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 June 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.)

2425 E. Camelback Road, Suite 620
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 July 12, 1997, is 2,481,264 shares.
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES

                                      INDEX


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

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

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

Consolidated Statements of Operations (unaudited) -               5
         Three Month Period Ended June 30, 1997 and 1996  

Consolidated Statements of Cash Flows (Unaudited) -               6
         Three Month Period Ended June 31, 1997 and 1996

Management's Discussion and Analysis of Financial                 8
         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                                                        12
<PAGE>
                  PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
                                   (Unaudited)
<TABLE>
<S>                                                                                  <C>           <C>   
       ASSETS
                                                                                     30-Jun-97      31-Dec-96
Current assets:
---------------
  Cash and equivalents, unrestricted                                                    $1,753         $1,136
  Cash, restricted                                                                           0            409
  Securities available for sale                                                            574            727
  Accounts and other receivables,
    less allowance for doubtful accounts                                                   713            503
  Current Portion of Receivables from sale of businesses,
    net of allowance                                                                       815          1,356
  Factored accounts receivables, net of allowance for doubtful accounts                    634          1,139
  Inventories                                                                              309            328
  Prepaid expenses and other current assets                                                260            192
  Other assets held for sale                                                               206            206
                                                                                           ---            ---
    Total current assets                                                                 5,264          5,996

Receivables from sales of businesses, less current portion,
  net of allowance                                                                           0            119
Investment in real estate                                                                9,318          9,481
Deferred income taxes                                                                    1,482          1,460
Property and equipment, net                                                              3,065          3,084
Other assets                                                                             1,755          1,831
                                                                                         -----          -----

TOTAL ASSETS                                                                           $20,884        $21,971
                                                                                       =======        =======

    LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
--------------------
  Current portion of long-term debt                                                        496            547
  Accounts payable                                                                         922          1,000
  Accrued employment costs                                                                 656            491
  Accrued expenses and other current liabilities                                           848          1,339
  Factored receivables reserve                                                             207            286
  Liabilities subject to compromise                                                        749            754
  Foreign Tax Liability                                                                    250            250
                                                                                           ---            ---
    Total current liabilities                                                            4,128          4,667

Long-term debt, less current portion                                                     8,183          8,403

Minority interest                                                                          330            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 2,489,530, respectively                 31,202         31,202
  Accumulated deficit                                                                  (20,293)       (20,139)
  Unrealized appreciation on securities available for sale
    net of income taxes                                                                    310            443
                                                                                           ---            ---
                                                                                        11,219         11,506
  Treasury stock at cost  (670,784 and 667,802 shares, respectively)                    (2,976)        (2,976)
                                                                                       -------        -------

    Total shareholders' equity                                                           8,243          8,530

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                             $20,884        $21,971
                                                                                       =======       =======
</TABLE>
                                       3
<PAGE>
                          PERFORMANCE INDUSTRIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (Unaudited)

                                                       Six Months Ended June 30
                                                       ------------------------

                                                        1997              1996
                                                        ----              ----

Revenues                                        $     11,906      $     10,970

Cost of revenues                                     (10,783)           (9,659)
Selling, general and administrative expenses          (1,024)           (1,884)
Interest expense                                        (383)             (391)
Other income (expenses), net                              90               244
Loss on closure of restaurants                             0             (575)
                                                           -             -----

Income (loss) from continuing operations before
    income taxes and minority interest                  (194)           (1,295)

Provision for income taxes                                (1)                 6

Minority interest in loss from subsidiary                 41                18
                                                          --                --

Net income (loss)                               $       (154)      $    (1,271)
                                                ============      ============

Net income (loss) per common share              $      (0.06)      $     (0.51)
                                                ============      ============

Average number of shares outstanding               2,481,264         2,489,530
                                                ============      ============
                                       4
<PAGE>
                          PERFORMANCE INDUSTRIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (Unaudited)

                                                    Three Months Ended June 30
                                                    --------------------------

                                                         1997              1996
                                                         ----              ----

Revenues                                           $    5,814        $    5,429

Cost of revenues                                       (5,451)           (4,950)
Selling, general and administrative expenses             (367)           (1,007)
Interest expense                                         (177)             (210)
Other income (expenses), net                               25               122
Loss on closure of restaurants                              0             (575)
                                                            -             -----

Income (loss) from continuing operations before
    income taxes and minority interest                   (156)           (1,191)

Provision for income taxes                                  0               (1)

Minority interest in loss from subsidiary                  22                15
                                                           --                --

Net income (loss)                                  $     (134)        $  (1,177)
                                                   ==========        ==========

Net income (loss) per common share                 $    (0.05)        $   (0.47)
                                                   ==========        ==========

Average number of shares outstanding                2,481,264         2,489,530
                                                   ==========        ==========
                                       5
<PAGE>
                          PERFORMANCE INDUSTRIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
             FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
                (DOLLARS IN THOUSANDS, EXCEPTING PER SHARE DATA)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   Six Months Ended June 30
                                                                                   ------------------------
                                                                                    1,997           1,996
                                                                                    ------          -----
<S>                                                                                 <C>           <C>     
Net cash provided by (used in) operating activities                                 $  135        $(1,301)

Cash flows from investing activities:
    Decrease (increase) in restricted cash                                             409            488
    Decrease (increase) in receivables from sales of businesses,
      net                                                                              660            691
    Purchase of property and equipment                                                (321)        (1,310)
    Increase in real estate under development                                            0           (220)
    Other                                                                                5              0
                                                                                        --              -
          Net cash provided by (used in) investing activities                          753           (351)

Cash flows from financing activities:

    Proceeds from borrowings                                                             0          1,702
    Repayments of borrowings                                                          (271)          (350)
                                                                                     -----           -----
          Net cash provided by (used in) financing activities                         (271)         1,352


Net increase (decrease) in cash and cash equivalents                                    617          (300)
Cash and cash equivalents at beginning of period                                      1,136           411
                                                                                    ------            ---
Cash and cash equivalents at end of period                                          $ 1,753       $   111
                                                                                    =======       =======
</TABLE>
                  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.
                                       6
<PAGE>
Managements Discussion and Analysis

Results of Operations

Performance Industries, Inc.

The loss for the  three  month  period  ending  June 30,  1997 was  $134,000  as
compared to a loss of $1,171,000 for the same period last year.  Included in the
loss for three  months was a  non-recurring  charge of $50,000 for  discontinued
operations, the Development subsidiary lost approximately $75,000 which accounts
for the three month period ending June 30, 1997. This accounts for a majority of
the loss for the parent.

The company had a net operating  loss of $154,000 for the six months ending June
30, 1997 as compared to a loss of  $1,295,000  for the same period in 1996.  The
company's cost cutting measures including,  reduction of management staff at the
corporate level,  tighter controls at the restaurant division and the completion
of construction in the Development division all helped in reducing the loss.

The company is moving its corporate offices as of August 15, 1997. The lease for
the offices it  currently  occupies  expired on July 31, 1997 and a  substantial
increase  in the rental was sought by the  landlord.  In  addition  the  company
requires  less space due to staff  reductions.  The new space is at a comparable
costs to the present rent and is less square feet saving  approximately  $80,000
per year in rental expense.

Management  has  decided  to  concentrate  all  of  its  future  efforts  on the
restaurant  business.  This has produced the greatest revenue for the company in
the  past.  To  do so  the  company  is  selling  its  Funding  and  Development
subsidiaries as more particularly described in Part II Item 5 Other Information.
Management  believes,  that by divesting itself of these divisions,  the company
may have greater  interest to stock analysts who specialize in certain  industry
segments.  Management  believes,  but there can be no assurance,  that this will
result in greater  activity in the company's  stock and an increase in the stock
price.

Performance Restaurants Group, Inc.

Gross revenue for the Restaurant Group for the first months ending June 30, 1997
increased 11% from the same period last year to $5,477,175 from $4,960,526. Cost
of sales rose by 6% for the three  month  period  ending  June 30, 1997 from the
same period last year from $4,849,536 to $5,157,359.  Restaurant  level earnings
increased by $307,823.  This increase is a result of increased  sales and better
cost controls at the restaurant level.
                                       7
<PAGE>
Administrative  expenses  for the  three  month  period  ending  June  30,  1997
decreased  45% to $186,749  from  $342,100  for the same period last year.  This
decrease is related to the reduction in  management  at the  corporate  level in
July,  1996.  The  Restaurant  Group had net income of  $113,426  for the second
quarter  1997 as  compared  to a net loss of  $234,188  for the same period last
year.

Gross  revenues  for  stores  opened at least one year rose by less than 1% from
$8,998,172 for the first 6 months of the year to $9,051,376. Restaurant earnings
for stores opened at least one year  increased by 18% from $659,986 to $780,299.
The  increase in  restaurant  earnings  resulted  from  tighter  controls on the
restaurant  level as well as  changes to the menu which  yielded  higher  profit
margins.

The increase in sales was mainly a result of the acquisition of new restaurants.
The company has  instituted  cost cutting  measures  which has helped reduce the
cost of sales  as a  percentage  of gross  sales  at the  restaurant  level.  In
addition,  the corporate office was  restructured  over the last year to further
reduce expenses. As a result the division posted a net profit for the quarter as
compared to a loss last year.

Liquidity and Capital Resources

With the sale of the Funding and Development subsidiaries, the company will have
sufficient  cash to meet its capital  needs  through  year end and into the next
fiscal year. The Restaurant  division has been reporting  substantial net income
before  administrative  expense  for the  first  half of the  year.  Management,
expects but there can be no  assurance,  that this trend will  continue  for the
remainder of the year.  The increase in net income has resulted  from  increased
revenues and reduced costs of sales. Management believes that cost of sales as a
percentage of gross  revenues will remain steady  throughout the balance of this
fiscal year.

There are no plans for  further  capital  improvements  at any of the  company's
Restaurants  over  the  remainder  of the  fiscal  year.  There  are no  pending
acquisitions  of new  units,  although  the  company  does  receive  and  review
information on restaurants  for sale on a regular  basis.  With the  significant
cash reserve the company will be able to make any desirable  acquisition  it may
find without outside financing.

The  company  expects  to  continue  expansion  plans  by  purchasing  operating
restaurants.  The Carlos Murphy's Restaurants  purchased last year are operating
within  projections.  Management  believes  there are other  restaurants  on the
market that present the same  opportunity  as Carlos  Murphy's to increase sales
and profits with a comparatively small capital outlay.

The company is also  considering  changing  several of its Bobby  McGee's to the
McGee's  Grill  Sports Bar  concept.  Some of the older  stores are not  showing
growth in sales and even some  decline.  As the McGee's  Grill concept has lower
operating  costs these stores could  produce  profits at lower sales  volume.  A
change in concept  would also entice new  patrons to try the store and  increase
sales.
                                       8
<PAGE>
Part II           Other Information


Item 1            Legal Proceedings

                  The minority members of Camelback Plaza Development L.C. filed
                  a demand for arbitration under the Operating  Agreement of the
                  Limited Liability Company for and accounting. Pending the sale
                  of the company's interest in the L.C. to the minority members,
                  the parties have stipulated to a stay of proceedings.

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 annual meeting of  shareholders  was held of July 28, 1997
                  for the election of directors  and  ratification  of choice of
                  auditors.

Item 5            Other Information

                  The  Company has agreed to sell its  Funding  Subsidiary  to a
                  Limited  Liability  Company which includes two of its officers
                  and directors as members,  Ed Fochtman Jr. and Joe Hrudka. The
                  sale is on  terms  which  are at  least  as  favorable  as the
                  company would have received in an arms length transaction. The
                  Funding  Subsidiary had not added a new client since the first
                  quarter when its principal  marketing  employee left for other
                  employment.  The  company  was not  able  to  find a  suitable
                  replacement.  A  third  party  had  offered  to  purchase  the
                  business on  substantially  the same terms but the closing was
                  delayed while financing was arranged.

                  With the sale  approximately  $400,000 of capital  invested in
                  accounts  receivable  will be available  to the  company.  The
                  company will also no longer be required to guarantee  the line
                  of credit with the third party finance  company which was used
                  to fund purchases of accounts. The move will allow the company
                  to focus on its core  business  of  Restaurant  ownership  and
                  management.

                  The company has agreed to sell its interest in Camelback Plaza
                  Development,  L.C.  to the other  members for  $700,000.  As a
                  result of the sale the  company  will report a loss on sale of
                  approximately  1.5  million  dollars  in the third  quarter of
                  1997.

                  The company had loaned money to the subsidiary  over the years
                  to cover the cost of developing the property. The loss will be
                  a result  of  forgiving  this  debt as part of the  sale.  The
                  Development  subsidiary  has  been a  financial  drain  on the
                  company since its beginning and still has operational losses.

                  By  selling  its  interest  the  company  will  terminate  its
                  obligation to meet any  continuing  shortfalls in  operational
                  income to meet the needs of the Plaza.  The Company  will also
                  resolve an arbitration  proceeding  filed by the other members
                  over  it's  management  of  the  property.   While  management
                  believes they would have ultimately  prevailed in this action,
                  the  expense of the  litigation  would  effect  the  company's
                  income for the next several  quarters.  The Board of Directors
                  has  decided  to  concentrate  on  the  core  business  of the
                  company,  Restaurant  management and ownership,  and to divest
                  itself of its other operations.

Item 6            Exhibits and Reports on form 8-K
                           None
                                       9
<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: August 13, 1997             /s/ Joe Hrudka
                                  --------------
                                          Joe Hrudka
                                          Chairman of the Board
                                          (Principal Executive Officer)


                                  /s/ Ed Fochtman
                                  ---------------
                                          Ed Fochtman
                                          Chief Financial Officer
                                          (Principal Accounting Officer)
                                       12