U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K


(Mark One)

[   ] ANNUAL  REPORT UNDER  SECTION 13 OR 15(d) OF THE 
      SECURITIES EXCHANGE  ACT OF 1934 [FEE  REQUIRED]
      For the fiscal year ended ______________

 OR
 

[ X ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
       THE SECURITIES EXCHANGE ACT OF 1934
       For the transition period from April 1, 1996 to June 30, 1996

                         Commission file number 0-24212

                         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)

                  520 Madison Avenue, New York, New York 10022
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (212) 843-1480

    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)

Redeemable Common Stock Purchase Warrants   Units, each consisting of one share
-----------------------------------------   of Common Stock and two Redeemable
        (Title of class)                    Common Stock Purchase Warrants
                                            -----------------------------------
                                                     (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  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.       [  ]

         As of October 9, 1996,  the aggregate  market value of the voting stock
held by non-affiliates of the Registrant was approximately $8,140,000.

         As of October 9, 1996,  there were 2,125,000 shares of the Registrant's
Common Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None
                               PAGE 1 OF 50 PAGES
                            EXHIBIT INDEX -- PAGE 22


<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.


         Productivity  Technologies  Corp.  (formerly named  Production  Systems
Acquisition Corporation),  a Delaware corporation ("Company"),  was organized in
June 1993 as a Specified Purpose Acquisition  Company(R)  ("SPAC(R)"),* with the
objective  of  acquiring  an  operating  business  ("Target  Business")  in  the
production  systems industry  ("Production  Systems  Industry").  The Production
Systems Industry  consists of companies which produce the machinery,  components
and systems for manufacturing.

         On May 23,  1996,  the Company  achieved  its  objective of acquiring a
Target Business with the acquisition of Atlas Technologies,  Inc.  ("Atlas"),  a
Michigan-based  corporation  incorporated in 1974 and engaged in the manufacture
and  sale  of  equipment  to  automate  metal  stamping  press  operations.  The
acquisition was accomplished through the merger of a wholly-owned  subsidiary of
the Company into Atlas,  with Atlas being the  surviving  company and becoming a
wholly-owned subsidiary of the Company. The Company has no other subsidiaries or
operations.

                                Business of Atlas

         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 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.

         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
shaping function.  Atlas' products stack cut sheet metal blanks for feeding into
the  presses,  move  components  from one  press  station  to  another  within a
multistation  transfer press or between  presses within a tandem line of presses
and facilitate the changing of dies on a press.

         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 the  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.

         Sales of Atlas products have principally been to two customer  segments
- automobile and automotive parts  manufacturers,  and appliance  manufacturers.
Other  customers  include  manufacturers  of garden and lawn  equipment,  office
furniture,  heating,  air  conditioning  and  ventilation  (HVAC)  equipment and
aircraft.  In Atlas' 1994,  1995 and 1996 fiscal years,  the automotive  segment
accounted  for  approximately  82%,  79% and  86% of  sales,  respectively,  and
appliance manufacturers accounted for approximately 4%, 8% and 8%, respectively.
For such fiscal years, sales by Atlas to General Motors Corporation  represented
14%, 15% and 10%,  respectively,  sales to Chrysler Corporation  represented 5%,
35% and 13%, respectively,  and sales to The Ford Motor Company represented 25%,
4% and 11%, respectively,  of total sales. Sales are predominantly in the United
States and
--------
*  "Specified Purpose Acquisition Company" and "SPAC" are registered 
    service marks of GKN Securities Corp.

                                                                    Page 2


<PAGE>

Canada but, in recent years, Atlas has targeted sales efforts in Mexico,  Europe
and Asia, which, for the 1994, 1995 and 1996 fiscal years,  represented 10%, 10%
and 12% of total sales in such years.

         Atlas uses three marketing channels:  direct sales,  accounting for the
largest portion, with offices at its headquarters in Fenton,  Michigan,  Atlanta
and  Chicago;   commissioned  sales  representatives;   and  original  equipment
manufacturers (OEMs) specializing in metal presses and related equipment.  Order
backlogs were approximately $13,300,000, $16,500,000 and $18,200,000 at June 30,
1994, 1995 and 1996, respectively.

Products

         Atlas offers critical, high technology products based on proven designs
and engineering,  which it believes offer superior  technology,  engineering and
features to those offered by its competitors. Atlas products are modular and may
be used with  existing  systems as well as with  completely  new  systems.  As a
result of their modular design, a variety of pieces of equipment can be combined
to form an appropriate solution for a customer's metal stamping needs. Virtually
all  of its  products  are 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.  Generally, there is a large number of suppliers
that are capable of providing the materials and components used by Atlas.

         Atlas personnel  perform  applications  engineering,  product design or
customization,  procurement, fabrication, machining, assembly, testing, shipping
and  installation  of the  products and systems it sells.  In 1993,  Atlas began
implementing  a continuing  program to achieve  greater  standardization  in the
engineering  and design of its  products.  To date,  the program has resulted in
faster order fulfillment and production,  improved  fabrication and,  management
believes,   increased  sales.  Atlas  believes  that  significant  cost-reducing
improvements can still be made in the manufacturing  process,  particularly from
further  standardization.  No assurance  can be given,  however,  that such cost
reduction  will be  attained  because  Atlas  may not be  able  to  perform  the
engineering required or make the necessary capital investment.

         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.  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.

         Atlas'  transfer  press  automation  equipment  is sold by it under the
names  Flex  2000 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.

         Stacking  and  destacking  automation  equipment  is used to handle the
sheet metal in the initial stages of the stamping  process.  Stackers stack flat
blanks from the coiled rolls which are delivered to the manufacturer. Destacking
equipment  feeds the flat blanks into the press and includes  functions to scrub
or roll-coat the metal blanks and to que them to assure a steady flow.

                                                                   Page 3

<PAGE>

Competition

         Atlas  products  are sold in  specialized  markets  that  have  limited
customers and few  competitors.  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 Volvo AB, Herwo Die Changing,  AB, Hirotec (Japan),
Verson All Steel Press, a division of Allied  Products  Corp.,  HMS Products Co.
and Aisaku (Japan). Each of these companies offers components which compete with
certain components  manufactured or sold by Atlas, but the Company believes that
none offers as  comprehensive  a line as Atlas. A number of the  competitors are
well established with substantial  financial resources,  recognized brand names,
customer  loyalty and  established  market  positions,  strong  engineering  and
distribution networks and comprehensive manufacturing capabilities.

Trademarks and Patents

         Atlas has an agreement to use  components in the Flex 5000(R)  transfer
press that it  manufacturers  and sells  that are based on patents  owned by Mr.
John Maher,  an individual.  The agreement  grants Atlas an exclusive  worldwide
license  to use  the  patents  for a term  equal  to the  life  of the  patents,
including any extensions as a result of modifications to the patents. Currently,
the patents registered with the United States Patent and Trademark Office expire
on various dates between June 23, 2005 and June 21, 2007.  Atlas is obligated to
pay Mr.  Maher a  royalty  based on a  portion  of the  sales  price of the Flex
5000(R) as it relates to the value of the patented components. For Atlas' fiscal
years ended June 30, 1995 and 1996,  Atlas expensed  approximately  $100,000 and
$320,000, respectively, in license fees under this agreement. The agreement also
provides  that Mr.  Maher is  responsible  for  defending  Atlas for any  patent
infringements.  Atlas  believes  that the terms of the  agreement  are  industry
competitive.

         Atlas has registered with the United States Patent and Trademark Office
a trademark on "Flex 5000(R)."

         Atlas  owns  and has  registered  with the  United  States  Patent  and
Trademark  Office two patents,  one for a power and free roller conveyer and one
for the  transfer  arm for  supporting  workpieces.  Atlas  also has  registered
patents  for the first of these in Canada and Great  Britain.  Atlas has applied
for two United  States  patents  for certain  apparatus  and methods for forming
workpieces and for magnetic sheet separator constructions.

Management and Employees

         Ronald M. Prime is currently the Chief  Executive  Officer of Atlas and
has been responsible for the overall  operations of Atlas,  managing the project
management,  engineering,  manufacturing,  controls,  service,  purchasing,  and
finance departments.  Mr. Prime has also been active in product development,  as
well  as  the  establishment  and  improvement  of  Atlas'  project  management,
engineering,  manufacturing,  and financial  processes.  From 1972 to 1984,  Mr.
Prime was President of Fluid & Electric Control Co.,  founding that business and
growing  it from one  person  to 150,  one of the  largest  industrial  controls
contractors in Michigan.  That company was merged with a predecessor of Atlas in
1984.  From  1970 to  1972,  Mr.  Prime  held  various  technical  and  controls
engineering positions.

         Michael D. Austin is currently  the President of Atlas and has been the
principal officer of Atlas,  chiefly  responsible for directing the sales of the
company,  for  determining  the overall  product  directions,  managing  product
research and development,  and managing the application engineering departments.
From 1977 to 1996, Mr. Austin held various other management  positions at Atlas,
including  Vice President of Operations,  Sales Manager,  and Controls  Manager.
From 1973 to 1977, Mr. Austin held various  controls  engineering and management
positions at Fluid & Electric Control Co., including Chief Engineer.

                                                                       Page 4

<PAGE>


         Neither Mr. Prime nor Mr. Austin performs any policy-making functions
for the Company.

         Atlas  employs  approximately  200 persons.  None of these persons is a
member of a union.  Atlas believes that its employee  relations are good.  Atlas
believes  that its location in Michigan is  beneficial in its access and ability
to hire qualified personnel because of the highly  industrialized  nature of the
area.


ITEM 2.  PROPERTIES

         Atlas  operates  its  manufacturing  facilities  in Fenton and  Linden,
Michigan.  It has  approximately  43,200 square feet of space in Fenton which is
used for  assembly  operations  and light and medium  machining  operations  and
electrical panel construction. Project management, engineering and sales offices
are also located in Fenton. In Linden, at one location,  Atlas has a welding and
fabrication  facility  located in  approximately  16,300 square feet and a heavy
machining and light and medium assembly facility located in approximately 21,000
square feet.  Atlas also  maintains  office  space at its site in Linden.  Atlas
rents approximately  1,200 square feet of space in Atlanta,  Georgia for a sales
office.

         Atlas is in the  process of  building a fourth  facility  on a new 10.9
acre site  adjacent to its  existing  Fenton  location.  The new  facility  will
initially provide  approximately  51,000 square feet of manufacturing  space and
8,000 square feet of office  space,  but will be capable of expanding at a later
date to  approximately  140,000 square feet of  manufacturing  and 25,000 square
feet of office space. The new facility will have higher roofs and heavier cranes
to facilitate manufacturing of larger equipment.

         The  initial  phase  of the  project  is  planned  to be  completed  in
February, 1997 and is expected to cost approximately $3,500,000,  funded through
Industrial Revenue Bonds. The consolidation and additional space are anticipated
to increase overall office and manufacturing floor efficiencies.

         The principal  executive  office of Atlas is located at 201 South Alloy
Drive, Fenton, Michigan 48430, and its telephone number is (810) 629-6663.


ITEM 3.  LEGAL PROCEEDINGS

         In 1996,  Atlas and John  Maher,  the owner of the  patent for the Flex
5000(R)  licensed to Atlas,  initiated an action  against  Orchid  International
Group Inc. ("Orchid") in the Federal Court of Canada,  Trial Division,  claiming
infringement and wrongful sale,  manufacture and use by Orchid of the inventions
protected by such patent and seeking, among other relief, a declaration that the
patents  are valid and have been  infringed  by  Orchid,  injunctive  relief and
damages of at least $5,000,000  (Cdn). The defendant has not yet filed an answer
to the complaint.

         In October  1996, a demand for  arbitration  was filed against Atlas by
SWVA, Inc. for  $15,400,000  damages alleged to result from a breach of contract
and breach of warranty by Atlas with  respect to certain  equipment  supplied by
Atlas to the  claimant.  Atlas has not yet  responded to the demand but believes
that it is not  responsible for the alleged  defects.  It also believes that, if
repairs to the equipment (which had a purchase cost of approximately $1,300,000)
are required to be made by it under its contract and warranty,  such repairs can
be made for less than $100,000. Prior to the institution of the arbitration, the
parties were negotiating as to responsibility for payment of the repairs.

         Except for such  matters,  neither the  Company nor Atlas is  currently
involved in any material legal proceedings.
                                                                        Page 5

<PAGE>


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

         (a)     On May 21,  1996,  a Special  Meeting of the
Stockholders of the Company was held.

         (b)     At the Special Meeting, the following persons were elected as
directors of the Company to serve for the periods indicated:

                 (i)   Class I Directors - to serve for terms expiring at the
annual meeting of stockholders to be held during the 1997 fiscal year: 
Messrs. Jesse A. Levine and Alan I. Goldman.

                 (ii)  Class II Directors - to serve for terms expiring at the
annual meeting of stockholders to be held during the 1998 fiscal year:  
Messrs. Ray J. Friant, Jr. and John S. Strance.

                 (iii) Class III Directors - to serve for terms expiring at the
annual meeting of stockholders to be held during the 1999 fiscal year: 
Messrs. Samuel N. Seidman, Joseph K. Linman and Alan H. Foster.

         (c)     At  the  Special   Meeting,  the  following matters were acted
upon:

         Proposal 1 - to approve a Merger Agreement, dated December 18, 1995,
providing  for the merger of a wholly owned  subsidiary  of the Company with and
into Atlas, with Atlas becoming a wholly owned subsidiary of the Company.

         Proposal 2 - to approve an amendment to the Certificate of 
Incorporation  of the  Company to change its name to  Productivity  Technologies
Corp.

         Proposal 3 - to approve an amendment to the Certificate of 
Incorporation  of the  Company to  provide  for  classification  of its Board of
Directors into three classes serving staggered terms as described above.

         Proposal 4 - to elect seven directors.

         Proposal  5 - to adopt  the 1996  Performance  Equity Plan.

         All of the matters presented to the meeting were adopted, with
the number of votes for, votes against,  abstentions and broker  non-votes being
as follows:

                    Votes       Votes                      Broker
                     For       Against    Abstentions     Non-Votes

Proposal 1     1,408,936       221,608         0           490,860

Proposal 2     1,929,796       181,608      10,000           --

Proposal 3     1,381,436       238,600      11,000         490,368

Proposal 5     1,807,796       281,108      32,500           --

                                                                      Page 6

<PAGE>

          The nominees for election as directors (Proposal 4) received the 
following votes:

                                       For            Withheld

           Jesse A. Levine           1,973,459         147,945
           Alan I. Goldman           1,973,459         147,945
           Ray J. Friant, Jr.        1,973,459         147,945
           John S. Strance           1,973,459         147,945
           Samuel N. Seidman         1,973,459         147,945
           Joseph K. Linman          1,973,459         147,945
           Alan H. Foster            1,973,459         147,945

                                                                    
                                                                      Page 7

<PAGE>

                                     PART II

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

         Effective August 2, 1996, the Common Stock (Symbol:  PRAC) and Warrants
(Symbol:  PRACW) were listed for trading on the Nasdaq SmallCap Market. Prior to
that date,  the Common  Stock and Warrants  were traded in the  over-the-counter
market and quoted on the OTC Bulletin Board. The Company's Units (Symbol: PRACU)
are quoted on the OTC Bulletin Board.

         The  following  table sets forth the range of high and low  closing bid
prices for Units,  Common  Stock and  Warrants,  as reported by the OTC Bulletin
Board.  The OTC Bulletin Board is an  inter-dealer  automated  quotation  system
sponsored  and  operated by the NASD for equity  securities  not included in the
Nasdaq System.  Such  over-the-counter  market quotations  reflect  inter-dealer
prices, without retail mark-up,  mark-down or commission and may not necessarily
reflect actual transactions.
<TABLE>
<CAPTION>
                                               Units               Common Stock                 Warrants
                                         -----------------      -----------------         -------------------
                                          High       Low        High          Low          High          Low
                                          ----       ---        ----          ---          ----          ---
<S>                                      <C>         <C>        <C>           <C>          <C>         <C>
Year ended March 31, 1995:
   Second Quarter (beginning June 24,
     1994).............................   5 3/4      5 1/2      N/A           N/A           N/A           N/A
   Third Quarter.......................   5 3/4      5 1/8      4 1/4         4             7/8           3/4
   Fourth Quarter......................   5 1/2      5 1/2      4 1/4         4 1/4         7/8           5/8
Year ended March 31, 1996:
   First Quarter.......................   5 1/2      5 1/4      4 3/8         4 1/8         5/8           3/8
   Second Quarter .....................   5 1/4      5 1/4      4 11/16       4 3/8         9/16          3/8
   Third Quarter.......................   5 1/4      5 1/4      4 3/4         4 11/16       1/2           7/16
   Fourth Quarter......................   5 3/4      5 1/4      5             4 3/4        15/16          5/16
Quarter ended June 30, 1996............   9          5 3/4      6             4 5/8        1 5/8        1 3/16
</TABLE>


         As of  October  9,  1996,  the  Company  had 9 holders of record of its
Common Stock.  The Company  believes that there are in excess of 500  beneficial
holders of the Company's Common Stock.

         The Company has not declared or paid any  dividends on its Common Stock
since its inception.

                                                                     Page 8

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

         The  following  selected  financial  data  have been  derived  from the
Company's and its  predecessor's  consolidated  financial  statements which have
been audited by BDO Seidman, LLP, independent  certified public accountants,  as
of June 30,  1996 and for the  periods  July 1, 1995 to May 23, 1996 and May 24,
1996 to  June  30,  1996  and  Dupuis  &  Ryden,  independent  certified  public
accountants,  who audited the years ended June 30, 1995,  1994,  1993, and 1992.
The following data should be read in conjunction with  "Management's  Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  and  the
Consolidated  Financial  Statements and Notes thereto included elsewhere in this
Report.

                  (Dollars in thousands, except per share data)

Consolidated Statements of Operations Data
<TABLE>
<CAPTION>
                                          The                                Predecessor
                                        Company     ---------------------------------------------------------------
                                      -----------    July 1
                                        May 24,       1995         Year         Year          Year          Year
                                          to           to         Ended        Ended         Ended         Ended
                                        June 30,     May 23,     June 30,     June 30,      June 30,      June 30,
                                         1996         1996         1995         1994          1993          1992
                                         ----         ----         ----         ----          ----          ----
<S>                                    <C>           <C>         <C>          <C>           <C>           <C>
Net sales                              $ 4,404       $31,598     $29,077      $21,186       $22,830       $18,949
Cost of sales                            3,029        21,773      21,034       16,320        16.774        13,910
Gross profit                             1,375         9,825       8,043        4,866         6,056         5,039
Selling, general and
administrative expenses                    729         6,007       5,119        4,872         4,663         4,293
Officers' bonuses                          197         2,1l7        --          ---           ---           ---
Income (loss) From operations              448         1,701       2,924          (6)         1,393           746
Net income (loss)                          204           762       2,219        (297)           884           493
Net income per share of
common stock                            $  .10
Weighted average common shares           2,125
</TABLE>

Consolidated Balance Sheet Data
<TABLE>
<CAPTION>
                                          The                            Predecessor
                                        Company
                                      -----------     --------------------------------------------------
                                        June 30,      June 30,      June 30,     June 30,      June 30,
                                          1996          1995          1994         1993          1992
                                       ---------      --------      --------     --------      --------
<S>                                     <C>           <C>            <C>         <C>           <C>  
Current assets                          $18,690       $11,423        $8,850      $10,500       $10,210
Current liabilities                      13,642         8,321         7,246        8,287         8,475
Working capital                           5,048         3,102         1,604        2,213         1.735
Property, plant and equipment, net        4,240         2,517         2,595        2,580         2,063
Total assets                             26,023        14,550        11,774       13,417        12,916
Long-term debt, less current
maturities                                2,228         2,717         1,666        1,855         1,808
Total liabilities                        16,650        11,037         8,912       10,143        10,284
Stockholders' equity                      9,373         3,513         2,862        3,274         2,632

</TABLE>


                                                                     Page 9


<PAGE>



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

The Company

      In March 1994, the Company raised  $150,000 in bridge  financing  ("Bridge
Financing") in order to pay certain  organizational  expenses,  the costs of the
Bridge Financing and certain costs of its initial public offering ("IPO").  Nine
investors in the Bridge Financing loaned $150,000 to the Company and were issued
promissory  notes in that amount,  bearing interest at 10% per annum and payable
upon  consummation  of the IPO, and Warrants to purchase  300,000  shares of the
Common Stock ("Bridge Warrants").

      The IPO was  completed  on July 5,  1994,  and the  Company  received  net
proceeds of $8,980,100 after payment of offering expenses. A substantial portion
of such net proceeds ($8,262,000) was placed in the Trust Fund until the earlier
of the Company's  consummation of a business  combination with a Target Business
or  liquidation.  The trust  agreement  limited  investments to U.S.  Government
securities  with a maturity of 180 days or less.  At March 31,  1996,  there was
approximately  $9,071,000 in the Trust Fund.  Cumulative  interest earned on the
funds in the Trust Fund and on other  funds of the  Company  was  $845,000 as of
March 31, 1996.  The  remaining  proceeds of the IPO, and the interest  thereon,
have been  used to pay for  business,  legal and  accounting  due  diligence  on
prospective acquisitions, and continuing general and administrative expenses, as
well as other expenses.

      On May 23, 1996,  the Company  consummated  its  acquisition  of Atlas and
terminated  the Trust Fund,  utilizing  its proceeds to pay the purchase  price.
Substantially all of the Company's working capital needs prior to that date were
attributable  to the  identification,  evaluation  and  selection  of a suitable
Target Business and the structuring,  negotiation and consummation of a business
combination  with  Atlas.  During the year ended  March 31,  1996,  the  Company
incurred general,  administrative  and other expenses and taxes of approximately
$398,000,  which  were  associated  primarily  with  its  evaluation  of  Target
Businesses.  Since May 23,  1996,  the Company has been a holding  company  with
Atlas being its sole subsidiary and operating business.

      On May 17, 1996, the Company's Board of Directors approved a change of the
Company's  fiscal  year to one ending on June 30,  effective  July 1,  1996,  to
coincide with Atlas' fiscal year.

Atlas

      During the last several  years,  the  business  focus of Atlas has been on
manufacturing  and selling  quick die change,  transfer  press and  stacking and
destacking  equipment.  During  the same  period,  Atlas  has  standardized  its
products,  changed  certain of its  manufacturing  methods and sold off an older
product line in an effort to improve  productivity  and margins and  concentrate
its efforts on its current principal products.

      Historically,  about  90% of the sales of Atlas  have been to  automotive,
appliance and HVAC manufacturers.  Recently automotive orders have substantially
increased  due to  several  large  stamping  operation  upgrade  programs  being
undertaken  by,  and  resultant  order  increases  from,  several  international
automobile manufacturers.  For Atlas' fiscal years 1994, 1995 and 1996, sales to
customers in the automotive  industry  accounted for approximately  82%, 79% and
86%, respectively, of total sales. Consequently,  the sales and profitability of
Atlas will depend to a large extent on the economic  conditions  that affect the
automotive industry,  and to a lesser extent, the appliance industry, as well as
general economic conditions in the United States,  Mexico, Europe and Asia where
the majority of its  customers are located.  Although  Atlas is dependent on the
automotive industry, Atlas believes that product standardization and design, and
manufacture  and  sale of  certain  of its  products  such as quick  die  change
machinery  and flexible  transfer  presses  should reduce the effect on Atlas of
cyclicality within the automotive industry.  Atlas further believes that because
its equipment generally  increases  productivity and reduced per-unit production
costs,  there will be  continuing  demand for its products in  down-turns in the
economy and in industry groups to which it sells.

                                                                      Page 10


<PAGE>


      A  significant  percentage  of  Atlas'  sales  are to a  small  number  of
customers.  While these customers are  concentrated in primarily two industries,
the automotive and appliance industries, Atlas believes that its customers
in these industries are undertaking long-term productivity  improvement programs
and that they will  continue to place  orders with Atlas.  Atlas is  undertaking
marketing efforts to diversify its customer base;  however,  no assurance can be
given  that it will  be  successful.  Atlas  also is  standardizing  many of its
products in an attempt to attract  new and  different  customers  and to be more
efficient in the design, manufacture and delivery of the products it sells. Such
efficiency may result in improved operating  margins,  although no assurance can
be given that margins will increase or if increased remain at such  percentages.
Nonetheless,  Atlas  believes  that in the  foreseeable  future,  its sales will
continue to be  primarily  within  those  industries  to which it  currently  is
selling at the current proportionate percentages.

      Recently the sales of Atlas to  customers in Mexico,  Europe and Asia have
increased and for the Atlas fiscal year ended June 30, 1995 and 1996 represented
10%, 10% and 12% of the sales of Atlas in such years.  Foreign sales are subject
to a  number  of  risks,  including  transportation  delays  and  interruptions,
political and economic  disruptions,  the  imposition  of tariff and  non-tariff
barriers and changes in governmental policies including statutory and regulatory
changes.  Although  there is little Atlas can do to protect  itself against such
risks,  to the extent  possible,  Atlas' foreign sales are denominated in United
States dollars to eliminate the risk of currency fluctuation,  foreign sales may
be guaranteed in part by the Foreign Credit Insurance Corporation, shipments are
normally  made FOB  Michigan  to reduce the risk of loss  borne by Atlas  during
shipment  and Atlas  obtains  foreign  risk and  credit  insurance  through  the
Export-Import Bank of the United States.

Results of Operations

      Effective May 23, 1996, the Company  entered into a Merger  Agreement with
Atlas  whereby  Atlas  became a  wholly-owned  subsidiary  of the  Company.  The
financial  statements  after that date are those of the new reporting entity and
are not  comparable to the  pre-merger  periods.  However,  for purposes of this
discussion, fiscal year 1996 represents the period May 24 to June 30, 1996 (post
merger)  combined with the period July 1, 1995 to May 23, 1996  (pre-merger) and
then compared to fiscal year 1995.

Fiscal Year 1996 compared to Fiscal Year 1995

      Net sales for the fiscal year ending  June 30, 1996 were  $36,002,861,  an
increase  of 24% over net sales of  $29,077,684  for  fiscal  year  1995.  Sales
increased in fiscal 1996 due largely to increased  customer needs for costsaving
and  quality-enhancing  tooling, as well as general growth in the auto industry.
Gross  profit  for  1996 was  $11,200,668,  compared  to 1995  gross  profit  of
$8,043,402.  Gross profit  increased  $3,157,266,  or 39%,  mainly due to higher
volumes and improved  product mix. Order backlogs at June 30, 1996 and 1995 were
$18,200,000 and $16,078,000  respectively,  an increase of 13% over the previous
year.

      Cost of  products  sold for fiscal year 1996 was  $24,802,193  compared to
$21,034,282  for fiscal year 1995.  The 18% increase in costs was lower than the
related 24% increase in sales,  resulting in an improved  cost of sales of 68.9%
in 1996, compared to 72.3% in 1995.

      For fiscal 1996, selling,  general and administrative expenses (SG&A) were
$6,736,106,  compared  to  $5,118,720  for  1995,  mainly  due to the  costs  of
administering  increases in volume. Other material SG&A increases were due to an
increase of  $398,730 in legal and  professional  services,  ESOP plan  proposed
termination,  and increased tax and audit work. Selling expenses and commissions
increased by $448,000 due to the higher volume of business and expenses  related
to increased  business  activity in Europe and Asia. In addition,  royalties for
the Flex 5000 product increased  $221,050 due to increased sales in this product
line.

      Officer bonuses to Ronald Prime and Michael Austin,  executives and former
owners of Atlas,  amounted to $2,314,000 in fiscal 1996. Of this total, $753,000
was  expensed  subsequent  to  January 1, 1996,  when the  employment  agreement
between the Company and Messrs. Prime and Austin commenced. No bonuses were paid
to Messrs. Prime and Austin in earlier years.
                                                                    Page 11


<PAGE>

      Interest  expense  decreased  to $570,182 in fiscal 1996 from  $644,853 in
1995.  The decrease was caused by reduced  long-term debt and a reduction in the
line of credit interest rate.
 
      Net income for fiscal 1996 was $967,428,  compared to a 1995 net income of
$2,219,974  (results for 1995  included a  non-recurring  gain of $308,565  from
disposal of assets,  and a $319,000 one time adjustment in tax credit  valuation
allowance), representing a net reduction of 56%. The reduction in net income was
largely caused by $1,715,600 in non-recurring  management  bonuses and expenses,
which were related to the merger of Atlas and PTC.  Bonuses  paid to  management
during the 1996 year  reflect  amounts  retained by Atlas which were not paid in
1994 or 1995.

      A total of $3,370,818 of cash was used in operating  activities during the
fiscal year ended June 30, 1996, as compared to $2,193,804 of cash provided from
operations  during  fiscal  1995.  Major  changes in cash  flows from  operating
activities  from the fiscal year ending June 30, 1995 to fiscal year ending June
30, 1996 include net income,  which  decreased from $2,219,974 in fiscal 1995 to
$967,428 in fiscal 1996 due  primarily to officers  bonuses,  growth in contract
receivables  of  $3,565,732  during  fiscal  1996,  and an increase in costs and
estimated  earnings in excess of billings on uncompleted  contracts,  which grew
$2,672,063  during fiscal 1996 to accommodate  increases in order  volumes.  Net
cash  used in  investing  activities  totaled  $287,125  during  fiscal  1996 as
compared to $606,925 in fiscal 1995.  Cash  investing  was higher in fiscal 1995
primarily  due to  advances  by the  Company to certain  shareholders.  Net cash
provided by financing  activities totaled $3,264,061 during fiscal 1996, largely
comprising  additional  line of credit  borrowings and proceeds from  additional
long-term debt  borrowings.  Net cash during fiscal 1996  increased  $494,926 as
cash  provided  by  financing  activities  offset  cash used by  operations  and
investing activities.

Fiscal Year 1995 compared to Fiscal Year 1994

      Net sales for the fiscal  year 1995 were  $29,077,684,  an increase of 37%
over net sales of $21,186,245  for fiscal year 1994. Net income was  $2,219,974,
compared  to a net loss of  $297,887  in fiscal  year 1994.  The amount of order
backlog  at  June  30,  1995  and  1994,  was   $16,078,000   and   $13,298,000,
respectively, which represents an increase of 21%. The increase in net sales was
the result of increased  orders from major  automobile  manufacturers  which are
implementing   programs  of  sheet  metal   press  room   automation.   Overall,
profitability for fiscal year 1995 was largely the result of Atlas being able to
use  previous  engineering  standards,  and a reduction in  engineering  time to
design and release orders and an  improvement  in the mix of principal  products
sold which  encompassed  an  increase in multiple  unit  orders.  The margin for
fiscal year 1995 was  approximately 28% compared to 23% in fiscal year 1994. The
change in the engineering of certain of its products has resulted in Atlas being
able to improve the quality,  delivery time and  manufacturing  costs related to
these products.  During fiscal year 1995, Atlas  established  itself as the sole
preferred  supplier  for quick die change  products  by the three  major  United
States domestic automobile  manufacturers.  Atlas believes that this designation
will result in an increase in the amount of orders from the automobile  industry
in the foreseeable future.

      In fiscal year 1995,  Atlas  recognized  a gain of $308,000 on the sale of
one of its older product lines and corporate airplane. The product line was sold
to enable Atlas to  concentrate  its  resources on certain of its core  products
that it believes have future  growth  potential.  The inventory and  engineering
drawings related to this line were sold for an aggregate of $410,000,  resulting
in a profit of $280,000 and is reflected as a gain on disposal of an asset.

      Cost of products sold for fiscal year 1995 was $21,034,282 compared to
$16,320,825 for fiscal year 1994.  The 29% increase was the result of the 
increase in the overall amount of sales.

      Selling,  general and  administrative  expenses  for fiscal year 1995 were
$5,118,720  compared to $4,871,820 for fiscal year 1994. The 5% increase was the
result of an increase  in sales  during the period  which  caused an increase of
$142,000 in sales  representative  commissions  and an increase of $104,900  for
other expenses and bad debt provision.
                                                                   Page 12


<PAGE>

      Interest  expense  increased to $644,853 in fiscal year 1995 from $439,601
in fiscal year 1994.  The  increase  was the result of an increase in the amount
borrowed  under the  revolving  line of credit from the NBD Bank,  N.A.  and the
interest  paid on a ten year note issued in  connection  with the  redemption of
stock of Atlas at the time of the  retirement of a previous  officer  commencing
November 1994. For the year ending June 30, 1995, the stock  redemption by Atlas
in November  1994 of shares  owned by a former  officer and  director  increased
long-term debt and, therefore, reduced total stockholder's equity.

      A total of $1,099,529 of cash was provided by operating  activities during
the fiscal year ended  1994,  which was  approximately  50% of the level of cash
provided by operations  during fiscal 1995. Major changes in cash flows provided
by operating activities from the fiscal year ending June 30, 1994 to fiscal year
ending June 30, 1995 include net income,  which increased from negative $297,887
in  fiscal  1994 to  $2,219,974  in  fiscal  1995  and a  decrease  in  contract
receivables  of  $1,795,705  during  fiscal  1995  compared  to an  increase  of
$1,411,635  in such  receivables  during  fiscal 1994.  In  addition,  costs and
estimated  earnings  in excess of billings on  uncompleted  contracts  decreased
further in 1995 as compared to 1994,  providing an additional  $905,063 in cash.
Accounts  payable and accrued  expenses  increased by  $1,111,639  during fiscal
1995, largely to accommodate Company growth,  while the Company used $467,753 of
cash to pay down accounts  payable and accrued  expenses during fiscal 1994. Net
cash used in  investing  activities  during  fiscal 1995 and 1994 were  similar,
totaling  $606,925  and  $462,125,  respectively.  However,  net  cash  used  in
financing  activities  increased  in fiscal  1995 due  largely to the  Company's
reduction of its line of credit  during  fiscal 1995.  Company net  decreases in
cash  in  fiscal  1995  and  1994  were   similar,   at  $75,831  and  $103,139,
respectively.

Liquidity and Capital Resources

      Atlas believes that its principal  long-term capital  requirement has been
and is  expected  to  continue  to be the  funding  of capital  expenditures  to
modernize, improve and expand its facilities and marketing efforts and financing
day-to-day  operations.  In connection with the Company's  acquisition of Atlas,
Atlas paid an aggregate of  $2,201,848.88  in connection  with certain long term
debt,   covenants  not  to  compete  and  contingent   liabilities   for  former
stockholders.  This was partially funded out of a six-year term loan obtained in
May 1996 from NBD Bank,  N.A.  in the  amount of  $1,500,000  which  loan  bears
interest  at the  bank's  prime  rate plus one  percent.  The loan is secured by
assets of Atlas and  guaranteed  by the Company in the amount of $500,000  until
December 31, 1996 and $150,000 until May 31, 1997, when the guaranty terminates.

      The  Company's  working  capital at June 30, 1996 was  $5,047,991,  versus
working  capital of $3,102,511 at June 30, 1995. The increase in working capital
resulted  primarily from an increase in  consolidated  post-transaction  cash on
hand, which resulted from the Company's escrowed funds in excess of the purchase
price for Atlas.

      At June 30, 1996,  Atlas had borrowings  outstanding  of $2,693,179  under
various term loans, of which the current portion was $464,393,  comprised of the
following  loans:  (i) borrowings of $955,050 from NBD Bank, N.A. secured by the
plant of Atlas with a payment due on February 2, 1998 of  $805,560,  which bears
interest at the rate of 1.25% over the bank's  prime rate;  (ii)  borrowings  of
$180,470  from NBD Bank,  N.A.  secured by the  equipment  of Atlas with a final
payment  due July 1998,  which bears  interest  at the rate of 7.75%;  and (iii)
borrowings of $78,492 from Concord  Commercial secured by the equipment of Atlas
with a final  payment due  October,  1999,  which bears  interest at the rate of
8.7%. In May 1996, as part of the credit  facility which Atlas entered into with
NBD Bank, N.A.,  Atlas can borrow up to $550,000 to finance future  acquisitions
of equipment and facilities.

      In addition to the term loans,  Atlas has entered into a revolving  credit
loan with NBD Bank,  N.A.  in the amount of  $8,000,000.  The amount that may be
borrowed  under this facility is limited to certain  percentages of the domestic
accounts  receivable,  raw materials  and work in process of Atlas.  At June 30,
1996,  borrowings  under this facility were  $7,188,558.  Borrowings  under this
credit  facility  bear interest at the  adjustable  rate of 3/4% over the bank's
prime rate and are due on May 31, 1997.  Atlas is reviewing with NBD Bank,  N.A.
the potential for utilizing the  ExportImport  Bank of the United States for the
financing of foreign receivables and work in process.  Atlas believes that, as a
result of its revolving facility,  its short term credit facilities are adequate
to support its business operation at its current levels of sales.

                                                                  Page 13


<PAGE>

      Until it reaches capacity at its present  manufacturing  facilities (which
management   believes  is   approaching),   Atlas   believes  that  its  capital
expenditures and operating costs will grow at rates proportional to increases in
sales  volume.  Currently,  for  capital  expenditures  not  related to facility
expansion,  Atlas has budgeted approximately $300,000 per year for machinery and
equipment,  which it believes  sufficient to accommodate  growth in orders to be
processed at its existing two production  facilities.  Such capital expenditures
will be met using current credit facilities and working capital.

      As discussed in Item 2--Properties,  Atlas is presently constructing a new
production  facility with  approximately  60,000  square feet of production  and
office space adjacent to its existing Fenton  location,  at an estimated cost of
$3,500,000.

Contingencies

      The Company has received a demand for arbitration ("Demand") dated October
1, 1996 from a former  customer who alleges,  among other issues,  a $15,400,000
claim for damages  resulting  from a breach of contract and breach of warranties
related to the design and  manufacture  of  certain  industrial  equipment.  The
Company  believes  the Demand is without  merit and will  vigorously  defend its
position.  Further,  with  respect to the alleged  damages,  the total  purchase
amount on this contract was  $1,360,000.  The former  customer has  acknowledged
receiving  the  Company's  standard  terms  and  conditions.   These  terms  and
conditions provide in pertinent part that the Company will not, in any event, be
liable for any incidental or consequential  damages,  including loss of profits.
Further,  the Company  warranty  policy  states that the buyer's  sole remedy is
limited to either repair or replacement of the equipment or defective parts, or,
after  negotiated  settlement,  return of the goods to  seller.  While the final
outcome  of  the  Demand  cannot  be  determined  at  this  early  date  in  the
proceedings, management believes that the final outcome will not have a material
adverse effect on the Company's results of operations or its financial position.

Recent Accounting Standards

      In March 1995, the Financial  Accounting  Standards Board issued Statement
of  Financial  Accounting  Standards  No. 121,  "Accounting  for  Impairment  of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121").
SFAS No. 121 requires, among other things,  impairment loss of assets to be held
and gains or losses from assets that are  expected to be disposed of be included
as a component of income from continuing  operations before taxes on income. The
Company has adopted SFAS No. 121 and its  implementation did not have a material
effect on the financial statements of Atlas or the Company.

      In October 1995, the Financial Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  123,  "Accounting  for  Stock-Based
Compensation"  ("SFAS No. 123").  SFAS No. 123 encourages  entities to adopt the
fair value method in place of the  provisions  of  Accounting  Principals  Board
Opinion No. 25.  "Accounting for Stock Issued to Employees"  ("APB No. 25"), for
all arrangements  under which employees  receive shares of stock or other equity
instruments of the employer or the employer  incurs  liabilities to employees in
amounts  based on the  price of the  stock.  The  Company  intends  to adopt the
employee stock-based  compensation  provisions of SFAS No. 123 by disclosing the
pro forma net income and pro forma net income  per share  amounts  assuming  the
fair value method was adopted.  The Company will adopt this  standard  effective
for its fiscal year ending June 30,  1997,  as provided  for under SFAS No. 123.
The  Company  does not expect  adoption  of this  standard  will have a material
effect on the financial statements of Atlas or the Company.


                                                                  Page 14


<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Financial  Statements  of the  Company  as set forth on page F-1.




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

             Not applicable.

                                                                  Page 15


<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The  current  directors  and  executive  officers  of the  Company  are as
follows:

                                    Director
Nominee                      Age     Since      Position

Ray J. Friant, Jr......       65      1993      Chairman of the Board
Samuel N. Seidman......       62      1993      President and Director
Joseph K. Linman.......       57      1993      Director and Vice President
John S. Strance........       71      1993      Director and Vice President
Jesse A. Levine........       29      1993      Director, Chief Financial 
                                                Officer, Vice President, 
                                                Secretary and Treasurer
Alan H. Foster.........       70      1993      Director
Alan I. Goldman........       59      1993      Director


     Ray J. Friant,  Jr. has been Chairman of the Board of the Company since its
inception. Since 1988, Mr. Friant has been Managing Director of Seidman, Friant,
Levine Ltd., a crisis  management  company,  where he currently  specializes  in
corporate  restructuring  and  reorganization.  In  this  capacity,  he has  had
management  control,  and has successfully  restructured  and/or  stabilized the
operations,  of three public  companies,  CMI Corp., Mr. Gasket Co. and Advanced
Semiconductor   Materials  International  N.V.  ("ASM"),  which  companies  have
manufacturing  operations in road  building  equipment,  automotive  aftermarket
products and semiconductor  production  equipment,  respectively.  In connection
with his activities  with Seidman,  Friant,  Levine Ltd.,  Mr. Friant  presently
serves as Chief Operating Officer of ASM's chemical vapor deposition businesses.
Since  1982,  Mr.  Friant  has  also  been  President  and  Director  of  Friant
Associates,  Inc.,  specializing in corporate turnarounds.  Mr. Friant was Group
Vice President and General  Manager of  Gulf+Western  Industrial  Products Group
(IPG) from 1978 to 1982. IPG was a group of ten companies involved in electronic
systems,  electronic  connectors,   electronic  components,   electro-mechanical
components, wire and cable, cutting tools and hardware manufacturing.  From 1973
to 1978,  as an  employee  of ITT Corp.,  Mr.  Friant  successfully  reorganized
several  multi-million  dollar  subsidiaries.  In  addition,  he had a number of
special worldwide  assignments  involving ITT Corp.  headquarters  organization,
resource  allocation  for product  development,  and management  succession.  At
Western Union Corp. from 1969 to 1972, Mr. Friant  developed and implemented the
business of teleprocessing at a non-regulated subsidiary. From 1953 to 1969, Mr.
Friant was employed by General Electric Co. ("GE"), where he was responsible for
initiating GE's phased array radar business, for designing and implementing GE's
Program Management System for managing large, complex military contracts and for
the business turnaround of several unsuccessful organizations. Mr. Friant earned
B.S. degrees in both Mechanical Engineering and Electrical Engineering from West
Virginia  University.  He also  graduated  from  General  Electric's  three-year
graduate  level Advanced  Engineering  program and General  Electric  Management
School.

      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 and  economic  consulting  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 is Managing Director
of Seidman, Friant, Levine Ltd., and serves as a director of AMREP Corp., 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,  a
multi-national producer of automated equipment and systems for the production of
semiconductors, 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  production

                                                                      Page 16


<PAGE>

systems company 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 has served as  director  of numerous  public and private
companies,  including Penn Engineering Corporation,  a manufacturer of equipment
for steel  production and metal processing which had been listed on the American
Stock  Exchange.  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,  Secretary, Treasurer and a Director
of the Company.

      Joseph K.  Linman has been Vice  President  and a Director  of the Company
since its inception.  Mr. Linman retired from the Ford Motor Company ("Ford") in
1989 after 25 years with that  company,  preceded  by two years with RCA Defense
Electronics.  During his career with Ford,  Mr. Linman held numerous  managerial
and  executive  positions  in  financial,  marketing,  technical,   governmental
relations and external affairs capacities,  including Chief Financial Officer of
Ford Latin America, S.A. de C.V., a wholly-owned Ford subsidiary responsible for
automotive  operations  in Latin  America,  South Africa and Egypt.  Mr.  Linman
served as a member of the boards of directors or  executive  committees  of Ford
subsidiary companies in nine countries and as a member of the advisory committee
of the Council of the  Americas  and the  Mexico-U.S.  Business  Committee  that
pioneered  the North  American  Free Trade  Agreement.  Mr. Linman earned a B.S.
degree  from  Oregon  State  University  and  an  M.B.A.   degree  from  Indiana
University.

     John S. Strance has been Vice  President and a Director of the Company from
its inception. He is currently a private investor. From 1986 to 1992, he was the
President   of  Star   Controls   Corporation,   a  provider  of   sophisticated
microprocessor  control  products for process  control and  automation  systems,
which he founded.  From 1983 to 1986, Mr. Strance was an independent  consultant
assessing  technology and market trends and identifying and evaluating companies
for acquisition.  From 1980 to 1983, Mr. Strance  performed the same services as
Director of Planning and Development for Gulf+Western Manufacturing, responsible
for product development using new technology.  From 1954 until 1980, Mr. Strance
held management  positions as president of several subsidiaries of Gulf+Western.
Mr.  Strance  has been  granted  13 U.S.  letters  patent for new  products  and
production  systems.  Mr.  Strance  earned B.S. and M.S.  degrees in  Mechanical
Engineering  from the  University  of Oklahoma  and the  Carnegie  Institute  of
Technology, respectively.

     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 Regional Vice
President-Midwest of Seidman & Co., Inc., specializing in financial and business
analysis, corporate finance, private placements and corporate advisory services.
From January 1991 to December  1991,  Mr.  Levine was  Contracts  Administration
Manager of The Newman Group Computer  Services Corp.,  Inc., a computer  systems
supplier.  Previously,  Mr.  Levine  served as a commercial  credit  analyst for
Society Bank,  Michigan.  Mr. Levine earned a B.A.  degree in economics from the
University  of  Michigan  and has been  elected a chartered  financial  analyst.
Samuel N. Seidman, the President of the Company, is Mr. Levine's uncle.


      Alan H.  Foster has been a Director of the  Company  since its  inception.
Since 1986, he has been an Adjunct  Professor of Finance and Corporate  Strategy
at the University of Michigan.  In  conjunction  with the University of Michigan
School of  Engineering,  Mr.  Foster is  engaged  in the study of the  future of
"agile machines." 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 traded on the Nasdaq National Market.  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.
                                                                   Page 17


<PAGE>

     Alan I.  Goldman has been a Director of the  Company  since its  inception.
Since 1985,  Mr.  Goldman has been  self-employed  as an  investment  banker and
management  consultant,   specializing  in  mergers  and  acquisitions,  private
placements  and business and  organization  consulting.  From 1975 to 1985,  Mr.
Goldman  was Senior  Vice  President,  Finance  and Chief  Financial  Officer of
Management Assistance, Inc., a multi-national computer manufacturing,  marketing
and  maintenance  company and a purchaser  and user of  productions  systems and
components.  From  1970 to  1974,  Mr.  Goldman  was  Vice  President,  Finance,
Treasurer and Chief Financial Officer of Interway Corporation,  an international
company  engaged in trailer  and  container  leasing and fleet  management.  Mr.
Goldman is  presently a director of U.S.  Alcohol  Testing of America,  Inc. Mr.
Goldman earned a B.A. degree from Cornell  University and an M.B.A.  degree from
New York University.

      The Company's  Board of Directors is divided into three  classes,  each of
which  serves for a term of two years,  with only one class of  directors  being
elected  in each  year.  The term of  office of the  first  class of  directors,
consisting of Messrs. Goldman and Levine, will expire at the next annual meeting
of stockholders, the term of office of the second class of directors, consisting
of Messrs.  Friant and  Strance,  will  expire at the second  succeeding  annual
meeting of stockholders, and the term of office of the third class of directors,
consisting  of Messrs.  Seidman,  Linman and  Foster,  will  expire at the third
succeeding  annual meeting of  stockholders.  In each case, a director will hold
office  until the next  annual  meeting  of  stockholders  at which his class of
directors is to be elected.

Compliance with Section 16(a) of the Exchange Act

      Section 16(a) of the Exchange Act requires officers, directors and persons
who beneficially own more than 10% of a registered class of equity securities of
the Company  ("10%  stockholders")  to file reports of ownership  and changes in
ownership with the Commission. Officers, directors and 10% stockholders also are
required  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 three month period  ended June 30,  1996,  each of its
officers,  directors  and 10%  stockholders  complied  with  the  Section  16(a)
reporting requirements.


ITEM 11.  EXECUTIVE COMPENSATION

      No  executive   officer  of  the  Company   received  any  cash  or  other
compensation for services  rendered from the Company since its inception through
May 22, 1996.  Until May 22, 1996,  Seidman & Co.,  Inc., a corporation of which
Samuel N. Seidman is President and Jesse A. Levine is Regional Vice  President -
Midwest,  was paid $5,000 per month as an  administrative  fee. It also received
and will  continue  to  receive  reimbursement  for any  out-of-pocket  expenses
incurred in  connection  with the Company's  business.  There is no limit on the
amount of such  out-of-pocket  expenses and there has not been nor will there be
any  review of the  reasonableness  of such  expenses  by anyone  other than the
Company's Board of Directors,  which includes persons who have received, and may
seek, reimbursement.

      On February 8, 1996,  the Board of Directors  of the Company  approved the
following  annual salaries for its executive  officers,  effective May 23, 1996,
upon consummation of the acquisition of Atlas:  Chairman (presently Mr. Friant),
$70,000;  President (presently Mr. Seidman),  $75,000;  Chief Financial Officer,
Secretary and Treasurer  (presently Mr.  Levine),  $25,000;  and Vice Presidents
(presently  Messrs.  Linman,  Strance and Levine)  $25,000.  Such  salaries  are
payable in equal monthly  installments.  An officer holding more than one office
will receive only the salary of the highest paying office. All of such officers,
in their capacities as directors, participated in the deliberations of the Board
of Directors concerning executive officer compensation.  The Board also approved
fees of $16,000 per year for each director who is not an employee of the Company
(presently  Messrs.  Foster and  Goldman),  which is payable in equal  quarterly
installments.  In addition,  non-employee  directors and officers other than the
Chairman and President  will be paid at the rate of $1,000 to $2,000 per day, as
determined by the Chairman and the  President,  for actual days spent by them in

                                                                   Page 18


<PAGE>


consulting  or other special  assignments  for the benefit of the Company or its
subsidiaries.  Officers and directors  are also eligible for other  compensation
and  benefits  as may be  approved  by the Board  from  time to time,  including
benefits under the Company's 1996  Performance  Equity Plan which was adopted by
the  stockholders of the Company on May 21, 1996. On July 30, 1996, the Board of
Directors awarded options under such plan to the Company's  officers as follows:
- Messrs. Friant and Seidman - 70,833.33 shares each; Messrs. Linman and Strance
-  42,500  shares  each;  Mr.  Levine  -  28,333.33  shares.  Such  options  are
exercisable until July 30, 2001, at an exercise price of $5.00 per share.

      The Company has no employment agreements with its executive officers, each
of whom presently serves at the discretion of the Board of Directors.

Atlas Employment Agreements

     Messrs.  Ronald M. Prime and Michael D. Austin have entered into employment
agreements with Atlas under which they serve as the Chief Executive  Officer and
President of Atlas, respectively.

      The  employment  agreements  with Messrs.  Prime and Austin are  identical
except that the term of Mr.  Prime's  agreement  will  terminate on December 31,
1998 and that of Mr. Austin will terminate on December 31, 2001.  Each agreement
requires the  executive  to devote  substantially  all of his business  time and
attention to the affairs of Atlas.  The agreements  provide for base salaries of
$190,000 per year subject to  cost-of-living  increases after December 31, 1996,
for six weeks vacation per year,  reimbursement of business expenses,  use of an
automobile and mobile telephone,  medical and life insurance  benefits and other
benefits generally made available to other employees.

      The agreements also provide for two bonuses based on the earnings of Atlas
before  interest and taxes,  adjusted in the manner set forth in the  agreements
("Adjusted  Earnings").  Under one bonus arrangement,  Messrs.  Prime and Austin
will each be paid $208,333 for each of the six years beginning  January 1, 1996,
in which  Atlas'  Adjusted  Earnings  exceed  $2,000,000  and,  if the  Adjusted
Earnings average at least $2,000,000 during such six-year period, they will each
be paid,  at the end of the  six-year  period,  the sum of  $1,250,000  less the
aggregate of the amounts paid to them under such bonus arrangement for the prior
five years. Based on the Adjusted Earnings of the Company for the period January
1 through  June 30, 1996,  the Company has accrued  $104,167 for each of Messrs.
Prime and Austin under this arrangement.

      Under the second  bonus  arrangement,  if during the five years  beginning
January 1, 1996, the Adjusted  Earnings average at least  $2,626,000,  they will
each be paid an  amount  equal to the  amount  by which  such  average  Adjusted
Earnings exceed  $2,626,000.  Both bonus arrangements are subject to liquidation
of amount and  acceleration  of payment in the event of a sale by the Company of
the capital  stock of Atlas or a sale by Atlas of all or a  substantial  part of
its assets or issuance of capital  stock of Atlas such that a person or group of
related  persons  becomes the owner of 51% or more of the  outstanding  stock of
Atlas. The bonuses are also subject to reduction to the extent of life insurance
benefits paid to an executive's estate pursuant to life insurance  maintained on
the life of the executive  pursuant to the employment  agreements.  Based on the
Adjusted Earnings of the Company for the period January 1 through June 30, 1996,
the Company has accrued $272,722 for each of Messrs. Prime and Austin under this
arrangement.

      Each  employment  agreement  also  contains  provisions   restricting  the
disclosure of confidential information and non-competition covenants.

                                                                 Page 19

<PAGE>



===============================================================================

                           SUMMARY COMPENSATION TABLE

-------------------------------------------------------------------------------
                                                          Salary
Name and Principal Position            Period               ($)
-------------------------------------------------------------------------------
Samuel N. Seidman, President & CEO     4/1/96-6/30/96      6,250
                                       4/1/95-3/31/96       --
                                       6/24/94-3/31/95      --
===============================================================================




                                                                   Page 20


<PAGE>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain  information  regarding  beneficial
ownership  of the  Company's  Common  Stock,  as of  October 9, 1996 by (i) each
stockholder  known by the Company to be beneficial  owner of more than 5% of the
outstanding  Common  Stock,  (ii) each  director  of the  Company  and (iii) all
directors and officers as a group.  Except as otherwise  indicated,  the Company
believes that the beneficial  owners of the Common Stock listed below,  based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.

                                          Number              Percentage
Name of Beneficial Owner                 of Shares         Beneficially Owned
------------------------                 ---------         ------------------

Ray J. Friant, Jr....................
  30 Boxwood Drive
  Convent Station, New Jersey 07960      193,083(1)              8.7%

Samuel N. Seidman....................
  520 Madison Avenue
  New York, New York 10022               207,083(1)              9.3%

Joseph K. Linman.....................    112,250(1)              5.2%

John S. Strance......................    108,250(1)              5.0%

Jesse A. Levine......................     70,833(1)              3.3%

Alan H. Foster.......................     21,250                 1%

Alan I. Goldman......................     21,250                 1%
All Officers and Directors
  as a group (7 persons).............    733,999(1)              30.3%


-----------------------
(1)  Includes shares of Common Stock issuable upon immediately exercisable 
     Warrants and options as follows: Mr. Friant--86,833 shares; Mr. Seidman
     --90,833 shares; Mr. Linman--46,500 shares; Mr. Strance--44,500 shares;
     Mr. Levine--28,333 shares.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED PARTIES

      Seidman & Co., Inc., an affiliate of the Company,  makes  available to the
Company  a  small  amount  of  office   space,   as  well  as  certain   office,
administrative  and secretarial  services as may be required by the Company from
time to time.  The Company  paid Seidman & Co.,  Inc.  $5,000 per month for such
services until May 22, 1996, including $8,000 during the three months ended June
30,  1996.  Samuel N.  Seidman,  a director and  President  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
Regional Vice President--Midwest of Seidman & Co., Inc.



                                                                     Page 21


<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a)    The following documents are filed as part of this report:

      The  financial  statements  of the Company and Atlas  listed in Item 8 are
submitted as a separate section of this report.
             1. Financial Statement Schedules
                    Not Applicable.
             2. Exhibits as required by Item 601 of Regulation S-K:

Exhibit No.  Description

    3.1      Certificate of Incorporation*
    3.1.1    Amendment to Certificate of Incorporation filed May 28, 1996**
    3.2      By-laws*
    4.1      Form of Common Stock Certificate of the Company*
    4.2      Form of Warrant Certificate of the Company*
    4.3      Unit Purchase Option between GKN Securities Corp. and the Company*
    4.4      Warrant Agreement between Continental Stock Transfer & Trust 
             Company and the Company*
   10.1      Form of Underwriting Agreement between the Company and GKN 
             Securities Corp.*
   10.3      Form of Share Escrow Agreement between the Company and Continental
             Stock Transfer &
             Trust Company*
   10.4      Letter Agreement among each of the Stockholders of the Company, the
             Company and GKN
             Securities Corp.*
   10.5      Letter Agreement between Seidman & Co., Inc. and the Company
             regarding administrative support*
   10.6      Agreement of Merger dated as of December 18, 1995 (without 
             schedules or exhibits)*** 
   10.6.1    Amendment to Agreement of Merger dated December 18, 1995*** 
   10.7      Employment Agreement dated May 23, 1996 between  Atlas
             Technologies, Inc. ("Atlas") and Ronald M. Prime****
   10.8      Employment Agreement dated May 23, 1996 between Atlas Technologies,
             Inc. and Michael D. Austin****
   10.9      1996 Performance Equity Plan of the Company****
   27        Financial Data Schedule (filed electronically only)*****

-----------------------------
(Footnotes on next page)

                                                               Page 22

<PAGE>

-----------------------------
*     Filed as Exhibits to Registration Statement on Form S-1, No. 33-78188, 
      and incorporated herein by reference.

**    Filed as Exhibit to Report on Form 8-K (Event dated May 23, 1996) and
      incorporated herein by reference.

***   Filed as Exhibits to Report on Form 8-K (Event dated December 18, 1995)
      and incorporated herein by reference.

****  Filed as Exhibits to Report on Form 10-K for fiscal year ended March 31,
      1996 and incorporated herein by reference

***** Filed herewith.


      (b) During the period covered by this report the Company filed a report on
Form 8-K (Event dated May 23, 1996) which reported information under Items 2, 5,
7 and 8 and included the following financial statements:

             (A)    Atlas Technologies, Inc.

             Balance sheet as of March 31, 1996 (unaudited)

             Statements   of  Income  for  nine  months  ended  March  31,  1996
             (unaudited) and March 31, 1995 (unaudited)

             Statement of Stockholders' Equity for period ended March 31, 1996
             (unaudited)

             Statements  of Cash  Flows for nine  months  ended  March 31,  1996
             (unaudited) and March 31, 1995 (unaudited)

             Selected Information


             (B)    Production Systems Acquisition Corporation and
                    Atlas Technologies, Inc.

             Unaudited Pro Forma  Consolidated  Statement of Operations for nine
             months ended March 31, 1996

             Unaudited Pro Forma Consolidated Statement of Operations for year
             ended June 30, 1995

             Notes to Unaudited Pro Forma Consolidated Statements of Operations

             Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1996

             Notes to Unaudited Pro Forma Consolidated Balance Sheet



                                                                Page 23


<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 11, 1996                       PRODUCTIVITY TECHNOLOGIES CORP.


                                       By: /s/  Samuel N. Seidman
                                          ----------------------------------
                                           Samuel N. Seidman
                                           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.



/s/  Ray J. Friant, Jr.         Chairman of the Board      October 11, 1996
----------------------------
Ray J. Friant, Jr.



/s/  Samuel N. Seidman          Chief Executive Officer,   October 11, 1996
----------------------------    President and Director
Samuel N. Seidman   
                                                


/s/  Joseph K. Linman            Vice President and        October 11, 1996
----------------------------     Director
Joseph K. Linman



/s/  John S. Strance             Vice President and        October 11, 1996
----------------------------     Director
John S. Strance



/s/  Jesse A. Levine             Vice President,          October 11, 1996
----------------------------     Secretary, Treasurer 
Jesse A. Levine                  and Director and
                                 Chief Financial Officer


/s/  Alan H. Foster              Director                 October 11, 1996
----------------------------
Alan H. Foster



/s/  Alan I. Goldman             Director                 October 11, 1996
----------------------------
Alan I. Goldman


                                                                    Page 24

<PAGE>


                                Productivity Technologies Corp. and Subsidiary
                                                           and the Predecessor

                                                                         Index


Reports of Independent Certified Public Accountants                       F-2


Financial Statements
      Consolidated Balance Sheet of The Company and Balance
            Sheet of the Predecessor                                      F-5
      Consolidated Statement of Operations of The Company
            and Statements of Operations of the Predecessor               F-7
      Consolidated Statement of Stockholders' Equity of The
            Company and Statements of Stockholders' Equity of
            the Predecessor                                               F-8
      Consolidated Statement of Cash Flows of The Company
            and Statements of Cash Flows of the Predecessor               F-9


Notes to Financial Statements                                             F-11


Schedule II - Valuation and Qualifying Accounts                           F-26


                                       F-1

<PAGE>

Report of Independent Certified Public Accountants


Productivity Technologies Corp.
New York, New York

We have audited the  accompanying  consolidated  balance  sheet of  Productivity
Technologies Corp. and Subsidiary ("The Company"),  as of June 30, 1996, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for the period May 24, 1996 to June 30, 1996 ("Successor period"). We have
also audited the statements of operations,  stockholders'  equity and cash flows
of the  Predecessor  (see Note 1) for the  period  July 1, 1995 to May 23,  1996
("Predecessor  period").  We have also audited the 1996  information in Schedule
II. These financial statements and the Schedule II are the responsibility of the
Companies'  managements.  Our  responsibility  is to express an opinion on these
financial statements and the Schedule II based on our audits.

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

As discussed in Note 2 to the financial statements, all of the outstanding stock
of the  Predecessor  was  sold  in a  business  combination  accounted  for as a
purchase. As a result of the acquisition, the consolidated financial information
for the period after the acquisition is presented on a different cost basis than
that for the period before the acquisition and, therefore, is not comparable.



                                       F-2

<PAGE>

In our opinion,  The Company's  consolidated  financial  statements  referred to
above  present  fairly,  in all material  respects,  the  financial  position of
Productivity Technologies Corp. and Subsidiary at June 30, 1996, and the results
of their  operations and their cash flows for the Successor period in conformity
with generally accepted  accounting  principles.  Further,  in our opinion,  the
Predecessor's  financial  statements  referred to above present  fairly,  in all
material  respects,  the results of operations and cash flows of the Predecessor
for the Predecessor  period,  in conformity with generally  accepted  accounting
principles.

Also, in our opinion,  the 1996 information in Schedule II presents  fairly,  in
all material respects, the information set forth therein.



                                                       BDO SEIDMAN, LLP




Troy, Michigan
October 2, 1996, except for Note 13
which is as of October 14, 1996


                                       F-3

<PAGE>


Report of Independent Certified Public Accountants


To the Board of Directors and Stockholders
Atlas Technologies, Inc.
Fenton, Michigan

We have audited the accompanying balance sheet of Atlas Technologies, Inc. ("the
Predecessor"),  as of June 30, 1995,  and the related  statements of operations,
stockholders'  equity,  and cash  flows for each of the two years in the  period
ended June 30,  1995.  We have also  audited  the 1994 and 1995  information  in
Schedule  II.  These   financial   statements   and  the  Schedule  II  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and the Schedule II based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Atlas Technologies,  Inc. as of
June 30, 1995,  and the results of its operations and its cash flows for each of
the two years in the period ended June 30, 1995,  in conformity  with  generally
accepted accounting principles.

Also,  in our  opinion,  the 1994 and 1995  information  in Schedule II presents
fairly, in all material respects, the information set forth therein.




                                                         DUPUIS & RYDEN
Flint, Michigan
August 11, 1995



                                       F-4

<PAGE>


                                Productivity Technologies Corp. and Subsidiary
                                                           and the Predecessor

                                 Consolidated Balance Sheet of The Company and
                                              Balance Sheet of the Predecessor


                                                   The Company     Predecessor
                                                   June 30, 1996  June 30, 1995
-------------------------------------------------------------------------------

Assets (Notes 6 and 7)

Current Assets
  Cash and cash equivalents                           $  512,179    $   17,253
  Short-term investments, including accrued interest     965,255         -
  Contract receivables (Note 3)                        7,958,159     4,190,726
  Notes receivable                                       240,606       466,458
  Costs and estimated earnings in excess of
    billings on uncompleted contracts (Note 4)         7,593,003     5,692,367
  Inventories                                            720,947       775,320
  Prepaid expenses and other                             220,494        11,994
  Deferred income taxes (Note 10)                        480,000       269,000
-------------------------------------------------------------------------------
Total Current Assets                                  18,690,643    11,423,118
-------------------------------------------------------------------------------
Property and Equipment
  Land                                                   216,000        77,200
  Buildings and improvements                           2,132,388     1,935,595
  Machinery and equipment                              1,888,479     4,626,860
  Transportation equipment                                31,500        97,760
-------------------------------------------------------------------------------
                                                       4,268,367     6,737,415
  Less accumulated depreciation                           27,928     4,220,195
-------------------------------------------------------------------------------
Net Property and Equipment                             4,240,439     2,517,220
-------------------------------------------------------------------------------
Other Assets
  Goodwill, net of accumulated amortization of $10,923
    (Note 2)                                           2,593,803          -
  Noncompetition agreement, net of accumulated
    amortization (Note 5)                                228,083       245,083
  Deferred income taxes (Note 10)                           -          187,000
  Other assets                                           270,803       177,880
-------------------------------------------------------------------------------
Total Other Assets                                     3,092,689       609,963
-------------------------------------------------------------------------------
                                                     $26,023,771   $14,550,301
-------------------------------------------------------------------------------
See accompanying notes to financial statements.

                                       F-5

<PAGE>
                               Productivity Technologies Corp. and Subsidiary
                                                          and the Predecessor
                                Consolidated Balance Sheet of The Company and
                                             Balance Sheet of the Predecessor

                                               The Company         Predecessor
                                               June 30, 1996      June 30, 1995
-------------------------------------------------------------------------------
Liabilities and Stockholders' Equity

Current Liabilities
  Accounts payable                              $ 2,444,411        $ 2,384,530
  Line-of-credit (Note 6)                         7,188,558          2,608,938
  Accrued expenses
    Executive bonus agreement (Note 12)             753,778               -
    Commissions payable                             544,248            413,214
    Payroll and related withholdings                438,274            224,924
    Federal and state income taxes                  221,790            262,950
    Other                                         1,052,237            527,736
  Billings in excess of costs and estimated
    earnings on uncompleted contracts (Note 4)      534,963          1,306,390
  Current maturities of long-term debt (Note 7)     464,393            591,925
------------------------------------------------------------------------------



Total Current Liabilities                        13,642,652          8,320,607
Deferred Income Taxes (Note 10)                     779,000               -
Long-Term Debt, less current maturities (Note 7)  2,228,786          2,716,813
-------------------------------------------------------------------------------
Total Liabilities                                16,650,438         11,037,420
-------------------------------------------------------------------------------
Commitments and Contingencies (Notes 12 and 13)

Stockholders' Equity (Notes 8 and 9)
  Preferred stock, $.001 par value, 1,000,000
     authorized and none outstanding                  -                   -
  Common stock; 1996 - $.001 par value, 20,000,000 
    shares authorized and 2,125,000 outstanding; 
    1995 - $1 par value, 50,000 shares authorized,
    25,683 outstanding                               2,125              25,683
  Additional paid-in capital                     9,177,488              73,465
  Retained earnings                                193,720           3,413,733
-------------------------------------------------------------------------------
Total Stockholders' Equity                       9,373,333           3,512,881
-------------------------------------------------------------------------------

                                              $ 26,023,771        $ 14,550,301
-------------------------------------------------------------------------------

See accompanying notes to financial statements.

                                       F-6

<PAGE>

                               Productivity Technologies Corp. and Subsidiary
                                                          and the Predecessor

                          Consolidated Statement of Operations of The Company
                              and Statements of Operations of the Predecessor

<TABLE>
<CAPTION>
                                          The Company                                             Predecessor
                                        ---------------      ------------------------------------------------------------
                                           May 24, to          July 1, 1995            Year Ended            Year Ended
                                         June 30, 1996        to May 23, 1996         June 30, 1995         June 30, 1994
-------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                  <C>                   <C>                   <C>   
Net Sales                                 $4,404,192           $31,598,669           $29,077,684           $21,186,245
-------------------------------------------------------------------------------------------------------------------------
Cost of Sales                              3,029,113            21,773,080            21,034,282            16,320,825
-------------------------------------------------------------------------------------------------------------------------
Gross Profit                               1,375,079             9,825,589             8,043,402             4,865,420

Selling, General and
  Administrative Expenses                    729,141             6,006,965             5,118,720             4,871,820

Officers' Bonuses (Notes 2 and 12)           197,290             2,117,251                  -                     -
------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations                448,648             1,701,373             2,924,682                (6,400)
------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
  Interest income                             20,274                33,837                32,971                19,450
  Interest expense                           (57,331)             (512,851)             (644,853)             (439,601)
  Gain (loss) on disposal of assets             -                   (2,976)              308,565                31,866
  Miscellaneous                              (41,744)              151,198                63,609                59,798
-----------------------------------------------------------------------------------------------------------------------
Total Other Expenses                         (78,801)             (330,792)             (239,708)             (328,487)
-----------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes            369,847             1,370,581             2,684,974              (334,887)

Income Tax Benefit (Provision)
  (Note 10)                                 (165,000)             (608,000)             (465,000)               37,000
-----------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                            204,847               762,581             2,219,974              (297,887)
-----------------------------------------------------------------------------------------------------------------------
Net Income Per Share of
  Common Stock                                  $.10
-----------------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares             2,125,000
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.


                                       F-7

<PAGE>

                                Productivity Technologies Corp. and Subsidiary
                                                           and the Predecessor

                 Consolidated Statement of Stockholders' Equity of The Company
                     and Statements of Stockholders' Equity of the Predecessor

<TABLE>
<CAPTION>
                                              Common Stock           Additional      Retained         Total
                                         ---------------------        Paid-In        Earnings       Stockholders'
                                          Shares       Amount         Capital       (Deficit)         Equity
-----------------------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>              <C>           <C>            <C>    
Balance, July 1, 1993 (Predecessor)       35,579     $ 35,579        $186,691      $ 3,051,571    $ 3,273,841

Stock repurchase from ESOP
    participants (Note 8)                   (678)        (678)       (113,226)            -          (113,904)

Net loss                                     -           -               -           (297,887)       (297,887)
-----------------------------------------------------------------------------------------------------------------
Balance, June 30, 1994 (Predecessor)      34,901       34,901          73,465       2,753,684       2,862,050

Stock repurchase from former
  stockholder (Note 8)                    (9,218)      (9,218)           -         (1,559,925)     (1,569,143)

Net income                                  -            -               -          2,219,974       2,219,974
----------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 (Predecessor)      25,683        25,683          73,465      3,413,733       3,512,881

Distribution to former stockholder
  (Note 8)                                  -             -               -          (700,000)       (700,000)

Net income                                  -             -               -           762,581         762,581
----------------------------------------------------------------------------------------------------------------
Balance, May 23, 1996 (Predecessor)       25,683     $  25,683      $   73,465     $3,476,314     $ 3,575,462
----------------------------------------------------------------------------------------------------------------
Balance, May 24, 1996 (Company)        1,785,001     $   1,785      $ 7,351,741    $  (11,127)     $7,342,399

Reclassification of common stock
  subject to possible redemption
  (Note 8)                               339,999           340         1,825,747         -          1,826,087

Net income                                  -              -                 -        204,847         204,847
---------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 (Company)       2,125,000      $  2,125      $ 9,177,488     $ 193,720       9,373,333
---------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

                                       F-8

<PAGE>
        
                                Productivity Technologies Corp. and Subsidiary
                                                           and the Predecessor

                           Consolidated Statement of Cash Flows of The Company
                               and Statements of Cash Flows of the Predecessor

<TABLE>
<CAPTION>
                                                           The Company                           Predecessor
                                                          --------------    ---------------------------------------------------
                                                            May 24, to       July 1, 1995        Year Ended        Year Ended
                                                           June 30, 1996     to May 23, 1996   June 30, 1995     June 30, 1994
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>               <C>               <C>                <C>    
Cash Flows From Operating Activities
  Net income (loss)                                        $  204,847       $  762,581         $ 2,219,974        $ (297,887)
  Adjustments to reconcile net income (loss)
    to net cash provided by (used in) operating
    activities
      Depreciation                                             27,931          360,726             355,088           386,985
      Amortization                                             12,688           15,235               9,917              -
      Deferred income taxes                                    46,000          164,000            (202,000)           30,000
      (Gain) loss on sale of property and
       equipment                                                 -               2,976             (28,565)          (31,866)
      Changes in operating assets and liabilities
       Contract receivables                                (3,565,732)        (201,701)         (1,795,705)        1,411,635
       Inventories, prepaid expenses and other               (488,818)         295,028           1,428,519           185,709
       Costs and estimated earnings in excess of
        billings on uncompleted contracts - net
        effect                                              1,365,906       (4,037,969)           (905,063)         (117,294)
       Accounts payable, accrued expenses and other         1,271,862          174,259           1,111,639          (467,753)
-------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operating
  Activities                                               (1,125,316)      (2,464,865)          2,193,804         1,099,529
-------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
  Maturity of U.S. Government securities deposited
    in trust fund                                            7,120,000            -                   -                 -
  Purchase of Atlas                                         (6,900,000)           -                   -                 -
  Expenditures for property and equipment                      (49,549)       (466,828)           (381,211)         (404,459)
  Collections on notes receivable                                6,312         219,540             175,144            15,900
  Proceeds from sale of property and equipment                    -              3,400             132,142            34,725
  Issuance of notes receivable                                    -               -               (533,000)         (108,291)
-------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities            176,763        (243,888)           (606,925)         (462,125)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.


                                       F-9

<PAGE>

                                Productivity Technologies Corp. and Subsidiary
                                                           and the Predecessor

                           Consolidated Statement of Cash Flows of The Company
                               and Statements of Cash Flows of the Predecessor

<TABLE>
<CAPTION>
                                                  The Company                          Predecessor
                                                 -------------     --------------------------------------------------
                                                  May 24, to       July 1, 1995        Year Ended         Year Ended
                                                 June 30, 1996     to May 23, 1996   June 30, 1995      June 30, 1994
---------------------------------------------------------------------------------------------------------------------
<S>                                             <C>               <C>                <C>                  <C>   
Cash Flows From Financing Activities
  Net borrowings (payments) - line-of-credit     589,300           3,990,320         (1,019,562)          (517,700)
  Payments on long-term debt, capital
    leases and notes payable                      43,161)         (2,072,398)          (557,148)          (426,853)
  Proceeds from additions of long-term debt         -              1,500,000            110,000            317,914
  Distribution to former stockholders               -               (700,000)              -                  -
  Purchase of company stock                         -                   -              (196,000)          (113,904)
---------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Financing
  Activities                                     546,139           2,717,922         (1,662,710)          (740,543)
---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Cash and Cash
  Equivalents                                   (402,414)              9,169            (75,831)          (103,139)
Cash and Cash Equivalents, at beginning 
  of period                                      914,593              17,253             93,084            196,223
---------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, at end of period     $512,179          $   26,422         $   17,253         $   93,084
---------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information
  Cash Paid During the Period For
    Interest                                    $ 57,331          $  522,637         $  628,689         $  430,145
    Income taxes                                    -                570,175            777,458            203,000
---------------------------------------------------------------------------------------------------------------------
Supplemental Noncash Investing and
  Financing Activities
    Purchase of equipment with
      loan obligation                           $   -             $     -            $   97,941         $     -
    Purchase of stock with loan
      obligations                                   -                   -             1,373,143               -
    Consummation of a noncompetition
      agreement with loan obligation                -                   -               255,000               -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.


                                      F-10

<PAGE>

1.    Summary of Significant Accounting Policies

Formation of the Company and Basis of Presentation

Production  Systems  Acquisition  Corporation  ("PSAC") was incorporated in June
1993 with the  objective  of  acquiring  an  operating  business  engaged in the
production  systems  industry.  PSAC originally  selected March 31 as its fiscal
year-end. PSAC completed an initial public offering ("Offering") of common stock
in July 1994 and raised net proceeds of approximately $9.0 million.

In December 1995, PSAC entered into a Merger Agreement with Atlas
Technologies, Inc. ("Atlas") whereby Atlas would become a wholly-owned
subsidiary of PSAC.  (The acquisition was consummated May 23, 1996 - see
Note 2.)  Subsequently, PSAC changed its corporate name to Productivity
Technologies Corp. ("PTC").  PTC's operating results since inception are
summarized below (in thousands):  
                                                     
<TABLE>
<CAPTION>
                                                                                  June 1993       
                                                                                 (Inception)
                                                   Year Ended      Year Ended      Through
                                April 1, 1996       March 31,       March 31,      March 31,
                               to May 23, 1996        1996            1995           1994
---------------------------------------------------------------------------------------------
<S>                                <C>               <C>             <C>            <C>   
Interest income                    $ 56              $ 503           $ 343          $  -
Operating expenses                  (54)             (266)            (250)           (2)
Income taxes                         (3)              (132)            (31)            -
--------------------------------------------------------------------------------------------
Net Income (Loss)                  $ (1)             $ 105           $  62     $      (2)
--------------------------------------------------------------------------------------------
</TABLE>

The  above  operating  results  of PTC  are  not  included  in the  accompanying
financial statements.

The accompanying consolidated financial statements for the period May 24 to June
30, 1996  include the  accounts of PTC and its  wholly-owned  subsidiary,  Atlas
(collectively,   "The  Company").  All  significant  intercompany  accounts  and
transactions have been eliminated upon consolidation.

                                      F-11

<PAGE>

The accompanying  financial  statements presented for the period July 1, 1995 to
May 23,  1996,  and for the years  ended June 30,  1995 and 1994  represent  the
financial statements of Atlas (the "Predecessor").

Nature of Business

The  Company is a  manufacturer  of  automated  industrial  systems,  machinery,
equipment,  components,  industrial hydrostatic drives and engineering services.
It  operates  with two  manufacturing  plants  and three  sales and  engineering
offices. The main plant is located in Fenton,  Michigan with an additional plant
operating in nearby Linden, Michigan.

Sales of products have  principally  been to  automobile  and  automotive  parts
manufacturers and appliance manufacturers. Other customers include manufacturers
of garden and lawn equipment,  office  furniture,  heating,  ventilation and air
conditioning equipment and aircraft.  Sales to automotiverelated  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
Mexico,  Europe and Asia.  Export sales during the twelve  months ended June 30,
1996, 1995 and 1994 amounted to approximately 13%, 10% and 10%, respectively, of
annual sales.

Cash Equivalents

For purposes of the statements of cash flows,  the Company  considers all highly
liquid debt instruments  purchased with a maturity of three months or less to be
cash equivalents.

Short-term Investments

Short-term  investments  represent U.S. Treasury Bills with maturities of twelve
months or less and are carried at cost, which approximates market.

                                      F-12

<PAGE>


Use of Estimates

In  preparing  financial   statements  in  conformity  with  generally  accepted
accounting principles,  management is required to make estimates and assumptions
that  affect  (1)  the  reported  amounts  of  assets  and  liabilities  and the
disclosure of contingent  assets and liabilities as of the date of the financial
statements,  and (2) revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of contract receivables. 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.  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.  Allowances  of
approximately  $163,000 and $232,000 were deemed  necessary at June 30, 1996 and
1995, respectively.

Fair Values of Financial Instruments

The carrying  amounts of the  Company's  cash and cash  equivalents,  short-term
investments,   contract  receivables,  accounts  payable  and  accrued  expenses
approximate fair value because of the short maturity of these items.

The carrying  amounts of the  line-of-credit  and 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.


                                      F-13

<PAGE>

Revenue and Cost Recognition

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.

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.

Revenues from  time-and-material  contracts are recognized currently as the work
is performed.

Inventories

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

Property and Equipment

Property and equipment are stated at cost. Beginning May 24, 1996,  depreciation
is computed on the  straight-line  method,  generally using the following useful
lives:

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



                                      F-14


<PAGE>



Prior  to May 24,  1996  depreciation  was  computed  using  straight  line  and
accelerated methods over the estimated useful lives of the assets.

Intangible Assets

Goodwill,  representing  the  excess of cost over the fair  value of net  assets
acquired in the acquisition of Atlas, is being amortized over twenty-five  years
using the straight-line method.

The noncompetition agreement is amortized using the straight-line method.

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.

Income Taxes

Income taxes are calculated using the liability method specified by Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes".

Net Income Per Common Share

Net income  per  common  share for the  period  May  24-June  30,  1996 has been
computed  based on the weighted  average  number of common and  dilutive  common
equivalent shares outstanding.

Long-Lived Assets

Long-lived  assets,  such as goodwill 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. This
policy is in accordance  with SFAS No. 121,  "Accounting  for the  Impairment of
Long-Lived  Assets  and for  Long-Lived  Assets  to Be  Disposed  Of,"  which is
effective  for fiscal years  beginning  after  December 15, 1995.  No impairment
losses have been necessary through June 30, 1996.

                                      F-15


<PAGE>



Stock-Based Compensation

In October 1995, SFAS No. 123,  "Accounting for Stock-Based  Compensation,"  was
issued.  SFAS No. 123  encourages  entities  to adopt the fair  value  method in
replacement  of the  provisions of Accounting  Principles  Board Opinion No. 25,
"Accounting  for Stock Issued to Employees",  for all  arrangements  under which
employees receive shares of stock or other equity instruments of the employer or
the employer  incurs  liabilities  to employees in amounts based on the price of
the stock.  The Company intends to adopt the employee  stock-based  compensation
provisions of SFAS No. 123 by disclosing  the pro forma net income and pro forma
net income per share  amounts  assuming the fair value  method was adopted.  The
Company,  which will adopt this standard beginning in its 1997 fiscal year, does
not expect SFAS No. 123 will have a material effect on its financial statements.

Reclassifications

Certain prior year amounts have been  reclassified  to conform with current year
presentation.


2.    Acquisition

On May 23, 1996,  PTC acquired all the  outstanding  shares of Atlas for cash of
$6,900,000,  and  related  acquisition  costs  of  approximately  $337,060.  The
acquisition,  which was pursuant to a Merger  Agreement dated December 18, 1995,
also included certain employment  agreements with bonus  arrangements  involving
the principal shareholders of Atlas (see Note 12).

The  acquisition  has been accounted for using the purchase method of accounting
and, accordingly,  the purchase price has been allocated to the assets purchased
and  liabilities  assumed  based on the  estimated  fair  values  at the date of
acquisition.  The excess of the purchase  price over the estimated fair value of
net  assets  acquired  of  $2,604,726  was  recorded  as  goodwill  and is being
amortized on a straight-line  basis over  twenty-five  years. The purchase price
was allocated as follows:

Working capital                                            $    2,238,011
Property and equipment                                          4,218,818
Other assets                                                      363,985
Goodwill                                                        2,604,726
Liabilities                                                    (2,188,480)
-----------------------------------------------------------------------------
Purchase Price                                             $    7,237,060
-----------------------------------------------------------------------------

Since the purchase price assigned to the net assets  acquired was based on their
estimated  fair  values at the May 23,  1996  acquisition  date,  the  financial
statements  for periods  subsequent to May 23, 1996 are presented on a different
cost basis than those for prior periods and, therefore, are not comparable.

Pro forma  results of  operations,  as if the  acquisition  had occurred July 1,
1994, are unaudited and are reflected  below.  Pro forma  adjustments  primarily
include (1) additional  depreciation  and  amortization  on the excess  purchase
price  allocated to property and  equipment  and goodwill,  (2)  elimination  of
interest income on the portion of PTC's investment in U.S. government securities
deposited in a trust fund and liquidated upon consummation of the acquisition of
Atlas, (3) elimination of management  bonuses and professional  fees incurred by
Atlas prior to the merger that would not have been incurred in the normal course
of business had it not been stated that the Merger  Agreement  contemplated  the
net worth of Atlas at a specific level at the date of the merger, (4) additional
salaries for PTC's management and additional bonuses to Atlas' senior management
under new  employment  agreements,  and (5)  provision  for  income  taxes at an
effective  rate  of 43%.  This  pro  forma  financial  data  is not  necessarily
indicative of the results that would have occurred had the acquisition  occurred
July 1, 1994.


                                      F-16

<PAGE>



Year Ended June 30,                         1996              1995
-------------------------------------------------------------------------------
Net sales                              $ 36,003,000      $ 29,078,000
Net income                                1,409,000           764,000
Net income per common share                     .66               .36
-------------------------------------------------------------------------------

3.    Contract Receivables

The contract receivables consisted of:

June 30,                                    1996              1995
-------------------------------------------------------------------------------
Billed
      Completed contracts               $ 1,315,374       $ 2,714,436
      Uncompleted contracts               6,757,622         1,259,168
Unbilled                                     48,634           449,242
-------------------------------------------------------------------------------
Total Contracts Receivable                8,121,630         4,422,846

Less allowance for doubtful accounts       (163,471)         (232,120)
-------------------------------------------------------------------------------
Total                                   $ 7,958,159       $ 4,190,726
-------------------------------------------------------------------------------

4.    Costs and Estimated Earnings on
      Uncompleted Contracts

Costs  and  estimated  earnings  on  uncompleted   contracts  consisted  of  the
following:

June 30,                                    1996              1995
-------------------------------------------------------------------------------
Costs incurred on uncompleted contracts $25,617,770       $11,089,156
Estimated earnings                       10,217,972         3,915,526
------------------------------------------------------------------------------- 
                                         35,835,742        15,004,682
Less billings to date                    28,777,702        10,618,705
-------------------------------------------------------------------------------
Total                                   $ 7,058,040       $ 4,385,977
-------------------------------------------------------------------------------

                                      F-17

<PAGE>


The above  totals are  included in the  accompanying  balance  sheets  under the
following captions:


June 30,                                    1996              1995
-------------------------------------------------------------------------------
Costs and estimated earnings in excess
of billings on uncompleted contracts    $ 7,593,003      $ 5,692,367

Billings in excess of costs and 
estimated earnings on uncompleted
contracts                                  (534,963)      (1,306,390)
-------------------------------------------------------------------------------
Total                                   $ 7,058,040      $ 4,385,977
-------------------------------------------------------------------------------


5.    Noncompetition Agreement

Atlas  has  paid  $255,000  to a  former  stockholder  in  connection  with  the
repurchase  of  Atlas  stock  under  a  ten-year  noncompetition  agreement.  In
connection  therewith,  Atlas  recorded  an asset for  $255,000,  which is being
amortized on a straight-line basis starting in December 1994.


6.    Line-of-Credit

At June  30,  1996,  Atlas  has an  $8,000,000  working  capital  line-of-credit
agreement with a bank, which is secured by substantially all assets.  The amount
that may be borrowed under this agreement is limited to specified percentages of
contract  receivables,  work in process and  inventories  of Atlas.  Interest is
charged at a rate between prime and 3/4% over prime,  depending on the Company's
liabilities  to  tangible  capital  funds  ratio,  as defined  in the  borrowing
agreement.  (The  prime  rate was  8.25%  at June 30,  1996 and 9.0% at June 30,
1995.)  The loan  agreement  contains  certain  restrictions  on the  payment of
dividends or management  fees to PTC; such payments from Atlas are restricted to
$350,000 per year.  The loan  agreement  also contains  various other  financial
covenants.   The  line-of-credit   balances   outstanding  were  $7,188,558  and
$2,608,938 at June 30, 1996 and 1995, respectively.


                                      F-18

<PAGE>


                               Productivity Technologies Corp. and Subsidiary
                                                          and the Predecessor

                                                Notes to Financial Statements


7.    Long-Term Debt


Long-term debt consisted  of:

June 30,                                            1996             1995
-------------------------------------------------------------------------------
Loans payable to bank, due in monthly 
principal installments totaling $36,455 at
June 30, 1996, plus interest (primarily at 
prime plus .5% - 1.25%), secured by 
substantially all assets                        $ 2,608,466       $ 1,365,414

Note payable to former stockholder of 
Atlas for purchase of stock and
noncompetition agreement, repaid
during fiscal 1996                                    -             1,554,839

Other                                                84,713           388,485
-------------------------------------------------------------------------------
Total Long-Term Debt                              2,693,179         3,308,738
Less current maturities                             464,393           591,925
-------------------------------------------------------------------------------
Total                                           $ 2,228,786       $ 2,716,813
-------------------------------------------------------------------------------

Scheduled  maturities  of long-term  debt for future years ending June 30 are as
follows: 1997 - $464,393; 1998 - $406,948;  1999 - $1,083,785;  2000 - $258,919;
2001 - $250,008; and $229,126 thereafter.

The  prime  interest  rate  was  8.25%  and  9.0% at June  30,  1996  and  1995,
respectively.


8.    Stockholders' Equity

On July 5, 1994,  PTC  consummated  its Offering of 1,700,000  units  ("Units").
(425,000 shares had been previously  issued for $25,000.) Each Unit consisted of
one share of PTC's common  stock,  $.001 par value,  and two  Redeemable  Common
Stock  Purchase  Warrants  ("Warrants").  Each  Warrant  entitles  the holder to
purchase from PTC one share of common stock at an exercise price of $5.00 during
the period  commencing on the later of one year from the  effective  date of the
Offering or the consummation of a Business  Combination,  and ending seven years
from the effective  date of the  Offering.  The Warrants will be redeemable at a
price of $.01 per  Warrant  upon 30 days  notice at any time,  only in the event
that the last sale price of the common  stock is at least $8.50 per share for 20
consecutive  trading  days ending on the third day prior to date on which notice
of redemption is given.



                                      F-19

<PAGE>

PTC also issued 300,000  warrants to certain  investors,  which are identical to
the Warrants discussed above,  except that they are not redeemable until 90 days
after the consummation of a Business Combination.

At June 30,  1996,  4,210,000  shares  of common  stock  were  reserved  for (1)
issuance  upon  exercise  of the  warrants  described  above,  and  (2)  for the
securities underlying a purchase option granted the underwriter of the Offering.
This option,  which allows the  underwriter  the right to purchase up to 170,000
Units,  is  exercisable  initially  at $7.50 per Unit for a period of four years
commencing one year from the Offering  date.  Each Unit consists of one share of
PTC common  stock and two  Warrants.  The Units  issuable  upon  exercise of the
purchase  option are identical to those described above except that the Warrants
contained therein expire five years from the effective date of the Offering.

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.

In connection  with the May 23, 1996  acquisition  of Atlas,  a total of 339,999
shares of common stock that were previously subject to possible  redemption were
reclassified to permanent equity by the Company.

Atlas has  periodically  repurchased  its stock in prior years,  and in order to
comply with the Michigan Business Act, all such treasury stock was combined with
common stock,  paid-in capital,  and retained  earnings and was considered to be
retired, but available for reissue. During 1995, Atlas purchased 9,218 shares of
its own stock from a former  stockholder  for  $1,569,143.  In 1994, the Company
purchased 678 shares of its own stock from ESOT participants for $113,904.

In  accordance  with  the  December  18,  1995  Merger  Agreement,   a  $700,000
distribution was paid to a former shareholder in May 1996.


                                      F-20

<PAGE>



9.    Employee Benefit Plans

Atlas  previously  sponsored an Employee Stock Ownership Trust (ESOT) for all of
the Company's  employees.  Atlas elected to  contribute  $200,000,  $150,000 and
$120,000 to the ESOT during the periods  ended May 23,  1996,  June 30, 1995 and
June 30, 1994,  respectively.  At May 23, 1996, the Company's stock owned by the
ESOT was acquired as part of the purchase  transaction.  The Company anticipates
liquidating the ESOT during fiscal year 1997.

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 330,000 shares. As of
June 30, 1996, no shares have been issued pursuant to this Plan.

The  Company  has  a  401(k)  plan  covering  substantially  all  the  Company's
employees.  The plan allows for  eligible  employees to defer a portion of their
salary. The plan does not provide for Company contributions.


10.   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.


                                      F-21

<PAGE>

Significant  components of the Company's  deferred tax liabilities and assets at
June 30, 1996 are as follows:

Depreciation and basis of assets              $ 693,000
Other                                            86,000
-------------------------------------------------------------------------------
Deferred Tax Liability                        $ 779,000
-------------------------------------------------------------------------------
Accrual for executive bonus agreement         $ 185,000
Research credit carryforward                    178,000
Other                                           117,000
-------------------------------------------------------------------------------
Deferred Tax Asset                            $ 480,000
-------------------------------------------------------------------------------

Significant components of the Atlas' net deferred tax asset at June 30, 1995 are
as follows:

Research credit carryforward                  $ 494,000
Depreciation and basis of assets               (134,800)
Other - net                                      96,800
-------------------------------------------------------------------------------
Net Deferred Tax Asset                        $ 456,000
-------------------------------------------------------------------------------


                                      F-22


<PAGE>

Significant  components of the Company's  income tax provision  (benefit) are as
follows:
<TABLE>
<CAPTION>
                                 May 24, 1996
                                     to           July 1, 1995      Year Ended        Year Ended
                                June 30, 1996     May 23, 1996     June 30, 1995     June 30, 1994
--------------------------------------------------------------------------------------------------
<S>                             <C>               <C>               <C>                <C>    
Federal
      Current                   $ 108,000         $ 401,000         $ 561,000          $   -
      Deferred                     46,000           164,000          (202,000)           30,000
      Other                          -                 -               10,000           (70,000)

State
      Current                      11,000            43,000            96,000             3,000
-------------------------------------------------------------------------------------------------


Total                           $ 165,000         $ 608,000         $ 465,000         $ (37,000)
-------------------------------------------------------------------------------------------------
</TABLE>

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

<TABLE>
<CAPTION>
                                 May 24, 1996
                                      to          July 1, 1995     Year Ended        Year Ended
                                 June 30, 1996    May 23, 1996     June 30, 1995   June 30, 1994
-------------------------------------------------------------------------------------------------
<S>                              <C>              <C>                <C>             <C>    
Tax at statutory rate            $ 126,000        $ 466,000          $ 913,000       $ (114,000)

State income taxes, net
      of federal income tax
      benefit                        7,000           28,000             96,000            3,000

Goodwill amortization and
      other non-deductible
      items                          6,000           70,000               -                -

Change in valuation
      allowance                        -               -              (319,000)         219,000

Research credit                        -               -              (208,000)        (143,000)

Other - net                          26,000          44,000            (17,000)          (2,000)
-------------------------------------------------------------------------------------------------
Total Income Taxes                $ 165,000       $ 608,000          $ 465,000        $ (37,000)
-------------------------------------------------------------------------------------------------
</TABLE>

                                      F-23

<PAGE>


Atlas has tax research credit  carryforwards  totalling $178,000 that will begin
to expire in 2008.


11.   Major Customers

For the twelve months ended June 30, 1996, 1995 and 1994, the Company's sales to
its  major  customers  (each  representing  more  than 10% of total  net  sales)
amounted to approximately  64%, 60% and 39% of total annual sales.  During 1996,
there were four major customers  representing 30%, 13%, 11% and 10% of total net
sales; during 1995, there were three customers  representing 35%, 15% and 10% of
total net sales; and during 1994, there were two customers, representing 25% and
14% of total net sales.


12.   Commitments

(1)   In connection with the Merger Agreement, the Company has entered
      into employment agreements which changed the compensation of two
      executive officers of Atlas.  These employment agreements are
      identical except that one agreement expires on December 31, 1998, and
      the other expires on December 31, 2001.  Each agreement requires the
      executive to devote substantially all of his business time and attention
      to the affairs of the Company.  Annual compensation under each
      agreement is $190,000, subject to cost of living increases after
      December 31, 1996.

      The employment agreements also provide for two bonus calculations based on
      the earnings of the Company before interest and taxes (as defined).  Under
      one of the bonus arrangements, each of the two executives mentioned in the
      above  paragraph will be paid $208,333 for each of the six years beginning
      January 1, 1996 in which the Company's  "Adjusted Earnings" (as defined in
      the  related  agreements)  exceed  $2,000,000.  If the  Adjusted  Earnings
      average  at  least  $2,000,000  during  such  six-year  period,   the  two
      executives  will each be paid, at the end of the six year period,  the sum
      of  $1,250,000  less the  aggregate of the amounts paid to them under such
      bonus arrangement for the prior five years.

      Under the second  bonus  arrangement,  if during the five years  beginning
      January  1, 1996,  the  "Average  Adjusted  Earnings"  (as  defined in the
      related  agreements) are at least $2,626,000,  each executive will be paid
      an  amount  equal to the  amount by which  such  average  earnings  exceed
      $2,626,000. Both bonus arrangements are also subject to various conditions
      described  in  the  related  agreements.  The  bonus  arrangements  do not
      terminate in the event of death of the  executive,  but  payments  will be
      reduced by the amount of insurance benefits paid to the executive's estate
      pursuant to life insurance in effect.

                                      F-24


<PAGE>

(2)   As of June 30,  1996,  the Company  had  outstanding  commitments  for the
      purchase of real estate and the  construction  of a new facility  totaling
      approximately $3,500,000.


13.   Contingencies

      The Company has received a "Demand For Arbitration" dated October 1, 1996
      by a former customer who alleges, among other issues, a $15,400,000 claim
      for damages resulting from a breach of contract and breach of warranties
      related to the design and manufacture of certain industrial equipment.

      The Company believes the arbitration demand  is without  merit  and  will
      vigorously defend its position.  Further, with respect to the alleged
      damages, the total purchase amount on this contract was $1,360,000.  The 
      former  customer has acknowledged receiving the Company's standard terms
      and conditions. These terms and conditions provide, in pertinent part,
      that the Company will not, in any event, be liable for any incidental or
      consequential damages, including loss of profits.  Further, the Company's
      warranty policy states that the buyer's sole remedy is limited to either
      repair or replacement of the equipment or defective parts, or, after
      negotiated settlement, return of the goods to seller.

      While the final outcome of the arbitration demand cannot be determined at 
      this early date in the  proceedings,  management believes  that the final
      outcome  will not have  a  material  adverse  effect  on  the Company's
      results  of  operations  or  its financial  position.



                                      F-25

<PAGE>

                                Productivity Technologies Corp. and Subsidiary
                                                           and the Predecessor

                                Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                                                           Additions
                                                       Balance at          Charged to                              Balance
                                                       Beginning           Cost and                                at End
Description                                            of Period           Expenses          Deductions           of Period
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>               <C>                  <C>   
Period May 24, 1996 to June 30, 1996 (Company)
  Allowance for doubtful accounts
    (deducted from contract receivables)               $ 163,471              -                       -           $ 163,471
----------------------------------------------------------------------------------------------------------------------------------
Period July 1, 1995 to May 23, 1996 (Predecessor)
  Allowance for doubtful accounts
    (deducted from contract receivables)               $ 232,120           180,337            (1) (248,986)       $ 163,471
----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30, 1995 (Predecessor)
  Allowance for doubtful accounts
    (deducted from contract receivables)               $ 127,533           108,000            (1)   (3,413)       $ 232,120
----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30, 1994 (Predecessor)
  Allowance for doubtful accounts
    (deducted from contract receivables)               $  58,770            64,500            (1)    4,263        $ 127,533
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>


(1) Accounts  deemed to be  uncollectible  (net of accounts  collected that were
    previously deducted).



                                      F-26

<PAGE>