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<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=5>UNITED STATES</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=5>SECURITIES AND EXCHANGE COMMISSION</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Washington, D.C. 20549</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=5>FORM 8-K</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Current report</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Date of Report: October 23, 2008</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>PERFORMANCE TECHNOLOGIES, INCORPORATED</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Commission file number 0-27460</FONT></B></P>
<P align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Incorporated pursuant to the Laws of the State of Delaware Internal Revenue Service &#150; Employer Identification No. 16-1158413 205 Indigo Creek Drive, Rochester, New York 14626</FONT></B></P>
<P align=center><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>(585)256-0200</FONT></B></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" 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: [ ] 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)).</FONT></P>
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<P align=justify><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Item 2.02 Results of Operations and Financial Condition</FONT></B></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>On October 23, 2008, Performance Technologies, Incorporated issued a press release announcing its results of operations for the quarter ending June 30, 2008. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.</FONT></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>(c) Exhibits.</FONT></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>(99.1) Press release issued by Performance Technologies, Incorporated on October 23, 2008. </FONT></P>
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<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2><B>SIGNATURES</B></FONT></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>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 face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>&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 align=left width="63%" colSpan=2><FONT face="Times New Roman" size=2><B>PERFORMANCE TECHNOLOGIES, INCORPORATED</B></FONT></TD>
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     <TD align=left width="14%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>October 29, 2008</FONT></TD>
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     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>By /s/ John M. Slusser</FONT>&nbsp; </TD>
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     <TD align=left width="43%"><FONT face="Times New Roman" size=2>John M. Slusser</FONT></TD>
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     <TD align=left width="14%">&nbsp; </TD>
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     <TD align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>President and Chief Executive Officer</FONT>&nbsp; </TD>
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     <TD align=left width="14%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>October 29, 2008</FONT></TD>
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     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>By /s/ Dorrance W. Lamb</FONT>&nbsp; </TD>
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     <TD align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>Dorrance W. Lamb</FONT> </TD>
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     <TD align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>Chief Financial Officer and Senior Vice President of Finance</FONT>&nbsp; </TD>
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     <TD noWrap><FONT face=Arial size=2>Exhibit 99.1</FONT></TD></TR></TABLE></P>
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     <TD noWrap><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>For more information contact:</FONT></B><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Dorrance W. Lamb</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>SVP and Chief Financial Officer</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Performance Technologies</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>585-256-0200 ext. 7276</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>http://www.pt.com</FONT><BR>
<U><FONT face=ArialMT,Arial,Helvetica,sans-serif color=#0000ff size=2>finance@pt.com</FONT></U></TD></TR></TABLE></P>
<P align=center><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=4>Performance Technologies Announces </FONT></B><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=4>Third Quarter 2008 Financial Results</FONT></B></P>
<P align=center><B><I><FONT face=Arial-BoldItalicMT,Arial,Helvetica,sans-serif size=2>&#147;Company Reports $.02 earnings per share for the latest quarter&#148;</FONT></I></B></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>ROCHESTER, NY &#150; October 23, 2008 -- Performance Technologies, Inc. (NASDAQ: PTIX), a leading provider of innovative communications solutions, today announced its financial results for the third quarter 2008.</FONT></P>
<P align=justify><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Financial Summary</FONT></B></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Revenue in the third quarter 2008 amounted to $9.2 million, compared to $10.8 million in the third quarter 2007. Revenue for the nine months ended September 30, 2008 amounted to $31.4 million, compared to $29.7 million during the corresponding period in 2007.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Net income in the third quarter 2008 amounted to $.3 million, or $.02 per diluted share, including stock-based compensation expense of $.2 million, or $.01 per share; unsuccessful acquisition expenses of $.2 million, or $.02 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 11.6 million shares outstanding. Net income for the third quarter 2007 amounted to $1.7 million, or $.13 per diluted share, including stock-based compensation expense of $.2 million, or $.01 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 12.5 million shares outstanding.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Net income for the nine months ended September 30, 2008 amounted to $1.5 million, or $.13 per diluted share, including stock-based compensation expense of $.5 million, or $.03 per share; unsuccessful acquisition expenses of $.2 million, or $.02 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 11.7 million shares outstanding. Net income for the nine months ended September 30, 2007 amounted to $.6 million, or $.05 per diluted share, including stock-based compensation expense of $.5 million, or $.04 per share; write-off of software development costs amounting to $.5 million, or $.04 per share; restructuring charges of $.2 million, or $.02 per share; and a recovery on a note receivable of $.5 million, or $.02 per share, based on 12.9 million shares outstanding.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>The Company had 11.6 million common shares outstanding at September 30, 2008. The decline in the number of common shares outstanding is primarily attributable to the Company repurchasing 1.3 million common shares over the past twelve months for an aggregate purchase price of $6.2 million. In a separate announcement today, our Board of Directors approved a new stock repurchase program for an aggregate purchase price of up to $10 million of our common shares. Cash and investments amounted to $35.4 million at September 30, 2008, or $3.05 per share, and the Company had no long-term debt.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>&#147;The deteriorating economic climate began to impact our business in the third quarter,&#148; said John Slusser, president and chief executive officer. &#147;Although the third quarter tends to be seasonally slower in July and especially August, we did not see the expected resumption of business typical in September. Our customers reacted to growing credit and overall economic concerns by putting budgeted capital expenditures for network infrastructure on hold and some of our OEM customers saw reduced product demands because of uncertainty in their end markets. Given this change in the business environment, we took measures to reduce budgeted expense levels while maintaining a clear focus on our key 2008 initiatives of market diversification, continued strengthening of our signaling product line and ongoing emphasis on gross margin.&#148;<BR style="PAGE-BREAK-BEFORE: always" clear=all>
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<P align=justify><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Business Overview and Guidance</FONT></B></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>The Company globally targets three vertical markets for its communications products: telecommunications, aerospace and defense, and commercial. The telecommunications market, historically our largest vertical market, is driven by investments in network infrastructure by carriers and service providers. Growth in our OEM telecommunications business is primarily dependent on the broad deployment of next-generation telecommunications solutions. Demand for our signaling systems products is governed by investments necessary to support the worldwide explosive growth in text messaging and the cost saving benefits of migrating existing networks to IP-based (Internet) networks. Sales into the aerospace and defense market are typically to prime contractors and system integrators and reflect investment levels by various government agencies in specific programs and projects. Our commercial market business is principally tied to deployment of data communications oriented servers in financial and other end applications.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>The Company provides guidance only on earnings per share expected in the next quarter. A substantial portion of the Company&#146;s revenue is derived from orders placed within a quarter and shipped in the final month of the same quarter. Management anticipates a loss per share in the fourth quarter 2008 to be in the range of ($.01) to ($.07) per share. These per share estimates exclude stock-based compensation expense of $.01 per share and restructuring charges, if any.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>John Slusser further commented, &#147;At the time of this earnings release, there are significant concerns about the health of the global economy. In this climate, any forward business visibility is extremely limited. Our fourth quarter guidance is based upon our best near-term view coupled with expense control measures that are prudent to make, while not sacrificing longer term objectives. Our solid, un-leveraged balance sheet provides us the strength to manage through challenging economic times. Most importantly, we believe the ever increasing value proposition of our product portfolio gives us the tools to make a unique and compelling business case to customers who will be more sensitive than ever to the economics of their businesses.&#148;</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>More in-depth discussions of the Company's strategy and financial performance can be found in the Company's periodic reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission.</FONT></P>
<P align=justify><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>About Performance Technologies </FONT></B><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(</FONT><U><FONT face=ArialMT,Arial,Helvetica,sans-serif color=#0000ff size=2>www.pt.com</FONT></U><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Performance Technologies (NASDAQ: PTIX) is a global supplier of integrated IP-based platforms and solutions for advanced communications networks and innovative computer system architectures. Our Embedded Systems Group offers robust application-ready platforms that incorporate open standards-based software and hardware, providing significantly accelerated end product deployment benefits for equipment manufacturers. Our Signaling Systems Group offers the SEGway&#153; product suite, which includes IP STPs, SS7 over IP transport solutions, and signaling gateways that enable lower operating costs through utilization of IP networks, thereby creating competitive advantages for carriers in existing and emerging markets.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Performance Technologies is headquartered in Rochester, New York. Additional engineering facilities are located in San Diego and San Luis Obispo, California, and Kanata, Ontario, Canada.</FONT></P>
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<A name="page_5"></A><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Forward-Looking Statements</FONT></B></FONT><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>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&#146;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&#146;s control. These risks and uncertainties include, among other factors, general business and economic conditions, rapid technological changes accompanied by frequent new product introductions, competitive pressures, dependence on 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 the Company&#146;s manufacturing capacity and arrangements, the protection of the Company&#146;s proprietary technology, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to goodwill and investments, foreign regulations and potential material weaknesses in internal control over financial reporting. In addition, during weak or uncertain economic periods, customers&#146; visibility deteriorates causing delays in the placement of their orders. These factors often result in a substantial portion of the Company&#146;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 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 of December 31, 2007, as contained in the Company&#146;s Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.</FONT></P>
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<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>A conference call will be held on Friday, October 24 at 10:00 a.m., New York time, to discuss the Company&#146;s financial performance for the Third quarter 2008. All institutional investors can participate in the conference by dialing (866) 250-5144 or (416) 849-6163. 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 October 24 through October 28, 2008. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 698064. A live webcast of the conference call will be available on the Performance Technologies website at www.pt.com and will be archived to the site within two hours after the completion of the call.</FONT></P>
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     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES</FONT></B></TD></TR>
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     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>CONSOLIDATED BALANCE SHEETS</FONT></B></TD></TR>
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     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>(unaudited)</FONT></B></TD></TR>
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     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
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     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>ASSETS</FONT></B></TD></TR>
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     <TD align=left width="74%">&nbsp; </TD>
     <TD align=center width="11%" colSpan=2><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>September 30,</FONT></B>&nbsp; </TD>
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     <TD align=center width="2%"></TD>
     <TD align=center width="12%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>December 31,</FONT></B></TD></TR>
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     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="11%" colSpan=2><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2008</FONT></B></TD>
     <TD align=center width="1%"></TD>
     <TD align=left width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="12%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2007</FONT></B></TD></TR>
<TR>
     <TD width="99%" colSpan=7>&nbsp; </TD>
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     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Current assets:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=right width="1%" bgColor=#80ffff></TD>
     <TD align=right width="2%" bgColor=#80ffff></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%"></TD></TR>
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     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Cash and cash equivalents</FONT>&nbsp; </TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>27,948,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>15,592,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
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     <TD align=left width="74%">&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Investments</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,509,000</FONT>&nbsp; </TD>
     <TD align=right width="1%" bgColor=#80ffff></TD>
     <TD align=right width="2%" bgColor=#80ffff></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>14,150,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
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     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accounts receivable</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,577,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>7,933,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Inventories</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,511,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,783,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Prepaid income taxes</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>482,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>713,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Prepaid expenses and other assets</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>559,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>916,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Deferred taxes</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,963,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,037,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total current assets</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>46,549,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>46,124,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR>
     <TD width="99%" colSpan=7>&nbsp; </TD>
     <TD width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Investments</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,960,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,500,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Property, equipment and improvements</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,208,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,260,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Software development costs</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,748,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,297,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Deferred taxes</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>963,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,196,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Goodwill</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,143,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,143,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>61,571,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"></TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>59,520,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"></TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</FONT></B></TD></TR>
<TR>
     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Current liabilities:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accounts payable</FONT>&nbsp; </TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,638,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,392,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accrued expenses</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,224,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,425,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total current liabilities</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,862,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,817,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income taxes payable</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>453,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>807,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total liabilities</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>7,315,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,624,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Stockholders&#146; equity:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Preferred stock</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Common stock</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>133,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>133,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Additional paid-in capital</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>16,024,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>15,483,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Retained earnings</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>46,511,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>45,231,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accumulated other comprehensive loss</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(189,000</FONT> </TD>
     <TD align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="10%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Treasury stock</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(8,223,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=left width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(7,951,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="74%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total stockholders&#146; equity</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>54,256,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>52,896,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="74%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total liabilities and stockholders&#146; equity</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>61,571,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="10%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>59,520,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR></TABLE><BR>
<BR style="PAGE-BREAK-BEFORE: always" clear=all>


<A name="page_7"></A>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES</FONT></B> </TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>CONSOLIDATED STATEMENTS OF INCOME</FONT></B> </TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</FONT></B> </TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>(unaudited)</FONT></B> </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%">&nbsp; </TD>
     <TD align=center width="21%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Three Months Ended</FONT></B></TD>
     <TD align=center width="2%"></TD>
     <TD align=center width="21%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Nine Months Ended</FONT></B></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%">&nbsp; </TD>
     <TD align=center width="21%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>September 30,</FONT></B></TD>
     <TD align=center width="2%"></TD>
     <TD align=center width="21%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>September 30,</FONT></B></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2008</FONT></B></TD>
     <TD align=left width="1%">&nbsp;</TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2007</FONT></B></TD>
     <TD align=left width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2008</FONT></B></TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2007</FONT></B></TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Sales</FONT>&nbsp; </TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>9,181,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>10,786,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>31,387,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>29,745,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Cost of goods sold</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,172,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,682,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>13,874,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>13,923,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Software capitalization write-off</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="8%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>45,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="8%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>520,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Gross profit</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,009,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,059,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>17,513,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>15,302,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Operating expenses:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Selling and marketing</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,907,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,676,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,147,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,952,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Research and development</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,210,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,230,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,894,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>7,552,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>General and administrative</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,165,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,220,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,660,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,725,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Unsuccessful acquisition expenses</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>229,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>229,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Restructuring charges</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="8%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>26,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="8%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>240,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total operating expenses</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,511,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,152,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>16,930,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>16,469,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income (loss) from operations</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(502,000</FONT> </TD>
     <TD align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>907,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>583,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(1,167,000</FONT> </TD>
     <TD align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Note receivable recovery</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>143,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Other income, net</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>156,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>453,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>814,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,659,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income (loss) before income taxes</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(346,000</FONT> </TD>
     <TD align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,360,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,397,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>635,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income tax benefit</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(602,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(331,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(86,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(8,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>256,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,691,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,483,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>643,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Basic earnings per share</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.02</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.14</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.13</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.05</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Weighted average common shares</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,604,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>12,506,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,662,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>12,857,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Diluted earnings per share</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.02</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.13</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.13</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.05</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="56%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Weighted average common and</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="56%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>common equivalent shares</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,607,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>12,548,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="2%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,676,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>12,903,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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ptiearnings0908.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing
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: October 23, 2008
PERFORMANCE TECHNOLOGIES, INCORPORATED
Commission file number 0-27460
Incorporated pursuant to the Laws of the State of Delaware Internal Revenue Service – Employer Identification No. 16-1158413 205 Indigo Creek Drive, Rochester, New York 14626
(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 October 23, 2008, Performance Technologies, Incorporated issued a press release announcing its results of operations for the quarter ending June 30, 2008. 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 Performance Technologies, Incorporated on October 23, 2008.
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
October 29, 2008
By /s/ John M. Slusser
John M. Slusser
President and Chief Executive Officer
October 29, 2008
By /s/ Dorrance W. Lamb
Dorrance W. Lamb
Chief Financial Officer and Senior Vice President of Finance
Exhibit 99.1
For more information contact:
Dorrance W. Lamb
SVP and Chief Financial Officer
Performance Technologies
585-256-0200 ext. 7276
http://www.pt.com
finance@pt.com
Performance Technologies Announces
Third Quarter 2008 Financial Results
"Company Reports $.02 earnings per share for the latest quarter"
ROCHESTER, NY – October 23, 2008 -- Performance Technologies, Inc. (NASDAQ: PTIX), a leading provider of innovative communications solutions, today announced its financial results for the third quarter 2008.
Financial Summary
Revenue in the third quarter 2008 amounted to $9.2 million, compared to $10.8 million in the third quarter 2007. Revenue for the nine months ended September 30, 2008 amounted to $31.4 million, compared to $29.7 million during the corresponding period in 2007.
Net income in the third quarter 2008 amounted to $.3 million, or $.02 per diluted share, including stock-based compensation expense of $.2 million, or $.01 per share; unsuccessful acquisition expenses of $.2 million, or $.02 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 11.6 million shares outstanding. Net income for the third quarter 2007 amounted to $1.7 million, or $.13 per diluted share, including stock-based compensation expense of $.2 million, or $.01 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 12.5 million shares outstanding.
Net income for the nine months ended September 30, 2008 amounted to $1.5 million, or $.13 per diluted share, including stock-based compensation expense of $.5 million, or $.03 per share; unsuccessful acquisition expenses of $.2 million, or $.02 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 11.7 million shares outstanding. Net income for the nine months ended September 30, 2007 amounted to $.6 million, or $.05 per diluted share, including stock-based compensation expense of $.5 million, or $.04 per share; write-off of software development costs amounting to $.5 million, or $.04 per share; restructuring charges of $.2 million, or $.02 per share; and a recovery on a note receivable of $.5 million, or $.02 per share, based on 12.9 million shares outstanding.
The Company had 11.6 million common shares outstanding at September 30, 2008. The decline in the number of common shares outstanding is primarily attributable to the Company repurchasing 1.3 million common shares over the past twelve months for an aggregate purchase price of $6.2 million. In a separate announcement today, our Board of Directors approved a new stock repurchase program for an aggregate purchase price of up to $10 million of our common shares. Cash and investments amounted to $35.4 million at September 30, 2008, or $3.05 per share, and the Company had no long-term debt.
"The deteriorating economic climate began to impact our business in the third quarter," said John Slusser, president and chief executive officer. "Although the third quarter tends to be seasonally slower in July and especially August, we did not see the expected resumption of business typical in September. Our customers reacted to growing credit and overall economic concerns by putting budgeted capital expenditures for network infrastructure on hold and some of our OEM customers saw reduced product demands because of uncertainty in their end markets. Given this change in the business environment, we took measures to reduce budgeted expense levels while maintaining a clear focus on our key 2008 initiatives of market diversification, continued strengthening of our signaling product line and ongoing emphasis on gross margin."
Business Overview and Guidance
The Company globally targets three vertical markets for its communications products: telecommunications, aerospace and defense, and commercial. The telecommunications market, historically our largest vertical market, is driven by investments in network infrastructure by carriers and service providers. Growth in our OEM telecommunications business is primarily dependent on the broad deployment of next-generation telecommunications solutions. Demand for our signaling systems products is governed by investments necessary to support the worldwide explosive growth in text messaging and the cost saving benefits of migrating existing networks to IP-based (Internet) networks. Sales into the aerospace and defense market are typically to prime contractors and system integrators and reflect investment levels by various government agencies in specific programs and projects. Our commercial market business is principally tied to deployment of data communications oriented servers in financial and other end applications.
The Company provides guidance only on earnings per share expected in the next quarter. A substantial portion of the Company's revenue is derived from orders placed within a quarter and shipped in the final month of the same quarter. Management anticipates a loss per share in the fourth quarter 2008 to be in the range of ($.01) to ($.07) per share. These per share estimates exclude stock-based compensation expense of $.01 per share and restructuring charges, if any.
John Slusser further commented, "At the time of this earnings release, there are significant concerns about the health of the global economy. In this climate, any forward business visibility is extremely limited. Our fourth quarter guidance is based upon our best near-term view coupled with expense control measures that are prudent to make, while not sacrificing longer term objectives. Our solid, un-leveraged balance sheet provides us the strength to manage through challenging economic times. Most importantly, we believe the ever increasing value proposition of our product portfolio gives us the tools to make a unique and compelling business case to customers who will be more sensitive than ever to the economics of their businesses."
More in-depth discussions of the Company's strategy and financial performance can be found in the Company's periodic reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission.
About Performance Technologies
(
www.pt.com
)
Performance Technologies (NASDAQ: PTIX) is a global supplier of integrated IP-based platforms and solutions for advanced communications networks and innovative computer system architectures. Our Embedded Systems Group offers robust application-ready platforms that incorporate open standards-based software and hardware, providing significantly accelerated end product deployment benefits for equipment manufacturers. Our Signaling Systems Group offers the SEGway™ product suite, which includes IP STPs, SS7 over IP transport solutions, and signaling gateways that enable lower operating costs through utilization of IP networks, thereby creating competitive advantages for carriers in existing and emerging markets.
Performance Technologies is headquartered in Rochester, New York. Additional engineering facilities are located in San Diego and San Luis Obispo, California, and Kanata, Ontario, Canada.
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, general business and economic conditions, rapid technological changes accompanied by frequent new product introductions, competitive pressures, dependence on 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 the Company's manufacturing capacity and arrangements, the protection of the Company's proprietary technology, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to goodwill and investments, foreign regulations 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 the Company'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 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 of December 31, 2007, as contained in the Company's Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.
###
A conference call will be held on Friday, October 24 at 10:00 a.m., New York time, to discuss the Company's financial performance for the Third quarter 2008. All institutional investors can participate in the conference by dialing (866) 250-5144 or (416) 849-6163. 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 October 24 through October 28, 2008. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 698064. A live webcast of the conference call will be available on the Performance Technologies website at www.pt.com and will be archived to the site within two hours after the completion of the call.
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30,
December 31,
2008
2007
Current assets:
Cash and cash equivalents
$
27,948,000
$
15,592,000
Investments
3,509,000
14,150,000
Accounts receivable
6,577,000
7,933,000
Inventories
5,511,000
4,783,000
Prepaid income taxes
482,000
713,000
Prepaid expenses and other assets
559,000
916,000
Deferred taxes
1,963,000
2,037,000
Total current assets
46,549,000
46,124,000
Investments
3,960,000
2,500,000
Property, equipment and improvements
2,208,000
2,260,000
Software development costs
3,748,000
3,297,000
Deferred taxes
963,000
1,196,000
Goodwill
4,143,000
4,143,000
Total assets
$
61,571,000
$
59,520,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
1,638,000
$
1,392,000
Accrued expenses
5,224,000
4,425,000
Total current liabilities
6,862,000
5,817,000
Income taxes payable
453,000
807,000
Total liabilities
7,315,000
6,624,000
Stockholders' equity:
Preferred stock
Common stock
133,000
133,000
Additional paid-in capital
16,024,000
15,483,000
Retained earnings
46,511,000
45,231,000
Accumulated other comprehensive loss
(189,000
)
Treasury stock
(8,223,000
)
(7,951,000
)
Total stockholders' equity
54,256,000
52,896,000
Total liabilities and stockholders' equity
$
61,571,000
$
59,520,000
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2008
2007
2008
2007
Sales
$
9,181,000
$
10,786,000
$
31,387,000
$
29,745,000
Cost of goods sold
4,172,000
4,682,000
13,874,000
13,923,000
Software capitalization write-off
45,000
520,000
Gross profit
5,009,000
6,059,000
17,513,000
15,302,000
Operating expenses:
Selling and marketing
1,907,000
1,676,000
6,147,000
4,952,000
Research and development
2,210,000
2,230,000
6,894,000
7,552,000
General and administrative
1,165,000
1,220,000
3,660,000
3,725,000
Unsuccessful acquisition expenses
229,000
229,000
Restructuring charges
26,000
240,000
Total operating expenses
5,511,000
5,152,000
16,930,000
16,469,000
Income (loss) from operations
(502,000
)
907,000
583,000
(1,167,000
)
Note receivable recovery
143,000
Other income, net
156,000
453,000
814,000
1,659,000
Income (loss) before income taxes
(346,000
)
1,360,000
1,397,000
635,000
Income tax benefit
(602,000
)
(331,000
)
(86,000
)
(8,000
)
Net income
$
256,000
$
1,691,000
$
1,483,000
$
643,000
Basic earnings per share
$
.02
$
.14
$
.13
$
.05
Weighted average common shares
11,604,000
12,506,000
11,662,000
12,857,000
Diluted earnings per share
$
.02
$
.13
$
.13
$
.05
Weighted average common and
common equivalent shares
11,607,000
12,548,000
11,676,000
12,903,000