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<P style="MARGIN-TOP: 4px; MARGIN-BOTTOM: 0px" align=center><FONT style="FONT-FAMILY: Times New Roman" size=5><B>UNITED STATES </B></FONT></P>

<P STYLE="margin-top: 4px; margin-bottom: 0px; text-align: center"><FONT STYLE="font: large Times New Roman"><B>SECURITIES AND
EXCHANGE COMMISSION </B></FONT></P>

<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px" align=center><FONT style="FONT-FAMILY: Times New Roman" size=3><B>Washington, D.C. 20549 </B></FONT></P>

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<P style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px" align=center><FONT style="FONT-FAMILY: Times New Roman" size=5><B>FORM 8-K </B></FONT></P>

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<P style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px" align=center><FONT style="FONT-FAMILY: Times New Roman" size=4><B>CURRENT REPORT </B></FONT></P>

<P style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px" align=center><FONT style="FONT-FAMILY: times new roman"><B><FONT style="FONT-SIZE: 11pt">Pursuant to Section&nbsp;13 or 15(d) of </FONT></B></FONT></P>

<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px" align=center><FONT style="FONT-FAMILY: times new roman"><B>The Securities Exchange Act of 1934 </B></FONT></P>

<P style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px" align=center><FONT STYLE="font-family: times new roman"><B>Date of Report
(Date of earliest event reported): </B></FONT><B><FONT STYLE="font: 11pt Times New Roman"></FONT><FONT STYLE="font-family: times new roman">November
8, 2012 </FONT></B></P>

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   <TD width="56%"><FONT style="FONT-SIZE: 22pt"><STRONG><FONT style="FONT-FAMILY: arial; FONT-SIZE: 16pt">Performance Technologies,</FONT></STRONG><FONT style="FONT-FAMILY: arial; FONT-SIZE: 16pt"> </FONT></FONT></TD></TR>

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   <TD width="56%"><FONT style="FONT-FAMILY: Times New Roman" size=6><B><FONT style="FONT-FAMILY: arial; FONT-SIZE: 16pt">Incorporated</FONT><FONT style="FONT-FAMILY: arial; FONT-SIZE: 16pt">&nbsp;</FONT></B></FONT></TD></TR></TABLE><FONT style="FONT-FAMILY: Times New Roman" size=2>(Exact name of registrant as specified in its charter)</FONT></P>

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   <TD vAlign=top align=center><FONT style="FONT-FAMILY: Times New Roman" size=2><B>Delaware</B></FONT></TD>

   <TD vAlign=bottom><FONT STYLE="font-size: xx-small"><B>&nbsp;</B></FONT></TD>

   <TD vAlign=bottom align=center><FONT STYLE="font: x-small Times New Roman"><B>0-27460</B></FONT></TD>

   <TD vAlign=bottom><FONT STYLE="font-size: xx-small"><B>&nbsp;</B></FONT></TD>

   <TD vAlign=bottom align=center><FONT STYLE="font: x-small Times New Roman"><B>16-1158413</B></FONT></TD></TR>

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   <TD vAlign=top align=center><P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px" align=center><FONT STYLE="font: xx-small Times New Roman">(State
                               or other jurisdiction</FONT></P>

   <P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 1px" align=center><FONT STYLE="font: xx-small Times New Roman">of incorporation)</FONT></P></TD>

   <TD vAlign=bottom><FONT STYLE="font-size: xx-small"><B>&nbsp;</B></FONT></TD>

   <TD vAlign=top align=center><FONT STYLE="font: xx-small Times New Roman">(Commission File Number)</FONT></TD>

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   <P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px" align=center><FONT STYLE="font: xx-small Times New Roman">(I.R.S. Employer</FONT></P>

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   <TD vAlign=top colSpan=3 align=center><FONT style="FONT-FAMILY: Times New Roman" size=2><B>140 Canal View Boulevard&nbsp;&nbsp; Rochester, New York</B></FONT></TD>

   <TD vAlign=bottom><FONT size=1>&nbsp;</FONT></TD>

   <TD vAlign=bottom align=center><FONT style="FONT-FAMILY: Times New Roman" size=2><B>14623</B></FONT></TD></TR>

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   <TD vAlign=top colSpan=3 align=center><FONT STYLE="font: xx-small Times New Roman">(Address of&nbsp;principal&nbsp;executive
   offices)</FONT></TD>

   <TD vAlign=bottom><FONT STYLE="font-size: xx-small"><B>&nbsp;</B></FONT></TD>

   <TD vAlign=bottom align=center><FONT STYLE="font: xx-small Times New Roman"><B>(Zip Code)</B></FONT></TD></TR>                                                                                                                      <TR>
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   <TD COLSPAN="5" STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: x-small">&nbsp;</FONT><FONT STYLE="font-size: xx-small">Registrant&#8217;s
   telephone number, including area code:</FONT><FONT STYLE="font-size: x-small"><B> (585)&nbsp;256-0200</B></FONT></TD></TR>
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   <TD COLSPAN="5" STYLE="vertical-align: top; text-align: center">&nbsp;</TD></TR>
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<P style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><FONT style="FONT-FAMILY: Times New Roman" size=2>Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: </FONT></P>

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   <TD vAlign=top width="4%" align=left><FONT style="FONT-FAMILY: Times New Roman" size=2><FONT style="FONT-FAMILY: WINGDINGS">&#168;</FONT></FONT></TD>

   <TD vAlign=top align=left><FONT style="FONT-FAMILY: Times New Roman" size=2>Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR></TABLE>

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   <TD vAlign=top width="4%" align=left><FONT style="FONT-FAMILY: Times New Roman" size=2><FONT style="FONT-FAMILY: WINGDINGS">&#168;</FONT></FONT></TD>

   <TD vAlign=top align=left><FONT style="FONT-FAMILY: Times New Roman" size=2>Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR></TABLE>

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   <TD vAlign=top width="4%" align=left><FONT style="FONT-FAMILY: Times New Roman" size=2><FONT style="FONT-FAMILY: WINGDINGS">&#168;</FONT></FONT></TD>

   <TD vAlign=top align=left><FONT style="FONT-FAMILY: Times New Roman" size=2>Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR></TABLE>

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   <TD vAlign=top width="4%" align=left><FONT style="FONT-FAMILY: Times New Roman" size=2><FONT style="FONT-FAMILY: WINGDINGS">&#168;</FONT></FONT></TD>

   <TD vAlign=top align=left><FONT style="FONT-FAMILY: Times New Roman" size=2>Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></TD></TR></TABLE>

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<P STYLE="text-align: justify"><FONT STYLE="font: x-small TimesNewRomanPS-BoldMT,Times New Roman,Times,serif"><B>Item 2.02 Results
of Operations and Financial Condition</B></FONT></P>

<P align=justify><FONT STYLE="font: x-small TimesNewRomanPSMT,Times New Roman,Times,serif">On&nbsp;</FONT><FONT STYLE="font-family: Times New Roman">November
8</FONT><FONT STYLE="font-family: TimesNewRomanPSMT,Times New Roman,Times,serif">, 201</FONT><FONT STYLE="font-family: Times New Roman">2</FONT><FONT STYLE="font-family: TimesNewRomanPSMT,Times New Roman,Times,serif">,
Performance Technologies, Incorporated </FONT><FONT STYLE="font-family: Times New Roman">("PT") </FONT><FONT STYLE="font-family: TimesNewRomanPSMT,Times New Roman,Times,serif">issued
a press release announcing its results of operations for the quarter </FONT><FONT STYLE="font-family: Times New Roman">and nine
months ended September 30, 2012</FONT><FONT STYLE="font-family: TimesNewRomanPSMT,Times New Roman,Times,serif">. A copy of the press
release is being furnished as Exhibit 99.1 to this Form 8-K.</FONT></P>

<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">(c) Exhibits.</FONT></P>

<P align=justify><FONT STYLE="font: x-small TimesNewRomanPSMT,Times New Roman,Times,serif">(99.1) Press release issued by PT
on&nbsp;November 8, 2012.</FONT></P>

<P align=justify>&nbsp;</P>

<P align=justify>&nbsp;</P>

<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif"><B>SIGNATURES</B></FONT></P>

<P align=justify><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.</FONT></P>

<P align=justify><B><FONT size=2 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></B></P>

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   <TD width="61%" colSpan=2 align=left><FONT size=2 face="Times New Roman"><B>PERFORMANCE TECHNOLOGIES, INCORPORATED</B></FONT></TD>

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   <TD width="45%" align=left>&nbsp;</TD>

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   <TD width="18%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif"><FONT size=2 face="Times New Roman">November
   8, 2012</FONT></FONT></TD>

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   <TD style="BORDER-BOTTOM: #000000 1px solid" width="45%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">By /s/ John M. Slusser</FONT>&nbsp; </TD>

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   <TD width="45%" align=left><FONT size=2 face="Times New Roman">John M. Slusser</FONT></TD>

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   <TD width="18%" align=left>&nbsp; </TD>

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   <TD width="45%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">President and Chief Executive Officer</FONT>&nbsp; </TD>

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   <TD width="45%" align=left>&nbsp;</TD>

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   <TD width="45%" align=left>&nbsp;</TD>

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   <TD width="18%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif"><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">November <FONT size=2 face="Times New Roman">8, 2012</FONT></FONT></FONT></TD>

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   <TD style="BORDER-BOTTOM: #000000 1px solid" width="45%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">By /s/ Dorrance W. Lamb</FONT>&nbsp; </TD>

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   <TD width="45%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Dorrance W. Lamb</FONT> </TD>

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   <TD width="45%" align=left><FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">Senior Vice President of Finance</FONT>&nbsp;<FONT size=2 face="TimesNewRomanPSMT,Times New Roman,Times,serif">and Chief Financial Officer</FONT></TD>

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<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: right"><B>Exhibit 99.1</B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: right"></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><B>For more information contact:&#9; </B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">Dorrance W. Lamb</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">SVP and Chief Financial Officer&#9;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">PT&#9;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">585-256-0200 ext. 7276</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">http://www.pt.com</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif">finance@pt.com</FONT>&#9;</P>

<P STYLE="font: bold 14pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><BR>
PT Announces Third Quarter 2012 Financial Results</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">ROCHESTER, NY &ndash; November 8, 2012 &ndash; PT (NASDAQ:
PTIX), a leading global provider of advanced network communications solutions, today announced its unaudited financial results
for the third quarter 2012.&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">Revenue in the third quarter 2012 amounted to $4.7 million,
compared to $9.0 million in the third quarter 2011. Revenue for the nine months ended September 30, 2012 amounted to $18.0 million,
compared to $27.1 million during the corresponding period in 2011.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">On the basis of generally accepted accounting principles (GAAP),
the net loss in the third quarter 2012 amounted to ($1.7 million), or ($.15) per basic share, based on 11.1 million shares outstanding,
including amortization of purchased intangible assets of $.03 per share and stock-based compensation expense of $.01 per share.
The GAAP net loss in the third quarter 2011 amounted to ($.1 million), or ($.01) per basic share, including a restructuring charge
of $.01 per share, an impairment charge of $.04 per share, amortization of purchased intangible assets of $.03 per share and stock-based
compensation expense of $.01 per share, based on 11.1 million shares outstanding.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">The GAAP net loss for the nine months ended September
30, 2012 amounted to ($3.1 million), or ($.28) per basic share, including amortization of purchased intangible assets of $.08
per share and stock-based compensation expense of $.02 per share, based on 11.1 million shares outstanding. The GAAP net loss
for the nine months ended September 30, 2011 amounted to ($1.6 million), or ($.15) per basic share, including a
restructuring charge of $.02 per share, an impairment charge of $.04 per share, amortization of purchased intangible assets
of $.07 per share, litigation expenses of $.04 per share, and stock-based compensation expense of $.02 per share, based on
11.1 million shares outstanding.</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">The non-GAAP net loss in the third quarter 2012 amounted to
($1.3 million), or ($.12) per basic share, compared to non-GAAP net income of $.7 million, or $.07 per share in the third
quarter 2011. The non-GAAP net loss for the nine months ended September 30, 2012 amounted to ($2.1 million), or ($.19) per basic
share, compared to net income of $.5 million, or $.04 per share for the nine months ended September 30, 2011. Please refer
to the reconciliations between GAAP and non-GAAP financial measures contained in this release.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">On September 30, 2012, the Company had cash and investments
amounting to $14.7 million, working capital of $17.1 million and no long-term debt.</P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="color: black">&quot;We are extremely dissatisfied
with our third quarter results,&rdquo; said John Slusser, president and chief executive officer. &quot;</FONT>After experiencing
a dramatic slowdown in telecommunications equipment revenue during the second quarter 2012, we surveyed our customer base to get
an updated view of their going forward product requirements and had mixed results. Our service provider customers generally expect
to make additional investments in their network infrastructure while our OEM customers were more reluctant to project requirements
because of little or no visibility of demand from their end customers. Based upon the feedback received and ongoing global economic
climate uncertainty, we have concluded that our quarterly revenue run rates will likely not return to the first quarter 2012 level
in the near term.<FONT STYLE="color: black"> Given this circumstance, we implemented a program to bring our operations more in
line with anticipated business opportunities.&quot;</FONT></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="color: black">&nbsp;</FONT></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="color: black">On October 31, 2012, PT announced a program to restructure its operations,
reduce its workforce, rationalize its product lines, and refocus its resources on initiatives that are more closely aligned with
the Company&rsquo;s near-term objectives and market potential. Specifically, the Company is reducing its personnel by fourteen
employees or 10% of its workforce and is recording a non-cash impairment charge against certain of PT&rsquo;s software development
costs and purchased intangible assets. As a result of this action, the Company expects to incur fourth quarter 2012 pre-tax restructuring
charges of approximately $.5 million, representing employee-related costs which will result in cash expenditures, and approximately
$.8 million, which will be recorded as a non-cash impairment charge. The Company currently estimates that the full annualized
cost savings resulting from this restructuring program will be in the range of $1.3 million to $1.5 million in 2013.<B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><B>About PT (www.pt.com) </B></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">PT (NASDAQ: PTIX) is a global supplier of advanced network communications
solutions for telecommunication service providers, government communications, and OEM markets. PT&rsquo;s product portfolio includes
IP-centric network elements and applications designed for high availability, scalability, and long life cycle deployments. PT&rsquo;s
SEGway&trade; SS7 and Diameter Signaling Solutions provide affordable, high density signaling and advanced routing for next-generation
LTE and IMS networks. These solutions enable IP migration, gateway capabilities, SIP bridging, and core-to-edge distributed intelligence,
as well as features such as Number Portability and SMS Spam Defense. PT&rsquo;s Multi-Protocol and Communication Server (MPS) product
portfolio enables LAN/WAN, radar and Smart-Grid networks to acquire, distribute and record critical data over IP Networks. PT&rsquo;s
industry-leading Monterey MicroTCA and IPnexus<SUP>&reg;</SUP> Platforms anchor a growing portfolio of the Company&rsquo;s own
solutions. Many other OEMs and application developers leverage PT&rsquo;s carrier-grade platforms and Linux<SUP>&reg;</SUP> development
environment (PT&rsquo;s NexusWare<SUP>&reg;</SUP>). PT is headquartered in Rochester, NY and maintains sales and engineering offices
around the world.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

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<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><B></B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><B>Forward-Looking Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">The Private Securities Litigation Reform Act of 1995 provides
a &quot;safe harbor&quot; for certain forward-looking statements. This press release contains forward-looking statements which
reflect the Company's current views with respect to future events and financial performance, within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and is subject to the safe harbor provisions
of those Sections. The Company&rsquo;s future operating results are subject to various risks and uncertainties and could differ
materially from those discussed in the forward-looking statements and may be affected by various trends and factors which are beyond
the Company&rsquo;s control. These risks and uncertainties include, among other factors, business and economic conditions, rapid
technological changes accompanied by frequent new product introductions, competitive pressures, dependence on key customers and
the potential loss of key customers, inability to gauge order flows from customers, fluctuations in quarterly and annual results,
the reliance on a limited number of third party suppliers, limitations of PT&rsquo;s manufacturing capacity and arrangements, the
protection of PT&rsquo;s proprietary technology, errors or defects in our products, the effects of pending or threatened litigation,
the dependence on key personnel, changes in critical accounting estimates, potential impairments related to investments, foreign
regulations, possible loss or significant curtailment of significant government contracts or subcontracts, and potential material
weaknesses in internal control over financial reporting. In addition, during weak or uncertain economic periods, customers&rsquo;
visibility deteriorates causing delays in the placement of their orders. These factors often result in a substantial portion of
PT&rsquo;s revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter. Forward-looking
statements should be read in conjunction with the most recent audited Consolidated Financial Statements, the Notes thereto, Risk
Factors, and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company, as contained
in the Company&rsquo;s Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 0; margin-left: 0"><B>Non-GAAP Financial
Measures</B></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">As a supplement to the GAAP-based consolidated financial statements
contained in this press release, the Company is providing a presentation of non-GAAP financial measures which can be useful to
investors to gain an overall understanding of the Company&rsquo;s current financial performance. Specifically, the Company believes
the non-GAAP financial measures provide useful information to investors by excluding certain expenses the Company believes are
not indicative of its core operating results. The non-GAAP financial measures exclude certain expenses such as the effects of
(a) amortization of purchased intangible assets, (b) stock-based compensation, (c) restructuring costs, (d) litigation expenses
and (e) impairment charges &ndash; vendor software.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">Management utilizes a number of different financial measures,
both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions and
forecasting and planning for future periods. We also consider the use of the non-GAAP financial measures to be helpful in assessing
various aspects of our business operations.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">Non-GAAP financial measures are not meant to be considered
a substitute for the corresponding GAAP financial information and should not be considered in isolation from measures of financial
performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the
use of non-GAAP financial measures as an analytical tool and that these measures should only be used to evaluate the Company&rsquo;s
results of operations in conjunction with the corresponding GAAP financial information.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">A reconciliation of non-GAAP measures to
GAAP measures is included herein.</P>

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<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin-right: 0; margin-left: 0"></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">###</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">A conference call will be held on Monday, November 12, at 10:00
a.m., New York time, to discuss the results. All institutional investors can participate in the conference by dialing (866) 494-3746
or (416) 915-1196. The call will be available simultaneously for all other investors at (866) 494-3387 or (416) 915-1198. A digital
recording of this conference call may be accessed immediately after its completion from November 12 through November 16, 2012.
To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 510179. A live webcast of the
conference call will be available on the PT website at www.pt.com and will be archived to the site within two hours after the
completion of the call.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">PT is a trademark of Performance Technologies, Inc. The names
of actual companies, products, or services may be the trademarks, registered trademarks, or service marks of their respective
owners in the United States and/or other countries.</P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><B>PERFORMANCE TECHNOLOGIES, INCORPORATED AND
SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>(unaudited)</B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0.25in 0 12pt; text-align: center; text-indent: 0.5in"><B>ASSETS</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Arial, Helvetica, Sans-Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30, <BR>2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, <BR>2011</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="9">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 50%; text-align: left; padding-left: 10pt">Cash and cash equivalents</TD><TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">6,881,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">9,641,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 10pt">Investments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,830,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,798,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,150,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,622,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 10pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,693,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,421,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Prepaid expenses and other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,020,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,155,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Prepaid income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">119,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">67,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,693,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,704,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">Investments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,974,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,362,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Property, equipment and improvements, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,791,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,891,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Software development costs, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,451,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,932,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Purchased intangible assets, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,756,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,390,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 20pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">34,665,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,279,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 12pt 0; text-align: center; text-indent: 0.5in">LIABILITIES AND
STOCKHOLDERS&rsquo; EQUITY</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Arial, Helvetica, Sans-Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 10pt">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 50%; text-align: left; padding-left: 20pt">Accounts payable</TD><TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">717,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">1,015,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 20pt">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,674,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,547,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt">Deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,220,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,808,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 20pt">Fair value of foreign currency hedges</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt">Other payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">999,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 30pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,611,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,415,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Deferred income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">89,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">83,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt">Total liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,700,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,498,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Stockholders&rsquo; equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt">Preferred stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 20pt">Common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,533,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,347,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 20pt">Retained earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,099,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,237,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt">Accumulated other comprehensive income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(118,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt">Treasury stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,818,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,818,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 30pt">Total stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">28,965,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">31,781,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 30pt">Total liabilities and stockholders&rsquo; equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">34,665,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,279,000</TD></TR></TABLE>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0.25in 0 12pt; text-align: center; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 7 -->
    <DIV STYLE="margin-bottom: 6pt">&nbsp;</DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt">&nbsp;</DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in">PERFORMANCE TECHNOLOGIES,
INCORPORATED AND SUBSIDIARIES</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in">CONSOLIDATED STATEMENTS
OF OPERATIONS</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in">FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2012 AND 2011</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in"></P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in">(unaudited)</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"></P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Arial, Helvetica, Sans-Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="7" STYLE="text-align: center"><B>Three Months Ended <BR>September 30,</B>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="7" STYLE="text-align: center"><B>Nine Months Ended <BR>September 30,</B>&nbsp;&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 40%; padding-left: 5.4pt">Sales</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,671,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">9,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">18,045,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">27,125,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Cost of goods sold</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,870,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,454,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,611,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14,419,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Gross profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,801,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,546,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,434,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,706,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Operating expenses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Selling and marketing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,232,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,585,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,127,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,966,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 10pt">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,221,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,593,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,349,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,342,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">983,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">981,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,125,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,590,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 10pt">Impairment charge-vendor software</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Restructuring charges</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">71,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">253,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 20pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,436,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,630,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,601,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14,551,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Loss from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,635,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(84,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,167,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,845,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Other income, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">42,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">41,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">86,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Loss before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,593,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(88,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,126,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,759,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Income tax provision (benefit)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">80,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(123,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 20pt">Net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,673,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(86,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,138,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,636,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 5.4pt">Basic loss per share</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(.15</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(.01</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(.28</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(.15</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 5.4pt">Weighted average common shares</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,116,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,116,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,116,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,116,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>








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<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">PERFORMANCE TECHNOLOGIES, INCORPORATED AND
SUBSIDIARIES</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2012 AND 2011</P>

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<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in">(unaudited)</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 9pt Arial, Helvetica, Sans-Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center">Three Months Ended <BR> September 30,</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center">Nine Months Ended <BR>September 30,</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="font-size: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 5.4pt">Gross Profit Reconciliation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 52%; text-align: left; padding-left: 5.4pt">GAAP gross profit</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1,801,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">4,546,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">8,434,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">12,706,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;Amortization of purchased intangible assets<SUP>(a)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">302,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">891,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">812,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;&nbsp;Stock-based compensation<SUP>(b)</SUP></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP gross profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,107,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,829,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,335,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,527,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP gross profit percentage of sales</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45.1</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">53.7</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">51.7</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49.9</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 5.4pt">Operating Expense Reconciliation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 10pt">GAAP operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,436,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,630,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,601,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,551,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">&nbsp;&nbsp;Stock-based compensation <SUP>(b)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(57,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(63,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(176,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(225,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 10pt">&nbsp;&nbsp;Restructuring costs<SUP>(c)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(71,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(253,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">&nbsp;&nbsp;Litigation expenses<SUP>(d)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(414,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">&nbsp;&nbsp;Impairment charge-vendor software<SUP>(e)</SUP></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(400,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(400,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,379,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,096,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,425,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,259,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 5.4pt">Net Loss Reconciliation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">&nbsp;GAAP net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,673,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(86,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,138,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,636,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;Amortization of purchased intangible assets<SUP>(a)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">302,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">891,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">812,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;&nbsp;Stock-based compensation<SUP>(b)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">61,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">66,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">186,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">234,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;Restructuring costs<SUP>(c)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">71,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">253,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;Litigation expenses<SUP>(d)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">414,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;&nbsp;Impairment charge-vendor software<SUP>(e)</SUP></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">400,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">400,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP net (loss) income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,310,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">731,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,061,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">477,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; padding-left: 5.4pt">Loss per Common Share</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">GAAP basic net loss per common share</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.01</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.28</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Non-GAAP basic<SUP>(f)</SUP> net (loss) income per common share</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.12</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">.07</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.19</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">.04</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>









<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"></P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif">&nbsp;</FONT></P>


<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif">The Non-GAAP
financial measures above, and their reconciliation to our GAAP results for the periods presented, reflect adjustments relating
to the following items:</FONT></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><BR>
<FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif"><SUP>(a) </SUP>Amortization of purchased intangible assets: a non-cash expense
arising from the acquisition of intangible assets that the Company is required to amortize over their expected useful lives. The
value of purchased intangible assets increased significantly as a result of the acquisition of the USP and SP2000 signaling technologies
from GENBAND in January 2011.</FONT></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif">&nbsp;</FONT></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif"><SUP>(b) </SUP>Stock-based
compensation costs: a non-cash expense incurred in accordance with share-based compensation accounting guidance.</FONT></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif">&nbsp;</FONT></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif"><SUP>(c) </SUP>Restructuring
costs: costs incurred as a result of restructuring activities taken to bring operating expenses more in line with expected revenues.</FONT></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif"><SUP>(d)</SUP></FONT>
Litigation expenses: legal expenses not indicative of core operating activities.</P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif"><SUP>&nbsp;</SUP></FONT></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif"><SUP>(e)</SUP></FONT>
Impairment charge - vendor software - One-time impairment charge recorded in connection with the termination of a marketing reseller
agreement with a vendor, not indicative of core operating activities.</P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif">&nbsp;</FONT></P>

<P STYLE="font: 9pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 9pt Arial, Helvetica, Sans-Serif"><SUP>(f) </SUP>Basic
and diluted net income per common share are identical for the three and nine months ended September 30, 2011.</FONT></P>



<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: right"></P>

<P STYLE="margin: 0"><FONT STYLE="font-size: 9pt">&nbsp;</FONT></P>

</BODY>
</HTML>
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{"company-data": {"conformed-name": "PERFORMANCE TECHNOLOGIES INC \\DE\\", "cik": "0001003950", "assigned-sic": "3576", "irs-number": "161158413", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-27460", "film-number": "121191202"}, "business-address": {"street1": "140 CANAL VIEW BOULEVARD", "city": "ROCHESTER", "state": "NY", "zip": "14623", "phone": "5852560200"}, "mail-address": {"street1": "140 CANAL VIEW BOULEVARD", "city": "ROCHESTER", "state": "NY", "zip": "14623"}}
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
November
8, 2012
Performance Technologies,
Incorporated
(Exact name of registrant as specified in its charter)
Delaware
0-27460
16-1158413
(State
                               or other jurisdiction
of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)
140 Canal View Boulevard   Rochester, New York
14623
(Address of principal executive
   offices)
(Zip Code)
Registrant's
   telephone number, including area code:
(585) 256-0200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results
of Operations and Financial Condition
On
November
8
, 201
2
,
Performance Technologies, Incorporated
("PT")
issued
a press release announcing its results of operations for the quarter
and nine
months ended September 30, 2012
. A copy of the press
release is being furnished as Exhibit 99.1 to this Form 8-K.
(c) Exhibits.
(99.1) Press release issued by PT
on November 8, 2012.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
PERFORMANCE TECHNOLOGIES, INCORPORATED
November
   8, 2012
By /s/ John M. Slusser
John M. Slusser
President and Chief Executive Officer
November
8, 2012
By /s/ Dorrance W. Lamb
Dorrance W. Lamb
Senior Vice President of Finance
and Chief Financial Officer
Exhibit 99.1
For more information contact:
Dorrance W. Lamb
SVP and Chief Financial Officer
PT
585-256-0200 ext. 7276
http://www.pt.com
finance@pt.com
PT Announces Third Quarter 2012 Financial Results
ROCHESTER, NY – November 8, 2012 – PT (NASDAQ:
PTIX), a leading global provider of advanced network communications solutions, today announced its unaudited financial results
for the third quarter 2012.
Revenue in the third quarter 2012 amounted to $4.7 million,
compared to $9.0 million in the third quarter 2011. Revenue for the nine months ended September 30, 2012 amounted to $18.0 million,
compared to $27.1 million during the corresponding period in 2011.
On the basis of generally accepted accounting principles (GAAP),
the net loss in the third quarter 2012 amounted to ($1.7 million), or ($.15) per basic share, based on 11.1 million shares outstanding,
including amortization of purchased intangible assets of $.03 per share and stock-based compensation expense of $.01 per share.
The GAAP net loss in the third quarter 2011 amounted to ($.1 million), or ($.01) per basic share, including a restructuring charge
of $.01 per share, an impairment charge of $.04 per share, amortization of purchased intangible assets of $.03 per share and stock-based
compensation expense of $.01 per share, based on 11.1 million shares outstanding.
The GAAP net loss for the nine months ended September
30, 2012 amounted to ($3.1 million), or ($.28) per basic share, including amortization of purchased intangible assets of $.08
per share and stock-based compensation expense of $.02 per share, based on 11.1 million shares outstanding. The GAAP net loss
for the nine months ended September 30, 2011 amounted to ($1.6 million), or ($.15) per basic share, including a
restructuring charge of $.02 per share, an impairment charge of $.04 per share, amortization of purchased intangible assets
of $.07 per share, litigation expenses of $.04 per share, and stock-based compensation expense of $.02 per share, based on
11.1 million shares outstanding.
The non-GAAP net loss in the third quarter 2012 amounted to
($1.3 million), or ($.12) per basic share, compared to non-GAAP net income of $.7 million, or $.07 per share in the third
quarter 2011. The non-GAAP net loss for the nine months ended September 30, 2012 amounted to ($2.1 million), or ($.19) per basic
share, compared to net income of $.5 million, or $.04 per share for the nine months ended September 30, 2011. Please refer
to the reconciliations between GAAP and non-GAAP financial measures contained in this release.
On September 30, 2012, the Company had cash and investments
amounting to $14.7 million, working capital of $17.1 million and no long-term debt.
"We are extremely dissatisfied
with our third quarter results," said John Slusser, president and chief executive officer. "
After experiencing
a dramatic slowdown in telecommunications equipment revenue during the second quarter 2012, we surveyed our customer base to get
an updated view of their going forward product requirements and had mixed results. Our service provider customers generally expect
to make additional investments in their network infrastructure while our OEM customers were more reluctant to project requirements
because of little or no visibility of demand from their end customers. Based upon the feedback received and ongoing global economic
climate uncertainty, we have concluded that our quarterly revenue run rates will likely not return to the first quarter 2012 level
in the near term.
Given this circumstance, we implemented a program to bring our operations more in
line with anticipated business opportunities."
On October 31, 2012, PT announced a program to restructure its operations,
reduce its workforce, rationalize its product lines, and refocus its resources on initiatives that are more closely aligned with
the Company's near-term objectives and market potential. Specifically, the Company is reducing its personnel by fourteen
employees or 10% of its workforce and is recording a non-cash impairment charge against certain of PT's software development
costs and purchased intangible assets. As a result of this action, the Company expects to incur fourth quarter 2012 pre-tax restructuring
charges of approximately $.5 million, representing employee-related costs which will result in cash expenditures, and approximately
$.8 million, which will be recorded as a non-cash impairment charge. The Company currently estimates that the full annualized
cost savings resulting from this restructuring program will be in the range of $1.3 million to $1.5 million in 2013.
About PT (www.pt.com)
PT (NASDAQ: PTIX) is a global supplier of advanced network communications
solutions for telecommunication service providers, government communications, and OEM markets. PT's product portfolio includes
IP-centric network elements and applications designed for high availability, scalability, and long life cycle deployments. PT's
SEGway™ SS7 and Diameter Signaling Solutions provide affordable, high density signaling and advanced routing for next-generation
LTE and IMS networks. These solutions enable IP migration, gateway capabilities, SIP bridging, and core-to-edge distributed intelligence,
as well as features such as Number Portability and SMS Spam Defense. PT's Multi-Protocol and Communication Server (MPS) product
portfolio enables LAN/WAN, radar and Smart-Grid networks to acquire, distribute and record critical data over IP Networks. PT's
industry-leading Monterey MicroTCA and IPnexus
®
Platforms anchor a growing portfolio of the Company's own
solutions. Many other OEMs and application developers leverage PT's carrier-grade platforms and Linux
®
development
environment (PT's NexusWare
®
). PT is headquartered in Rochester, NY and maintains sales and engineering offices
around the world.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for certain forward-looking statements. This press release contains forward-looking statements which
reflect the Company's current views with respect to future events and financial performance, within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and is subject to the safe harbor provisions
of those Sections. The Company's future operating results are subject to various risks and uncertainties and could differ
materially from those discussed in the forward-looking statements and may be affected by various trends and factors which are beyond
the Company's control. These risks and uncertainties include, among other factors, business and economic conditions, rapid
technological changes accompanied by frequent new product introductions, competitive pressures, dependence on key customers and
the potential loss of key customers, inability to gauge order flows from customers, fluctuations in quarterly and annual results,
the reliance on a limited number of third party suppliers, limitations of PT's manufacturing capacity and arrangements, the
protection of PT's proprietary technology, errors or defects in our products, the effects of pending or threatened litigation,
the dependence on key personnel, changes in critical accounting estimates, potential impairments related to investments, foreign
regulations, possible loss or significant curtailment of significant government contracts or subcontracts, and potential material
weaknesses in internal control over financial reporting. In addition, during weak or uncertain economic periods, customers'
visibility deteriorates causing delays in the placement of their orders. These factors often result in a substantial portion of
PT's revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter. Forward-looking
statements should be read in conjunction with the most recent audited Consolidated Financial Statements, the Notes thereto, Risk
Factors, and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company, as contained
in the Company's Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.
Non-GAAP Financial
Measures
As a supplement to the GAAP-based consolidated financial statements
contained in this press release, the Company is providing a presentation of non-GAAP financial measures which can be useful to
investors to gain an overall understanding of the Company's current financial performance. Specifically, the Company believes
the non-GAAP financial measures provide useful information to investors by excluding certain expenses the Company believes are
not indicative of its core operating results. The non-GAAP financial measures exclude certain expenses such as the effects of
(a) amortization of purchased intangible assets, (b) stock-based compensation, (c) restructuring costs, (d) litigation expenses
and (e) impairment charges – vendor software.
Management utilizes a number of different financial measures,
both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions and
forecasting and planning for future periods. We also consider the use of the non-GAAP financial measures to be helpful in assessing
various aspects of our business operations.
Non-GAAP financial measures are not meant to be considered
a substitute for the corresponding GAAP financial information and should not be considered in isolation from measures of financial
performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the
use of non-GAAP financial measures as an analytical tool and that these measures should only be used to evaluate the Company's
results of operations in conjunction with the corresponding GAAP financial information.
A reconciliation of non-GAAP measures to
GAAP measures is included herein.
###
A conference call will be held on Monday, November 12, at 10:00
a.m., New York time, to discuss the results. All institutional investors can participate in the conference by dialing (866) 494-3746
or (416) 915-1196. The call will be available simultaneously for all other investors at (866) 494-3387 or (416) 915-1198. A digital
recording of this conference call may be accessed immediately after its completion from November 12 through November 16, 2012.
To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 510179. A live webcast of the
conference call will be available on the PT website at www.pt.com and will be archived to the site within two hours after the
completion of the call.
PT is a trademark of Performance Technologies, Inc. The names
of actual companies, products, or services may be the trademarks, registered trademarks, or service marks of their respective
owners in the United States and/or other countries.
PERFORMANCE TECHNOLOGIES, INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30,
2012
December 31,
2011
Current assets:
Cash and cash equivalents
$
6,881,000
$
9,641,000
Investments
5,830,000
2,798,000
Accounts receivable
4,150,000
5,622,000
Inventories
4,693,000
5,421,000
Prepaid expenses and other assets
1,020,000
1,155,000
Prepaid income taxes
119,000
67,000
Total current assets
22,693,000
24,704,000
Investments
1,974,000
3,362,000
Property, equipment and improvements, net
1,791,000
1,891,000
Software development costs, net
4,451,000
3,932,000
Purchased intangible assets, net
3,756,000
4,390,000
Total assets
$
34,665,000
$
38,279,000
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
717,000
$
1,015,000
Accrued expenses
1,674,000
1,547,000
Deferred revenue
3,220,000
2,808,000
Fair value of foreign currency hedges
46,000
Other payable
999,000
Total current liabilities
5,611,000
6,415,000
Deferred income taxes
89,000
83,000
Total liabilities
5,700,000
6,498,000
Stockholders' equity:
Preferred stock
Common stock
133,000
133,000
Additional paid-in capital
17,533,000
17,347,000
Retained earnings
21,099,000
24,237,000
Accumulated other comprehensive income
18,000
(118,000
)
Treasury stock
(9,818,000
)
(9,818,000
)
Total stockholders' equity
28,965,000
31,781,000
Total liabilities and stockholders' equity
$
34,665,000
$
38,279,000
PERFORMANCE TECHNOLOGIES,
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS
FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012
2011
2012
2011
Sales
$
4,671,000
$
9,000,000
$
18,045,000
$
27,125,000
Cost of goods sold
2,870,000
4,454,000
9,611,000
14,419,000
Gross profit
1,801,000
4,546,000
8,434,000
12,706,000
Operating expenses:
Selling and marketing
1,232,000
1,585,000
4,127,000
4,966,000
Research and development
1,221,000
1,593,000
4,349,000
5,342,000
General and administrative
983,000
981,000
3,125,000
3,590,000
Impairment charge-vendor software
400,000
400,000
Restructuring charges
71,000
253,000
Total operating expenses
3,436,000
4,630,000
11,601,000
14,551,000
Loss from operations
(1,635,000
)
(84,000
)
(3,167,000
)
(1,845,000
)
Other income, net
42,000
(4,000
)
41,000
)
86,000
Loss before income taxes
(1,593,000
)
(88,000
)
(3,126,000
)
(1,759,000
)
Income tax provision (benefit)
80,000
(2,000
)
12,000
(123,000
)
Net loss
$
(1,673,000
)
$
(86,000
)
$
(3,138,000
)
$
(1,636,000
)
Basic loss per share
$
(.15
)
$
(.01
)
$
(.28
)
$
(.15
)
Weighted average common shares
11,116,000
11,116,000
11,116,000
11,116,000
PERFORMANCE TECHNOLOGIES, INCORPORATED AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2012 AND 2011
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012
2011
2012
2011
Gross Profit Reconciliation
GAAP gross profit
$
1,801,000
$
4,546,000
$
8,434,000
$
12,706,000
Amortization of purchased intangible assets
(a)
302,000
280,000
891,000
812,000
Stock-based compensation
(b)
4,000
3,000
10,000
9,000
Non-GAAP gross profit
2,107,000
4,829,000
9,335,000
13,527,000
Non-GAAP gross profit percentage of sales
45.1
%
53.7
%
51.7
%
49.9
%
Operating Expense Reconciliation
GAAP operating expenses
3,436,000
4,630,000
11,601,000
14,551,000
Stock-based compensation
(b)
(57,000
)
(63,000
)
(176,000
)
(225,000
)
Restructuring costs
(c)
(71,000
)
(253,000
)
Litigation expenses
(d)
(414,000
)
Impairment charge-vendor software
(e)
(400,000
)
(400,000
)
Non-GAAP operating expenses
3,379,000
4,096,000
11,425,000
13,259,000
Net Loss Reconciliation
GAAP net loss
(1,673,000
)
(86,000
)
(3,138,000
)
(1,636,000
)
Amortization of purchased intangible assets
(a)
302,000
280,000
891,000
812,000
Stock-based compensation
(b)
61,000
66,000
186,000
234,000
Restructuring costs
(c)
71,000
253,000
Litigation expenses
(d)
414,000
Impairment charge-vendor software
(e)
400,000
400,000
Non-GAAP net (loss) income
$
(1,310,000
)
$
731,000
$
(2,061,000
)
$
477,000
Loss per Common Share
GAAP basic net loss per common share
$
(.15
)
$
(.01
)
$
(.28
)
$
(.15
)
Non-GAAP basic
(f)
net (loss) income per common share
$
(.12
)
$
.07
$
(.19
)
$
.04
The Non-GAAP
financial measures above, and their reconciliation to our GAAP results for the periods presented, reflect adjustments relating
to the following items:
(a)
Amortization of purchased intangible assets: a non-cash expense
arising from the acquisition of intangible assets that the Company is required to amortize over their expected useful lives. The
value of purchased intangible assets increased significantly as a result of the acquisition of the USP and SP2000 signaling technologies
from GENBAND in January 2011.
(b)
Stock-based
compensation costs: a non-cash expense incurred in accordance with share-based compensation accounting guidance.
(c)
Restructuring
costs: costs incurred as a result of restructuring activities taken to bring operating expenses more in line with expected revenues.
(d)
Litigation expenses: legal expenses not indicative of core operating activities.
(e)
Impairment charge - vendor software - One-time impairment charge recorded in connection with the termination of a marketing reseller
agreement with a vendor, not indicative of core operating activities.
(f)
Basic
and diluted net income per common share are identical for the three and nine months ended September 30, 2011.