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 March 31, 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 May 12, 1998, is 2,481,264 shares.
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES

                                      INDEX


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

Consolidated Balance Sheets -
         March 31, 1998 and December 31, 1997                                 3

Consolidated Statements of Operations (Unaudited) -                           4
         Three Month Period Ended March 31, 1998 and 1997

Consolidated Statements of Cash Flows (Unaudited) -                           5
         Three Month Period Ended March 31, 1998 and 1997

Management's Discussion and Analysis of Financial                             6
         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
                                                                               31-Mar-98   31-Dec-97
                                                                               ---------   ---------
<S>                                                                            <C>         <C>     
Current assets:
     Cash and equivalents, unrestricted                                        $  2,387    $  2,815
     Accounts and other receivables,
         less allowance for doubtful accounts                                       425         410
     Notes Receivable                                                               350        --
     Current Portion of Receivables from sale of businesses,
         net of allowance                                                           269         269
     Factored receivables, net of allowance for doubtful accounts                   261         261
     Inventories                                                                    250         313
     Prepaid expenses and other current assets                                      157         227
     Real estate held for sale                                                      785         785
                                                                               --------    --------
             Total current assets                                                 4,884       5,080

     Deferred income taxes                                                        1,291       1,291
     Property and equipment, net                                                  2,636       2,757
     Other assets                                                                 1,258       1,277
                                                                               --------    --------

             TOTAL ASSETS                                                      $ 10,069    $ 10,405
                                                                               ========    ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt                                         $  1,051    $  1,051
     Accounts payable                                                               487         637
     Accrued employment costs                                                       435         476
     Accrued expenses and other current liabilities                                 446         666
     Factored receivables reserve                                                    61          61
     Liabilities subject to compromise                                              797         797
     Foreign Tax Liability                                                          250         250
                                                                               --------    --------
             Total current liabilities                                            3,527       3,938

     Long-term debt, less current portion                                           169         255

Shareholder's equity:
     Preferred Stock, par value $1.00 per share: authorized
         100,000 shares; none issued                                               --          --
     Common stock, no par value; authorized 5,000,000 shares;
         3,157,332 issued; outstanding 2,376,889 and 2,377,889, respectively     31,202      31,202
     Accumulated deficit                                                        (21,583)    (21,745)
                                                                               --------    --------
                                                                                  9,619       9,457

     Treasury stock at cost  671,784 and 670,784 shares, respectively            (3,246)     (3,245)
                                                                               --------    --------
             Total shareholders' equity                                           6,373       6,212
                                                                               --------    --------

             TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $ 10,069    $ 10,405
                                                                               ========    ========
</TABLE>
                                                                               3
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
                      Consolidated Statement of Operations
            For the Three Month Periods Ended March 31, 1998 and 1997
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (Unaudited)




                                                    Three Months Ended March 31
                                                    ---------------------------
                                                       31-Mar-98      31-Mar-97
                                                       ---------      ---------

Revenues                                             $     4,900    $     5,730

Cost of revenues                                          (4,377)        (5,332)
Selling, general and administrative expenses                (396)          (498)
Interest expense                                              (8)           (37)
Other income (expenses), net                                  31            286
Gain (loss) on sale or disposition of assets                 (60)            20
                                                     -----------    -----------

Income (loss) from continuing operations before
    income taxes                                              90            169

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

Income (loss) from continuing operations                      90            168

Income (loss) from discontinued operations                    72           (188)
                                                     -----------    -----------

Net income (loss)                                    $       162    $       (20)
                                                     ===========    ===========

Net income (loss) per common share
     Continuing operations                           $      0.04    $      0.07
     Discontinued operations                         $      0.03    $     (0.08)
                                                     -----------    -----------

Net income (loss) per common share                   $      0.07    $     (0.01)
                                                     ===========    ===========

Average number of shares outstanding                   2,376,889      2,481,264
                                                     ===========    ===========


Certain  reclassifications have been made to the consolidated statements of cash
flows  for  the  three-month  periods  ended  March,  1997  to  conform  to  the
consolidated financial statement classifications for 1998.
                                                                               4
<PAGE>
                          PERFORMANCE INDUSTRIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
            FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               Three Months Ended March 31
                                                               ---------------------------

                                                                         1998       1997
                                                                         ----       ----
<S>                                                                    <C>        <C>     
Net cash provided by (used in) operating activities                    $    84    $  (151)

Cash flows from investing activities:
    Decrease (increase) in restricted cash                                --          253
    Decrease (increase) in receivables from sales of businesses, net      --          206
    Purchase of property and equipment                                     (75)      (196)
    Proceeds from sale of property and equipment                          --           20
    Issuance of Notes Receivable                                          (350)      --
                                                                       -------    -------
          Net cash provided by (used in) investing activities             (425)       283

Cash flows from financing activities:

    Repayments of borrowings                                               (86)      (122)
    (Increase) decrease in treasury stock                                   (1)      --
                                                                       -------    -------
          Net cash provided by (used in) financing activities              (87)      (122)


Net increase (decrease) in cash and cash equivalents                      (428)        10
Cash and cash equivalents at beginning of period                         2,815      1,136
                                                                       -------    -------
Cash and cash equivalents at end of period                             $ 2,387    $ 1,146
                                                                       =======    =======
</TABLE>

Certain  reclassifications have been made to the consolidated statements of cash
flows  for  the  three-month  periods  ended  March,  1997  to  conform  to  the
consolidated financial statement classifications for 1998.
                                                                               5
<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 March 31,  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.

 Revenues  for the  Company  decreased  by 14% for the first  Quarter of 1998 as
compared in 1997. The decrease in revenue is  attributable to the leasing of the
two Carlos Murphy's Restaurants.

Revenues for stores opened at least one year rose by 4% for the first quarter of
1998 as compared to the same period last year. Restaurant earnings were $531,175
for the first  quarter  1998 as compared to  $410,295  for the first  quarter of
1997. This is attributed to continuing savings by cost control at the restaurant
level.

Restaurant  net profit was  $121,000  for first  quarter,  1998 as  compared  to
$223,382 for the first quarter of 1997. The decrease in Restaurant net profit is
attributable  to the increase in  administrative  expense due to the sale of the
other operation  divisions of the Company.  As a result of the sale, more of the
corporate  administrative  expenses were directly  classified to the  Restaurant
division.  The  Company  is  continuing  its  efforts  to reduce  administrative
expenses.

The  Company had income from  discontinued  operations  of $72,000 for the first
quarter 1998 as compared to a loss of $188,000 for 1997. The income was from the
collection of a Funding Account that had been fully reserved.  The Company had a
further loss of $60,000 from discontinued operations.  This is primarily related
to the Las Vegas  Restaurant  which was  subleased  in the  first  quarter.  The
Company had paid a non-recurring charge of $20,000 during the quarter related to
its prior bankruptcy.

Net  income  for the  Company  was  $162,000  for the first  quarter  of 1998 as
compared to a loss of $20,000 for the same period in 1997.
                                                                               6
<PAGE>
Liquidity and Capital Resources

The company has  sufficient  cash  reserves  to meet  operational  needs for the
upcoming year. Management believes, but there can be no assurance,  that it will
be able to finance any future expansion through loans or leases 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:    May 13, 1998                  /s/  Joe Hrudka
                                        ----------------------------------
                                             Joe Hrudka
                                             Chairman of the Board
                                             (Principal Executive Officer)


                                        /s/  Ed Fochtman, Jr.
                                        ----------------------------------
                                             Ed Fochtman, Jr.
                                             Chief Financial Officer
                                             (Principal Accounting Officer)
                                                                               9