UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                              --------------------


                                    FORM 10-Q


(Mark One)
          [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                    For the Quarter Ended September 30, 2000
                                       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 0-27460



                     PERFORMANCE TECHNOLOGIES, INCORPORATED
             (Exact name of registrant as specified in its charter)

                Delaware                                  16-1158413
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
      incorporation of organization)

    315 Science Parkway, Rochester New York                14620
    (Address of principal executive offices)             (Zip Code)

                              ---------------------

       Registrant's telephone number, including area code: (716) 256-0200

                       ----------------------------------



         Indicate by check mark 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 the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .


         The number of shares  outstanding of the registrant's  common stock was
12,721,000 as of October 30, 2000.



<PAGE>



             Performance Technologies, Incorporated and Subsidiaries

                                      Index


                                                                            Page
                                                                            ----
Part I.   Financial Information

Item 1.   Consolidated Financial Statements

             Consolidated Balance Sheets as of September 30, 2000
             (unaudited) and December 31, 1999                                3

             Consolidated Statements of Income For The Three
             Months Ended September 30, 2000 and 1999 (unaudited)             4

             Consolidated Statements of Income For The Nine
             Months Ended September 30, 2000 and 1999 (unaudited)             5

             Consolidated Statements of Cash Flows For The Nine
             Months Ended September 30, 2000 and 1999 (unaudited)             6

             Notes to Consolidated Financial Statements For The Nine
             Months Ended September 30, 2000 (unaudited)                      7

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                           8


Part II.  Other Information

Item 1.   Legal Proceedings                                                  12

Item 6.   Exhibits and Reports on Form 8-K                                   12

Signatures                                                                   13



<PAGE>


             PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS



                                              September 30,         December 31,
                                                  2000                  1999
                                              -------------        -------------
                                               (unaudited)

Current assets:
  Cash and cash equivalents                     $17,619,000         $ 9,792,000
  Marketable securities                          13,984,000          22,007,000
  Accounts receivable, net                        7,363,000           9,474,000
  Inventories, net                                5,400,000           3,910,000
  Prepaid expenses and other                        640,000             684,000
  Deferred taxes                                  1,161,000           1,129,000
                                                -----------         -----------
       Total current assets                      46,167,000          46,996,000

Equipment and improvements, net                   2,040,000           1,695,000
Software development, net                           736,000             451,000
                                                -----------         -----------
       Total assets                             $48,943,000         $49,142,000
                                                ===========         ===========





                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
  Current portion of long term debt             $                   $     6,000
  Accounts payable                                1,080,000             904,000
  Income taxes payable                              650,000           1,990,000
  Accrued expenses                                3,457,000           5,087,000
                                                 ----------         -----------
       Total current liabilities                  5,187,000           7,987,000

  Deferred taxes                                    281,000             327,000
                                                 ----------         -----------
       Total liabilities                          5,468,000           8,314,000
                                                 ----------         -----------
Stockholders' equity:
  Preferred stock
  Common stock - $.01 par value; 50,000,000
    authorized; 13,260,038 and 13,186,526
    shares issued at September 30, 2000 and
    December 31, 1999, respectively                 133,000             132,000
  Additional paid-in capital                     13,050,000          12,665,000
  Retained earnings                              33,079,000          28,003,000
  Cumulative translation adjustments                 41,000              28,000
  Less: Treasury stock - at cost, 211,400        (2,828,000)
       shares                                    ----------          -----------
       Total stockholders' equity                43,475,000          40,828,000
                                                 ----------         -----------
       Total liabilities and                    $48,943,000         $49,142,000
       stockholders' equity                     ===========         ===========


<PAGE>


             PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
                     SEPTEMBER 30, 2000 AND 1999 (unaudited)



                                                      Three Months Ended
                                                         September 30,
                                                    2000                1999
                                             --------------      ---------------
                                                                     (restated)

Sales                                           $ 9,244,000         $12,890,000
Cost of goods sold                                2,976,000           4,430,000
                                                -----------         -----------
Gross profit                                      6,268,000           8,460,000
                                                -----------         -----------
Operating expenses:
  Selling and marketing                           1,480,000           1,644,000
  Research and development                        2,301,000           2,279,000
  General and administrative                        526,000           1,226,000
                                                -----------         -----------
      Total operating expenses                    4,307,000           5,149,000
                                                -----------         -----------
Income from operations                            1,961,000           3,311,000

Other income, net                                   492,000             390,000
                                                -----------         -----------
Income before income taxes                        2,453,000           3,701,000

Provision for income taxes                          932,000           1,431,000
                                                -----------         -----------
      Net income                                $ 1,521,000         $ 2,270,000
                                                ===========         ===========

Basic earnings per share                        $       .12         $       .17
                                                ===========         ===========
Diluted earnings per share                      $       .11         $       .16
                                                ===========         ===========


Net income available to common stockholders     $ 1,521,000         $ 2,270,000
                                                ===========         ===========
Weighted average number of common shares
   used in basic earnings per share              13,199,178          13,173,089
Common equivalent shares                            479,319             777,051
                                                -----------         -----------
Weighted average number of common shares
   used in diluted earnings per share            13,678,497          13,950,140
                                               ============         ===========





<PAGE>

             PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED
                     SEPTEMBER 30, 2000 AND 1999 (unaudited)

                                                       Nine Months Ended
                                                         September 30,
                                                     2000               1999
                                                -----------         -----------
                                                                     (restated)

Sales                                           $28,927,000         $31,599,000
Cost of goods sold                                9,500,000          10,972,000
                                                -----------         -----------
Gross profit                                     19,427,000          20,627,000
                                                -----------         -----------
Operating expenses:
  Selling and marketing                           3,956,000           4,213,000
  Research and development                        6,720,000           6,248,000
  General and administrative                      2,081,000           3,051,000
                                                -----------         -----------
      Total operating expenses                   12,757,000          13,512,000
                                                -----------         -----------
Income from operations                            6,670,000           7,115,000

Other income, net                                 1,516,000           1,054,000
                                                -----------         -----------
Income before income taxes                        8,186,000           8,169,000

Provision for income taxes                        3,110,000           3,456,000
                                                -----------         -----------
      Net income                                $ 5,076,000         $ 4,713,000
                                                ===========         ===========

Basic earnings per share                        $       .38         $       .36
                                                ===========         ===========
Diluted earnings per share                      $       .37         $       .34
                                                ===========         ===========

Net income available to common stockholders     $ 5,076,000         $ 4,713,000
                                                ===========         ===========
Weighted average number of common shares
   used in basic earnings per share              13,227,889          13,095,057
Common equivalent shares                            678,172             579,628
                                                -----------         -----------
Weighted average number of common shares
  used in diluted earnings per share             13,906,061          13,674,685
                                                ===========         ===========





<PAGE>



             PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
                                   (unaudited)

                                                         Nine Months Ended
                                                           September 30,
                                                       2000             1999
                                                    -----------     -----------
                                                                     (restated)

Cash flows from operating activities:
 Net income                                         $ 5,076,000     $ 4,713,000
Non-cash adjustments:
 Depreciation and amortization                          952,000         895,000
 Other                                                  (78,000)       (158,000)
 Compensation expense                                                   715,000
Changes in operating assets and liabilities:
 Accounts receivable                                  2,118,000      (2,949,000)
 Inventories                                         (1,483,000)       (531,000)
 Prepaid expenses and other                              44,000         531,000
 Accounts payable                                       176,000        (716,000)
 Accrued expenses                                    (1,630,000)      2,027,000
 Income taxes payable                                (1,340,000)        675,000
                                                    -----------     -----------
    Net cash provided by operating activities         3,835,000       5,202,000
                                                    -----------     -----------

Cash flows from investing activities:
 Purchases of equipment and improvements, net          (943,000)       (602,000)
 Capitalized software development                      (639,000)       (159,000)
 Purchase of marketable securities                  (15,977,000)    (23,011,000)
 Maturities of marketable securities                 24,000,000       1,000,000
                                                    -----------     -----------
    Net cash provided (used) by
    investing activities                              6,441,000     (22,772,000)
                                                    -----------     -----------

Cash flows from financing activities:
 Repayment of notes payable                             (6,000)          (9,000)
 Proceeds from issuance of common stock                385,000          498,000
 Purchase of treasury stock                         (2,828,000)
                                                    ----------      -----------
    Net cash (used) provided by financing
    activities                                      (2,449,000)         489,000
                                                    ----------      -----------
    Net increase (decrease) in cash
    and cash equivalents                             7,827,000      (17,081,000)

Cash and cash equivalents at beginning of period     9,792,000       25,741,000
                                                    ----------      -----------
Cash and cash equivalents at end of period         $17,619,000      $ 8,660,000
                                                   ===========      ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash financing activity:
 Exercise of stock options using 100 and 46,849
   shares ofcommon stock in 2000 and 1999,
   respectively.                                    $     4,000     $   719,000
                                                    ===========     ===========




<PAGE>


             Performance Technologies, Incorporated and Subsidiaries
                   Notes to Consolidated Financial Statements
                  For The Nine Months Ended September 30, 2000
                                   (Unaudited)

Note - A  The  unaudited  Consolidated  Financial  Statements   of  Performance
Technologies,  Incorporated and Subsidiaries  (the "Company") have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X of the  Securities  and Exchange  Commission.  Accordingly,  the
Consolidated  Financial  Statements  do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of management,  all adjustments considered
necessary  for a fair  presentation  have been  included.  The  results  for the
interim periods are not necessarily indicative of the results to be expected for
the year. The accompanying  Consolidated  Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements of the Company as
of December 31, 1999,  as reported in its Annual  Report on Form 10-K filed with
the Securities and Exchange Commission.

Note - B  During the nine months ended September 30, 2000,  73,512 common shares
were issued upon the exercise of stock options.

Note - C  Inventories  consisted  of the  following  at  September  30, 2000 and
December 31, 1999:


                                              September 30,         December 31,
                                                   2000                1999
                                              -----------           -----------

Purchased parts and components                $ 2,728,000           $ 1,822,000
Work in process                                 3,290,000             2,893,000
Finished goods                                    223,000               113,000
                                              -----------           -----------
                                                6,241,000             4,828,000
Less:  reserve for inventory obsolescence        (841,000)             (918,000)
                                              -----------           -----------
   Net                                        $ 5,400,000           $ 3,910,000
                                              ===========           ===========



<PAGE>

                                       -2-
             Performance Technologies, Incorporated and Subsidiaries

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Overview

All 1999 financial information contained herein has been restated to reflect the
December 1999 acquisition of MicroLegend Telecom Systems, Inc., accounted for as
a pooling of  interests.  Furthermore,  per share  amounts have been adjusted to
reflect a three-for-two stock split effected in September 1999.

Diluted  earnings  per share for the third  quarter  2000  amounted  to $.11 per
share, compared to $.16 per share for the third quarter 1999. Net income for the
third quarter 2000  amounted to $1.5  million,  compared to $2.3 million for the
respective  1999 period.  Revenue for the third quarter  2000,  amounted to $9.2
million,  compared to $12.9 million for the third quarter 1999. Diluted earnings
per share for the first nine months of 2000 increased to $.37, from $.34 for the
same period in 1999.  For the nine months ended  September 30, 2000,  net income
grew to $5.1  million,  compared  to $4.7  million  for the same period in 1999.
Revenue for the nine months ended September 30, 2000 was $28.9 million, compared
to $31.6 million for the  respective  period in 1999. At September 30, 2000, the
Company had $31.6 million of cash, cash  equivalents  and marketable  securities
and no debt. For the nine months ended September 30, 2000, the Company generated
income from operations,  excluding  depreciation and amortization  (EBITDA),  of
$7.6   million,   compared  to  $8.0  million  for  the  same  period  of  1999.
International  sales  (shipments  outside of North  America)  amounted to 32% of
total  revenue for the first nine  months of 2000,  compared to 19% for the same
period in 1999.

During the third quarter,  the Company  introduced  several new advanced telecom
products  directed  toward  next-generation  telecommunications  infrastructure.
These products include the market's first  carrier-grade  Layer 3 Fault Tolerant
Ethernet switch designed for use in next-generation IP platforms, as well as two
new network access products for T1/E1/J1/T3 network interface capabilities.  The
Company also introduced a new IP equipment  backplane  architecture,  IPnexusTM,
targeted at reducing cost and time-to-market  for telecom platform  integration.
The IPnexus  architecture,  which was recently submitted to the appropriate open
standards organization for adoption, allows the Company to address opportunities
that exist in the  expansion  and build out of both the  wireline  and  wireless
telecommunications  infrastructure.  Given  the  early  interest  in this new IP
embedded  systems  approach,  the Company  believes many of the platforms  being
designed  for  next-generation  telecommunication  applications  will  use  this
advanced  integration  concept.  In addition,  the Company began  shipping a new
Compact  PCI  (cPCI)  version  of its  SS7  signaling  gateway  directed  toward
integrated SS7 applications. All of these new products are fully integrated into
the IPnexus architecture.

In addition to the recent product activity,  the Company  collaborated with both
AudioCodes  Ltd. and the Motorola  Computer Group on a  comprehensive,  IP-based
telephony demonstration for next-generation  softswitch/gateway applications. In
September,   using  the  "standards   based"  elements  provided  by  the  three
organizations,  an operating  demonstration of an integrated media and signaling
gateway  was shown at the Voice On the Net (VON)  Conference  in  Atlanta.  This
demonstration,  specifically  incorporating the Performance Technologies' SS7/IP
signaling and the  carrier-grade IP Ethernet switch  products,  provided all the
media and signaling  capabilities  required to bridge  today's  SS7-based  voice
network with next-generation IP-based data networks.

The  Company  also  announced  several  new  customer  relationships  during the
quarter.  Samsung  Electronics  is  now  utilizing  PTI's  SS7  products  in Sun
Microsystems'  carrier-grade  platforms  for HLR and VLR wireless  applications.
Sevis  Systems  is using the  Company's  access  products  for SS7  surveillance
systems,  while  Clarent  Corporation  is beginning to integrate  PTI's  IPnexus
family of SS7 signaling  gateways,  T1/E1 Access and IP switching  products into
their next-generation Voice-over-IP (VoIP) media gateway.

Guidance for the fourth quarter 2000 and for calendar year 2001:

The following are  forward-looking  statements within the meaning of the Private
Securities  Litigation  Reform Act of 1995 and are  subject  to the safe  harbor
provisions  of that Act.  The Company  supplies  products to  telecommunications
equipment  manufacturers  that are integrated  into current and  next-generation
network  systems.  Design  wins  reach  production  volumes  at  varying  rates,
typically beginning in six to twelve months after the design win occurs.  During
the third quarter,  the Company recorded six new design wins for its products. A
variety of risks such as schedule delays,  cancellations and changes in customer
markets  can  adversely  affect a design win before  production  is reached  and
during  deployment.  Despite  this  difficulty,  however,  and  after  carefully
assessing  a number of  forward-looking  indicators,  management  believes it is
prudent to increase revenue and earnings expectations for the fourth quarter and
for 2000.  Revenue is expected to increase  approximately  10% sequentially from
the third  quarter  and  diluted  earnings  per share  for 2000 is  expected  to
increase to $.46 or $.47 per share,  from previous  guidance of $.39 to $.42 per
share.  Management  intends  to  continue  to  invest  significantly  in  sales,
marketing and  engineering  during the  remainder of the year,  and into 2001 to
increase the likelihood of success of the Company's long-range strategy. At this
point,  management  expects  30%  revenue  growth  in 2001 and  expects  diluted
earnings  per share to  increase  by 20% - 25% in 2001,  over 2000.  Revenue and
earnings  estimates  are  forward-looking  statements  within the meaning of the
Private  Securities  Litigation  Reform Act of 1995 and are based on indications
from the  Company's  customers  and  predicting  when design wins will  generate
shipments.  These indications and predictions have not been completely  reliable
in the past.


         Quarter and Nine Months Ended September 30, 2000, compared with
              the Quarter and Nine Months Ended September 30, 1999

Sales.  Sales for the  quarter  ended  September  30,  2000  were $9.2  million,
compared to $12.9 million for the third quarter 1999.  Sales for the nine months
ended  September 30, 2000 were $28.9 million,  compared to $31.6 million for the
same  period in 1999.  During  the first two  quarters  of 2000,  the  Company's
products  were grouped into three  distinct  categories  in one market  segment:
Signaling  System 7 (SS7)  and  network  access  products,  Lockheed  Martin/LAN
interface products (U.S. Government/COTS) and other products (combining non-COTS
LAN interface  products,  Network Switching and older/legacy  products).  In the
third quarter,  a new product category has been added for IP Switching  products
because the new CPC4400 IP Ethernet  switch was  introduced  in August and began
shipping in September. Sales expressed as a percentage of total sales from these
categories  represented  the  following  for the  three and nine  months  ending
September 30, 2000 and 1999:

                                                 Three Months Ended
                                                   September 30,
                                                2000               1999
                                             ----------         ---------


SS7 and network access products                    87%               58%
Lockheed Martin (government)                        0%               28%
IP Switching products                               1%                0%
Other products                                     12%               14%
                                             ----------         ---------
 Total                                            100%              100%
                                             ==========         =========


                                                  Nine Months Ended
                                                   September 30,
                                                2000               1999
                                             ----------         ---------


SS7 and network access products                    85%               57%
Lockheed Martin (government)                        4%               29%
IP Switching products                               0%                0%
Other products                                     11%               14%
                                             ----------         ---------
Total                                             100%              100%
                                             ===========        =========


Signaling System 7 (SS7) and network access products: Revenue from this category
increased to $8.0 million  during the third quarter 2000,  from $7.5 million for
the third quarter 1999.  Sales of SS7 and network access products  increased 36%
during the first nine months of 2000 to $24.4 million,  over the respective 1999
period.

Lockheed Martin/LAN interface products (U.S. Government/COTS): The contract with
Lockheed  Martin for LAN interface  products  ended in June 2000.  For the first
nine months of 2000, shipments amounted to $1 million, or 4% of sales,  compared
to $9.2 million, or 29% of sales for the same period during 1999. At the present
time, the customer's  procurement  requirements  are not known and management is
not  projecting  additional  revenue from this customer  during the remainder of
2000 or into 2001.

IP Switching:  During the third quarter,  the Company  introduced the CPC4400 IP
Ethernet switch.  Shipments to Clarent  Corporation  amounted to $110,000 during
the third quarter for their  next-generation media gateway. The Company has also
delivered  more than a dozen CPC4400  evaluation  units to several major telecom
equipment suppliers.

Other  products:  Revenue  from this  category  represented  approximately  $1.1
million  for the third  quarter  2000,  compared to $1.7  million,  for the same
period in 1999.  Many of these  products are project  oriented and shipments can
fluctuate  significantly on a quarterly basis. Revenue of other products for the
nine months ending September 30, 2000 amounted to $3.3 million, compared to $4.4
million for the first nine months of 1999.  Management expects revenue from this
category to continue to decline from 1999 revenue levels.

Analysis of  Revenue:  The  following  table sets forth the  Company's  revenue,
excluding  the revenue from the Lockheed  Martin  contract,  for the nine months
ended September 30, 1999 and 2000:

                                              Nine months ended
                                                September 30,
                                             2000           1999
                                             ----           ----
                                                (in millions)

Total revenue                                $28.9          $31.6
Less:  Lockheed Martin contract               (1.0)          (9.2)
                                             -----          -----
        Telecom revenue                      $27.9          $22.4
                                             =====          =====

Gross profit.  Gross profit consists of sales, less cost of goods sold including
material costs,  manufacturing expenses and amortization of software development
costs.  Gross  margin for the third  quarter  2000  improved  to 67.8% of sales,
compared to 65.6% for the third quarter  1999.  Gross margin for the nine months
ending September 30, 2000 improved to 67.2% of sales,  compared to 65.3% for the
same period in 1999.  The  improvement  in gross margin during 2000 is primarily
attributable  to greater  revenue from higher  margin  Signaling  System 7 (SS7)
Gateway products, communications software sales and manufacturing efficiencies.

Operating  expenses.  Total  operating  expenses were $4.3 million,  or 46.6% of
sales for the third  quarter 2000,  compared to $5.1 million,  or 39.9% of sales
for the  comparable  1999  quarter.  For the first  nine  months of 2000,  total
operating  expenses  were $12.8  million,  or 44.1% of sales,  compared to $13.5
million, or 42.8% of sales for the comparable 1999 period.

Selling and  marketing  expenses  were $1.5  million,  or 16.0% of sales for the
third  quarter 2000,  compared to $1.6  million,  or 12.8% of sales for the same
quarter in 1999.  Selling and marketing  expenses  amounted to $4.0 million,  or
13.7% of sales for the first nine months of 2000,  compared to $4.2 million,  or
13.3% for the same period in 1999. In September 2000, a new advertising  program
was  launched  to promote  the  IPnexus  architecture  and  family of  products.
Management expects selling and marketing expenses to increase as a percentage of
sales  during  the  remainder  of 2000  and  into  2001 as a  result  of  hiring
additional  sales  people  and  aggressively   marketing  its  IPnexus  products
including  the cPCI  Signaling  System 7  Gateway,  carrier-grade  IP  switching
products and network access products.

Research and development  expenses were $2.3 million,  or 24.9% of sales for the
third  quarter  2000,  compared  to $2.3  million,  or 17.7%  of  sales  for the
comparable 1999 quarter. Research and development expenses were $6.7 million, or
23.2% of sales for the nine months ended  September  30, 2000,  compared to $6.3
million,  or 19.8% of sales  for the  respective  period  in 1999.  The  Company
expects  to  continue  to invest  heavily in  research  and  development  and is
actively  recruiting  for several newly approved  engineering  positions to meet
development plans.

General and  administrative  expenses  were  $526,000,  or 5.7% of sales for the
third  quarter 2000,  compared to $1.2  million,  or 9.5% of sales for the third
quarter 1999. Third quarter 1999 expenses  included  certain  one-time  charges.
General and administrative  expenses were $2.1 million, or 7.2% of sales for the
nine months ended September 30, 2000, compared to $3.1 million, or 9.7% of sales
for the first nine  months of 1999.  General  and  administrative  expenses  are
significantly lower in 2000 than in 1999 because  contributions to the Company's
formula-based, performance bonus plan are substantially below 1999 levels.

Other  income,  net.  Other income  consists  primarily of interest  income from
marketable securities and cash equivalents.  The funds are primarily invested in
high quality Municipal and U.S. Treasury securities with maturities of less than
one year.

Income taxes. The provision for income taxes for the third quarter 2000 is based
on the combined federal, state and foreign effective tax rate of 38.0%, compared
to 38.7%  for the third  quarter  1999 and the  effective  tax rate for the nine
months  ending  September  30,  2000 was 38.0%,  compared  to 42.3% for the same
period in 1999.  The  Company  derives  approximately  a 1%  benefit  in its net
effective  corporate income tax rate from the foreign sales tax credit provision
of the Internal  Revenue Code (the  "Code").  Any changes in this section of the
Code could affect the Company's tax rate in future periods.


LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2000, the Company's  primary source of liquidity  included cash
and cash equivalents of $17.6 million,  marketable securities with a maturity of
less than one year of $14.0  million and  available  borrowings  of $5.0 million
under a revolving credit facility with a bank. No amounts were outstanding under
this credit  facility as of September 30, 2000. The Company had working  capital
of $41.0  million at September  30, 2000,  compared to $39.0 million at December
31, 1999.

Cash provided by operating  activities  for the nine months ended  September 30,
2000 was $3.8 million, compared to $5.2 million for the same period in 1999. The
difference  in cash provided by operating  activities  for the nine months ended
September 30, 2000, over the comparable 1999 period,  is primarily  attributable
to  changes  in  the  components  of  working  capital.  (See  the  Consolidated
Statements of Cash Flows appearing in the Financial  Statements included in this
report).

Capitalization  of certain software  development  costs amounted to $639,000 for
the nine months  ended  September  30,  2000,  compared to $159,000 for the same
period in 1999.

On August 14, 2000,  the Board of Directors  authorized  the repurchase of up to
one million shares of the Company's common stock over the next twelve months. As
of September 30, 2000, the Company has  repurchased a total of 211,400 shares at
a total cost of $2,828,000.







The  Company is  presently  negotiating  an  extension  to its  existing  credit
facility  that expired on October 31,  2000.  Assuming  there is no  significant
change in the  Company's  business,  management  believes that its current cash,
cash equivalents,  and marketable  securities  together with cash generated from
operations and available  borrowings  under the Company's loan  agreement,  when
approved,  will be sufficient to meet the Company's anticipated needs, including
working  capital and  capital  expenditure  requirements,  for at least the next
twelve months.  However,  an unfavorable  determination in the outstanding class
action  litigation could have a material adverse effect on the Company's working
capital. Furthermore, management is continuing its strategic acquisition program
to further accelerate new product and market penetration  efforts.  This program
could have an impact on the  Company's  working  capital,  liquidity  or capital
resources.


Impact of the Year 2000 Issue

The Company has not  experienced any material Year 2000 issues  internally,  nor
with key  suppliers or customers  and it appears  that such  organizations  have
successfully  transitioned to the Year 2000. However,  there can be no assurance
that problems will not arise for the Company,  its  suppliers,  its customers or
others with whom the Company does  business  later in 2000, or with systems that
have not yet been fully tested.  The Company  intends to continue to monitor its
compliance, as well as the compliance of others whose operations are material to
the Company's business.


FORWARD-LOOKING STATEMENTS AND RISK FACTORS

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for  certain  forward-looking  statements.  This  Quarterly  Report on Form 10-Q
contains forward-looking  statements,  which reflect the Company's current views
with respect to future events and financial  performance,  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934, as amended,  and is subject to the safe harbor
provisions of those Sections.

These forward-looking statements,  including the guidance for the fourth quarter
2000  and for  the  calendar  year  2001,  are  subject  to  certain  risks  and
uncertainties,  including  those  identified  below,  which could  cause  actual
results to differ materially from historical results or those  anticipated.  The
words "believes,"  "anticipates,"  "plans," "may," "intend," "estimate," "will,"
"should," "could," and other expressions which indicate future events and trends
also identify  forward-looking  statements.  However,  the absence of such words
does not mean that a statement is not forward-looking.

The  Company's  future  operating  results  are  subject  to  various  risks and
uncertainties   and  could  differ   materially  from  those  discussed  in  the
forward-looking  statements  and may be affected  by various  trends and factors
which are beyond the Company's  control.  These  include,  among other  factors,
general  business  and  economic  conditions,  rapid or  unexpected  changes  in
technologies,  cancellation or delay of customer orders including those relating
to the SS7 and communication access design wins referenced above, changes in the
product or customer mix of sales, delays in new product  development,  delays or
lack of  availability  of  electronic  components,  customer  acceptance  of new
products and customer  delays in  qualification  of  products.  Furthermore,  an
unfavorable  determination in the outstanding class action litigation could have
a material adverse effect on the Company's working capital.  This report on Form
10-Q should be read in conjunction with the Consolidated  Financial  Statements,
the notes thereto,  Management's  Discussion and Analysis of Financial Condition
and Results of Operations as of December 31, 1999 and "Risk Factors" as reported
in the Company's  Annual Report on Form 10-K, as filed with the  Securities  and
Exchange Commission.


<PAGE>


             Performance Technologies, Incorporated and Subsidiaries

                           Part II. Other Information


Item 1.           Legal Proceedings

On and after May 24, 2000,  five class action  lawsuits  were filed  against the
Company,  as well as several of its officers and directors,  alleging violations
of federal  securities  laws and seeking  recovery of unspecified  damages.  The
lawsuits were filed in United States District Court for the Western  District of
New York.  During the third quarter,  plaintiffs filed a petition with the court
to consolidate  the lawsuits into one class action and designated  lead counsel.
Performance Technologies continues to believe that these cases are without merit
and intends to vigorously defend against these allegations.






Item 6.       Exhibits and Reports on Form 8-K

              A.    Exhibits

                    None.

              B.    Reports on Form 8-K. There were no reports filed on Form 8-K
                    during the three month period ended September 30, 2000.






<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 TECHNOLOGIES, INCORPORATED





November 13, 2000                  By: /s/       Donald L. Turrell
                                   -------------------------------
                                                 Donald L. Turrell
                                                 President and
                                                 Chief Executive Officer




November 13, 2000                  By: /s/       Dorrance W. Lamb
                                   ------------------------------
                                                 Dorrance W. Lamb
                                                 Chief Financial Officer and
                                                 Vice President, Finance