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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: 11pt 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: 11pt times new roman"><B>Date of Report (Date
of earliest event reported): February 21, 2013</B></FONT></P>

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   <TD STYLE="width: 60%"><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><FONT STYLE="font: 16pt arial"><B>Incorporated</B></FONT></TD></TR></TABLE>
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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>

   <P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 1px" align=center><FONT STYLE="font: xx-small Times New Roman">Identification No.)</FONT></P></TD></TR>

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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>

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   <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 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 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 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="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 10pt"><B>Item 2.02 Results of Operations and Financial Condition</B></P>

<P STYLE="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 10pt">On February 21, 2013, Performance Technologies, Incorporated
(&quot;PT&quot;) issued a press release announcing its results of operations for the quarter and year ended December 31, 2012.
A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.</P>

<P STYLE="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 10pt">(c) Exhibits.</P>

<P STYLE="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 10pt">(99.1) Press release issued by PT on February 21,
2013.</P>

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

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

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

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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt/115% Times New Roman, Times, Serif"><B>PERFORMANCE TECHNOLOGIES, INCORPORATED</B></TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="width: 27%">&nbsp;</TD>
    <TD STYLE="width: 6%">&nbsp;</TD>
    <TD STYLE="width: 48%">&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
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    <TD STYLE="font: 10pt/115% Times New Roman, Times, Serif">February 21, 2013</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; font: 10pt/115% Times New Roman, Times, Serif">By /s/ John M. Slusser<FONT STYLE="font-size: 12pt"> </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font: 10pt/115% Times New Roman, Times, Serif">John M. Slusser</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font: 10pt/115% Times New Roman, Times, Serif">President and Chief Executive Officer<FONT STYLE="font-size: 12pt"> </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="font: 10pt/115% Times New Roman, Times, Serif">February 21, 2013</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; font: 10pt/115% Times New Roman, Times, Serif">By /s/ Dorrance W. Lamb<FONT STYLE="font-size: 12pt"> </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font: 10pt/115% Times New Roman, Times, Serif">Dorrance W. Lamb<FONT STYLE="font-size: 12pt"> </FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD STYLE="font: 10pt/115% Times New Roman, Times, Serif">Senior Vice President of Finance and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
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<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 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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 Fourth Quarter 2012</P>

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

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif">ROCHESTER,
NY &ndash; February 21, 2013 &ndash; PT (NASDAQ: PTIX), a leading global provider of advanced network communications solutions,
today announced its unaudited financial results for the fourth quarter 2012.</FONT></P>

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif">Revenue
in the fourth quarter 2012 amounted to $5.3 million, compared to $9.1 million in the fourth quarter 2011. Revenue for 2012 amounted
to $23.3 million, compared to $36.2 million for 2011.</FONT></P>

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif">On the
basis of generally accepted accounting principles (GAAP), the net loss in the fourth quarter 2012 amounted to ($4.0 million),
or ($.36) per basic share, based on 11.1 million shares outstanding, including charges for the impairment of software capitalization
costs and purchased intangible assets totaling $.14 per share, a charge for excess OEM inventories of $.12 per share, restructuring
costs of $.04 per share, amortization of purchased intangible assets of $.02 per share, a discrete income tax charge of $.01 per
share, and stock-based compensation expense of $.01 per share. GAAP net income in the fourth quarter 2011 amounted to $.5 million,
or $.04 per diluted share, based on 11.1 million shares outstanding, including stock compensation expense of $.01 per share, amortization
of purchased intangible assets of $.03 per share and write-off of software development costs of $.02 per share.</FONT></P>

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif">The GAAP
net loss for 2012 amounted to ($7.1 million), or ($.64) per basic share, including charges for the impairment of software capitalization
costs and purchased intangible assets totaling $.14 per share, a charge for excess OEM inventories of $.12 per share, restructuring
costs of $.04 per share, amortization of purchased intangible assets of $.10 per share, a discrete income tax charge of $.01 per
share, and stock-based compensation expense of $.02 per share. The GAAP net loss for 2011 amounted to ($1.2 million), or ($.10)
per basic share, based on 11.1 million shares outstanding. This loss includes restructuring expense of $.02 per share, stock compensation
expense of $.03 per share, an impairment charge against vendor software of $.04 per share, write-off of software development costs
of $.02 per share, amortization of purchased intangible assets of $.10 per share and litigation expenses of $.04 per share.</FONT></P>

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif">The non-GAAP
net loss in the fourth quarter 2012 amounted to ($.3 million), or ($.03) per basic share, compared to non-GAAP net income of $1.0
million, or $.09 per diluted share in the fourth quarter 2011. The non-GAAP net loss for 2012 amounted to ($2.4 million), or ($.22)
per basic share, compared to net income of $1.5 million, or $.13 per diluted share for 2011. Please refer to the reconciliations
between GAAP and non-GAAP financial measures contained in this release.</FONT></P>

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif">On December
31, 2012, the Company had cash and investments amounting to $14.3 million, working capital of $15.5 million and no long-term debt.</FONT></P>

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

<P STYLE="font: 9pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif">On January
10, 2013, PT announced its decision to sharpen its strategic business focus, concentrate on its high value-add communications
product families, transition away from other product portfolio elements, and implement operational expense reductions. In conjunction
with this <FONT STYLE="color: black">decision, the Company reduced its personnel by ten employees, or 8% of its workforce as of
January 10, 2013. </FONT>As a result of this action, the Company expects to incur first quarter 2013 pre-tax restructuring charges
of approximately $.3 million, representing employee-related costs, which will result in cash expenditures. This action reduced
operating expenses by approximately $.7 million per year. When combined with the savings <FONT STYLE="color: black">from the restructuring
PT announced in October 2012, the Company has reduced its break-even expense level by more than $2 million per year. During the
first half of 2013, we expect to increase our sales and marketing investments in our Diameter signaling product to accelerate
its penetration in this growing market.</FONT></FONT></P>

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

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<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font-size: 10pt; color: black">&quot;While our
fourth quarter revenues and net loss are disappointing, we are confident that we have taken the necessary measures, both in the
fourth quarter and since, to stabilize the Company&rsquo;s operations and place us firmly on the path to profitability,&rdquo;
said John Slusser, president and chief executive officer. &quot;These measures were based upon focusing our efforts on high-value
add, strong-margin products that provide the best prospects for revenue growth as global economic conditions improve. We enter
2013 with a lean, focused and dedicated group of employees and an exciting new Diameter signaling product, our Universal Diameter
Router (UDR). Our ability to provision a complete signaling evolution path in a single, highly-integrated, carrier-grade end solution
set </FONT>&ndash;<FONT STYLE="color: black"> spanning from today&rsquo;s legacy network upgrades to next-generation 4G LTE architectures
</FONT>&ndash;<FONT STYLE="color: black"> positions us very well in the network signaling marketplace going forward.&rdquo;</FONT></P>

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

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

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

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font-size: 10pt">PT (NASDAQ: PTIX) is a global
supplier of advanced, high availability network communications solutions.</FONT></P>

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font-size: 10pt">Its SEGway&trade; Diameter and
SS7 Signaling Systems provide tightly integrated signaling and advanced routing capabilities and applications that uniquely span
the mission critical demands of both existing and next-generation 4G LTE and IMS telecommunications networks. The Company&rsquo;s
IPnexus<SUP>&reg;</SUP> Multi-Protocol Gateways and Servers enable a broad range of IP-interworking in data acquisition, sensor,
radar, and control applications for aviation, weather and other infrastructure networks. Established in 1981, PT is headquartered
in Rochester, NY and markets and sells its products worldwide through its direct sales organization as well as through channel
partners that include major telecommunications equipment vendors, government prime contractors and value-added resellers.</FONT></P>

<P STYLE="font: 10pt/12pt Helv,sans-serif; margin: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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

<P STYLE="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif"><B>Forward-Looking
Statements</B></FONT></P>

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

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font-size: 9pt"><B>&nbsp;</B></FONT></P>

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<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font-size: 10pt"><B>Non-GAAP Financial Measures</B></FONT></P>

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font-size: 10pt">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) write-offs of software capitalization and
purchased intangible assets, (c) OEM excess inventory charges, (d) stock-based compensation costs, (e) restructuring costs, (f)
litigation expenses, and (g) impairment charges &ndash; vendor software.</FONT></P>

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

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

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

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

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

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

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

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

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

<P STYLE="font: 10pt/12pt Arial, Helvetica, Sans-Serif; margin: 0"><FONT STYLE="font-size: 10pt">A conference call will be held
on Friday, February 22, 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
February 22 through February 26, 2013. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using
passcode 62275. 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.</FONT></P>

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

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

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<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; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, <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; background-color: rgb(204,238,255)">
    <TD COLSPAN="9">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <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: rgb(204,238,255)">
    <TD STYLE="width: 56%; text-align: left; padding-left: 10pt">Cash and cash equivalents</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">7,546,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">9,641,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt">Investments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,794,000</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: rgb(204,238,255)">
    <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">3,775,000</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: White">
    <TD STYLE="padding-left: 10pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,615,000</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: rgb(204,238,255)">
    <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">932,000</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: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Prepaid income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">206,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="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-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">445,000</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">368,000</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: 20pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,313,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,072,000</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></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 5.4pt">Investments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,969,000</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: White">
    <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">1,683,000</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: rgb(204,238,255)">
    <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">3,716,000</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: White">
    <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="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,835,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="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: 1pt; padding-left: 5.4pt">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">&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">102,000</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: 20pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">31,516,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,749,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <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>

<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD COLSPAN="9" STYLE="text-align: center; padding-left: 10pt; vertical-align: middle"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</B></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">&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">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: 56%; text-align: left; padding-left: 20pt">Accounts payable</TD><TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,134,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; 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">1,664,000</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">3,002,000</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">5,800,000</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">696,000</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">553,000</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">6,496,000</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">6,968,000</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">17,591,000</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">17,099,000</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">15,000</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">25,020,000</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">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">31,516,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,749,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <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: 0; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 6 -->
    <DIV STYLE="margin-bottom: 6pt">&nbsp;</DIV>
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<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>PERFORMANCE TECHNOLOGIES,
INCORPORATED AND SUBSIDIARIES</B></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 MONTHS
AND YEAR ENDED DECEMBER 31, 2012 AND 2011</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">&nbsp;</P>

<P STYLE="font: bold 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">&nbsp;</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: 10pt Arial, Helvetica, Sans-Serif">
<TR STYLE="vertical-align: bottom">
<TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">&nbsp;Three Months Ended <BR>December 31,</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended <BR>December 31,&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom"><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="9">&nbsp;</TD><TD STYLE="font-size: 9pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 9pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 9pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-size: 9pt; 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="width: 40%; padding-left: 5.4pt">Sales</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,275,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">9,051,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">23,320,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">36,176,000</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-left: 5.4pt">Cost of goods sold</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,805,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,166,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,416,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,585,000</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; text-indent: -8.1pt; padding-left: 8.1pt">&nbsp;&nbsp;Software capitalization and purchased intangible asset write-off</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</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">OEM excess inventory charge</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">1,351,000</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">1,351,000</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></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 (loss)</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">(481,000</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">4,710,000</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">7,953,000</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">17,416,000</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="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">808,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,444,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,935,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,410,000</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">1,234,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,782,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,583,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,124,000</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">872,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">978,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,997,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,568,000</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">Restructuring charges</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">434,000</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">434,000</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: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Impairment charge-vendor software</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">&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">&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: 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">3,348,000</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">4,204,000</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">14,949,000</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">18,755,000</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) income from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,829,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">506,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,996,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,339,000</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">11,000</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">68,000</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">52,000</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">154,000</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) income before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,818,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">574,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,944,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,185,000</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">182,000</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">101,000</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">194,000</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">(22,000</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) income</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,000,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">473,000</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">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,138,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,163,000</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) earnings per share</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(.36</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">.04</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">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(.64</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(.10</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"></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">Diluted earnings per share</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</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">.04</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</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>
<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<SUP>(1)</SUP></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>
<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><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: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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

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

<P STYLE="font: 9pt Times New Roman, Times, Serif; margin: 0"><SUP>(1)</SUP>Shares used in both basic (loss) earnings per share
and diluted earnings per share</P>

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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; 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; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended <BR>December 31,</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended <BR>December 31,</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">&nbsp;&nbsp;GAAP gross profit (loss)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(481,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">4,710,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">7,953,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">17,416,000</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">265,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">279,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,156,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,091,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.3in; padding-left: 0.3in">&nbsp;&nbsp;&nbsp;&nbsp;Software capitalization and purchased intangible asset write-off<SUP>(b)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</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;OEM excess inventory charge<SUP>(c)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,351,000</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">1,351,000</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></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;&nbsp;Stock-based compensation<SUP>(d)</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">2,000</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">14,000</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">11,000</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">2,739,000</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">5,166,000</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">12,074,000</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">18,693,000</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">51.9</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">57.1</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">51.8</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></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">3,348,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,204,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,949,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,755,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt">Stock-based compensation<SUP>(d)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(53,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(69,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(229,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(294,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: 1.8pt; padding-left: 10pt">Restructuring costs<SUP>(e)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(434,000</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">(434,000</TD><TD STYLE="text-align: left">)</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; text-indent: 1.8pt; padding-left: 10pt">Litigation expenses<SUP>(f)</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">(428,000</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; text-indent: 1.8pt; padding-left: 10pt">Impairment charge &ndash; vendor software<SUP>(g)</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">&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">&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;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">2,861,000</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">4,135,000</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">14,286,000</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">17,380,000</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 Income (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;&nbsp;GAAP net (loss) income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,000,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">473,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,138,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,163,000</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">265,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">279,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,156,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,091,000</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; text-indent: -0.3in; padding-left: 0.3in">&nbsp;&nbsp;&nbsp;&nbsp;Software capitalization and
    purchased intangible asset write-off<SUP>(b)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,600,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</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;OEM excess inventory charge<SUP>(c)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,351,000</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">1,351,000</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></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;Stock-based compensation<SUP>(d)</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">&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">243,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">305,000</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;Restructuring costs<SUP>(e)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">434,000</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">434,000</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;Litigation expenses<SUP>(f)</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">428,000</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;Impairment charge &ndash; vendor software<SUP>(g)</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">&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">&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;Non-GAAP net (loss) income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(293,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">998,000</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">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,354,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,489,000</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; text-indent: -12.6pt; padding-left: 12.6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GAAP basic and diluted<SUP>(h)</SUP> net (loss) income per share</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.36</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">.04</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.64</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.10</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; text-indent: -12.6pt; padding-left: 12.6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP basic and diluted<SUP>(h)</SUP> net (loss)&nbsp;income per share</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.03</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">.09</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">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(.21</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">.13</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-size: 10pt">&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><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>
</TABLE>


<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0">The Non-GAAP financial measures above, and the reconciliation to our
GAAP results for the periods presented, reflect adjustments relating to the following items:</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><BR>
<SUP>(a) </SUP>Amortization of purchased intangible assets<I> </I>&ndash; a non-cash expense arising from the acquisition of intangible
assets that the Company is required to amortize over their expected useful life. The amount of purchased intangible assets increased
significantly as a result of the acquisition of the USP and SP2000 signaling technologies acquired from GENBAND.</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><SUP>(b) </SUP>Software capitalization and purchased intangible asset
write-off &ndash; a non-cash charge incurred to write down the recorded balance of capitalized software development projects and
purchased intangible assets to their estimated net realizable value.</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><SUP>(c) </SUP>OEM excess inventory charge &ndash; a non-cash charge
to increase the reserve for excess and obsolete inventories due to the Company&rsquo;s decision to transition away from its OEM
product line.</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><SUP>(d) </SUP>Stock-based compensation costs &ndash; a non-cash expense
incurred in accordance with share-based compensation accounting guidance.</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><SUP>(e)</SUP> Restructuring costs<I> </I>&ndash; costs incurred as
a result of restructuring activities taken to bring operating expenses more in line with expected revenues.</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><SUP>(f)</SUP> Litigation expenses &ndash; legal expenses not indicative
of core operating activities.</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><SUP>(g)</SUP> Impairment charge &ndash; vendor software &ndash; 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: 8pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 8pt Arial, Helvetica, Sans-Serif; margin: 0"><SUP>(h)</SUP> Basic and diluted net income per common share are identical
for the three months and year ended December 31, 2011.</P>

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



<P STYLE="margin: 0"></P>

</BODY>
</HTML>
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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): February 21, 2013
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 February 21, 2013, Performance Technologies, Incorporated
("PT") issued a press release announcing its results of operations for the quarter and year ended December 31, 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 February 21,
2013.
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
February 21, 2013
By /s/ John M. Slusser
John M. Slusser
President and Chief Executive Officer
February 21, 2013
By /s/ Dorrance W. Lamb
Dorrance W. Lamb
Senior Vice President of Finance and Chief Financial Officer
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 Fourth Quarter 2012
Financial Results
ROCHESTER,
NY – February 21, 2013 – PT (NASDAQ: PTIX), a leading global provider of advanced network communications solutions,
today announced its unaudited financial results for the fourth quarter 2012.
Revenue
in the fourth quarter 2012 amounted to $5.3 million, compared to $9.1 million in the fourth quarter 2011. Revenue for 2012 amounted
to $23.3 million, compared to $36.2 million for 2011.
On the
basis of generally accepted accounting principles (GAAP), the net loss in the fourth quarter 2012 amounted to ($4.0 million),
or ($.36) per basic share, based on 11.1 million shares outstanding, including charges for the impairment of software capitalization
costs and purchased intangible assets totaling $.14 per share, a charge for excess OEM inventories of $.12 per share, restructuring
costs of $.04 per share, amortization of purchased intangible assets of $.02 per share, a discrete income tax charge of $.01 per
share, and stock-based compensation expense of $.01 per share. GAAP net income in the fourth quarter 2011 amounted to $.5 million,
or $.04 per diluted share, based on 11.1 million shares outstanding, including stock compensation expense of $.01 per share, amortization
of purchased intangible assets of $.03 per share and write-off of software development costs of $.02 per share.
The GAAP
net loss for 2012 amounted to ($7.1 million), or ($.64) per basic share, including charges for the impairment of software capitalization
costs and purchased intangible assets totaling $.14 per share, a charge for excess OEM inventories of $.12 per share, restructuring
costs of $.04 per share, amortization of purchased intangible assets of $.10 per share, a discrete income tax charge of $.01 per
share, and stock-based compensation expense of $.02 per share. The GAAP net loss for 2011 amounted to ($1.2 million), or ($.10)
per basic share, based on 11.1 million shares outstanding. This loss includes restructuring expense of $.02 per share, stock compensation
expense of $.03 per share, an impairment charge against vendor software of $.04 per share, write-off of software development costs
of $.02 per share, amortization of purchased intangible assets of $.10 per share and litigation expenses of $.04 per share.
The non-GAAP
net loss in the fourth quarter 2012 amounted to ($.3 million), or ($.03) per basic share, compared to non-GAAP net income of $1.0
million, or $.09 per diluted share in the fourth quarter 2011. The non-GAAP net loss for 2012 amounted to ($2.4 million), or ($.22)
per basic share, compared to net income of $1.5 million, or $.13 per diluted share for 2011. Please refer to the reconciliations
between GAAP and non-GAAP financial measures contained in this release.
On December
31, 2012, the Company had cash and investments amounting to $14.3 million, working capital of $15.5 million and no long-term debt.
On January
10, 2013, PT announced its decision to sharpen its strategic business focus, concentrate on its high value-add communications
product families, transition away from other product portfolio elements, and implement operational expense reductions. In conjunction
with this
decision, the Company reduced its personnel by ten employees, or 8% of its workforce as of
January 10, 2013.
As a result of this action, the Company expects to incur first quarter 2013 pre-tax restructuring charges
of approximately $.3 million, representing employee-related costs, which will result in cash expenditures. This action reduced
operating expenses by approximately $.7 million per year. When combined with the savings
from the restructuring
PT announced in October 2012, the Company has reduced its break-even expense level by more than $2 million per year. During the
first half of 2013, we expect to increase our sales and marketing investments in our Diameter signaling product to accelerate
its penetration in this growing market.
"While our
fourth quarter revenues and net loss are disappointing, we are confident that we have taken the necessary measures, both in the
fourth quarter and since, to stabilize the Company's operations and place us firmly on the path to profitability,"
said John Slusser, president and chief executive officer. "These measures were based upon focusing our efforts on high-value
add, strong-margin products that provide the best prospects for revenue growth as global economic conditions improve. We enter
2013 with a lean, focused and dedicated group of employees and an exciting new Diameter signaling product, our Universal Diameter
Router (UDR). Our ability to provision a complete signaling evolution path in a single, highly-integrated, carrier-grade end solution
set
–
spanning from today's legacy network upgrades to next-generation 4G LTE architectures
–
positions us very well in the network signaling marketplace going forward."
About PT (www.pt.com)
PT (NASDAQ: PTIX) is a global
supplier of advanced, high availability network communications solutions.
Its SEGway™ Diameter and
SS7 Signaling Systems provide tightly integrated signaling and advanced routing capabilities and applications that uniquely span
the mission critical demands of both existing and next-generation 4G LTE and IMS telecommunications networks. The Company's
IPnexus
®
Multi-Protocol Gateways and Servers enable a broad range of IP-interworking in data acquisition, sensor,
radar, and control applications for aviation, weather and other infrastructure networks. Established in 1981, PT is headquartered
in Rochester, NY and markets and sells its products worldwide through its direct sales organization as well as through channel
partners that include major telecommunications equipment vendors, government prime contractors and value-added resellers.
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) write-offs of software capitalization and
purchased intangible assets, (c) OEM excess inventory charges, (d) stock-based compensation costs, (e) restructuring costs, (f)
litigation expenses, and (g) 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 Friday, February 22, 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
February 22 through February 26, 2013. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using
passcode 62275. 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
December 31,
2012
December 31,
2011
Current assets:
Cash and cash equivalents
$
7,546,000
$
9,641,000
Investments
4,794,000
2,798,000
Accounts receivable
3,775,000
5,622,000
Inventories
3,615,000
5,421,000
Prepaid expenses and other assets
932,000
1,155,000
Prepaid income taxes
206,000
67,000
Deferred income taxes
445,000
368,000
Total current assets
21,313,000
25,072,000
Investments
1,969,000
3,362,000
Property, equipment and improvements, net
1,683,000
1,891,000
Software development costs, net
3,716,000
3,932,000
Purchased intangible assets, net
2,835,000
4,390,000
Deferred income taxes
102,000
Total assets
$
31,516,000
$
38,749,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
1,134,000
$
1,015,000
Accrued expenses
1,664,000
1,547,000
Deferred revenue
3,002,000
2,808,000
Fair value of foreign currency hedges
46,000
Other payable
999,000
Total current liabilities
5,800,000
6,415,000
Deferred income taxes
696,000
553,000
Total liabilities
6,496,000
6,968,000
Stockholders' equity:
Preferred stock
Common stock
133,000
133,000
Additional paid-in capital
17,591,000
17,347,000
Retained earnings
17,099,000
24,237,000
Accumulated other comprehensive income
15,000
(118,000
)
Treasury stock
(9,818,000
)
(9,818,000
)
Total stockholders' equity
25,020,000
31,781,000
Total liabilities and stockholders' equity
$
31,516,000
$
38,749,000
PERFORMANCE TECHNOLOGIES,
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS
FOR THE THREE MONTHS
AND YEAR ENDED DECEMBER 31, 2012 AND 2011
(unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2012
2011
2012
2011
Sales
$
5,275,000
$
9,051,000
$
23,320,000
$
36,176,000
Cost of goods sold
2,805,000
4,166,000
12,416,000
18,585,000
Software capitalization and purchased intangible asset write-off
1,600,000
175,000
1,600,000
175,000
OEM excess inventory charge
1,351,000
1,351,000
Gross profit (loss)
(481,000
)
4,710,000
7,953,000
17,416,000
Operating expenses:
Selling and marketing
808,000
1,444,000
4,935,000
6,410,000
Research and development
1,234,000
1,782,000
5,583,000
7,124,000
General and administrative
872,000
978,000
3,997,000
4,568,000
Restructuring charges
434,000
434,000
253,000
Impairment charge-vendor software
400,000
Total operating expenses
3,348,000
4,204,000
14,949,000
18,755,000
(Loss) income from operations
(3,829,000
)
506,000
(6,996,000
)
(1,339,000
)
Other income, net
11,000
68,000
52,000
154,000
(Loss) income before income taxes
(3,818,000
)
574,000
(6,944,000
)
(1,185,000
)
Income tax provision (benefit)
182,000
101,000
194,000
(22,000
)
Net (loss) income
$
(4,000,000
)
$
473,000
$
(7,138,000
)
$
(1,163,000
)
Basic (loss) earnings per share
$
(.36
)
$
.04
$
(.64
)
$
(.10
)
Diluted earnings per share
$
.04
Weighted average common shares
(1)
11,116,000
11,116,000
11,116,000
11,116,000
(1)
Shares used in both basic (loss) earnings per share
and diluted earnings per share
PERFORMANCE TECHNOLOGIES, INCORPORATED AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
(unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2012
2011
2012
2011
Gross Profit Reconciliation
GAAP gross profit (loss)
$
(481,000
)
$
4,710,000
$
7,953,000
$
17,416,000
Amortization of purchased intangible assets
(a)
265,000
279,000
1,156,000
1,091,000
Software capitalization and purchased intangible asset write-off
(b)
1,600,000
175,000
1,600,000
175,000
OEM excess inventory charge
(c)
1,351,000
1,351,000
Stock-based compensation
(d)
4,000
2,000
14,000
11,000
Non-GAAP gross profit
2,739,000
5,166,000
12,074,000
18,693,000
Non-GAAP gross profit percentage of sales
51.9
%
57.1
%
51.8
%
51.7
%
Operating Expense Reconciliation
GAAP operating expenses
3,348,000
4,204,000
14,949,000
18,755,000
Stock-based compensation
(d)
(53,000
)
(69,000
)
(229,000
)
(294,000
)
Restructuring costs
(e)
(434,000
)
(434,000
)
(253,000
)
Litigation expenses
(f)
(428,000
)
Impairment charge – vendor software
(g)
(400,000
)
Non-GAAP operating expenses
2,861,000
4,135,000
14,286,000
17,380,000
Net Income (loss) Reconciliation
GAAP net (loss) income
(4,000,000
)
473,000
(7,138,000
)
(1,163,000
)
Amortization of purchased intangible assets
(a)
265,000
279,000
1,156,000
1,091,000
Software capitalization and
    purchased intangible asset write-off
(b)
1,600,000
175,000
1,600,000
175,000
OEM excess inventory charge
(c)
1,351,000
1,351,000
Stock-based compensation
(d)
57,000
71,000
243,000
305,000
Restructuring costs
(e)
434,000
434,000
253,000
Litigation expenses
(f)
428,000
Impairment charge – vendor software
(g)
400,000
Non-GAAP net (loss) income
$
(293,000
)
$
998,000
$
(2,354,000
)
$
1,489,000
Loss per Common Share
GAAP basic and diluted
(h)
net (loss) income per share
$
(.36
)
$
.04
$
(.64
)
$
(.10
)
Non-GAAP basic and diluted
(h)
net (loss) income per share
$
(.03
)
$
.09
$
(.21
)
$
.13
The Non-GAAP financial measures above, and the 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 life. The amount of purchased intangible assets increased
significantly as a result of the acquisition of the USP and SP2000 signaling technologies acquired from GENBAND.
(b)
Software capitalization and purchased intangible asset
write-off – a non-cash charge incurred to write down the recorded balance of capitalized software development projects and
purchased intangible assets to their estimated net realizable value.
(c)
OEM excess inventory charge – a non-cash charge
to increase the reserve for excess and obsolete inventories due to the Company's decision to transition away from its OEM
product line.
(d)
Stock-based compensation costs – a non-cash expense
incurred in accordance with share-based compensation accounting guidance.
(e)
Restructuring costs
– costs incurred as
a result of restructuring activities taken to bring operating expenses more in line with expected revenues.
(f)
Litigation expenses – legal expenses not indicative
of core operating activities.
(g)
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.
(h)
Basic and diluted net income per common share are identical
for the three months and year ended December 31, 2011.