
<PAGE>

                Productivity Technologies Corp. and Subsidiaries

                                 June 30, 2004



                       Consolidated Financial Statements
<PAGE>

                            PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES

                              FINANCIAL STATEMENTS

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

                                    CONTENTS


                                                                            Page


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                      F-2

REPORT OF INDEPENDENT ACCOUNTANTS                                            F-3

FINANCIAL STATEMENTS:

  Consolidated Balance Sheets as of June 30, 2004 and 2003                   F-4

  Consolidated Statements of Operations for each of the
    years in the three-year period ended June 20, 2004                       F-6

  Consolidated Statements of Shareholders' Equity for
    each of the years in the three-year period
    ended June 30, 2004                                                      F-7

  Consolidated Statements of Cash Flows for each of
    the years in the three-year period ended June 30, 2004                   F-8

  Notes to Consolidated Financial Statements                         F-9 to F-24


                                      F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



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


We have audited the  accompanying  consolidated  balance sheets of  Productivity
Technologies  Corp.  and  Subsidiaries  (the  "Company") as of June 30, 2004 and
2003,  and the related  consolidated  statements  of  operations,  shareholders'
equity and cash flows for the years 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 audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). 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  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  consolidated  financial  position  of
Productivity  Technologies  Corp. and Subsidiaries as of June 30, 2004 and 2003,
and the  consolidated  results of their  operations and their cash flows for the
years then ended in conformity with accounting  principles generally accepted in
the United States of America.


/s/ FOLLMER RUDZEWICZ PLC

FOLLMER RUDZEWICZ PLC
Southfield, Michigan
September 13, 2004

                                      F-2
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

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, 2002, and the
related  consolidated  statements 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 consolidated
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 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  consolidated  financial  position  of
Productivity  Technologies  Corp. and  Subsidiaries as of June 30, 2002, 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/  DOEREN MAYHEW

August 23, 2002 (Except for Note 5,
  which the date is October 11, 2002)
Troy, Michigan











                                       F-3
<PAGE>

                           PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

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

                                                          ASSETS


                                                                                                    June 30,
                                                                                      --------------------------------------
                                                                                            2004                 2003
                                                                                      -----------------    -----------------

CURRENT ASSETS:
<S>                                                                                         <C>                 <C>
Cash and cash equivalents                                                                   $  233,882          $ 1,163,187
Short-term investments, including accrued interest                                             450,080              540,582
Contract receivables, net of allowance for doubtful accounts
of $377,663 in 2004 and $227,663 in 2003 (note 2)                                            4,479,656            3,620,852
Costs and estimated earnings in excess of billings on
uncompleted contracts (note 3)                                                               3,759,498            3,423,457
Inventories, net of reserve of $50,000 in 2004 and $150,000 in 2003                          1,151,703            1,154,512
Prepaid expenses and other current assets                                                      268,005              328,517
Deferred income taxes (note 8)                                                                 173,000              290,000
                                                                                      -----------------    -----------------

Total current assets                                                                      $ 10,515,824         $ 10,521,107
                                                                                      -----------------    -----------------


PROPERTY AND EQUIPMENT:
Land                                                                                           591,514           $  591,514
Buildings and improvements                                                                   4,962,690            4,962,690
Machinery and equipment                                                                      4,235,503            4,215,036
Transportation equipment                                                                        21,000               21,000
                                                                                      -----------------    -----------------

                                                                                           $ 9,810,707          $ 9,790,240
Less:  Accumulated depreciation                                                              4,241,399            3,631,717
                                                                                      -----------------    -----------------

Net property and equipment                                                                 $ 5,569,308          $ 6,158,523
                                                                                      -----------------    -----------------


OTHER ASSETS:
Goodwill (note 4)                                                                            2,985,909          $ 2,985,909
Patents (note 4)                                                                               256,893              354,384
Deferred income taxes (note 8)                                                                 722,000              430,000
Other assets                                                                                   299,570              252,955
                                                                                      -----------------    -----------------

Total other assets                                                                         $ 4,264,372          $ 4,023,248
                                                                                      -----------------    -----------------

Total assets                                                                              $ 20,349,504         $ 20,702,878
                                                                                      =================    =================
</TABLE>

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                                       LIABILITIES


                                                                                                   June 30,
                                                                                     --------------------------------------
                                                                                           2004                 2003
                                                                                     -----------------    -----------------

CURRENT LIABILITIES:

<S>                                     <C>                                               <C>                  <C>
Current portion of long-term debt (note 5)                                                $ 7,305,936          $ 8,385,918
Accounts payable                                                                            3,427,383            3,784,778
Accrued expenses:
Commissions payable                                                                           251,648              310,000
Warranty reserve                                                                              225,000              250,000
Payroll and related withholdings                                                               85,665               62,464
Interest                                                                                      240,755              610,957
Other                                                                                         271,199              143,574
Billings in excess of costs and estimated earnings on
uncompleted contracts (note 3)                                                                652,849            1,864,980
                                                                                     -----------------    -----------------

Total current liabilities                                                                $ 12,460,435         $ 15,412,671
                                                                                     -----------------    -----------------

Executive deferred compensation agreements (note 11)                                       $  974,933           $  974,933
Long-term debt, less current maturities (note 5)                                            3,613,326            1,735,000
                                                                                     -----------------    -----------------

Total liabilities                                                                        $ 17,048,694         $ 18,122,604
                                                                                     -----------------    -----------------

</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                                                                                    (6,668,073)          (7,388,609)
                                                                                     -----------------    -----------------

Total shareholders' equity                                                                $ 3,300,810          $ 2,580,274
                                                                                     -----------------    -----------------

Total liabilities and shareholders' equity                                               $ 20,349,504         $ 20,702,878
                                                                                     =================    =================
</TABLE>

             The attached NOTES TO CONSOIDATED FINANCIAL STATEMENTS
                   form an integral part of these statements.

                                      F-5

<PAGE>
<TABLE>
<CAPTION>
                                                PRODUCTIVITY TECHNOLOGIES
                                                  CORP. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF OPERATIONS


                                                Year ended June 30,
                                            ---------------------------------------------------
                                                2004               2003                2002
                                            ----------------------------------------------------

<S>                                         <C>                <C>                 <C>
REVENUES EARNED                             $ 28,155,198       $ 29,050,542        $ 24,767,655

COST OF REVENUES EARNED                       21,537,364         22,197,218          18,260,764
                                            ------------        -----------        -------------

GROSS PROFIT                                $  6,617,834       $  6,853,324        $  6,506,891

SELLING, GENERAL AND ADMINISTRA-
TIVE EXPENSES                                  5,497,191          6,003,959           6,452,908

IMPAIRMENT OF INTANGIBLE ASSETS
(NOTE 4)                                               -                  -           2,087,308
                                            ------------        -----------        -------------
INCOME (LOSS) FROM OPERATIONS               $  1,120,643       $    849,365        $ (2,033,325)
                                            ------------        -----------        -------------
OTHER INCOME (EXPENSES):

Interest expense                                (695,702)      $   (639,822)       $ (1,668,519)
Loss on disposal of equipment                                             -              (8,629)
Interest income                                    2,699             10,019              56,912
Miscellaneous (expense) income, net               (7,104)           111,031              74,387
                                            ------------        -----------        -------------
Total other expenses                        $   (700,107)      $   (518,772)        $(1,545,849)
                                            ------------        -----------        -------------

INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM                $    420,536       $    330,593        $ (3,579,174)


INCOME TAX (BENEFIT) EXPENSE (NOTE 8)           (175,000)           (29,981)            548,328
                                            ------------        -----------        -------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM                          $    595,536       $    360,574        $ (4,127,502)

EXTRAORDINARY ITEM, GAIN ON
EXTINGUISHMENT OF DEBT                           125,000                  -                   -
                                            ------------        -----------        -------------

NET INCOME (LOSS)                           $    720,536       $    360,574        $ (4,127,502)
                                            ============        ===========        ============

BASIC INCOME (LOSS) PER SHARE
BEFORE EXTRAORDINARY GAIN                   $       0.24       $       0.15        $      (1.67)
EXTRAORDINARY GAIN                                  0.05                  -                   -
                                            ------------        -----------        -------------

TOTAL BASIC EARNINGS (LOSS) PER SHARE       $       0.29       $       0.15        $      (1.67)
                                            ============        ===========        ============

DILUTED INCOME (LOSS) PER SHARE
BEFORE EXTRAORDINARY GAIN                   $       0.21       $       0.15        $      (1.67)
EXTRAORDINARY GAIN                                  0.05                  -                   -
                                            ------------        -----------        -------------


TOTAL DILUTED INCOME (LOSS) PER SHARE       $       0.26       $       0.15        $      (1.67)
                                            ============        ===========        ============
</TABLE>


             The attached NOTES TO CONSOIDATED FINANCIAL STATEMENTS
                   form an integral part of these statements.
                                      F-6
<PAGE>
<TABLE>
<CAPTION>
                                                 PRODUCTIVITY TECHNOLOGIES
                                                  CORP. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                        For the years ended June 30, 2004, 2003 and 2002

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


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

<S>            <C>                           <C>                <C>          <C>                  <C>                 <C>
BALANCE - July 1, 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

NET INCOME                                           -              -                  -              720,536            720,536
                                        ---------------  -------------   ----------------  -------------------  -----------------

BALANCE - June 30, 2004                      2,475,000          2,475        $ 9,966,408          $(6,668,073)        $3,300,810
                                        ===============  =============   ================  ===================  =================
</TABLE>


             The attached NOTES TO CONSOIDATED FINANCIAL STATEMENTS
                   form an integral part of these statements.
                                      F-7
<PAGE>
<TABLE>
<CAPTION>

                                              PRODUCTIVITY TECHNOLOGIES
                                               CORP. AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                        Year ended June 30,
                                                                          --------------------------------------------
                                                                               2004            2003            2002
                                                                          -----------     -----------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                       <C>             <C>             <C>
Net income (loss)                                                         $   720,536     $   360,574     $(4,127,502)
Adjustments to reconcile net income (loss) to net cash provided
from operating activities:
Depreciation                                                                  620,856         589,149         619,653
Amortization                                                                  237,841         142,444         103,119
Loss on disposal of property and equipment                                          -               -           8,629
Gain on foreign currency exchange                                             (11,127)              -               -
Gain on extinguishment of debt                                               (125,000)              -               -
Provisions for losses on contract receivables                                 150,000         (22,535)        (89,802)
Impairment of intangible assets                                                     -               -       2,087,308
Inventories net realizable value reserve                                     (100,000)         50,000         (50,000)
Deferred income taxes                                                        (175,000)         30,000         588,000
Changes in assets and liabilities:
Decrease (increase) in contract receivables                                (1,008,804)       (700,210)      2,725,468
Decrease in inventories, prepaid expenses and other current
assets, and other assets                                                      128,411          30,762         407,420
Decrease (increase) in costs estimated earnings in excess of
billings on uncompleted contracts - net                                    (1,548,172)       (536,306)      5,898,754
Decrease (increase) in accounts payable and accrued expenses                  660,123         603,975      (2,083,739)
                                                                          -----------     -----------     -----------
Total adjustments                                                         $(2,491,118)    $   187,279     $10,214,810
                                                                          -----------     -----------     -----------
Net cash (used in) provided from operating activities                     $(1,770,582)    $   547,853     $ 6,087,308
                                                                          -----------     -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                        $   (17,969)    $   (36,761)    $  (108,378)
Purchase of patent                                                                  -               -        (315,000)
Proceeds from sale of (purchases of) short-term investments - net              90,502        (390,862)         93,416
                                                                          -----------     -----------     -----------
Net cash provided from (used in) investing activities                     $    72,533     $  (427,623)    $  (329,962)
                                                                          -----------     -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on revolving credit agreement                                $   225,574     $(2,712,568)    $  (677,662)
Borrowings on long-term debt                                                4,047,770               -               -
Payments on long-term debt                                                 (3,350,000)     (1,216,312)       (873,899)
Debt issuance costs                                                          (154,600)              -               -
                                                                          -----------     -----------     -----------
Net cash provided from (used in) financing activities                     $   768,744     $(3,928,880)    $(1,551,561)
                                                                          -----------     -----------     -----------
NET (DECREASE) INCREASE IN CASH                                           $  (929,305)    $(3,808,650)    $ 4,205,785

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                               1,163,187       4,971,837         766,052
                                                                          -----------     -----------     -----------
CASH AND CASH EQUIVALENTS - END OF YEAR                                   $   233,882     $ 1,163,187     $ 4,971,837
                                                                          ===========     ===========     ===========


                          SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for interest                                    $ 1,065,904     $ 1,037,915     $   960,502
                                                                          ===========     ===========     ===========
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>


             The attached NOTES TO CONSOIDATED FINANCIAL STATEMENTS
                   form an integral part of these statements.

                                      F-8
<PAGE>


                            PRODUCTIVITY TECHNOLOGIES
                             CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                For the years ended June 30, 2004, 2003 and 2002

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

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 four manufacturing plants,
          sales and engineering  offices.  Two of the  manufacturing  plants are
          located in Fenton,  Michigan,  the third plant is located in Westland,
          Michigan and a fourth office located in Germany.

          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, 2004, 2003 and 2002,  amounted to approximately  21%, 17% and
          23% of annual sales, respectfully.

          In March 2004,  the Company began  operations in Germany.  The Company
          formed  Atlas  Technologies,  GmbH,  which  is  owned  100%  by  Atlas
          Technologies  (wholly  owned  subsidiary)  and is  included  in  these
          consolidated financial statements.

          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.

          Principles of Consolidation

          The  accompanying   consolidated   financial  statements  include  the
          accounts of PTC and its wholly owned subsidiaries, Atlas Technologies,
          Inc.  ("Atlas") and its wholly owned  subsidiary  Atlas  Technologies,
          Gmbh  (ATG)  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 44%, 39% and 38% of total revenue for the
          fiscal years ended June 30, 2004, 2003 and 2002, respectively.

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


                                                   June 30,
                                    ----------------------------------------
                                          2004                  2003
                                    ------------------    ------------------

                Ford Motor Company         23%                   19%
                GKN Aerospace               9%                   15%
                General Motors             21%                    4%
                Veltri Modular              1%                   18%



          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. and Atlas Technologies GmbH - 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 asset 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.

          Stock Based Compensation

          The  Company  has  adopted  SFAS  No.  148  and  the   disclosure-only
          provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
          The Company records compensation expense for stock options only if the
          market price of the Company's stock, on the date of grant, exceeds the
          amount an  individual  must pay to  acquire  the stock,  if  dilutive.
          Accordingly, if the Company had elected to recognize compensation cost
          based on the fair value of the  options at grant date,  the  Company's
          earnings and earnings per share from continuing  operations,  assuming
          dilution, for fiscal 2004, 2003 and 2002 would have been the pro forma
          amounts indicated below (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                 June 30,
                                               ---------------------------------------------
                                                  2004            2003            2002
                                               ------------   -------------   --------------

<S>                                                  <C>             <C>           <C>
Net income (loss) as reported                        $ 721           $ 361         $ (4,128)

Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects                      23               -                -
                                               ------------   -------------   --------------

Pro forma net earnings                               $ 698           $ 361         $ (4,128)
                                               ------------   -------------   --------------
Earnings (loss) per share:
As reported - Basic                                 $ 0.29          $ 0.15          $ (1.67)
                                               ------------   -------------   --------------
As reported - Diluted                               $ 0.26          $ 0.15          $ (1.67)
                                               ------------   -------------   --------------
Pro forma - Basic                                   $ 0.28          $ 0.15          $ (1.67)
                                               ------------   -------------   --------------
Pro forma - Diluted                                 $ 0.26          $ 0.15          $ (1.67)
                                               ------------   -------------   --------------
</TABLE>

          The fair  value of options  at date of grant was  estimated  using the
          Black-Scholes option pricing model with the following weighted average
          assumptions  used for  grants in fiscal  2004:  dividend  yield of 0%;
          expected volatility of 217.85%;  risk free interest rate of 1.75%; and
          expected life of 5

                                      F-12
<PAGE>

          years.  The  effects of  applying  SFAS No. 123 in the above pro forma
          disclosures are not necessarily indicative of future amounts,  because
          additional stock option awards could be made in future years.

          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,
                                            ------------------------------------------------
                                              2004                2003               2002
                                            ---------           ---------        -----------
Numerator for basic and diluted
  earnings per share:
<S>                                         <C>                 <C>              <C>
Net income (loss)                           $ 720,536           $ 360,574        $(4,127,502)

Denominator for basic and diluted
  earnings per share:
   Weighted average shares                  2,475,000           2,475,000          2,475,000
    outstanding, basic
   Weighted average shares
    outstanding, diluted                    2,731,000           2,475,000          2,475,000
</TABLE>


          Options to purchase  shares of common stock were  outstanding  at June
          30, 2003 and 2002 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.

          Recent Accounting Pronouncements

          In December  2003,  the  Securities  and Exchange  Commission  ("SEC")
          issued   Staff   Accounting   Bulletin   ("SAB")  No.  104,   "Revenue
          Recognition". SAB No. 104 revises and rescinds certain sections of SAB
          No. 101 in order to make this  interpretive  guidance  consistent with
          current  authoritative  accounting and auditing guidance and SEC rules
          and  regulations.  Accordingly  there is no impact to our  results  of
          operations,  financial  position  or cash  flows  as a  result  of the
          issuance of SAB No. 104.

          On December  23, 2003,  the FASB issued SFAS No. 132  (revised  2003),
          "Employers'   Disclosures  about  Pensions  and  Other  Postretirement
          Benefits,  an amendment of FASB  Statements  No. 87, 88 and 106, and a
          revision of FASB Statement No. 132 ("FAS 132 (revised  2003)")".  This
          statement revises employers' disclosures about pension plans and other
          postretirement  benefit plans.  It does not change the  measurement or
          recognition  of  those  plans  required  by SFAS No.  87,  "Employers'
          Accounting  for  Pensions",  SFAS No. 88,  "Employers'  Accounting for
          Settlements and  Curtailments of Defined Benefit Pension Plans and for
          Termination  Benefits",  and SFAS No. 106, "Employers'  Accounting for
          Postretirement  Benefits Other Than  Pensions".  The new rules require
          additional disclosures about the assets, obligations,  cash flows, and
          net  periodic  benefit  cost of  defined


                                      F-13
<PAGE>


          benefit  pension  plans  and  postretirement  benefit  plans.  The new
          disclosures  are  generally   effective  for  2003  calendar  year-end
          financial  statements of public  companies,  with a delayed  effective
          date for certain  disclosures  and for foreign plans.  The adoption of
          SFAS No.  132 did not have an  effect  on our  consolidated  financial
          statements.

          SFAS No. 149,  "Amendments of Statement 133 on Derivative  Instruments
          and Hedging Activities" amends and clarifies accounting for derivative
          instruments,  including  certain  derivative  instruments  embedded in
          other contracts,  and hedging  activities.  The Statement is effective
          for  contracts  entered  into or modified  after June 30, 2003 and for
          hedging relationships  designated after June 30, 2003. The adoption of
          this standard had no effect on the Corporation's  financial  condition
          or results of operations

          In December 2003, the FASB issued  Interpretation No. 46R ("FIN 46R"),
          a revision to FIN 46,  "Consolidation of Variable Interest  Entities".
          FIN 46R clarifies some of the provisions of FIN 46 and exempts certain
          entities from its requirements. FIN 46R is effective at the end of the
          first interim  period ending after March 15, 2004.  Entities that have
          adopted FIN 46 prior to this  effective date can continue to apply the
          provisions of FIN 46 until the effective date of FIN 46R. The adoption
          of FIN 46R  did  not  have an  effect  on our  consolidated  financial
          statements.


NOTE 2 CONTRACT RECEIVABLES

     The contract receivables consist of the following:

                                                  June 30,
                                        ---------------------------
                                            2004           2004
                                        -----------     -----------

Billed
  Completed contracts                   $ 1,784,168     $ 1,514,981
  Uncompleted contracts                   3,073,151       2,333,534
                                        -----------     -----------
        Total contract receivables      $ 4,857,319     $ 3,848,515

Less:  Allowance for doubtful accounts      377,663         227,663
                                        -----------     -----------
        Total                           $ 4,479,656     $ 3,620,852
                                        ===========     ===========


NOTE 3 COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS


<TABLE>
<CAPTION>
                                                                                 June 30,
                                                                 -----------------------------------------
                                                                        2004                  2003
                                                                 -------------------   -------------------

<S>                                                                    <C>                   <C>
Costs incurred on uncompleted contracts                                $ 25,558,246          $ 28,839,346

Estimated earnings on uncompleted contracts                              11,273,444            12,501,450
                                                                 -------------------   -------------------

Total costs and estimated earnings incurred
on uncompleted contracts                                               $ 36,831,690          $ 41,340,796

Less: Billings to date                                                   33,725,041            39,782,319
                                                                 -------------------   -------------------

Total                                                                   $ 3,106,649           $ 1,558,477
                                                                 ===================   ===================
</TABLE>

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

                                      F-14
<PAGE>

<TABLE>
<CAPTION>

Costs and estimated earnings in excess of
<S>                                                                     <C>                   <C>
billings on uncompleted contracts                                       $ 3,759,498           $ 3,423,457

Billings in excess of costs and estimated
earnings on uncompleted contracts                                          (652,849)           (1,864,980)
                                                                 -------------------   -------------------

Total                                                                   $ 3,106,649           $ 1,558,477
                                                                 ===================   ===================
</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.

     Management  has  assessed  the  remaining  carrying  amount  of  previously
     recorded  goodwill of  $2,985,909  and  determined  that such amount is not
     impaired in accordance with SFAS No. 142. Accordingly,  goodwill impairment
     was not recorded for the year ended June 30, 2004.

     The changes in the  carrying  amount of goodwill for fiscal 2004 and fiscal
     2003 are as follows:

<TABLE>
<CAPTION>

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

<S>                <C> <C>                         <C>                   <C>                   <C>
Balance as of June 30, 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
                                           ===================   ===================   ===================

Balance as of June 30, 2004                         $ 737,711            $2,248,198            $2,985,909
                                           ===================   ===================   ===================
</TABLE>


                                      F-15

<PAGE>



     Patents and Other Intangible Assets

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

                                         June 30, 2004                                 June 30, 2003
                      --------------------------------------------- ---------------------------------------------
                           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     $ 118,125     $ 196,875        $  315,000      $ 65,625     $ 249,375
Patent - Westland              258,132       198,114        60,018           258,132       153,123       105,009
                      ----------------- ------------- ------------- -----------------  ------------  ------------

Total patents               $  573,132     $ 316,239     $ 256,893        $  573,132     $ 218,748     $ 354,384
                      ----------------- ------------- ------------- -----------------  ------------  ------------

Non-compete
agreements                  $  348,750     $ 266,052      $ 82,698        $  348,750     $ 230,292     $ 118,458
IRB closing fees               138,785       138,785             -           138,785        62,194        76,591
ML Closing fees                154,603        24,550       130,053                 -             -             -
                      ----------------- ------------- ------------- -----------------  ------------  ------------

Total other                 $  642,138     $ 429,387     $ 212,751        $  487,535     $ 292,486     $ 195,049
                      ----------------- ------------- ------------- -----------------  ------------  ------------

Total                      $ 1,215,270     $ 745,626     $ 469,644       $ 1,060,667     $ 511,234     $ 549,433
                      ================= ============= ============= =================  ============  ============
</TABLE>


     On an annual basis the Company  evaluates 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, 2004 and 2003.

     All of the  Company's  patents and other  intangible  assets are subject to
     amortization. Amortization expense totaled $237,841, $142,444 and $103,119,
     respectively  for the years ended June 30, 2004,  2003 and 2002.  Estimated
     aggregate  amortization  expense  for  each  of  the  next  five  years  is
     approximated as follows:

              Fiscal year                           Amount
-----------------------------------------    ---------------------

                  2005                                $   198,000
                  2006                                    178,000
                  2007                                     53,000
                  2008                                     41,000
                  2009                                          -
               Thereafter                                       -
                                             ---------------------

                                                      $   470,000
                                             =====================


                                      F-16
<PAGE>

NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT


<TABLE>
<CAPTION>

                                                                                              2004               2003
                                                                                        -------------         ------------

Revolving line of credit with financial institution, Merrill
Lynch  Business  Financial  Services,   Inc.  ("MLB"),  with
interest  payable  monthly at the 2.85% above  30-day  LIBOR
(1.32% at June 30, 2004),  due December 2004.  This debt has
maximum  borrowings  up to  $4,000,000  and  is  secured  by
<S>                                                                                       <C>                 <C>
substantially all assets of Atlas                                                         $ 3,998,177         $          -

Note payable,  MLB, due in monthly  installments  of $19,444
through  December  2010,  plus  interest  at 3.15% above the
30-day  LIBOR.  The note is  secured  by  substantially  all
assets of Atlas.                                                                            3,402,780                    -

Note payable,  MLB, due in monthly  installments  of $13,889
through  December  2006,  plus  interest  at 3.15% above the
30-day  LIBOR.  The note is  secured  by  substantially  all
assets of Atlas.                                                                              430,555                    -

Credit facility with financial institution (Spectrum),  with
interest  due monthly at the bank's prime rate (4.0% at June
30, 2004) plus 5.2%, due December 2005. The facility  allows
maximum  borrowings  up to  $1,250,000,  based  on  eligible
accounts  receivable and is  collateralized by substantially
all assets of Westland.                                                                       695,167                    -

Note  payable  to a  financial  institution,  due in monthly
installments  of principal  plus interest at the banks prime
rate plus 3.0%, due February  2005.  This debt is secured by
substantially  all assets of Westland.  The entire amount of
this debt has been classified as a current liability.                                       2,212,583            2,178,148

Convertible  debentures,  net  of  a  discount  of  $20,000,
payable  to  a  financial   institution   (Cornell   Capital
Partners),  with  interest  accruing at 5% and payable  upon
maturity.  The debt  mature  June 2007 and is secured by all
real property of the Company.                                                                 180,000                    -

Commercial mortgage loan payable to a financial  institution
(Bank  One),  with  monthly  installments  of  $25,000  plus
interest at the banks prime rate plus 1.25%,  originally due
December 2012, repaid during fiscal 2004.                                                           -            2,700,000

Bank one revolving line of credit repaid during fiscal 2004                                         -            4,467,770

Note  payable to former  owner of  Westland  with a original
maturity  of  January  2006.  This note was repaid in fiscal
2004, net of $125,000 gain on extinguishment.                                                       -              775,000
                                                                                        -------------         ------------

                                                                                        $  10,919,262         $ 10,120,918

 Less - current maturities                                                                  7,305,936            8,385,918
                                                                                        -------------         ------------

                                                                                        $   3,613,326         $  1,735,000
                                                                                       ==============         ============


</TABLE>






                                      F-17

<PAGE>


     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.

     In June 2004, Cornell Capital ("Cornell Capital") entered into a securities
     purchase  agreement with the Company under which Cornell  Capital agreed to
     purchase  $300,000  face amount of the  Company's  convertible  debentures.
     Cornell Capital purchased $200,000 face amount of convertible debentures in
     June 2004.  Cornell Capital  subsequently  purchased $50,000 face amount of
     convertible  debentures  in  July  2004  and  $50,000  of  face  amount  of
     convertible  debentures in September 2004. In each case, the purchase price
     of the  debentures  was 90% of their face amount,  so that Cornell  Capital
     paid  $270,000 in the  aggregate  for $300,000 face amount of the Company's
     convertible debentures.

     The  debentures  are  convertible  at the  holder's  option  any time up to
     maturity at a conversion price equal to the lower of (i) $0.48 or (ii) 100%
     of the average of the three  lowest  closing bid prices of the common stock
     for the thirty trading days immediately  preceding the conversion date. The
     debentures  are secured by a second  mortgage on real property owned by the
     Company's  Atlas  subsidiary.  The  debentures  have a three-year  term and
     accrue  interest  at 5% per year.  Interest  accrues and must be paid at or
     prior to maturity.  At  maturity,  the Company has the option to either pay
     the holder the  outstanding  principal  balance and accrued  interest or to
     convert the  debentures  into shares of common stock at a conversion  price
     equal to the lower of (i) $0.48 or (ii)  100% of the  average  of the three
     lowest  closing bid prices of the common stock for the thirty  trading days
     immediately  preceding the conversion  date. No principal  payments are due
     prior to maturity.

     The Company can redeem the  debentures by paying Cornell  Capital  Partners
     120% of the face amount of the  debentures  to be  redeemed  and by issuing
     warrants  to Cornell  Capital  Partners to  purchase  50,000  shares of the
     Company's common stock for every $100,000 of debentures redeemed.

     The  Company  accounted  for the  conversion  features  of the  convertible
     debentures in accordance  with Emerging Issues Task Force (EITF) No. 00-27,
     "Application of Issue 98-5 to Certain Convertible Instruments".  As of June
     30, 2004 there is no beneficial  conversion  option as the conversion price
     is equal to or less than the fair value of the common stock.  Therefore, no
     intrinsic value has been assigned to the conversion option.

     The aggregate maturities of long-term debt are as follows:

              Fiscal year                           Amount
-----------------------------------------    ---------------------

                  2005                               $  7,305,936
                  2006                                    400,000
                  2007                                    330,555
                  2008                                    413,333
                  2009                                    233,333
               Thereafter                               2,236,105
                                             ---------------------

                                                     $ 10,919,262
                                             =====================



                                      F-18


<PAGE>


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 (425,000 shares had been
     previously  issued for  $25,000).  Each unit  consisted of one share of the
     Company's common stock, $0.001 par value, and two warrants. (These warrants
     and other  identical  warrants issued to investors  expired  unexercised in
     fiscal 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, 2004, no preferred  stock has been issued by the
     Company.

     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 Over the Counter  Bulletin  Board  (OTCBB).  In
     October 2003,  due to a delay in the Company's  filing its annual report on
     Form 10-K for the fiscal year ended June 30, 2003, the Company's  quotation
     on the OTCBB was  suspended.  The  Company's  common  stock then was traded
     through the Pink Sheets LLC. In August 2004, the Company's common stock was
     relisted for quotation on the OTCBB.


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, 2004, 2003 and
     2002.

     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 2004, 2003 and 2002.

     A summary of the status of the Company's  stock options for the years ended
     June 30, 2004, 2003 and 2002 are as follows:




                                      F-19

<PAGE>
<TABLE>
<CAPTION>

                                                                                         Weighted
                                                                      Weighted            Average
                                                                      Average            Exercise
                                                                       Shares              Price
                                                                   ---------------    ----------------

<S>                                 <C> <C>                               <C>                  <C>
Outstanding and exercisable at June 30, 2002                              289,167              $ 3.00
Granted                                                                         -                   -
Expired                                                                         -                   -
Exercised                                                                       -                   -
                                                                   ---------------    ----------------

Outstanding and exercisable at June 30, 2003                              289,167              $ 3.00
Granted                                                                   256,000                0.15
Expired                                                                    86,167                5.00
Exercised                                                                       -                   -
                                                                   ---------------    ----------------

Outstanding and exercisable at June 30, 2004                              459,000              $ 0.76
                                                                   ===============    ================
</TABLE>


     The following  summarizes  information  regarding stock options outstanding
     and exercisable at June 30, 2004, 2003 and 2002:

<TABLE>
<CAPTION>

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

<S> <C>     <C>                  <C>                     <C>                   <C>
    $0.15 - $1.88                459,000                 2.56                  $   0.76

</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:


                                      F-20
<PAGE>

<TABLE>
<CAPTION>

                                                                                  June 30,
                                                                 -------------------------------------------
                                                                          2004                    2003
                                                                 --------------------    -------------------

Current
<S>                                                                       <C>                    <C>
Warranty accrual                                                          $   77,000             $   85,000
Inventory net realizable value reserve                                        17,000                 51,000
Other                                                                         79,000                154,000
                                                                 --------------------    -------------------

Net current deferred tax asset                                            $  173,000             $  290,000
                                                                 ====================    ===================

Non-Current
Depreciation and basis of assets                                         $  (967,000)           $  (796,000)
Impairment of intangible assets                                              542,500                542,500
Research credit carryforward                                               1,165,000              1,165,000
Net operating loss carryforwards                                           1,999,000              2,024,400
Executive deferred compensation agreement                                    331,500                331,500
Other                                                                         38,500                 38,700
Valuation allowance                                                       (2,387,500)            (2,876,100)
                                                                 --------------------    -------------------

Net non-current deferred tax asset                                        $  722,000             $  430,000
                                                                 ====================    ===================

</TABLE>

     At June 30,  2004,  the  Company had  aggregated  net  operating  losses of
     approximately  $5,879,700 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.

     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realized.  The ultimate  realization of deferred tax
     assets is dependent  upon the  generation of future  taxable  income during
     periods in which those temporary differences become deductible.  Management
     considers  the  scheduled  reversals of deferred  taxes,  projected  future
     taxable income, and tax planning strategies in making this assessment.

     Based  upon the level of  historical  taxable  income and  projections  for
     future taxable income over the periods in which the deferred tax assets are
     deductible, management believes it is more likely than not that the Company
     will  realize the  benefits  of these  deductible  differences,  net of the
     existing  valuation  allowance at June 30, 2004. The amount of the deferred
     tax assets  considered  realizable,  however,  could be reduced in the near
     term if estimates of future taxable income during the  carryforward  period
     are reduced.

     The significant components of income tax expense (benefit) is as follows:

<TABLE>
<CAPTION>
                                                                           June 30,
                                                      ------------------------------------------------
                                                        2004                2003               2002
                                                      ----------         ---------           ---------
Federal
<S>                                                   <C>                 <C>                <C>
Current                                               $ 117,000           $  8,000           $ (39,672)
Deferred                                               (292,000)           (37,981)            588,000
                                                      ----------         ---------           ---------
Total income taxes (benefit)                          $(175,000)          $(29,981)          $ 548,328
                                                      ==========          =========          ==========

</TABLE>

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


                                      F-21

<PAGE>

<TABLE>
<CAPTION>
                                                                                      June 30,
                                                                --------------------------------------------------
                                                                    2004                2003              2002
                                                                -----------          ----------       ------------
<S>                                                             <C>                  <C>              <C>
Tax expense (benefit) at statutory rate                         $  185,482           $ 112,402        $(1,217,000)
Valuation allowance, tax research credit
valuation and other non-deductible items                          (385,085)           (146,206)         1,781,000
Other - net                                                         24,603               3,823            (15,672)
                                                                -----------          ----------       ------------
Total income tax (benefit) expense                              $ (175,000)          $ (29,981)       $   548,328
                                                                ===========          ==========       ============
</TABLE>




NOTE 9 OPERATING LEASE COMMITMENT

     The Company is obligated  for a building  lease  expiring June 2006 for its
     Westland  Subsidiary.  Rent expense for the years ended June 30, 2004, 2003
     and 2002, totaled $223,768,  $214,867 and $275,486,  respectively.  Minimum
     rental  payments under this  non-cancelable  lease at June 30, 2004, are as
     follows:

         Fiscal year                    Amount
------------------------------    -------------------
            2005                          $  214,867
            2006                             214,867

NOTE 10 EXPORT SALES

     A breakdown of export sales, based on shipment destination, is as follows:

<TABLE>
<CAPTION>
                                                                 June 30,
                                         --------------------------------------------------------
                                             2004                  2003                  2002
                                         ------------          ------------          ------------
<S>                                      <C>                   <C>                   <C>
United States                            $ 22,192,991          $ 24,202,585          $ 19,053,264
France                                        227,958               535,831             1,217,595
Brazil                                        424,666               206,074             1,569,391
China                                       3,951,055             1,455,650             1,464,331
Mexico                                         57,185                45,977               769,624
England                                       238,827                49,689               443,691
Germany                                       119,452                25,051               136,726
Canada                                        943,064             2,529,235               109,586
Other foreign countries                             -                   450                 3,447
                                         ------------          ------------          ------------
Total                                    $ 28,155,198          $ 29,050,542          $ 24,767,655
                                         ============          ============          =============
</TABLE>



                                      F-22
<PAGE>


NOTE 11 DEFERRED COMPENSATION

     As part of the  purchase  of  Atlas,  the  Company  entered  into  deferred
     compensation  agreements  with Ronald Prime and Mike Austin,  former owners
     and  executives  of  Atlas.  This  deferred   compensation  was  originally
     scheduled to be paid over a period from July 2000  through  July 2002.  The
     former  owners  agreed to defer  receipt of their  respective  compensation
     under a  subordinate  agreement  as part  of  debt  financing  arrangements
     entered  into  by  the  Company  and  MLB.  Included  in  the  accompanying
     consolidated  financial  statements  for the years  ended June 30, 2004 and
     2003 related to these amended agreements are the following:

                                                    June 30,
                                     ----------------------------------------
                                           2004                  2003
                                     ------------------    ------------------

Payable under 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, 2004.  The  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,
                          2004          2004       2003        2003       2003       2003       2003        2003
                       -------------------------------------------------------------------------------------------

<S>                      <C>          <C>         <C>         <C>        <C>        <C>        <C>         <C>
Revenues                 $ 7,113      $ 5,639     $7,839      $7,564     $8,034     $ 6,663    $ 7,617     $6,737
Cost of revenues           4,815        4,281      6,491       5,950      6,179       4,955      5,900      5,163
Net income (loss)            500          (16)        23         214        194         107        153        (93)
Net income (loss)
per share:
Basic                       0.20        (0.01)      0.01        0.09       0.09        0.04       0.06      (0.04)
Diluted                     0.17        (0.01)      0.01        0.09       0.09        0.04       0.06      (0.04)
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                    2,731        2,475      2,475       2,475      2,475       2,475      2,475      2,475
</TABLE>




                                      F-23

<PAGE>

NOTE 14 SUBSEQUENT EVENT

     In June 2004, Cornell Capital entered into a securities  purchase agreement
     with the Company under which Cornell  Capital  agreed to purchase  $300,000
     face  amount  of the  Company's  convertible  debentures.  Cornell  Capital
     purchased  $200,000  face amount of  convertible  debentures  in June 2004.
     Cornell Capital  subsequently  purchased $50,000 face amount of convertible
     debentures  in  July  2004  and  $50,000  of  face  amount  of  convertible
     debentures  in September  2004.  In each case,  the  purchase  price of the
     debentures  was 90% of their face  amount,  so that  Cornell  Capital  paid
     $270,000  in the  aggregate  for  $300,000  face  amount  of the  Company's
     convertible debentures.

     The  debentures  are  convertible  at the  holder's  option  any time up to
     maturity at a conversion price equal to the lower of (i) $0.48 or (ii) 100%
     of the average of the three  lowest  closing bid prices of the common stock
     for the thirty trading days immediately  preceding the conversion date. The
     debentures  are secured by a second  mortgage on real property owned by the
     Company's  Atlas  subsidiary.  The  debentures  have a three-year  term and
     accrue  interest  at 5% per year.  Interest  accrues and must be paid at or
     prior to maturity.  At  maturity,  the Company has the option to either pay
     the holder the  outstanding  principal  balance and accrued  interest or to
     convert the  debentures  into shares of common stock at a conversion  price
     equal to the lower of (i) $0.48 or (ii)  100% of the  average  of the three
     lowest  closing bid prices of the common stock for the thirty  trading days
     immediately  preceding the conversion  date. No principal  payments are due
     prior to maturity.

     The Company can redeem the  debentures by paying Cornell  Capital  Partners
     120% of the face amount of the  debentures  to be  redeemed  and by issuing
     warrants  to Cornell  Capital  Partners to  purchase  50,000  shares of the
     Company's common stock for every $100,000 of debentures redeemed.

     In  connection  with  Cornell  Capital's   investment  in  the  convertible
     debentures,  in July 2004, the Company issued to Cornell  247,500 shares of
     the Company's  common stock as a commitment fee, valued at $0.40 per share.
     The Company issued to Newbridge  Security  Corporation an additional 25,000
     shares of its common  stock as a  placement  agent fee.  These  shares were
     valued at $0.40 per share, or $109,000 in the aggregate.


                                      F-24