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, 1997
                                             ------------------

                                       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
incorporation or organization)                      No.)

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 12, 1997, is 2,481,264 shares.
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES

                                      INDEX


PART 1   FINANCIAL INFORMATION (Unaudited)                               Page
         ---------------------------------                               ----

Consolidated Balance Sheets -                                             3
         September 30, 1997 and December 31, 1996

Consolidated Statements of Operations (Unaudited) -                       4
         Nine Month Period Ended September 30, 1997 and 1996

Consolidated statements of Operations (Unaudited) -                       5
         Three Month Period Ended September 30, 1997 and 1996

Consolidated Statements of Cash Flows (Unaudited) -                       6
         Nine Month Period Ended September 30, 1997 and 1996

Notes to Consolidated Financial Statements (Unaudited)                    7

Management's Discussion and Analysis of Financial                     8 - 9
         Condition and Results of Operations

PART II  OTHER INFORMATION                                               10
         -----------------

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                                                               11
                                                                               2
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
                                   (Unaudited)
<TABLE>
<CAPTION>
       ASSETS
                                                                            30-Sept-97      31-Dec-96
<S>                                                                           <C>            <C>     
Current assets:
---------------
  Cash and equivalents, unrestricted                                          $  2,108       $  1,136
  Cash, restricted                                                                   0            409
  Securities available for sale                                                    318            727
  Accounts and other receivables,
    less allowance for doubtful accounts                                           584            503
  Current Portion of Receivables from sale of businesses,
    net of allowance                                                               472          1,356
  Factored accounts receivables, net of allowance for doubtful accounts             61          1,139
  Inventories                                                                      309            328
  Prepaid expenses and other current assets                                        157            192
  Other assets held for sale                                                       206            206
                                                                              --------       --------
    Total current assets                                                         4,215          5,996

Receivables from sales of businesses, less current portion,
  net of allowance                                                                   0            119
Investment in real estate                                                        9,244          9,481
Deferred income taxes                                                            1,517          1,460
Property and equipment, net                                                      2,969          3,084
Other assets                                                                     1,846          1,831
                                                                              --------       --------

TOTAL ASSETS                                                                  $ 19,791       $ 21,971
                                                                              ========       ========

       LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
--------------------
  Current portion of long-term debt                                           $    497       $    547
  Accounts payable                                                                 804          1,000
  Accrued employment costs                                                         376            491
  Accrued expenses and other current liabilities                                   783          1,339
  Factored receivables reserve                                                      61            286
  Liabilities subject to compromise                                                753            754
  Foreign Tax Liability                                                            250            250
                                                                              --------       --------
    Total current liabilities                                                    3,524          4,667

Long-term debt, less current portion                                             8,076          8,403

Minority interest                                                                  304            371

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;
     3,157,332 issued; outstanding 2,481,264 and 2,481,264, respectively        31,202         31,202
  Accumulated deficit                                                          (20,433)       (20,139)
  Unrealized appreciation on securities available for sale
    net of income taxes                                                             94            443
                                                                              --------       --------
                                                                                10,863         11,506
Treasury stock at cost  670,784 shares                                          (2,976)        (2,976)
                                                                              --------       --------

    Total shareholders' equity                                                   7,887          8,530
                                                                              --------       --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                    $ 19,791       $ 21,971
                                                                              ========       ========
</TABLE>
                                                                               3
<PAGE>
                          PERFORMANCE INDUSTRIES, INC.
                                AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                    Nine Months Ended September 30
                                                    ------------------------------

                                                      30-Sept-97        30-Sept-96
                                                      ----------        ----------
<S>                                                  <C>               <C>        
Revenues                                             $    17,279       $    16,433

Cost of revenues                                         (15,833)          (14,570)
Selling, general and administrative expenses              (1,340)           (3,252)
Interest expense                                            (559)             (563)
Other income (expenses), net                                 135                93
Gain (loss) on sale or disposition assets                    (42)              993
                                                     -----------       -----------

Income (loss) from continuing operations before
    income taxes and minority interest                      (360)             (866)

Provision for income taxes                                    (1)             (241)

Minority interest in loss from subsidiary                     67                20
                                                     -----------       -----------

Net income (loss)                                    $      (294)      $    (1,087)
                                                     ===========       ===========

Net income (loss) per common share                   ($     0.12)      ($     0.44)
                                                     ===========       ===========

Average number of shares outstanding                   2,481,264         2,481,264
                                                     ===========       ===========
</TABLE>
                                                                               4
<PAGE>
                          PERFORMANCE INDUSTRIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   Three Months Ended September 30
                                                   -------------------------------

                                                      30-Sept-97        30-Sept-96
                                                      ----------        ----------
<S>                                                  <C>               <C>        
Revenues                                             $     5,373       $     5,463

Cost of revenues                                          (5,050)           (4,911)
Selling, general and administrative expenses                (316)           (1,368)
Interest expense                                            (176)             (172)
Other income (expenses), net                                  16              (151)
Gain (loss) on sale or disposition of assets                 (12)            1,568
                                                     -----------       -----------

Income (loss) from continuing operations before
    income taxes and minority interest                      (165)              429

Provision for income taxes                                     0              (247)

Minority interest in loss from subsidiary                     26                 2
                                                     -----------       -----------

Net income (loss)                                    $      (139)      $       184
                                                     ===========       ===========

Net income (loss) per common share                   $     (0.06)      $     (0.07)
                                                     ===========       ===========

Average number of shares outstanding                   2,481,264         2,481,264
                                                     ===========       ===========
</TABLE>
                                                                               5
<PAGE>
                          PERFORMANCE INDUSTRIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
          FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
                (DOLLARS IN THOUSANDS, EXCEPTING PER SHARE DATA)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Nine Months Ended September 30
                                                              ------------------------------

                                                                         1997           1996
                                                                         ----           ----
<S>                                                                   <C>           <C>     
Net cash provided by (used in) operating activities                   $   339       $(1,150)

Cash flows from investing activities:
    Decrease (increase) in restricted cash                                409           579
    Decrease (increase) in receivables from sales of businesses,
      net                                                               1,003          (661)
    Purchase of property and equipment                                   (402)       (1,181)
    Increase in real estate under development                               0         1,413
                                                                      -------       -------
          Net cash provided by (used in) investing activities           1,010           150

Cash flows from financing activities:

    Proceeds from borrowings                                                0         1,071
    Repayments of borrowings                                             (377)         (384)
    (Increase) decrease in treasury stock                                   0           (25)
                                                                      -------       -------
          Net cash provided by (used in) financing activities            (377)          662


Net increase (decrease) in cash and cash equivalents                      972          (338)
Cash and cash equivalents at beginning of period                        1,136           411
                                                                      -------       -------
Cash and cash equivalents at end of period                            $ 2,108       $    73
                                                                      =======       =======
</TABLE>
                                                                               6
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (Unaudited)


(1)      Reclassifications:
         ------------------

Certain   reclassifications   have  been  made  to  the  consolidated  financial
statements  of prior periods to conform to the  classifications  for the current
period's presentation.
                                                                               7
<PAGE>
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS


RESULTS OF OPERATIONS
---------------------


Consolidated
------------

         Revenues for the Nine Months ending  September 30, 1997,  were up 5% to
$17,279,000.  from $16,443,000.  for the same period last year. Revenues for the
three month  period were down 1% from the same period last year.  This  resulted
from the sale of the Funding  division in August,  1997 and the reduction in fee
income  from last year's  levels.  This was  partially  offset by an increase in
revenues at the Restaurant Division.

         Selling  General  and  Administrative  expenses  were 77% lower for the
Three month period  ending  September  30, 1997 and 59% lower for the nine month
period ending than for the same periods last year. The reduction was a result of
the Company's  elimination of management  positions at the corporate  level. The
reduction has resulted in lower expenses for travel and entertainment,  employee
benefits  and  resulted  in the  reduction  of office  space  for the  Corporate
headquarters. The company has also realized savings from a reduction in the cost
of Worker's Compensation and General Liability Insurance.

         The company  had a net loss of  $139,000.  for the three  month  period
ending  September 30, 1997, as compared to net income of $184,000.  for the same
period last year. The Company  benefited from a one-time gain of $1,568,000.  on
the sale of an asset in the quarter ending September 30, 1996.  Without the gain
the  Company  would have lost  $1,139,000.  for the three  month  period  ending
September 30, 1996.  Management is studying  further ways to reduce overhead and
corporate costs.

Restaurants
-----------

         Revenues for the Restaurant division increased $119,000.  or 2% for the
quarter  ending  September  30, 1997 from the same  period last year.  The sales
increase is  attributed to the addition of the two Carlos  Murphy's  Restaurants
during the past year. The Restaurant  Division has a net profit of $97,800.  for
the three months  ending  September  30, 1997 as compared to a loss of $243,900.
for the same period  last year.  Net income for  Restaurants  for the nine month
period  ending  September  30,  1997  was  $434,600.  as  compared  to a loss of
$1,260,000.  for the same period last year.  Management  believes  that the cost
controls  that were  instituted  over the past year  resulted in the  Restaurant
Divisions having a net profit for the quarter and year to date.

         Management believes that revenues for the Fourth Quarter will be higher
than the  previous  year  because of  increased  sales at many of the  company's
stores as well as the addition of one of the Carlos Murphy's in 1997. Management
believes,  but there can be no assurance,  that the  Restaurant  Division  shall
continue to generate operating profits for the fourth Quarter and year end.
                                                                               8
<PAGE>
Development
-----------

         This division is under  contract to be sold. The closing was originally
scheduled to occur in August,  1997 but due to delays in financing by the Buyer,
the sale has been  delayed.  It is expected to close by November 26, 1997 or the
sale agreement will be canceled.

         Development had a net loss of $93,300 for the Three month period ending
September 30, 1997 as compared to a net loss of $3,800. for the same period last
year. The loss of the  Restaurant  tenant in the Fourth Quarter of last year and
the delay in  locating a  suitable  tenant  and doing  renovations  to the space
contributed to the loss.

         With the sale of this division the Company  expects to suffer a capital
loss of  approximately  $1.2 million dollars in the Fourth Quarter of this year.
However,  the sale will allow the Company to concentrate on its core business of
Restaurants and will eliminate operating losses for this division.


Liquidity and Capital Resources
-------------------------------

         Operations  provided  net cash  flow of  $339,000.  for the nine  month
period ended  September  30, 1997 as compared to a use of cash in  operations of
$1,150,000. for the same period last year.

         The Company had a net increase in cash of $972,000. from operations and
investments in the nine month period ending  September 30, 1997. The increase in
cash will give the company needed capital to acquire restaurant  locations.  The
Company is currently in active  negotiations for one additional  location and is
seeking other opportunities.

         Management  believes  that current  cash flow,  along with cash on hand
will meet all of its capital needs for the near future.  Should it be necessary,
Management believes, but there can be no assurance,  that it could borrow monies
to meet any additional cash needs.
                                                                               9
<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
                  ---------------------------------------------------

                  The Company held its annual  meeting on July 28, 1996 at which
         the  Board  of  Directors  was  reelected  to  serve  for one  year and
         employment of Toback CPA's as auditiors was approved.


Item 5.           Other Information
                  -----------------

                  None


Item 6.           Exhibits and Reports on Form 8-K
                  --------------------------------

                  None
                                                                              10
<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


Date: November 19, 1997     /s/ Joe Hrudka
                            --------------
                                   Joe Hrudka
                                   Chairman of the Board
                                   (Principal Executive Officer)


                            /s/ Ed Fochtman
                            ---------------
                                   Ed Fochtman
                                   Chief Financial Officer
                                   (Principal Accounting Officer)
                                                                              11