<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-K/A

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities and
     Exchange Act of 1934
     For the fiscal year ended June 30, 2001
                                 OR
[_]  Transition Report Pursuant to Section 13 or 15(d) of the Securities and
     Exchange Act of 1934
     For the transition period from _______ to _______

                        Commission file number  0-24242

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

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

         201 South Main Street, 8th  Floor, Ann Arbor, Michigan 48104
         ------------------------------------------------------------
                   (Address of Principal Offices)(Zip Code)

Registrant's Telephone Number, Including Area Code       (734) 996-1700
                                                   --------------------

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
     -----------------------------------------
             (Title of class)

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

State the approximate aggregate market value of the voting stock held by
nonaffiliates of the registrant at September 30, 2001: $700,000

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

                      Class                   Outstanding at September 30, 2001
            -----------------------          -----------------------------------
           Common stock, $.001 par value              2,475,000 shares

Documents Incorporated by Reference: Not applicable
<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  FORM 10-K/A
                              AMENDMENT TO REPORT
                   FILED PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

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

                                AMENDMENT NO. 1


     The undersigned registrant hereby amends the following items of its 2001
Annual Report on Form 10-K: Item 1, in order to correct the percentage of export
sales for fiscal 2001 as set forth under "Customers and Marketing"; Item 7, in
order to modify the third, fourth and fifth paragraphs under "Liquidity and
Capital Resources"; and the financial statements for fiscal 2001 provided
pursuant to Item 8, in order to include in the Audit Report the typed signature
of Doeren Mayhew, independent auditors, and in order to amend Footnotes 1, 5, 6,
8, 10, 11 and 12 of such financial statements to make certain corrective
changes.

     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.


                              PRODUCTIVITY TECHNOLOGIES CORP.

                                   By: /s/  Jesse A. Levine
                                      ---------------------
                                       Jesse A. Levine
                                       Vice President, Secretary, Treasurer and
                                       Chief Financial Officer



Date:  October 22, 2001
<PAGE>

                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS


General

     Productivity Technologies Corp. (the "Company") was incorporated in June
1993 under the name Production Systems Acquisition Corporation with the
objective of acquiring an operating business engaged in the production systems
industry. The Company completed an initial public offering ("IPO") of common
stock in July 1994 and raised net proceeds of approximately $9.0 million. In May
1996, the Company changed its name to Productivity Technologies Corp. and
acquired, through a merger, Atlas Technologies, Inc. ("Atlas") as a wholly owned
subsidiary. On February 23, 2000, the Company purchased, through a wholly owned
subsidiary formed for this purpose, substantially all of the assets of Westland
Control Systems, Inc. ("Westland"). The Company has no other subsidiaries or
operations. The Company, which produces industrial machinery, operates in a
single segment through its Atlas and Westland subsidiaries.

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

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

     Metal stamping presses are used to form a wide variety of sheet metal
components used in automobiles, appliances and other consumer and industrial
products. Atlas offers a complete range of products within three categories
critical to the operation of metal stamping presses: quick die changing
equipment, press automation equipment, and stacking and destacking equipment,
which, together, have historically accounted for approximately 85% to 90% of its
sales revenues. It also sells, on a turnkey basis, fully integrated metal
stamping systems comprised of components provided by Atlas and other
manufacturers. During 1998, Atlas began producing and selling finger tooling for
use with its and third party transfer press automation equipment. During fiscal
2000, Atlas also began to offer standard transfer press cells where Atlas acts
as the systems integrator for its customers.

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

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

     Westland manufactures custom electrical control panels primarily for use in
production machinery and machine tools utilized in automotive, adhesive &
sealant, food processing, and other industrial applications. Westland operates
one manufacturing plant in Westland, Michigan, which is located less than one
hour from Atlas'

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plants in Fenton, Michigan. Westland's plant comprises approximately 34,000
square feet of manufacturing space and 4,000 square feet of offices. Its
Westland location is centrally located in Southeastern Michigan nearby numerous
machinery manufacturers.

     The manufacture of control panels for industrial machinery often occurs in
the latter stages of construction. Machinery typically is first built and
subsequently wired. Machine wiring is conducted through the control panel. While
machine wiring and control panels are manufactured in the latter stages of
machine production, they are essential to effective machinery operation as they
turn stationary metal into functional machines. As a result, control panels are
considered a high value added machinery module.

     Management believes the Company has been a leader in the refinement of the
processes by which custom electrical panels are built. In particular, management
believes it has effective internal processes to convert the production of a
custom panel into more of a mass production process. At many stages in the panel
build process, Westland has reduced or eliminated certain steps, which incur
costs or extend production time. Westland also focuses on tight inventory
control. Often, the more expensive panel components are received into the
factory within one to two weeks of when the entire panel will be built, quality
tested, and shipped to the customer, thus reducing inventory carrying costs.
Inventory consignment arrangements also exist for some component and component
classes.

     Management believes Westland's processes help its customers. A number of
Westland's customers seek to outsource a substantial portion of their panel
building requirements. Often, machinery builders, which outsource the production
of their control panels, are focused on machinery construction first, while the
outsourcing of panel design and production remains a secondary concern. This can
lead to a situation where panels are required within three to four weeks, rather
than the six to eight weeks which management believes is more typical of the
control panel production industry in general. Westland's streamlined production
processes allow the Company to satisfy the rapid delivery requirements of
customers.


Customers and Marketing

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

     In the 1999, 2000 and 2001 fiscal years, automotive industry customers for
the Company accounted for approximately 96%, 91% and 68% of sales, respectively.
For such fiscal years, sales by the Company to General Motors Corporation
represented 14%, 18% and 8%, respectively, sales to DaimlerChrysler Corporation
(formerly Chrysler Corporation) represented 7%, 10% and 8%, respectively and
sales to The Ford Motor Company represented 8%, 16% and 28%, respectively, of
total sales. Sales are predominantly in the United States and Canada but, in
recent years and especially for the second half of fiscal year 2001, the Company
targeted sales efforts in Mexico, Brazil, Europe and Asia. International sales
for the 1999, 2000 and 2001 fiscal years represented approximately 40%, 15% and
24%, respectively, of total sales in such years.

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

     The order backlogs were approximately $16.0 million, $13.5 million and
$17.0 million at June 30, 1999, 2000 and 2001, respectively. The Company
believes substantially all of the June 30, 2001 backlog will be produced during
fiscal 2002.

                                       3
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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 manufactured on a made-to-order basis. Because of their
many desirable features, Atlas products are positioned at an above-average price
comparative to its competitors. The raw materials and components used by Atlas
in the manufacturing process are readily available and, generally, there are
numerous suppliers that are capable of providing these materials and components.

     Atlas personnel perform applications engineering, product design or
customization, procurement, fabrication, machining, assembly, testing, shipping
and installation of the products and systems it sells. Atlas continues to
implement a 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, and improved fabrication. Atlas believes that
significant cost-reducing improvements can still be made in the manufacturing
process, particularly from further standardization.

     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.

     Transfer press automation equipment is sold by Atlas 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. Atlas recently began offering standard Transfer Press Cells as a
systems integrator, comprised of Atlas equipment and presses made by other
manufacturers to more aggressively pursue the transfer press process market
segment.

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

     Westland manufactures custom electrical control panels primarily for use in
production machinery and machine tools utilized in automotive, adhesive &
sealant, food processing, and other industrial applications. The design and
manufacture of control panels for machinery occasionally occurs in the later
stages of the machinery design and construction process. Machinery must first be
constructed, and then wired, where the wiring is conducted through the control
panel. While the wiring of machinery occurs later in the construction process,
the wiring and

                                       4
<PAGE>

control panels are essential to effective machinery operation. It is the wiring
and controls, which convert the machinery from stationary metal to functional
machines.

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

Competition

     Atlas management believes Atlas' products are sold in specialized markets
that have limited customers and 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 ABB Flexible Automation (Sweden),
Herwo Die Changing (Sweden), Orchid International (Canada), Hirotec (Japan), HMS
Products Co. and Aisaku (Japan). Each of these companies offers components,
which compete with certain components manufactured or sold by Atlas. A number of
the competitors are well established with substantial financial resources,
recognized brand names, customer loyalty and established market positions,
capable engineering, strong distribution networks and comprehensive
manufacturing capabilities.

     Westland management believes Westland's competitors sell their products
primarily regionally. Typically, custom-built control panels are commodity type
products purchased by customers on the basis of quality and reliability,
delivery timing, and pricing. Westland's competitors in Southeast Michigan
include Stegnar Electric, Consistent, JIC Electric, X-Bar Automation,
Electromatic (formerly a distributor but which is moving into panel building
also), Control Technique, Innovative Control Systems, Venus Controls, and
Quantum. The two latter companies are minority owned, and are believed to have
an advantage as suppliers to the auto industry given U.S. automaker commitments
made in April 1998 to increase, and encourage their leading suppliers to
increase, purchases of auto parts from minority owned companies.

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

                                       5
<PAGE>

Trademarks and Patents

     Atlas has an agreement to use components in the FLEX 5000(R) transfer press
automation equipment that it manufactures and sells that are based on patents
owned by the estate of Mr. John Maher. 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 the estate of 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, 1999, 2000 and 2001 the
Company expensed approximately $241,000, $122,000 and $127,000, respectively, in
license fees under this agreement. The agreement also provides that the estate
of Mr. Maher is responsible for defending Atlas for any patent infringements.
Atlas believes that the terms of the agreement with the estate of Mr. Maher are
industry competitive.

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

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

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

     Westland owns one patent related to a lay-in wire way for cords and wires
for use in connection with the field installation of machinery. The product is
trademarked as "Cheeta-Duct(R)".

Management and Employees

     The Company employs approximately 185 persons. None of these persons is a
member of a union. The Company believes that its employee relations are good.
The Company's facilities are located in highly industrialized areas that benefit
the Company by reason of their proximity to customers and a quality labor force.

                                       6
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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview

     Revenues at Atlas are recognized using the percentage-of-completion method,
which measures the percentage of contract costs incurred to date and compares
these costs to the total estimated costs for each contract. Atlas estimates the
status of individual contracts when progress reaches a point where experience is
sufficient to estimate final results with reasonable accuracy. Contract costs
include all direct material and labor costs, and those indirect costs related to
contract performance, such as indirect labor, supplies, repairs and depreciation
costs. Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Changes in job performance, job
condition, estimated profitability, and final contract settlement may result in
revisions to costs and income, and are recognized in the period in which such
revisions are determined. Sales at Westland are recognized when products are
shipped.

Results of Operations


Fiscal Year 2001 Compared to Fiscal Year 2000

     Revenues earned for the year ended June 30, 2001 were $27,992,487 as
compared to $33,230,195 for the year ended June 30, 2000, a decrease of 16%,
principally as a result of lower order volume at Atlas during fiscal 2001. The
revenues earned at Westland, which was acquired by the Company on February 23,
2000, represented 15% of the total revenues earned by the Company in fiscal
2001.

     The order backlog as of June 30, 2001 increased 27% to $17,100,000 from the
June 30, 2000 backlog of $13,500,000. The Company attributes its backlog
increase to more focused and efficient sales efforts by personnel at both of its
locations, which, in turn, were facilitated by management changes at both
facilities during the second and third quarters of fiscal year 2001. Management
believes the Company's quotation activity is increasing worldwide relative to
one year ago.

     Gross profit for the year ended June 30, 2001 was $5,837,396, representing
a 15% decrease from the $6,895,369 gross profit for the year ended June 30,
2000. Gross profit decreased during fiscal 2001 primarily due to volume
reduction associated with lower than anticipated orders for Atlas and cost
overruns incurred late in the production cycle for certain products. As was
stated in the third quarter 10-Q, the Company made management changes in the
middle of the second quarter of fiscal 2001 and now believes production problems
which caused cost overruns in prior periods have been corrected and that Atlas
will experience lower cost overruns relative to initial project quotations in
the future.

     Consolidated selling, general and administrative (SG&A) expenses were
$8,004,219, up 26% as compared to SG&A expenses of $6,332,966 for the year ended
June 30, 2000. The increase is associated with the inclusion of the Westland
facility, which was acquired on February 23, 2000.

     Loss from operations for the year ended June 30, 2001 was $2,166,823
compared to income from operations of $562,403 for the year ended June 30, 2000.
The decline in income from operations was principally due to lower volume,
production costs overruns and the inclusion of a full year of Westland's SG&A
expenses.

     Interest expense for the year ended June 30, 2001 was $1,605,164, up 23%
from $1,307,732 for the year ended June 30, 2000. Higher interest costs during
fiscal 2001 were due to the indebtedness incurred by the Company for the
purchase of Westland.

     For the year ended June 30, 2001, the income tax benefit was $572,000. See
note 8 in the consolidated financial statements for additional analysis. At June
30, 2001 the balance sheet includes a deferred tax asset whose realization is
dependent upon future earnings. Based on historical operating losses and
uncertainty of future earnings, a valuation allowance of $646,000 has

                                       10
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been recorded at June 30, 2001. This asset includes research and experimentation
(R&E) credit carryforwards totaling approximately $168,400 that will begin to
expire in 2012 and net operating loss carryforwards valued at approximately
$1,269,000 that will begin to expire in 2020.

     For the year ended June 30, 2001, a net loss of $3,113,741 was incurred as
compared to net loss for the year ended June 30, 2000 of $256,280. The net loss
during fiscal 2001 was due to factors cited above, including cost overruns on
certain projects, lower volume, lower gross margins, and increased interest
expense.

Fiscal Year 2000 Compared to Fiscal Year 1999


     Revenues earned for the year ended June 30, 2000 were $33,230,195 as
compared to $34,001,248 for the year ended June 30, 1999, a decrease of 2%,
principally as a result of lower order volume at Atlas during fiscal 2000. The
revenues earned at Westland, which was acquired by the Company on February 23,
2000, represented 4% of the total revenues earned by the Company in fiscal 2000.
The order backlog as of June 30, 2000 was $13,500,000, down from the June 30,
1999 backlog of $16,000,000. The decline in backlog was mainly due to slower
closings of new orders at Atlas.

     Cost of revenues earned for the year ended June 30, 2000 was $26,334,826,
up 7% from costs of $24,609,631 for the year ended June 30, 1999. Cost of
revenues earned as a percentage of revenues increased to 79% of revenues earned
during the year ended June 30, 2000 as compared to 72% for year ended June 30,
1999. The increase in cost of revenues earned as a percentage of revenues for
the year ended June 30, 2000 was primarily due to product mix and cost overruns
incurred by Atlas late in the production cycle for certain products.

     Gross profit for the year ended June 30, 2000 was $6,895,369, representing
a 27% decrease from the $9,391,617 gross profit for the year ended June 30,
1999. Gross profit decreased during fiscal 2000 principally for the reasons
cited above related to the increase in cost of revenues earned as a percentage
of revenues. Westland's contribution to the Company's total gross profit was
approximately 3.5% in fiscal 2000.

     Consolidated selling, general and administrative (SG&A) expenses were
$6,332,966, down 16% as compared to SG&A expenses of $7,526,448 for the year
ended June 30, 1999. In January 1999, and continuing through June 2000, the
Company reduced fixed costs as part of a cost reduction initiative. The decline
in SG&A expenses for fiscal 2000 as compared to fiscal 1999 is due principally
to cost reductions at Atlas, partially offset by the inclusion of Westland's
SG&A expenses for an approximately four month period following its acquisition
by the Company on February 23, 2000. The Company's corporate expenses also were
lower in fiscal 2000 than in fiscal 1999 due in part to the decrease in the
number of directors effective as of December 31, 1999.

     Income from operations for the year ended June 30, 2000 was $562,403
compared to income from operations of $1,865,169 for the year ended June 30,
1999. The decline in income from operations was principally the result of lower
gross margins described above, partially offset by decreased SG&A expenses.

     Interest expense for the year ended June 30, 2000 was $1,307,732, up 57%
from $835,619 for the year ended June 30, 1999. Higher interest costs during
fiscal 2000 were due to higher financing requirements as a result of increased
accounts receivables, inventories, and work-in-process for Atlas, higher
interest rates and the indebtedness incurred by the Company for the purchase of
Westland.

     For the year ended June 30, 2000, the income tax benefit was $363,000. This
tax benefit differs from what it would have been under the statutory rate due
primarily to research and experimentation (R&E) tax credits the Company has
calculated.

     At June 30, 2000 the balance sheet included a deferred tax asset whose
realization depends on generating future taxable income. This asset includes R&E
credit carry forwards totaling approximately $844,000 that will

                                       11
<PAGE>

begin to expire in 2012 and net operating loss carry forwards totaling
approximately $1,074,000 that will begin to expire in 2020. Taking into
consideration the historical results of operations of Atlas and Westland, the
Company believes it is more likely than not that these carry forwards will be
realized in the future. However, due to the past IRS audit with respect to the
R&E tax credits and the costs the Company incurred in defending these credits,
the R&E credit carry forwards for fiscal 2000 included a 50% reserve.

     For the year ended June 30, 2000, a net loss of $256,280 was incurred as
compared to net income for the year ended June 30, 1999 of $974,290. The net
loss during fiscal 2000 was due to factors cited above, including cost overruns
on certain projects, lower volume, lower gross margins, and increased interest
expense. These factors were partially offset by a decrease in SG&A expenses.


Liquidity and Capital Resources

     Management believes financing facilities currently in place, including a
$1.0 million Atlas work-in-process "over-advance" facility being negotiated
presently, along with anticipated cash available from operations, may be
sufficient for general operations. On July 31, 2000, the Company was scheduled
to repay approximately $417,000 (including interest) of the subordinated
deferred indebtedness totaling, at the time, $1,108,352 due to the former owners
of Atlas. This repayment was postponed, and a partial payment of $200,000 was
made prior to December 31, 2000. The duration of the repayment was postponed
until October 31, 2001. As a result of the postponements, cash was conserved for
ongoing operations. In addition, the Company's bank has requested the
postponement of the payment of the $417,000 until the Company's financial
results improve.

     At June 30, 2001, the Company had (1) debt of $7,858,000 under the line of
credit, and $3,300,000 of Industrial Revenue Bond obligations, payable over the
12 years remaining in their term, (2) deferred executive compensation
obligations of $974,933 scheduled to be paid over three equal annual
installments during the period from July 2000 through July 2002, (3) five year
term debt of $3,600,000, bearing interest at 125 basis points over the prime
rate, incurred in February 2000 to purchase Westland, (4) five year subordinated
term debt of $2,750,000, payable to the former owner of Westland and bearing a
fixed interest rate of 9.25%, incurred in February 2000 to purchase Westland,
and (5) other debt of $33,899. This total of $18,516,832 compares to a total
combined long-term debt financing and line of credit balance of $22,961,403 as
of June 30, 2000. The decrease in indebtedness at June 30, 2001 is principally
due to paying down the line of credit.

     The Company believes that its short-term credit availability is adequate to
support its business operation at current and near-term anticipated sales
levels. This excludes the repayment of previously scheduled subordinated
deferred indebtedness as noted above. Working capital deficit at June 30, 2001
was ($1,533,171) and the current ratio was (.91) to 1, as compared to working
capital of $14,816,624 and a current ratio of 2.8 to 1 for the Company at June
30, 2000.

     The Company's revolving credit agreement and term loan with a bank impose
financial levels of tangible capital funds, specified leverage ratios (debt to
equity), and fixed expense coverage. At June 30, 2001, the Company was not in
compliance with the financial covenants specified in the agreements. On October
12, 2001, the Company obtained a letter agreement from the bank whereby the
financial covenants were waived by the bank for the fiscal year ended June 30,
2001.

     The Company's banking facilities are scheduled to mature in January 2002.
The Company's bank indebtedness, which in prior periods was listed as long-term,
has in the ordinary course of business been reclassified as short-term, which is
defined as a liability which matures in twelve (12) months or less. The Company
currently is in discussions with its lender concerning the renewal of its loan
facilities. In the past, the facility renewal has been for approximately two
years. Management believes a proposal from its lender for the renewal of its
loan facilities

                                       12
<PAGE>

will be forthcoming prior to their maturity. However, no assurance can be given
that such renewal will be obtained or that alternative loan facilities will be
made available to the Company by another lender under the tight credit markets
currently prevailing. The Company does not currently have sufficient proceeds
available to it from operations or otherwise to repay these existing loan
facilities when due. If the Company is unable to renew its revolving credit
agreement such inability could have a material adverse affect on Company
operations.


Contingencies

     Atlas has accrued certain financial reserves for contingencies of bad
debts, product warranty and health insurance run off costs.


Recent Accounting Standards

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101. "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes certain of the SEC's views in applying
accounting principles generally accepted in the United States to revenue
recognition in financial statements. The adoption of SAB No. 101 did not have a
material impact on the Company's results of operation or its financial position.

In July 2000, the Emerging Issues Task Force ("EITF") reached a final consensus
on Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs" ("EITF
No. 00-10"). When adopted, EITF No. 00-10 requires that all amounts billed to
customers in sale transactions related to shipping and handling be classified as
revenue. In addition, EITF No. 00-10 requires that shipping and handling fees
and costs in financial statements for prior periods presented for comparative
purposes be reclassified. EITF No. 00-10 must be adopted prior to, or concurrent
with, the adoption of SAB No. 101. The adoption of EITF No. 00-10 did not have a
material impact on the Company's results of operation or its financial position.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires companies
to apply the purchase method of accounting for all business combinations
initiated after June 30, 2001 and prohibits the use of the pooling-of-interest
method. SFAS No. 142 changes the method by which companies may recognize
intangible assets in purchase business combinations and generally requires
identifiable intangible assets to be recognized separately from goodwill. In
addition, it eliminates the amortization of all existing and newly acquired
goodwill on a prospective basis and requires companies to assess goodwill for
impairment, at least annually, based on the fair value of the reporting unit.

The Company will be required to adopt SFAS Nos. 141 and 142 on July 1, 2002;
however, early adoption as of July 1, 2001 is permitted. Furthermore, any
goodwill and any intangible asset determined to have an indefinite useful life
that are acquired in a purchase business combination completed after June 30,
2001 will not be amortized, but will continue to be evaluated for impairment in
accordance with the appropriate pre-Statement 142 accounting literature.
Goodwill and intangible assets acquired in business combinations completed
before July 1, 2001 will continue to be amortized prior to the adoption of
Statement 142.

Statement 141 will require upon adoption of Statement 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.

                                       13
<PAGE>

In connection with the transitional goodwill impairment evaluation, Statement
142 will require the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. Any
transitional impairment loss will be recognized as the cumulative effect of a
change in accounting principle in the Company's statement of operations.
Management has not determined the impact the adoption of SFAS Nos. 141 and 142
will have on the Company's financial statements or when the Company will elect
to adopt these statements.

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations ("SFAS 143"). SFAS 143 is
effective for fiscal years beginning after June 15, 2002, and establishes an
accounting standard requiring the recording of the fair value of liabilities
associated with the retirement of long-lived assets in the period in which they
are incurred. The Company is in the process of determining the future impact
that the adoption of FAS 143 may have on our earnings and financial position.

Forward-Looking Statements

     Various statements in this Report concerning the manner in which the
Company intends to conduct its future operations and potential trends that may
affect future results of operations are forward-looking statements. The Company
may be unable to realize its plans and objectives due to various important
factors. These factors include but are not limited to what management believes
is a current softening of the domestic and foreign markets for automobiles and
automotive parts resulting in reduced demand for the Atlas' automation
equipment; potential technological developments in the metal forming and
handling automation equipment markets which may render Atlas' automation
equipment noncompetitive or obsolete; the risk that Atlas may not succeed in its
ongoing patent suit against Orchid; the risk that Westland's customers may be
unwilling or unable to continue ordering control panels; the tightening of
credit availability generally or under the Company's credit facility which may
render the Company unable to access needed working capital; and general economic
and business conditions, both nationally and in our markets, particularly in
light of the events of September 11, 2001.

                                       14
<PAGE>

                        PRODUCTIVITY TECHNOLOGIES CORP.
                               AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS

                                 JUNE 30, 2001
<PAGE>

                                C O N T E N T S
                                - - - - - - - -


                                                                     Page
                                                                     ----


CONSOLIDATED FINANCIAL STATEMENTS


  Report of independent certified public accountants                 F-1


  Consolidated balance sheet                                         F-2


  Consolidated statement of operations                               F-3


  Consolidated statement of shareholders' equity                     F-4


  Consolidated statement of cash flows                               F-5


  Notes to consolidated financial statements                         F-6 to F-21
<PAGE>

              Report of Independent Certified Public Accountants
              --------------------------------------------------


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

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

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

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


                                    /s/ Doeren Mayhew

                                    DOEREN MAYHEW

August 24, 2001
Troy, Michigan

                                      F-1
<PAGE>

                        PRODUCTIVITY TECHNOLOGIES CORP.
                               AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEET
                                 JUNE 30, 2001

                                    ASSETS


<TABLE>
<S>                                                                 <C>
Current Assets
   Cash                                                             $    766,052
   Short-term investments, including accrued interest                    243,136
   Contract receivables, net of allowance for doubtful
      accounts of $340,000 (note 3)                                    5,533,773
   Costs and estimated earnings in excess of
      billings on uncompleted contracts (note 4)                       7,172,626
   Inventories                                                         1,463,559
   Prepaid expenses and other current assets                             356,102
   Deferred income taxes (note 8)                                        287,000
                                                                    ------------
          Total current assets                                        15,822,248

Property and Equipment
   Land                                                                  591,514
   Buildings and improvements                                          4,911,665
   Machinery and equipment                                             4,444,679
   Transportation equipment                                               21,000
                                                                    ------------

                                                                       9,968,858
   Less accumulated depreciation                                       2,738,043
                                                                    ------------

          Net property and equipment                                   7,230,815

Other Assets
   Goodwill, net of accumulated amortization
      of $883,459 (note 2)                                             6,521,888
   Patent, net of accumulated amortization of $63,141 (note 2)           686,859
   Deferred income taxes (note 8)                                      1,051,000
   Other assets                                                          444,512
                                                                    ------------

          Total other assets                                           8,704,259
                                                                    ------------

          Total assets (note 5)                                     $ 31,757,322
                                                                    ============
</TABLE>

                                      F-2
<PAGE>

                     LIABILITIES AND SHAREHOLDERS' EQUITY


<TABLE>
<S>                                                                <C>
Current Liabilities
   Current portion of long-term debt (note 5)                      $  9,831,899
   Accounts payable                                                   4,973,710
   Accrued expenses
      Commissions payable                                               248,000
      Warranty reserve                                                  315,000
      Royalties payable                                                 265,398
      Payroll and related withholdings                                  173,501
      Interest                                                          414,535
      Other                                                             251,393
   Billings in excess of costs and estimated earnings
      on uncompleted contracts (note 4)                                 251,701
   Current maturities of executive deferred compensation
      agreements (note 11)                                              630,282
                                                                   ------------

          Total current liabilities                                  17,355,419


Long-Term Debt, Less Current Maturities (note 5)                      7,710,000


Executive Deferred Compensation Agreements, Less Current
 Maturities (note 11)                                                   344,651


Shareholders' Equity (notes 6 and 7)
   Common stock; $.001 par value, 20,000,000 shares authorized;
      2,475,000 shares issued and outstanding                             2,475
   Additional paid-in capital                                         9,966,408
   Deficit                                                           (3,621,631)
                                                                   ------------

          Total shareholders' equity                                  6,347,252
                                                                   ------------

          Total liabilities and shareholders' equity               $ 31,757,322
                                                                   ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-2
<PAGE>

                        PRODUCTIVITY TECHNOLOGIES CORP.
                               AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF OPERATIONS
                           YEAR ENDED JUNE 30, 2001


<TABLE>
<S>                                                                <C>
Revenues Earned                                                    $ 27,992,387

Cost of Revenues Earned                                              22,154,991
                                                                   ------------
Gross Profit                                                          5,837,396

Selling, General and Administrative
   Expenses                                                           8,004,219
                                                                   ------------

Loss From Operations                                                 (2,166,823)

Other Income (Expenses)
   Interest expense                                                  (1,605,164)
   Interest income                                                       53,705
   Miscellaneous income                                                  32,541
                                                                   ------------

          Total other income (expenses)                              (1,518,918)
                                                                   ------------

Loss Before Income Taxes (Benefit)                                   (3,685,741)

Income Taxes (Benefit) (note 8)                                        (572,000)
                                                                   ------------

Net Loss                                                           $ (3,113,741)
                                                                   ============

Basic Loss Per Share (note 1)                                      $      (1.26)
                                                                   ============

Diluted Loss Per Share (note 1)                                    $      (1.26)
                                                                   ============

</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>

                         PRODUCTIVITY TECHNOLOGIES CORP.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                        FOR THE YEAR ENDED JUNE 30, 2001


<TABLE>
<CAPTION>
                               Common                        Common        Additional
                               Stock          Common        Stock to        Paid-in
                               Shares          Stock        be Issued       Capital         Deficit           Total
                           -------------    ----------    -------------  --------------  -------------     -----------
<S>                        <C>              <C>           <C>            <C>             <C>               <C>
Balance - June 30, 2000      2,475,000         2,475               --       9,966,408        (507,890)       9,460,993

Net Loss                            --            --               --              --      (3,113,741)      (3,113,741)
                           -----------      --------      -----------     -----------     -----------      -----------
Balance - June 30, 2001      2,475,000         2,475               --     $ 9,966,408     $(3,621,631)     $ 6,347,252
                           ===========      ========      ===========     ===========     ===========      ===========
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-4
<PAGE>

                         PRODUCTIVITY TECHNOLOGIES CORP.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                            YEAR ENDED JUNE 30, 2001

<TABLE>
<S>                                                                                 <C>
Cash Flows From Operating Activities:
   Net loss                                                                         $  (3,113,741)
      Adjustments to reconcile net earnings (loss) to net cash provided
          from (used in) operating activities:
          Depreciation                                                                    664,849
          Amortization                                                                    387,011
          Provisions for losses on contract receivables                                   237,500
          Inventory net realizable value reserve                                           50,000
          Deferred income taxes                                                          (572,000)
          Changes in assets and liabilities:
              Decrease in contract receivables                                          4,159,640
              Decrease in inventories, prepaid expenses
                 and other current assets                                                 317,369
              Decrease in costs and estimated earnings in excess of
                 billings on uncompleted contracts - net                                2,776,873
              Decrease in accounts payable and accrued expenses                          (248,435)
                                                                                    -------------
                      Total adjustments                                                 7,772,807
                                                                                    -------------
          Net cash provided from operating activities                                   4,659,066

Cash Flows From Investing Activities:
   Purchase of property and equipment                                                    (187,386)
   Proceeds from sale of short-term investments                                            66,949
                                                                                    -------------

          Net cash provided used in investing activities                                 (120,437)

Cash Flows From Financing Activities:
   Net borrowings (payments) on revolving credit agreement                             (3,880,148)
   Payments on long-term debt                                                            (431,004)
                                                                                    -------------

          Net cash used in financing activities                                        (4,311,152)
                                                                                    -------------

Net Increase in Cash                                                                      227,477

Cash - July 1, 2000                                                                       538,575
                                                                                    -------------

Cash - June 30, 2001                                                                $     766,052
                                                                                    =============

                      Supplemental Disclosure of Cash Flow Information
                      ------------------------------------------------

Cash paid during the year for interest                                              $   1,624,558
                                                                                    =============
Cash paid during the year for income taxes                                          $          --
                                                                                    =============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-5
<PAGE>

                        PRODUCTIVITY TECHNOLOGIES CORP.
                               AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001


Note 1 - Nature of Business and Significant Accounting Policies

       Nature of Business
       ------------------

       The Company is a manufacturer of automated industrial systems, machinery,
       equipment, electrical components and engineering services.  It operates
       with three manufacturing plants, sales and engineering offices.  Two of
       the manufacturing plants are located in Fenton, Michigan and the third
       plant is located in Westland, Michigan.

       Sales of products have principally been to automobile and automotive
       parts manufacturers and appliance manufacturers.  Other customers include
       manufacturers of garden and lawn equipment, office furniture, heating,
       ventilation and air conditioning equipment and aircraft.  Sales to
       automotive-related customers have accounted for the majority of total
       annual sales.  Sales are predominantly in the United States but, in
       recent years, the Company has targeted sales efforts in Canada, Mexico,
       Europe and Asia. Export sales during the year ended June 30, 2001,
       amounted to approximately 24%, of annual sales.

       Principles of Consolidation
       ---------------------------

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

       Short-term Investments
       ----------------------

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

       Estimates
       ---------

       The preparation of the consolidated financial statements in conformity
       with generally accepted accounting principles requires management to make
       estimates and assumptions that affect the reported amounts of assets and
       liabilities and the disclosure of contingent assets and liabilities at
       the date of the consolidated financial statements and the reported
       amounts of revenues and expenses during the reporting period.  Actual
       results could differ from those estimates.

                                      F-6
<PAGE>

Note 1 - Nature of Business and Significant Accounting Policies - Continued

       Concentrations of Credit Risk
       -----------------------------

       Financial instruments which potentially subject the Company to
       concentrations of credit risk consist principally of cash and contract
       receivables.  At times, the amount of cash on deposit in banks may be in
       excess of the respective financial institutions FDIC insurance limit.
       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.  The Company's
       inability to collect on its contract receivables could have a material
       adverse effect on the Company's operations.

       Fair Values of Financial Instruments
       ------------------------------------

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

       Revenue and Cost Recognition
       ----------------------------

       Revenues earned consist primarily of contract revenues from fixed price
       contracts, and the related contract costs, are recognized using the
       percentage-of-completion method, measured by the percentage of contract
       costs incurred to date to total estimated costs for each contract.  The
       Company estimates the status of individual contracts when progress
       reaches a point where experience is sufficient to estimate final results
       with reasonable accuracy.

       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.

                                      F-7
<PAGE>

Note 1 - Nature of Business and Significant Accounting Policies - Continued

       Revenue and Cost Recognition - Continued
       ----------------------------

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

       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.  Depreciation is computed on
       the straight-line and accelerated methods, generally using the following
       estimated useful lives:

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

       Intangible Assets
       -----------------

       Goodwill, representing the excess of cost over the fair value of net
       assets acquired in the acquisitions of Atlas and Westland, is being
       amortized over twenty-five years and twenty years, respectively, using
       the straight-line method.  The patent is amortized over its estimated
       useful life of approximately seventeen years 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.

                                      F-8
<PAGE>

Note 1 - Nature of Business and Significant Accounting Policies - Continued

       Health Insurance
       ----------------

       The Company was self-insured for certain losses relating to employee
       medical benefits. The Company discontinued its self-insured plan for the
       majority of health benefits during the year ended June 30, 2001 and now
       uses a third party insurer.

       Income Taxes
       ------------

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

       Loss Per Share
       --------------

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

         Numerator for basic and diluted earnings per share
           Net loss                                              $(3,113,741)

         Denominator for basic and diluted earnings per share
           Weighted average shares outstanding                     2,475,000

       Options to purchase shares of common stock were outstanding (see Notes 6
       and 7), but were not included in the computation of diluted earnings per
       share because there was a net loss in fiscal 2001; therefore any
       additional shares would be antidilutive.

       Long-Lived Assets
       -----------------

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

                                      F-9
<PAGE>

Note 1 - Nature of Business and Significant Accounting Policies - Continued

       Recent Accounting Pronouncements
       --------------------------------

       In December 1999, the Securities and Exchange Commission ("SEC") issued
       Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
       Financial Statements". SAB No. 101 summarizes certain of the SEC's views
       in applying accounting principles generally accepted in the United States
       to revenue recognition in financial statements. The adoption of SAB No.
       101 did not have a material impact on the Company's results of operations
       or its financial position.

       In July 2000, the Emerging Issues Task Force ("EITF") reached a final
       consensus on Issue No. 00-10, "Accounting for Shipping and Handling Fees
       and Costs" ("EITF No. 00-10"). When adopted, EITF No. 00-10 requires that
       all amounts billed to customers in sale transactions related to shipping
       and handling be classified as revenue.  In addition, EITF No. 00-10
       requires that shipping and handling fees and costs in financial
       statements for prior periods presented for comparative purposes be
       reclassified.  EITF No. 00-10 must be adopted prior to, or concurrent
       with, the adoption of SAB No. 101.  The adoption of EITF No. 00-10 did
       not have a material impact on the Company's results of operations or its
       financial position.

       In June 2001, the FASB issued SFAS No. 141, "Business Combinations", and
       SFAS No. 142, "Goodwill and Other Intangible Assets".  SFAS No. 141
       requires companies to apply the purchase method of accounting for all
       business combinations initiated after June 30, 2001 and prohibits the use
       of the pooling-of-interest method.  SFAS No. 142 changes the method by
       which companies may recognize intangible assets in purchase business
       combinations and generally requires identifiable intangible assets to be
       recognized separately from goodwill.  In addition, it eliminates the
       amortization of all existing and newly acquired goodwill on a prospective
       basis and requires companies to assess goodwill for impairment, at least
       annually, based on the fair value of the reporting unit.

       The Company will be required to adopt SFAS Nos. 141 and 142 on July 1,
       2002, however, early adoption as of July 1, 2001 is permitted.
       Management has not determined the impact the adoption of SFAS Nos. 141
       and 142 will have on the Company's consolidated financial statements or
       when the Company will elect to adopt these statements.

                                      F-10
<PAGE>

Note 1 - Nature of Business and Significant Accounting Policies - Continued

       Recent Accounting Pronouncements - Continued
       --------------------------------

       In July 2001, the FASB issued Statement of Financial Accounting Standards
       No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143").
       SFAS No. 143, is effective for fiscal years beginning after June 15,
       2002, and establishes an accounting standard requiring the recording of
       the fair value of liabilities associated with the retirement of long-
       lived assets in the period in which they are incurred.  The Company is in
       the process of determining the future impact that the adoption of SFAS
       No. 143 may have on our earnings and financial position.


Note 2 - Acquisitions

       On February 23, 2000, PTC, through a wholly-owned subsidiary formed for
       this purpose, purchased substantially all of the assets of Westland
       pursuant to an Asset Purchase Agreement entered into on such date for
       cash of $3,750,000, notes payable to seller of $2,750,000 (see Note 5),
       and related acquisition costs of $140,621.  Additional consideration of
       up to $2,300,000 may be due the seller dependant upon Westland's average
       earnings before interest and taxes during the period of January 1, 2000
       through December 31, 2002.

       The acquisition has been accounted for using the purchase method of
       accounting and, accordingly, the purchase price has been allocated to the
       assets purchased based on the estimated fair values at the date of
       acquisition.  The excess of the purchase price over the estimated fair
       value of assets acquired of $4,580,621 was recorded as goodwill and is
       being amortized on a straight-line basis over twenty years.

       The purchase price was allocated as follows:

         Working capital                                            $1,200,000
         Equipment                                                     110,000
         Patent                                                        750,000
         Goodwill                                                    4,580,621
                                                                    ----------

               Total purchase price                                 $6,640,621
                                                                    ==========

                                      F-11
<PAGE>

Note 3 - Contract Receivables

       The contract receivables consist of the following:

         Billed
           Completed contracts                                     $ 2,502,770
           Uncompleted contracts                                     3,371,003
                                                                   -----------

                   Total contract receivables                        5,873,773

         Less allowance for doubtful accounts                         (340,000)
                                                                   -----------

                   Total                                           $ 5,533,773
                                                                   ===========


Note 4 - Costs and Estimated Earnings on Uncompleted Contracts

       Costs incurred on uncompleted contracts                     $28,888,443

       Estimated earnings on uncompleted contracts                  10,168,707
                                                                   -----------

               Total costs and estimated earnings incurred
                 on uncompleted contracts                           39,057,150

       Less billings to date                                        32,136,225
                                                                   -----------

               Total                                               $ 6,920,925
                                                                   ===========

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

       Costs and estimated earnings in excess of
           billings on uncompleted contracts                       $ 7,172,626

       Billings in excess of costs and estimated
           earnings on uncompleted contracts                          (251,701)
                                                                   -----------

               Total                                               $ 6,920,925
                                                                   ===========

                                      F-12
<PAGE>

Note 5 - Notes Payable and Long-Term Debt

       $16,000,000 revolving credit agreement with a
         bank. The amount that may be borrowed under
         this agreement is limited to specified
         percentages of contract receivables, work-in
         process and property and equipment of Atlas.
         The approximate amount available under the
         credit agreement at June 30, 2001 is
         $2,300,000. The revolving credit agreement
         provides for outstanding borrowings to bear
         interest at a rate equal to (a) the bank's
         prime rate (which was 6.75% at June 30,
         2001) less 1/4%, or (b) the 30, 60, or 90
         day LIBOR rate plus 230 basis points, at the
         Company's option. No principal payments on
         outstanding borrowings are due until January
         31, 2002, at which time the entire balance
         is due. Borrowings under this agreement are
         secured by substantially all assets of Atlas               $ 7,858,000

       First mortgage note payable - See Item (1) on F-15             3,300,000
                                                                    -----------

               Total - this page                                     11,158,000

                                      F-13
<PAGE>

Note 5 - Notes Payable and Long-Term Debt - Continued

<TABLE>
<S>                                                                                 <C>
                 Total - from previous page                                         $11,158,000

     $3,600,000 term loan with a bank used for the purchase of
        Westland. The agreement provides for outstanding borrowings to
        bear interest at a rate equal to the bank's prime rate (which
        was 6.75% at June 30, 2001) plus 1 1/4% payable monthly.
        Minimum principal payments on the outstanding borrowings are due
        as follows: February 2002 - $540,000; February 2003 - $900,000;
        February 2004 - $900,000; and February 2005 - $1,260,000.
        Borrowings under this agreement are secured by substantially all
        assets of the Company                                                         3,600,000

     Subordinated term loans with the former owner of Westland. The
        agreements provide for outstanding borrowings to bear interest at
        a rate of 9.25%. Principal payments were to commence in five equal
        installments beginning in February 2001, the term notes are unsecured         2,750,000

     Other                                                                                33,899
                                                                                   -------------

                 Total                                                                17,541,899

     Less current portion of long-term debt                                            9,831,899
                                                                                   -------------

                 Total debt reflected as long-term                                 $   7,710,000
                                                                                   =============
</TABLE>

                                     F-14
<PAGE>

Note 5 - Notes Payable and Long-Term Debt - Continued

      (1) In January 1997, the Company borrowed $4,500,000 in connection with
          variable rate industrial revenue bonds issued by The Economic
          Development Corporation of the County of Genesee.  The note is payable
          in amounts of $400,000 per year for fiscal years 2000-2001 and then
          $300,000 per year through fiscal 2012.  Interest is payable quarterly
          and is set weekly by the remarketing agent at a level which allows the
          bonds to be sold at par.  The interest rate at June 30, 2001 was
          approximately 4%.  To enhance the marketability of the bonds and
          guarantee payment of the bonds on the Company's behalf, a bank has
          issued its Letter of Credit through December 2001, whereby a fee of 1%
          is charged annually.  Also, the bonds are secured by a first mortgage
          note secured by substantially all assets of the Company.

      The amounts of long-term debt coming due during the five years ending
      June 30, 2006 and thereafter are as follows:

        2002                                                      $9,831,899
        2003                                                       1,750,000
        2004                                                       1,750,000
        2005                                                       2,110,000
        2006                                                         300,000
        Thereafter                                                 1,800,000

      The Company's revolving credit agreement and term loan with a bank impose
      financial levels of tangible capital funds, specified leverage ratios
      (debt to equity), and fixed expense coverage. At June 30, 2001, the
      Company was not in compliance with the financial covenants specified in
      the agreements. On October 12, 2001, the Company obtained a waiver from
      the bank waiving its acceleration rights as a result of the Company's
      noncompliance.

      The Company's revolving credit agreement expires on January 31, 2002.
      Should the Company not be able to renew its revolving credit agreement or
      find a suitable replacement credit agreement, non-renewal could have a
      material adverse affect on the Company's operations.

                                     F-15
<PAGE>

Note 6  -  Shareholders' 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 May 24, 1996, and
      ending December 31, 2001. 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.

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

      At June 30, 2001, 3,700,000 shares of common stock were reserved for the
      issuance upon exercise of the warrants described above.

      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.  No preferred stock has been issued by the Company.

      Effective as of the close of business on May 4, 2001, the Company's Common
      Stock was delisted for trading on the NASDAQ SmallCap Market. Trading in
      the Company's Common Stock, Warrants and Units is now conducted in the
      over-the-counter markets on the NASD Electronic Bulletin Board. The OTC
      Bulletin Board is an inter-dealer automated quotation system sponsored and
      operated by the NASD for equity securities not included in the NASDAQ
      Stock Market. Such over-the-counter market quotations reflect inter-dealer
      prices, without retail mark-up, mark-down or commission and may not
      necessarily reflect actual transactions. The delisting could have a
      material adverse effect upon the Company in a number of ways, including
      its ability to raise additional capital. In addition, the absence of a
      trading system may adversely affect the ability of broker-dealers to sell
      the Company's Common Stock, and consequently may limit the public market
      for such Stock and have a negative effect upon its trading price. There
      can be no assurance that the Company's Common Stock will be relisted on
      the NASDAQ National Market at any future date or that such stock will be
      listed or traded on any market or trading system.


                                     F-16

<PAGE>

Note 7 - Employee Benefit Plans

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

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

      A summary of the status of the Company's stock options is as follows:

<TABLE>
<CAPTION>
                                                                                                            Weighted
                                                                                                             Average
                                                                                                            Exercise
                                                                                                Shares        Price
                                                                                              -----------  -----------
        <S>                                                                                   <C>          <C>
         Outstanding and exercisable at July 1, 2000                                              289,167        $3.00
         Granted                                                                                        -            -
         Expired                                                                                        -            -
         Exercised                                                                                      -            -
                                                                                              -----------  -----------

         Outstanding and exercisable at June 30, 2001                                             289,167        $3.00
                                                                                              ===========  ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                               Weighted Average
                                                                                ---------------------------------------
                                                              Options
                                                            Outstanding            Remaining
                                Range of                        and               Contractual              Exercisable
                                Exercise Prices             Exercisable              Life                     Price
                               ---------------------------------------------------------------------------------------
                               <S>                          <C>                   <C>                      <C>
                                $ 1.375 - $ 5.00              289,167               2 years                   $3.00
</TABLE>

                                     F-17
<PAGE>

Note 8  -  Income Taxes

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

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

         Current
           Warranty accrual                                      $  107,100
           Inventory net realizable value reserve                    51,000
           Other                                                    128,900
                                                                 ----------

               Net current deferred tax asset                    $  287,000
                                                                 ==========

         Non-Current
           Depreciation and basis of assets                      $ (700,000)
           Research credit carryforward - net                       168,400
           Net operating loss carryforwards                       1,915,000
           Executive deferred compensation agreement                302,800
           Other                                                     10,800
           Valuation allowance                                     (646,000)
                                                                 ----------

               Net non-current deferred tax asset                $1,051,000
                                                                 ==========

                                     F-18
<PAGE>

Note 8  -  Income Taxes - Continued

       The significant component of income tax benefit is as follows:

         Federal
           Deferred                                               $ (572,000)
                                                                  ==========

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

         Tax expense benefit at statutory rate                   $(1,253,000)
         Valuation allowance and other
           non-deductible items                                      699,000
         Other - net                                                 (18,000)
                                                                  ----------

               Total income tax benefit                           $ (572,000)
                                                                  ==========

       The Company has tax research credit carryforwards totaling approximately
       $990,000 that will begin to expire in 2012.  Based on management's
       estimates, these credit carryforwards have been reduced by 50% for
       financial statement purposes to reflect their estimated future value.

       In addition, the Company has net operating loss carryforwards totaling
       approximately $5,600,000 that will begin to expire in 2020.

                                     F-19
<PAGE>

Note 9  -  Operating Lease Commitments

       The Company entered into a new building leasing agreement in April 2001
       with the term beginning July 2001 and ending June 2007 for its Westland
       subsidiary.  Rent expense for the year ended June 30, 2001, totaled
       $215,980.  Minimum rental payments under this noncancelable lease, which
       contains a five year renewal option, at June 30, 2001, are as follows:

         2002                                    $   196,961
         2003                                        214,867
         2004                                        214,867
         2005                                        214,867
         2006                                        214,867



Note 10 - Export Sales and Major Customers

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

         United States                           $21,313,623
         Mexico                                    1,371,605
         England                                   2,746,052
         Germany                                   1,073,016
         China                                     1,109,200
         Canada                                      290,023
         Other foreign countries                      88,868
                                                 -----------

               Total                             $27,992,387
                                                 ===========

       For the year ended June 30, 2001, the Company had sales to two major
       customers (each representing more than 10% of total net sales) amounting
       to approximately 47% of total net sales.

                                     F-20
<PAGE>

Note 11  -  Bonus Restructuring

       During fiscal 1998, the Company amended the employment agreements of two
       executive officers of Atlas that were previously entered into in
       connection with the acquisition of Atlas.  These amended employment
       agreements are identical except that one agreement expired on December
       31, 1998, and 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
       the remaining agreement is $198,588, subject to cost of living increases
       for one of the officers. The amended agreements also provide that each
       executive, regardless of future employment, will receive four annual
       payments of $207,571 commencing July 30, 1999.

       Each executive also received 150,000 shares of restricted common stock of
       the Company issued during fiscal 1999.  The restricted common stock has
       been valued at market value less a 30% discount for lack of
       marketability.  Included in the accompanying consolidated financial
       statements as of and for the year ended June 30, 2001 related to these
       amended agreements are the following:

         Consolidated Balance Sheet
           Current maturities of executive
             deferred compensation agreements                       $  630,282

           Executive deferred compensation
           agreements, less current maturities                         344,651



Note 12  -  Legal Proceedings

       On March 9, 2001, the Company filed suit as plaintiff in the State of
       Michigan Sixth Judicial District Court in Oakland County, Michigan
       against Thomas G. Lee, the former owner and operator of Westland. The
       lawsuit contends Mr. Lee made fraudulent misrepresentations and omitted
       material facts prior to the purchase of Westland by the Company. The
       lawsuit seeks one or more remedies, including damages. Mr. Lee has filed
       a response and counterclaim seeking payment for contractual obligations
       structured at the time of the Westland purchase and for related
       employment compensation. This litigation is in the early phase of
       discovery at June 30, 2001.

                                     F-21