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<P style="MARGIN-TOP: 3px; MARGIN-BOTTOM: 0px" align=center><FONT face="Times New Roman" size=5><B>UNITED STATES </B></FONT></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px" align=center><FONT face="Times New Roman" size=5><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px" align=center><FONT face="Times New Roman" size=3><B>Washington, DC 20549 </B></FONT></P>
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     <TD align=center width="40%"><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=5>FORM 8-K</FONT></B></TD>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: '''''''''''''''''''''''''''Arial'''''''''''''''''''''''''''" face=Arial>CURRENT REPORT</FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><STRONG><FONT face=Arial>PURSUANT TO SECTION 13 OR 15(d) OF THE</FONT></STRONG></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><STRONG><FONT face=Arial>SECURITIES EXCHANGE ACT OF 1934</FONT></STRONG>&nbsp;</DIV><STRONG></STRONG></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman, serif'"><FONT face=Arial size=2>Date of Report </FONT><FONT face=Arial><FONT size=1>(Date of earliest event reported)</FONT>:&nbsp;&nbsp;<FONT size=2>February 5, 2009</FONT></FONT></FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: 'Arial'" face=Arial size=1>(Exact name of registrant as specified in its charter)</FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>Delaware</FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial size=1>of incorporation)</FONT></DIV></TD>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>02-27460</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial size=1>(Commission</FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>16-1158413</FONT></DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>205 Indigo Creek Drive</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>&nbsp;Rochester, New York</FONT></DIV></TD>
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<DIV style="DISPLAY: block; TEXT-INDENT: 0pt">&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>14626</FONT></DIV></TD></TR>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial size=1>(Address of principal executive offices)</FONT></DIV></TD>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''times new roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial size=1>(Zip Code)</FONT></DIV></TD></TR></TABLE>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: 'Times New Roman, serif'" face=Arial>(585) 256-0200&nbsp;&nbsp;&nbsp; </FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial size=1>(Registrant&#146;s telephone number, including area code)</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial size=2>Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):</FONT></DIV>
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<DIV align=justify><FONT style="DISPLAY: inline; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial size=2>Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</FONT></DIV></TD></TR></TABLE></DIV>
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<DIV align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</FONT></DIV></TD></TR></TABLE></DIV>
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<DIV align=left><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</FONT></DIV></TD></TR></TABLE></DIV>
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<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ''''''''''''''''''''''''''''''''''''''''''''''''''''''''Times New Roman''''''''''''''''''''''''''''''''''''''''''''''''''''''''" face=Arial>[&nbsp;&nbsp;]</FONT></DIV></TD>
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<P align=justify><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>Item 2.02 Results of Operations and Financial Condition</FONT></B></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>On February 5, 2009, Performance Technologies, Incorporated issued a press release announcing its results of operations for the quarter and year ended&nbsp;December 31, 2008. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.</FONT></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>(c) Exhibits.</FONT></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>(99.1) Press release issued by Performance Technologies, Incorporated on February 5, 2009. </FONT></P>
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<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2><B>SIGNATURES</B></FONT></P>
<P align=justify><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.</FONT></P>
<P align=justify><B><FONT face="TimesNewRomanPS-BoldMT,Times New Roman,Times,serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></B></P>
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     <TD align=left width="63%" colSpan=2><FONT face="Times New Roman" size=2><B>PERFORMANCE TECHNOLOGIES, INCORPORATED</B></FONT></TD>
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     <TD align=left width="14%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>February 6, 2009</FONT></TD>
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     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>By /s/ John M. Slusser</FONT>&nbsp; </TD>
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     <TD align=left width="43%"><FONT face="Times New Roman" size=2>John M. Slusser</FONT></TD>
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     <TD align=left width="18%"></TD></TR>
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     <TD align=left width="14%">&nbsp; </TD>
     <TD align=left width="5%"></TD>
     <TD align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>President and Chief Executive Officer</FONT>&nbsp; </TD>
     <TD align=left width="20%"></TD>
     <TD align=left width="18%"></TD></TR>
<TR>
     <TD align=left width="14%"></TD>
     <TD align=left width="5%"></TD>
     <TD align=left width="43%">&nbsp;</TD>
     <TD align=left width="20%"></TD>
     <TD align=left width="18%"></TD></TR>
<TR>
     <TD align=left width="14%"></TD>
     <TD align=left width="5%"></TD>
     <TD align=left width="43%">&nbsp;</TD>
     <TD align=left width="20%"></TD>
     <TD align=left width="18%"></TD></TR>
<TR>
     <TD align=left width="14%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>February 6, 2009</FONT></TD>
     <TD align=left width="5%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>By /s/ Dorrance W. Lamb</FONT>&nbsp; </TD>
     <TD align=left width="20%"></TD>
     <TD align=left width="18%"></TD></TR>
<TR>
     <TD align=left width="14%"></TD>
     <TD align=left width="5%"></TD>
     <TD align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>Dorrance W. Lamb</FONT> </TD>
     <TD align=left width="20%"></TD>
     <TD align=left width="18%"></TD></TR>
<TR>
     <TD align=left width="14%"></TD>
     <TD align=left width="5%"></TD>
     <TD align=left width="43%"><FONT face="TimesNewRomanPSMT,Times New Roman,Times,serif" size=2>Chief Financial Officer and Senior Vice President of Finance</FONT>&nbsp; </TD>
     <TD align=left width="20%"></TD>
     <TD align=left width="18%"></TD></TR></TABLE><BR>
<BR style="PAGE-BREAK-BEFORE: always" clear=all>


<A name="page_3"></A>&nbsp;
<P align=right>
<TABLE style="WIDTH: 358px; HEIGHT: 25px">
<TR>
     <TD noWrap align=right><FONT face=Arial size=2>Exhibit 99.1</FONT></TD></TR></TABLE></P>
<P align=justify>
<TABLE>
<TR>
     <TD noWrap><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>For more information contact:</FONT></B><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Dorrance W. Lamb</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>SVP and Chief Financial Officer</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Performance Technologies</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>585-256-0200 ext. 7276</FONT><BR>
<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>http://www.pt.com</FONT><BR>
<U><FONT face=ArialMT,Arial,Helvetica,sans-serif color=#0000ff size=2>finance@pt.com</FONT></U></TD></TR></TABLE></P>
<P align=center><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=4>Performance Technologies Announces&nbsp;</FONT></B><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=4>Fourth Quarter 2008 Financial Results</FONT></B></P>
<P align=center><B><I><FONT face=Arial-BoldItalicMT,Arial,Helvetica,sans-serif size=2>&#147;Company Reports $.02 earnings per share for the latest quarter&#148;</FONT></I></B></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>ROCHESTER, NY &#150; February 5, 2009 -- Performance Technologies, Inc. (NASDAQ: PTIX), a leading provider of innovative communications solutions, today announced its financial results for the fourth quarter 2008.</FONT></P>
<P align=justify><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Financial Summary</FONT></B></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Revenue in the fourth quarter 2008 amounted to $9.1 million, compared to $10.6 million in the fourth quarter 2007. Revenue for 2008 amounted to $40.5 million, compared to $40.3 million for 2007. </FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Net income in the fourth quarter 2008 amounted to $.2 million, or $.02 per diluted share based on 11.4 million shares outstanding. Net income for the fourth quarter 2007 amounted to $1.2 million, or $.10 per diluted share, including stock-based compensation expense of $.2 million, or $.01 per share; restructuring charges amounting to $.2 million, or $.01 per share, and a gain on sale of an investment of $.3 million, or $.02 per share, based on 11.8 million shares outstanding. </FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Net income for 2008 amounted to $1.7 million, or $.14 per diluted share including stock-based compensation expense of $.6 million, or $.03 per share; unsuccessful acquisition expenses of $.2 million, or $.02 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 11.6 million shares outstanding. Net income for 2007 amounted to $1.8 million, or $.14 per diluted share, including stock-based compensation expense of $.7 million, or $.04 per share; write-off of software development costs amounting to $.5 million, or $.03 per share; restructuring charges of $.4 million, or $.02 per share; a gain on sale of an investment of $.3 million, or $.02 per share; a recovery on a note receivable of $.5 million ($.4 million of which is reported in other income), or $.03 per share; and net discrete income tax provision items amounting to $.1 million, or $.01 per share, based on 12.6 million shares outstanding. </FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>The Company had 11.2 million common shares outstanding at December 31, 2008. Under the Company&#146;s stock repurchase programs, approximately .4 million and .6 million shares of its common stock were repurchased for aggregate purchase prices of $1.3 million and $2.3 million during the three and twelve months ended December 31, 2008, respectively. Cash and investments amounted to $33.5 million at December 31, 2008, or $2.98 per share, and the Company had no long-term debt.</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>&#147;Although our fourth quarter results were certainly impacted by the global economic slowdown,&#148; said John Slusser, president and chief executive officer, &#147;I am pleased that our bottom line performance exceeded our expectations. This result was due to the dedicated work of our employees who diligently pursued our ongoing objectives while maintaining a strong commitment to expense control. 2008 was our thirteenth consecutive year of profitability as a public company and despite the weakening second half economy, we continued our investment in our signaling program, increased our operating income and gross profit, and improved our gross margin (on essentially flat revenues).&#148;</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>On January 6, 2009, pursuant to an offer made to the Company in October 2008, the single auction rate municipal security held by the Company was sold at its par value of $2.45 million to a brokerage firm for cash. </FONT></P>
<P align=justify>&nbsp;</P>


<A name="page_4"></A>
<P align=justify><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Business Overview and Guidance</FONT></B></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>The Company globally targets two primary vertical markets for its communications products, namely telecommunications and aerospace and defense. The telecommunications market, historically our largest vertical market, is fundamentally driven by investments in network infrastructure by carriers and service providers. Telecommunications market revenues derived from our OEM and application-ready systems products are primarily dependent on broad, multi-year deployments of next-generation telecommunications infrastructure. Telecommunications market revenues generated from end solutions, such as our signaling products, are governed by investments necessary to support existing and evolving service demands such as the ongoing worldwide explosive growth in text messaging. Sales into the aerospace and defense market are typically to prime contractors and system integrators that reflect investment levels by various government agencies and military branches in specific programs and projects requiring enhanced communications capabilities. </FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>John Slusser further remarked, &#147;There is little doubt that the current economic environment will impact our business in 2009. Although market interest and activity related to our product portfolio remains strong, actual sales visibility is at an all time low. In light of these conditions, we initiated a staffing reduction in early January to further reduce our expense levels. Despite the necessity for these expense control measures, we remain dedicated to continuing our strategic programs, which are expected to generate long-term growth. In addition, we believe our balance sheet affords us the strength and flexibility to endure the current economic conditions.&#148; </FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>The Company provides guidance only on earnings per share expected in the next quarter. The following statements reflect the Company's current views with respect to future events and financial performance and are forward-looking statements covered within the &#147;safe harbor&#148; provisions described in the Private Securities Litigation Reform Act. Actual results may differ materially from these forward-looking statements. Given the current global economic environment, the Company&#146;s estimates are subject to a higher level of uncertainty than is customary. The Company assumes no obligation to revise or update these forward-looking statements to reflect events or circumstances after today or to reflect the occurrence of unanticipated events. Furthermore, a substantial portion of the Company&#146;s revenue is derived from orders placed within a quarter and shipped in the final month of the same quarter. Management anticipates a loss in the first quarter 2009 to be in the range of ($.05) to ($.10) per share. These per share estimates exclude stock-based compensation expense of $.01 per share and restructuring charges of approximately $.5 million, or $.04 per share. </FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>More in-depth discussions of the Company's strategy and financial performance can be found in the Company's periodic reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission. </FONT></P>
<P align=justify><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>About Performance Technologies </FONT></B><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(</FONT><U><FONT face=ArialMT,Arial,Helvetica,sans-serif color=#0000ff size=2>www.pt.com</FONT></U><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Performance Technologies (NASDAQ: PTIX) is a global supplier of advanced network communications and control solutions to end users, application developers and original equipment manufacturers that serve mission critical telecommunications, aerospace and defense markets. The Company provides remotely manageable, IP-centric network elements specifically engineered for high availability, scalability, and long life cycle deployments. Its products are built upon its own U.S. manufactured hardware combined with the Company&#146;s NexusWare&#174; Carrier Grade Linux&#174; operating system and software development environment plus a broad suite of communications protocols and high availability middleware. Performance Technologies&#146; product portfolio includes the SEGway&#153; suite of Signaling (SS7/SIP) Transfer Points, Signaling Gateways and Bridges, and its IPnexus&#174; family of COTS-based application ready systems, WAN gateways, and multi-protocol communications servers. </FONT></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Performance Technologies maximizes the value proposition of its products by leveraging its field proven systems, software and hardware technologies developed over a twenty-eight year record of demonstrated innovation. A tightly integrated combination of these technologies results in measurable benefits to its customers through compelling return-on-investment and substantially accelerated time to market metrics. The Company is headquartered in Rochester, New York and maintains centers of engineering excellence in San Diego and San Luis Obispo, California, and Kanata, Ontario, Canada. It has sales and marketing offices in the U.S. in Raleigh, Chicago, Dallas, and San Jose and international offices in London, England and Shanghai, China. </FONT></P>
<P align=justify><BR style="PAGE-BREAK-BEFORE: always" clear=all>
&nbsp;</P>

<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Forward-Looking Statements</FONT></B></FONT><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. This press release contains forward-looking statements which reflect the Company's current views with respect to future events and financial performance, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and is subject to the safe harbor provisions of those Sections. The Company&#146;s future operating results are subject to various risks and uncertainties and could differ materially from those discussed in the forward-looking statements and may be affected by various trends and factors which are beyond the Company&#146;s control. These risks and uncertainties include, among other factors, business and economic conditions, rapid technological changes accompanied by frequent new product introductions, competitive pressures, dependence on key customers, inability to gauge order flows from customers, fluctuations in quarterly and annual results, the reliance on a limited number of third party suppliers, limitations of the Company&#146;s manufacturing capacity and arrangements, the protection of the Company&#146;s proprietary technology, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to goodwill and investments, foreign regulations, and potential material weaknesses in internal control over financial reporting. In addition, during weak or uncertain economic periods, customers&#146; visibility deteriorates causing delays in the placement of their orders. These factors often result in a substantial portion of the Company&#146;s revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter. The Company undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events, or otherwise. Forward-looking statements should be read in conjunction with the audited Consolidated Financial Statements, the Notes thereto, Risk Factors, and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company as of December 31, 2007, as contained in the Company&#146;s Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.</FONT></P>
<P align=center>
<TABLE style="WIDTH: 33px; HEIGHT: 24px">
<TR>
     <TD noWrap><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>###</FONT></TD></TR></TABLE></P>
<P align=justify><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>A conference call will be held on Friday, February 6 at 10:00 a.m., New York time, to discuss the Company&#146;s financial performance for the Fourth quarter 2008. All institutional investors can participate in the conference by dialing (866) 250-5144 or (416) 849-6163. The call will be available simultaneously for all other investors at (866) 494-3387 or (416) 915-1198. A digital recording of this conference call may be accessed immediately after its completion from February 6 through February 10, 2009. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 698064. A live webcast of the conference call will be available on the Performance Technologies website at www.pt.com and will be archived to the site within two hours after the completion of the call.</FONT></P>
<P align=justify><BR style="PAGE-BREAK-BEFORE: always" clear=all>
&nbsp;</P>
</FONT>


<A name="page_6"></A>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES</FONT></B></TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>CONSOLIDATED BALANCE SHEETS</FONT></B></TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>(unaudited)</FONT></B></TD></TR>
<TR>
     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>ASSETS</FONT></B></TD></TR>
<TR>
     <TD width="100%" colSpan=8></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; </TD>
     <TD align=center width="13%" colSpan=2><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>December 31,</FONT></B></TD>
     <TD align=center width="1%"></TD>
     <TD align=center width="4%"></TD>
     <TD align=center width="14%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>December 31,</FONT></B></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%" colSpan=2><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2008</FONT></B></TD>
     <TD align=center width="1%"></TD>
     <TD align=left width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="14%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2007</FONT></B></TD></TR>
<TR>
     <TD width="99%" colSpan=7>&nbsp; </TD>
     <TD width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Current assets:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=right width="1%" bgColor=#80ffff></TD>
     <TD align=right width="4%" bgColor=#80ffff></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Cash and cash equivalents</FONT>&nbsp; </TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>29,218,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>15,592,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Investments</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,450,000</FONT>&nbsp; </TD>
     <TD align=right width="1%" bgColor=#80ffff></TD>
     <TD align=right width="4%" bgColor=#80ffff></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>14,150,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accounts receivable</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,677,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>7,933,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Inventories</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,303,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,783,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Prepaid income taxes</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>299,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>713,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Prepaid expenses and other assets</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>796,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>916,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Deferred taxes</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,955,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,037,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Fair value of foreign currency hedges</FONT></TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>107,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="12%">&nbsp;</TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD></TR>
<TR>
     <TD align=left width="68%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total current assets</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>46,805,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>46,124,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="99%" colSpan=7>&nbsp; </TD>
     <TD width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Investments</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,797,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,500,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Property, equipment and improvements</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,069,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,260,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Software development costs</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,840,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,297,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Deferred taxes</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>664,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,196,000</FONT>&nbsp; </TD>
     <TD align=right width="1%"></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Goodwill</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,143,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,143,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=right width="1%"></TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>59,318,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>59,520,000</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"></TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=center width="100%" colSpan=8><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</FONT></B></TD></TR>
<TR>
     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Current liabilities:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accounts payable</FONT>&nbsp; </TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>922,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,392,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accrued expenses</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,549,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,425,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total current liabilities</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,471,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,817,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income taxes payable</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>400,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>807,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total liabilities</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,871,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,624,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=8>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Stockholders&#146; equity:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Preferred stock</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Common stock</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>133,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>133,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Additional paid-in capital</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>16,052,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>15,483,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Retained earnings</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>46,689,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>45,231,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Accumulated other comprehensive income</FONT></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>73,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="12%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Treasury stock</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(9,500,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=left width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(7,951,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1pt solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="68%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total stockholders&#146; equity</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>53,447,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>52,896,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="68%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total liabilities and stockholders&#146; equity</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>59,318,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="12%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>59,520,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR></TABLE><BR>
<BR style="PAGE-BREAK-BEFORE: always" clear=all>


<A name="page_7"></A>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES</FONT></B> </TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>CONSOLIDATED STATEMENTS OF INCOME</FONT></B> </TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>FOR THE THREE AND&nbsp;TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007</FONT></B> </TD></TR>
<TR vAlign=bottom>
     <TD align=center width="100%" colSpan=16><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>(unaudited)</FONT></B> </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%">&nbsp; </TD>
     <TD align=center width="23%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Three Months Ended</FONT></B></TD>
     <TD align=center width="4%"></TD>
     <TD align=center width="23%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>Twelve&nbsp;Months Ended</FONT></B></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%">&nbsp; </TD>
     <TD align=center width="23%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>December 31,</FONT></B></TD>
     <TD align=center width="4%"></TD>
     <TD align=center width="23%" colSpan=7><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>December 31,</FONT></B></TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2008</FONT></B></TD>
     <TD align=left width="3%">&nbsp;</TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2007</FONT></B></TD>
     <TD align=left width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2008</FONT></B></TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=3><B><FONT face=Arial-BoldMT,Arial,Helvetica,sans-serif size=2>2007</FONT></B></TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Sales</FONT>&nbsp; </TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>9,130,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>10,574,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>40,517,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>40,319,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Cost of goods sold</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>3,814,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,614,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>17,689,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>18,537,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Software capitalization write-off</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%">&nbsp; <FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>76,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%">&nbsp;</TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%">&nbsp;&nbsp;&nbsp; <FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>76,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>520,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Gross profit</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,240,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,960,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>22,752,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>21,262,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Operating expenses:</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Selling and marketing</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,104,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,871,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>8,251,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>6,824,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Research and development</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,149,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,303,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>9,043,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>9,854,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>General and administrative</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,081,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,108,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,742,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>4,833,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Unsuccessful acquisition expenses</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%">&nbsp;</TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>229,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Restructuring charges</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="8%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>153,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="8%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>393,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="50%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Total operating expenses</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,334,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>5,435,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>22,265,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>21,904,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income (loss) from operations</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(94,000</FONT> </TD>
     <TD align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>525,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>487,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(642,000</FONT> </TD>
     <TD align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Gain on sale of investment</FONT> </TD>
     <TD align=right width="1%"></TD>
     <TD align=left width="8%"></TD>
     <TD align=left width="1%"></TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>305,000</FONT> </TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%"></TD>
     <TD align=left width="8%"></TD>
     <TD align=left width="1%"></TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%"></TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>305,000</FONT> </TD>
     <TD align=left width="1%"></TD></TR>
<TR>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Note receivable recovery</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>143,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Other income, net</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>174,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>470,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>987,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>2,129,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income (loss) before income taxes</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>80,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,300,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,474,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,935,000</FONT> </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Income tax provision&nbsp;(benefit)</FONT>&nbsp;&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(103,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>129,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>(189,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>)</FONT>&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>121,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>183,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=center width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,171,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,663,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>1,814,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Basic earnings per share</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.02</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.10</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.14</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.14</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Weighted average common shares</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,419,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,759,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,601,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>12,581,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Diluted earnings per share</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.02</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.10</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.14</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>$</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>.14</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD width="100%" colSpan=16>&nbsp; </TD></TR>
<TR>
     <TD align=left width="50%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>Weighted average common and</FONT>&nbsp; </TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD align=right width="1%">&nbsp; </TD>
     <TD align=left width="8%">&nbsp; </TD>
     <TD align=left width="1%">&nbsp; </TD></TR>
<TR vAlign=bottom bgColor=#80ffff>
     <TD align=left width="50%">&nbsp; &nbsp;<FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>common equivalent shares</FONT>&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,419,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=left width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,803,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="4%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>11,611,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD>
     <TD align=right width="3%"></TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="1%">&nbsp; </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=right width="8%"><FONT face=ArialMT,Arial,Helvetica,sans-serif size=2>12,626,000</FONT> </TD>
     <TD style="BORDER-BOTTOM: #000000 2pt double" align=left width="1%">&nbsp; </TD></TR></TABLE><BR>

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dec08.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 5, 2009
PERFORMANCE TECHNOLGIES, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation)
02-27460
(Commission
File Number)
16-1158413
(IRS Employer
Identification No.)
205 Indigo Creek Drive
Rochester, New York
14626
(Address of principal executive offices)
(Zip Code)
(585) 256-0200
(Registrant's telephone number, including area code)
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 (see General Instruction A.2 below):
[  ]
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))
[  ]
P
re-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 5, 2009, Performance Technologies, Incorporated issued a press release announcing its results of operations for the quarter and year ended December 31, 2008. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.
(c) Exhibits.
(99.1) Press release issued by Performance Technologies, Incorporated on February 5, 2009.
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 6, 2009
By /s/ John M. Slusser
John M. Slusser
President and Chief Executive Officer
February 6, 2009
By /s/ Dorrance W. Lamb
Dorrance W. Lamb
Chief Financial Officer and Senior Vice President of Finance
Exhibit 99.1
For more information contact:
Dorrance W. Lamb
SVP and Chief Financial Officer
Performance Technologies
585-256-0200 ext. 7276
http://www.pt.com
finance@pt.com
Performance Technologies Announces
Fourth Quarter 2008 Financial Results
"Company Reports $.02 earnings per share for the latest quarter"
ROCHESTER, NY – February 5, 2009 -- Performance Technologies, Inc. (NASDAQ: PTIX), a leading provider of innovative communications solutions, today announced its financial results for the fourth quarter 2008.
Financial Summary
Revenue in the fourth quarter 2008 amounted to $9.1 million, compared to $10.6 million in the fourth quarter 2007. Revenue for 2008 amounted to $40.5 million, compared to $40.3 million for 2007.
Net income in the fourth quarter 2008 amounted to $.2 million, or $.02 per diluted share based on 11.4 million shares outstanding. Net income for the fourth quarter 2007 amounted to $1.2 million, or $.10 per diluted share, including stock-based compensation expense of $.2 million, or $.01 per share; restructuring charges amounting to $.2 million, or $.01 per share, and a gain on sale of an investment of $.3 million, or $.02 per share, based on 11.8 million shares outstanding.
Net income for 2008 amounted to $1.7 million, or $.14 per diluted share including stock-based compensation expense of $.6 million, or $.03 per share; unsuccessful acquisition expenses of $.2 million, or $.02 per share; and a discrete income tax benefit of $.4 million, or $.03 per share, based on 11.6 million shares outstanding. Net income for 2007 amounted to $1.8 million, or $.14 per diluted share, including stock-based compensation expense of $.7 million, or $.04 per share; write-off of software development costs amounting to $.5 million, or $.03 per share; restructuring charges of $.4 million, or $.02 per share; a gain on sale of an investment of $.3 million, or $.02 per share; a recovery on a note receivable of $.5 million ($.4 million of which is reported in other income), or $.03 per share; and net discrete income tax provision items amounting to $.1 million, or $.01 per share, based on 12.6 million shares outstanding.
The Company had 11.2 million common shares outstanding at December 31, 2008. Under the Company's stock repurchase programs, approximately .4 million and .6 million shares of its common stock were repurchased for aggregate purchase prices of $1.3 million and $2.3 million during the three and twelve months ended December 31, 2008, respectively. Cash and investments amounted to $33.5 million at December 31, 2008, or $2.98 per share, and the Company had no long-term debt.
"Although our fourth quarter results were certainly impacted by the global economic slowdown," said John Slusser, president and chief executive officer, "I am pleased that our bottom line performance exceeded our expectations. This result was due to the dedicated work of our employees who diligently pursued our ongoing objectives while maintaining a strong commitment to expense control. 2008 was our thirteenth consecutive year of profitability as a public company and despite the weakening second half economy, we continued our investment in our signaling program, increased our operating income and gross profit, and improved our gross margin (on essentially flat revenues)."
On January 6, 2009, pursuant to an offer made to the Company in October 2008, the single auction rate municipal security held by the Company was sold at its par value of $2.45 million to a brokerage firm for cash.
Business Overview and Guidance
The Company globally targets two primary vertical markets for its communications products, namely telecommunications and aerospace and defense. The telecommunications market, historically our largest vertical market, is fundamentally driven by investments in network infrastructure by carriers and service providers. Telecommunications market revenues derived from our OEM and application-ready systems products are primarily dependent on broad, multi-year deployments of next-generation telecommunications infrastructure. Telecommunications market revenues generated from end solutions, such as our signaling products, are governed by investments necessary to support existing and evolving service demands such as the ongoing worldwide explosive growth in text messaging. Sales into the aerospace and defense market are typically to prime contractors and system integrators that reflect investment levels by various government agencies and military branches in specific programs and projects requiring enhanced communications capabilities.
John Slusser further remarked, "There is little doubt that the current economic environment will impact our business in 2009. Although market interest and activity related to our product portfolio remains strong, actual sales visibility is at an all time low. In light of these conditions, we initiated a staffing reduction in early January to further reduce our expense levels. Despite the necessity for these expense control measures, we remain dedicated to continuing our strategic programs, which are expected to generate long-term growth. In addition, we believe our balance sheet affords us the strength and flexibility to endure the current economic conditions."
The Company provides guidance only on earnings per share expected in the next quarter. The following statements reflect the Company's current views with respect to future events and financial performance and are forward-looking statements covered within the "safe harbor" provisions described in the Private Securities Litigation Reform Act. Actual results may differ materially from these forward-looking statements. Given the current global economic environment, the Company's estimates are subject to a higher level of uncertainty than is customary. The Company assumes no obligation to revise or update these forward-looking statements to reflect events or circumstances after today or to reflect the occurrence of unanticipated events. Furthermore, a substantial portion of the Company's revenue is derived from orders placed within a quarter and shipped in the final month of the same quarter. Management anticipates a loss in the first quarter 2009 to be in the range of ($.05) to ($.10) per share. These per share estimates exclude stock-based compensation expense of $.01 per share and restructuring charges of approximately $.5 million, or $.04 per share.
More in-depth discussions of the Company's strategy and financial performance can be found in the Company's periodic reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission.
About Performance Technologies
(
www.pt.com
)
Performance Technologies (NASDAQ: PTIX) is a global supplier of advanced network communications and control solutions to end users, application developers and original equipment manufacturers that serve mission critical telecommunications, aerospace and defense markets. The Company provides remotely manageable, IP-centric network elements specifically engineered for high availability, scalability, and long life cycle deployments. Its products are built upon its own U.S. manufactured hardware combined with the Company's NexusWare® Carrier Grade Linux® operating system and software development environment plus a broad suite of communications protocols and high availability middleware. Performance Technologies' product portfolio includes the SEGway™ suite of Signaling (SS7/SIP) Transfer Points, Signaling Gateways and Bridges, and its IPnexus® family of COTS-based application ready systems, WAN gateways, and multi-protocol communications servers.
Performance Technologies maximizes the value proposition of its products by leveraging its field proven systems, software and hardware technologies developed over a twenty-eight year record of demonstrated innovation. A tightly integrated combination of these technologies results in measurable benefits to its customers through compelling return-on-investment and substantially accelerated time to market metrics. The Company is headquartered in Rochester, New York and maintains centers of engineering excellence in San Diego and San Luis Obispo, California, and Kanata, Ontario, Canada. It has sales and marketing offices in the U.S. in Raleigh, Chicago, Dallas, and San Jose and international offices in London, England and Shanghai, China.
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, inability to gauge order flows from customers, fluctuations in quarterly and annual results, the reliance on a limited number of third party suppliers, limitations of the Company's manufacturing capacity and arrangements, the protection of the Company's proprietary technology, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to goodwill and investments, foreign regulations, and potential material weaknesses in internal control over financial reporting. In addition, during weak or uncertain economic periods, customers' visibility deteriorates causing delays in the placement of their orders. These factors often result in a substantial portion of the Company's revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter. The Company undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events, or otherwise. Forward-looking statements should be read in conjunction with the audited Consolidated Financial Statements, the Notes thereto, Risk Factors, and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company as of December 31, 2007, as contained in the Company's Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.
###
A conference call will be held on Friday, February 6 at 10:00 a.m., New York time, to discuss the Company's financial performance for the Fourth quarter 2008. All institutional investors can participate in the conference by dialing (866) 250-5144 or (416) 849-6163. The call will be available simultaneously for all other investors at (866) 494-3387 or (416) 915-1198. A digital recording of this conference call may be accessed immediately after its completion from February 6 through February 10, 2009. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 698064. A live webcast of the conference call will be available on the Performance Technologies website at www.pt.com and will be archived to the site within two hours after the completion of the call.
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
December 31,
December 31,
2008
2007
Current assets:
Cash and cash equivalents
$
29,218,000
$
15,592,000
Investments
2,450,000
14,150,000
Accounts receivable
6,677,000
7,933,000
Inventories
5,303,000
4,783,000
Prepaid income taxes
299,000
713,000
Prepaid expenses and other assets
796,000
916,000
Deferred taxes
1,955,000
2,037,000
Fair value of foreign currency hedges
107,000
Total current assets
46,805,000
46,124,000
Investments
1,797,000
2,500,000
Property, equipment and improvements
2,069,000
2,260,000
Software development costs
3,840,000
3,297,000
Deferred taxes
664,000
1,196,000
Goodwill
4,143,000
4,143,000
Total assets
$
59,318,000
$
59,520,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
922,000
$
1,392,000
Accrued expenses
4,549,000
4,425,000
Total current liabilities
5,471,000
5,817,000
Income taxes payable
400,000
807,000
Total liabilities
5,871,000
6,624,000
Stockholders' equity:
Preferred stock
Common stock
133,000
133,000
Additional paid-in capital
16,052,000
15,483,000
Retained earnings
46,689,000
45,231,000
Accumulated other comprehensive income
73,000
Treasury stock
(9,500,000
)
(7,951,000
)
Total stockholders' equity
53,447,000
52,896,000
Total liabilities and stockholders' equity
$
59,318,000
$
59,520,000
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2008
2007
2008
2007
Sales
$
9,130,000
$
10,574,000
$
40,517,000
$
40,319,000
Cost of goods sold
3,814,000
4,614,000
17,689,000
18,537,000
Software capitalization write-off
76,000
76,000
520,000
Gross profit
5,240,000
5,960,000
22,752,000
21,262,000
Operating expenses:
Selling and marketing
2,104,000
1,871,000
8,251,000
6,824,000
Research and development
2,149,000
2,303,000
9,043,000
9,854,000
General and administrative
1,081,000
1,108,000
4,742,000
4,833,000
Unsuccessful acquisition expenses
229,000
Restructuring charges
153,000
393,000
Total operating expenses
5,334,000
5,435,000
22,265,000
21,904,000
Income (loss) from operations
(94,000
)
525,000
487,000
(642,000
)
Gain on sale of investment
305,000
305,000
Note receivable recovery
143,000
Other income, net
174,000
470,000
987,000
2,129,000
Income (loss) before income taxes
80,000
1,300,000
1,474,000
1,935,000
Income tax provision (benefit)
(103,000
)
129,000
(189,000
)
121,000
Net income
$
183,000
$
1,171,000
$
1,663,000
$
1,814,000
Basic earnings per share
$
.02
$
.10
$
.14
$
.14
Weighted average common shares
11,419,000
11,759,000
11,601,000
12,581,000
Diluted earnings per share
$
.02
$
.10
$
.14
$
.14
Weighted average common and
common equivalent shares
11,419,000
11,803,000
11,611,000
12,626,000