UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                                       OR

              ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


               For the transition period from _______ to ________

                    Commission File Number __________________


                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
             (Exact name of registrant as specified in its charter)


         OHIO                                                 34-1334199
-------------------------------                ---------------------------------
(State or Other Jurisdiction of                (IRS Employer Identification No.)
Incorporation or Organization)

2701 E. CAMELBACK ROAD, SUITE 210
PHOENIX, ARIZONA                                            85016
---------------------------------                   ------------------------
(Address of principal executive offices)                  (Zip Code)


        Registrant's telephone number including area code: (602) 912-0100




Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that  registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
YES  X      NO
    ---        ---
Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed  by  Sections  12,  13 or 15d of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
YES  X      NO
    ---        ---


NUMBER OF SHARES  OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK AS
OF NOVEMBER 10, 1998, IS 2,221,263 SHARES.
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES


                                      INDEX



PART I   FINANCIAL INFORMATION (UNAUDITED)                                 PAGE
         ---------------------------------                                 ----

CONSOLIDATED BALANCE SHEETS -
         SEPTEMBER 30, 1998 AND DECEMBER 31, 1997                            3

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) -                          4
         NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998 AND 1997

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
         THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998 AND 1997                5

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -                          6
         NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998 AND 1997

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



PART II           OTHER INFORMATION                                          8
                  -----------------


ITEM 1.  LEGAL PROCEEDINGS

ITEM 2.  CHANGES IN SECURITIES

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5.  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


SIGNATURES                                                                    9

                                                                               2
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
ASSETS                                                                   30-SEPT-98    31-DEC-97
                                                                         ----------    ---------
<S>                                                                      <C>           <C>
Current assets:
     Cash and equivalents, unrestricted                                  $  1,927      $  2,815
     Accounts and other receivables                                           273           410
       less allowance for doubtful accounts
     Notes Receivable                                                         350             0
     Current Portion of Receivables from sale of businesses,
       net of allowance                                                       269           269
     Factored receivables, net of allowance for doubtful accounts             261           261
     Inventories                                                              266           313
     Prepaid expenses and other current assets                                194           227
     Real estate held for sale                                                785           785
                                                                         --------      --------
         Total current assets                                               4,325         5,080

     Deferred income taxes                                                  1,291         1,291
     Property and equipment, net                                            2,338         2,757
     Other assets                                                           1,223         1,277
                                                                         --------      --------

     TOTAL ASSETS                                                        $  9,177      $ 10,405
                                                                         ========      ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt                                        983         1,051
     Accounts payable                                                         562           637
     Accrued employment costs                                                 473           476
     Accrued expenses and other current liabilities                           551           666
     Factored receivables reserve                                              61            61
     Liabilities subject to compromise                                        797           797
     Foreign Tax Liability                                                    250           250
                                                                         --------      --------
        Total current liabilities                                           3,677         3,938

Long-term debt, less current portion                                           66           255

Shareholders' equity:
     Preferred Stock, par value $1.00 per share: authorized
       100,000 shares; none issued                                              0             0
     Common stock, no par value; authorized 5,000,000 shares;
       issued 3,157,332 shares; outstanding 2,226,263 and 2,481,264,
       respectively                                                        31,202        31,202
     Accumulated deficit                                                  (22,023)      (21,745)
                                                                         --------      --------
                                                                            9,179         9,457

     Treasury stock at cost (931,069 and 670,784 shares,
       respectively)                                                       (3,745)       (3,245)
                                                                         --------      --------
       Total shareholders' equity                                           5,434         6,212

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                               $  9,177      $ 10,405
                                                                         ========      ========
</TABLE>
                                                                               3
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
          FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED SEPTEMBER 30
                                                                ------------------------------

                                                                    1998             1997
                                                                -----------      -----------
<S>                                                             <C>              <C>
Revenues                                                        $    13,664      $    16,310

Cost of revenues                                                    (12,801)         (15,390)
Selling, general and administrative expenses                         (1,291)          (1,440)
Interest expense                                                        (22)             (74)
Other income (expenses), net                                             85              215
Gain (loss) on sale of assets                                           (48)             (42)
                                                                -----------      -----------

Income (loss) from continuing operations before
     income taxes                                                      (413)            (421)


Provision for income taxes                                               (0)              (1)
                                                                -----------      -----------


Income (loss) from continuing operations                               (413)            (422)

Income (loss) from discontinued operations                              135              128
                                                                -----------      -----------


Net income (loss)                                               $      (278)     $      (294)
                                                                ===========      ===========

Net income (loss) per common share
     Continuing operations                                      $     (0.18)     $     (0.17)
     Discontinued operations                                    $      0.06      $      0.05
                                                                -----------      -----------


Net income (loss) per common share                              $     (0.12)     $     (0.12)
                                                                ===========      ===========

Average number of shares outstanding                              2,339,416        2,481,264
                                                                ===========      ===========

</TABLE>

Certain  reclassifications  have  been  made to the  consolidated  statement  of
operations  for the  nine-month  period ended  September  1997 to conform to the
consolidated financial statement classifications for 1998.

                                                                               4
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
          FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED SEPTEMBER 30
                                                           -------------------------------

                                                               1998               1997
                                                           -----------        -----------
<S>                                                        <C>                <C>
Revenues                                                   $     4,209        $     5,103

Cost of revenues                                           $    (4,188)            (4,901)
Selling, general and administrative expenses               $      (474)              (354)
Interest expense                                           $        (5)               (31)
Other income (expenses), net                               $        18                125
Gain (loss) on sale of assets                              $       (15)               (42)
                                                           -----------        -----------

Income (loss) from continuing operations before
  income taxes                                                    (455)              (100)

Provision for income taxes                                           0                  0
                                                           -----------        -----------

Income (loss) from continuing operations                          (455)              (100)

Income (loss) from discontinued operations                 $        25                (40)
                                                           -----------        -----------

Net income (loss)                                          $      (430)       $      (140)
                                                           ===========        ===========

Net income (loss) per common share
  Continuing operations                                    $     (0.19)       $     (0.04)
  Discontinued operations                                  $      0.01        $     (0.02)
                                                           -----------        -----------

Net income (loss) per common share                         $     (0.18)       $     (0.06)
                                                           ===========        ===========

Average number of shares outstanding                         2,339,416          2,481,264
                                                           ===========        ===========
</TABLE>


Certain  reclassifications  have  been  made to the  consolidated  statement  of
operations  for the  three-month  period ended  September 1997 to conform to the
consolidated financial statement classifications for 1998.
                                                                               6
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
          FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                            NINE MONTHS ENDED SEPTEMBER 30
                                                                            ------------------------------


                                                                             1998                     1997
                                                                             ----                     ----
<S>                                                                           <C>                      <C>
Net cash provided by (used in) operating activities                           387                      339


Cash flows from investing activities:
     Decrease (increase) in restricted cash                                     0                      409
     Decrease (increase) in receivables from sales of businesses, net           0                    1,003
     Purchase of property and equipment                                      (168)                    (402)
     Issuance of Notes Receivable                                            (350)                       0
                                                                           ------                   ------
         Net cash provided by (used in) investing activities                 (518)                   1,010


Cash flows from financing activities:
     Repayment of borrowings                                                 (257)                    (377)
     (Increase) decrease in treasury stock                                   (500)                       0
                                                                           ------                   ------
         Net cash provided by (used in) financing activities                 (757)                    (377)


Net increase (decrease) in cash and cash equivalents                         (888)                     972
Cash and cash equivalents at beginning of period                            2,815                    1,136
                                                                           ------                   ------
Cash and cash equivalents at end of period                                  1,927                    2,108
                                                                           ======                   ======
</TABLE>

Certain  reclassifications  have been made to the consolidated statement of cash
flows  for  the  nine-month  period  ended  September  1997  to  conform  to the
consolidated financial statement classifications for 1998.

                                                                               6
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS




RESULTS OF OPERATIONS

During  1997,  the  Company  sold two of its  operating  companies,  Funding and
Development.  As a result,  there  has been a  reclassification  of  income  and
expenses  related to these  businesses as set forth in the  Company's  Report on
Form 10-Q for the period ending September 30, 1997.  Management's Discussion and
Analysis shall be limited to continuing operations.

The Company  currently owns and operates five  restaurants in California and one
in Arizona.  It also owns two Carlos Murphy's  Restaurants in San Diego, CA that
were leased to an unrelated third party in the first quarter of 1998.

In August, the party leasing the two Carlos Murphy's filed bankruptcy.  In early
September,  we took over the La Mesa  store.  The lease  expired on the La Jolla
store.

Revenues  for the Company for the third  quarter and nine month period were down
versus last year. The decrease in revenue is  attributable to the leasing of the
two Carlos  Murphy's  Restaurants,  and  declining  sales in our three  Southern
California stores.

The  larger  loss  from  continuing  operations  in  the  third  quarter  can be
attributed to the three Southern  California stores and an extraordinary  charge
to SG & A for 1998 of approximately  $100,000 with discontinued expenses for our
Las Vegas store amounting to $70,000 versus an extraordinary credit to SG & A in
1997 of $100,000 as a reduction in an accrual for Workman's Compensation.

Income from discontinued operations is the result of the collection of a Funding
Account that had been fully reserved.




LIQUIDITY AND CAPITAL RESOURCES

In  October,  the company  purchased  Steamers  Genuine  Seafood  Restaurant  in
Phoenix.  This  is  an  upscale  restaurant  like  our  Buster's  Restaurant  in
Scottsdale. We feel both concepts can be expanded into other markets.

We have an offer on our one remaining Carlos Murphy's in San Diego. The proceeds
from this sale will be used to  convert  the  restaurant  concept  in two of our
Southern California Bobby McGee's.

The  Company  continues  to look  for new  locations  or  other  restaurants  to
purchase.  Management believes,  but there can be no assurance,  that it will be
able to finance any  further  expansion  through  cash  reserves  and leasing of
equipment.

                                                                               7
<PAGE>
PART II  OTHER INFORMATION




Item 1.           Legal Proceedings
                  None

Item 2.           Changes in Securities
                  None

Item 3.           Defaults upon Senior Securities
                  None

Item 4.           Submission of Matters to a Vote of Security Holders
                  None

Item 5.           Other Information
                  None

Item 6.           Exhibits and Reports on Form 8-K
                  None


                                                                               8
<PAGE>
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, thereunto duly authorized.


                                       PERFORMANCE INDUSTRIES, INC.
                                       AND SUBSIDIARIES

DATED:   NOVEMBER 10, 1998             /s/     JOE HRUDKA
                                       -----------------------------------------
                                                JOE HRUDKA
                                                CHAIRMAN OF THE BOARD
                                                (PRINCIPAL EXECUTIVE OFFICER)


                                       /s/      ED FOCHTMAN
                                       -----------------------------------------
                                                ED FOCHTMAN
                                                CHIEF FINANCIAL OFFICER
                                                (PRINCIPAL ACCOUNTING OFFICER)