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


                                  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 March 31, 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 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
4,810,191  as of  May  6, 1997.


--------------------------------------------------------------------------------
                             Cover Page of 12 Pages

<PAGE>


             Performance Technologies, Incorporated and Subsidiaries

                                      Index


                                                                            Page

Part I.                       Financial Information

Item 1.                       Consolidated Financial Statements

                  Consolidated Balance Sheets as of March 31, 1997
                  (unaudited) and December 31, 1996                            3

                  Consolidated Statements of Income For The Three Months
                  Ended March 31, 1997 and 1996 (unaudited)                    4

                  Consolidated Statements of Cash Flows For The Three Months
                  Ended March 31, 1997 and 1996  (unaudited)                   5

                  Notes to Consolidated Financial Statements For The Three
                  Months Ended March 31, 1997                                  6

Item 2.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                    7


Part II.                      Other Information

Item 6.           Exhibits and Reports on Form 8-K                            10

                  Signatures                                                  12



<PAGE>


             PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>
<S>                                                                               <C>            <C>

                                                                                     March 31,   December 31,
                                                                                        1997          1996
                                                                                    (unaudited)
                                                                                  -------------  -------------
Current assets:
   Cash and cash equivalents                                                      $   6,503,000  $  10,027,000
   Marketable securities                                                             10,100,000      6,102,000
   Accounts receivable, net                                                           4,119,000      3,234,000
   Inventories, net - - Note C                                                        4,724,000      4,032,000
   Prepaid expenses and other                                                           302,000        284,000
   Deferred taxes                                                                       419,000        419,000
                                                                                  -------------  -------------
         Total current assets                                                        26,167,000     24,098,000
Equipment and improvements, net                                                       1,021,000      1,267,000
Software development, net                                                               615,000        549,000
Other assets                                                                            162,000        175,000
                                                                                  -------------  -------------
         Total assets                                                             $  27,965,000  $  26,089,000
                                                                                  =============  =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long term debt                                              $      12,000  $      26,000
   Accounts payable                                                                   1,638,000        953,000
   Income taxes payable                                                                 612,000         23,000
   Accrued expenses                                                                   1,624,000      2,131,000
                                                                                  -------------  -------------
         Total current liabilities                                                    3,886,000      3,133,000
Long term debt, less current portion                                                     27,000         30,000
Deferred taxes                                                                          219,000        219,000
                                                                                  -------------  -------------
         Total liabilities                                                            4,132,000      3,382,000
                                                                                  -------------  -------------
Stockholders' equity
   Preferred stock
   Common stock - - Note B                                                               49,000         49,000
   Additional paid-in capital                                                        12,899,000     12,885,000
   Retained earnings                                                                 11,042,000      9,930,000
   Treasury stock                                                                      (157,000)      (157,000)
                                                                                  -------------  -------------
         Total stockholders' equity                                                  23,833,000     22,707,000
                                                                                  -------------  -------------
         Total liabilities and stockholders' equity                               $  27,965,000  $  26,089,000
                                                                                  =============  =============

</TABLE>


<PAGE>


             PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)


<TABLE>
<CAPTION>
<S>                                                                               <C>            <C>


                                                                                       Three Months Ended
                                                                                             March 31,
                                                                                        1997          1996
                                                                                  -------------  -------------

Sales                                                                             $   7,434,000  $   5,537,000
Cost of goods sold                                                                    3,332,000      2,363,000
                                                                                  -------------  -------------
Gross profit                                                                          4,102,000      3,174,000
                                                                                  -------------  -------------
Operating expenses:
   Selling and marketing                                                                909,000        680,000
   Research and development                                                             942,000        594,000
   General and administrative                                                           688,000        587,000
                                                                                  -------------  -------------
         Total operating expenses                                                     2,539,000      1,861,000
                                                                                  -------------  -------------
Income from operations                                                                1,563,000      1,313,000

Other income (expense), net                                                             230,000        131,000
                                                                                  -------------  -------------
Income before taxes and minority interest                                             1,793,000      1,444,000

Provision for income taxes                                                              681,000        528,000
                                                                                  -------------  -------------
Income before minority interest                                                       1,112,000        916,000
Minority interest                                                                                      (19,000)
                                                                                  -------------  -------------
    Net income                                                                    $   1,112,000 $      897,000
                                                                                  ============= ==============



Earnings per share  - - Note D                                                    $         .23 $          .20
                                                                                  ============= ==============

Weighted average common and common
Equivalent shares                                                                     4,917,000      4,500,000
                                                                                  ============= ==============

</TABLE>


<PAGE>


             PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                               <C>            <C>

                                                                                        Three Months Ended
                                                                                             March 31,
                                                                                        1997          1996
                                                                                  -------------  -------------
Cash flows from operating activities
   Net income                                                                     $   1,112,000  $     897,000
   Non-cash adjustments:
      Depreciation and amortization                                                     554,000        137,000
      Reserve for inventory obsolescence                                                 50,000        150,000
      Other                                                                               5,000        (79,000)
   Changes in operating assets and liabilities:
      Accounts receivable                                                              (890,000)      (468,000)
      Inventories                                                                      (742,000)    (1,601,000)
      Prepaid expenses and other                                                        (18,000)       102,000
      Accounts payable                                                                  685,000        647,000
      Accrued expenses                                                                 (507,000)       (14,000)
      Income taxes payable                                                              589,000        492,000
                                                                                  -------------  -------------

          Net cash provided by operating activities                                     838,000        263,000
                                                                                  -------------  -------------

Cash flows from investing activities
   Cash purchases of equipment and improvements                                        (168,000)      (466,000)
   Capitalized software development                                                    (193,000)      (114,000)
   Purchase of marketable securities                                                 (3,998,000)
   Purchase of additional shares in subsidiary                                                         (44,000)
                                                                                  -------------  -------------

         Net cash used by investing activities                                       (4,359,000)      (624,000)
                                                                                  -------------  -------------

Cash flows from financing activities
   Payments on capital lease obligations                                                (15,000)       (15,000)
   Repayment of notes payable                                                            (2,000)        (3,000)
   Proceeds from issuance of common stock                                                14,000     11,421,000
                                                                                  -------------   ------------

         Net cash provided (used) by financing activities                                (3,000)    11,403,000
                                                                                  -------------   ------------

         Net increase (decrease) in cash                                             (3,524,000)    11,042,000

Cash and cash equivalents at beginning of period                                     10,027,000      2,466,000
                                                                                  -------------  -------------

Cash and cash equivalents at end of period                                        $   6,503,000  $  13,508,000
                                                                                  =============  =============

</TABLE>








<PAGE>


             Performance Technologies, Incorporated and Subsidiaries
                   Notes to Consolidated Financial Statements
                    For The Three Months Ended March 31, 1997
                                   (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, 1996,  as reported in its Annual  Report on Form 10-K filed with
the Securities and Exchange Commission.

Note - B There were 4,807,981 and 4,801,301 shares issued and outstanding(net of
treasury shares held) at March 31, 1997 and December 31, 1996, respectively,  of
the Company's  $.01 par value Common Stock.  During the three months ended March
31, 1997, 6,680 common shares were issued upon the exercise of stock options.

Note - C   Inventories   consisted   of  the  following  at  March 31, 1997  and
           December 31, 1996:
<TABLE>
<CAPTION>
<S>                                          <C>                    <C>


                                              March 31,             December 31,
                                                1997                   1996
                                            -----------             -----------
Purchased parts and components              $ 1,630,000             $ 1,601,000
Work in process                               3,093,000               2,641,000
Finished goods                                  447,000                 292,000
                                            -----------             -----------
                                              5,170,000               4,534,000
Less:  reserve for inventory obsolescence      (446,000)               (502,000)
                                            -----------             -----------
 Net                                        $ 4,724,000             $ 4,032,000
                                            ===========             ===========

</TABLE>

Note - D The provisions of Statement of Financial  Accounting  Standards No. 128
("SFAS 128"), "Earnings per Share" are effective for financial statements issued
for  interim  and annual  periods  ending  after  December  15,  1997.  SFAS 128
simplifies  the standards for computing  earnings per share and makes the United
States accounting  standard comparable to international  standards.  The Company
does not  believe  that  the  adoption  of SFAS 128  would  have  resulted  in a
significant  difference  in the  calculation  of earnings per share as currently
reported,  which  indicates  the  dilutive  effect of common  equivalent  shares
attributable to outstanding options and warrants.



<PAGE>



                                                         -
             Performance Technologies, Incorporated and Subsidiaries

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

The   Company's   operating   performance   is  subject  to  various  risks  and
uncertainties.  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,
1996 and "Risk Factors" as reported in the Company's  Annual Report on Form 10-K
filed with the Securities and Exchange Commission.

Matters discussed in Management's Discussion and Analysis of Financial Condition
and Results of Operations in this Form 10-Q include forward  looking  statements
within the meaning of Section 27A of the  Securities Act of 1933, as amended and
Section 21E of the  Securities  Act of 1934, as amended,  and are subject to the
safe harbor provisions of those Sections. The Company's future operating results
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,  changes in the product or customer mix of sales,  delays in
new product development, customer acceptance of new products and customer delays
in qualification of products.

Overview

The Company  achieved record sales and net income for the first quarter of 1997.
Revenues for the first quarter increased by 34% and net income increased by 24%.
At March 31,  1997,  the Company  had  approximately  $16.6  million in cash and
marketable securities and no significant debt.

The  Company's  revenues are  generated  from  products  designed to enhance the
performance of network systems based on varied computer architectures  including
VMEbus,  SBus and PCIbus.  The Company's  products operate on various  operating
systems including UNIX, Windows NT(TM),  VxWorks and most recently LINUX. During
the first half of 1997,  the Company  plans to focus on  delivering  a new ULTRA
SCSI  product  for the PCI  market and  expanding  the  remote  access  software
capabilities  of the Company's  Wide Area Network  products  including  software
support for Frame  Relay,  SS7,  Primary  Rate ISDN on Windows NT and Broad Band
Protocols  through  a  combination  of  internal  development  and  third  party
strategic relationships.  During the second half of 1997, the Company will focus
on the development of products for the emerging  Compact PCI market.  It appears
that this  technology  is being  embraced by the defense and  telecommunications
industries as the new platform of choice to replace more mature  standards  such
as the VMEbus.  In addition,  the Company expects to introduce its new family of
network switching products during the fourth quarter of 1997.

As part of the  Company's  effort to broaden  its  position  in the SBus and PCI
product  areas,  the  Company   announced  in  March  the  purchase  of  Artecon
Corporation's  SBus and PCIbus controller product line. The integration of these
PCI and SBus  asynchronous  controllers  for high speed support of remote access
and Internet  connectivity,  along with the  Company's  existing  family of high
performance  products,  results  in the  ability  to  provide  the Sun and  UNIX
marketplaces with one of the most comprehensive  suites of communications,  mass
storage and network interface solutions available in the industry.


  Quarter Ended March 31, 1997, compared with the Quarter Ended March 31, 1996

Sales.  Sales  for the  quarter  ended  March  31,  1997  increased  by 34.3% to
$7,434,000,  from  $5,537,000  for the  first  quarter  of 1996.  The  Company's
products are grouped into five categories:  WAN Interface adapter products,  LAN
Interface  adapter products,  Network Systems  products,  Mass Storage Interface
products  and   Inter-system   Connectivity   products.   WAN  Adapter  products
represented  49% of total  sales in the first  quarter,  compared to 45% for the
same quarter of the prior year. The Company  introduced several new WAN products
during  the past  twelve  months  and more  than  60% of the  increase  in sales
reported  is  attributable  to the  escalating  demand  for  the  Company's  WAN
communications  products.  Shipments of Network systems products represented 15%
of total sales for the first quarter,  compared to 8% for the same period a year
earlier. This increased revenue is primarily attributable to higher shipments of
the Company's "front-end" communications subsystems to Cray Research and greater
sales by the Company's UCONx  subsidiary of its  communication  server products.
Mass Storage products  represented 16% and 15% of sales in the first quarters of
1997 and  1996,  respectively.  The  introduction  of the Ultra  SCSI  interface
products in June, 1996 accelerated the revenue growth of this group. LAN Adapter
product  shipments  for the  first  quarter  of 1997  amounted  to 14% of sales,
compared to 24% for the first quarter of 1996.  There are two distinct  segments
in  the  Company's  LAN  business:   those  products   provided  for  commercial
applications  and those  provided for  Commercial  Off the Shelf (COTS)  Defense
applications. The COTS applications account for the largest shipments of the two
segments.  This business is project oriented and is very difficult to predict on
a quarterly basis. Management expects that the volume of this business will show
an increase during 1997.  Inter-system  Connectivity  product revenues decreased
from 8% of sales in the first  quarter  of 1996 to 6% for the first  quarter  of
1997.  The  Company is not  investing  in this group of  products  and a further
decline in these revenues is expected.

Gross Profit.  Gross profit consists of sales, less cost of goods sold including
materials costs, manufacturing expenses and amortization of software development
costs. Gross profit for the first quarter of 1997 increased to $4,102,000,  from
$3,174,000  for the first quarter 1996.  Gross margin was 55.2% of sales for the
first quarter,  compared to 57.3% in the first quarter 1996 and 56.3% for all of
1996.  Gross  margin  for the  first  quarter  of 1996 was  unusually  high on a
historical  basis and the gross  margin for the current  quarter was affected by
acceleration of the  amortization of certain  capitalized  software  development
costs.

Total Operating Expenses.  Total operating expenses increased to $2,539,000,  or
34.2 % of sales for the first quarter 1997, from  $1,861,000,  or 33.6% of sales
for the comparable 1996 quarter.  The Company is making significant  investments
in sales,  marketing,  research and  development  while reducing its general and
administrative expenses as a percentage of sales.

Selling and marketing expenses increased to $909,000,  or 12.2% of sales for the
first quarter  1997,  from  $680,000,  or 12.3% of sales for the same quarter in
1996.  This increase is primarily  attributable  to greater  personnel costs and
sales commissions due to higher sales levels.  In addition,  the marketing staff
has been bolstered to better  promote the Company's  products  domestically  and
internationally.  In February,  the Company presented its products at the Comnet
trade show in  Washington  DC and in April,  the Company  attended  the PCI Plus
trade show in Santa Clara, California.  PCI Plus was the first of many PCI trade
shows the Company  expects to  participate  in the future.  In May,  the Company
presented its products at InterOp in Las Vegas. This is one of the largest shows
offered for the networking  and  communications  marketplace.  During the second
half of  1997,  management  expects  that  sales  and  marketing  expenses  will
accelerate  as a  percentage  of sales in an effort to  promote  many of the new
products being introduced in the latter part of the year.

Research and development expenses were $942,000, or 12.7% of sales for the first
quarter of 1997, compared to $594,000, or 10.7% of sales for the comparable 1996
quarter.  Research  and  development  expenses  consist  primarily  of  employee
salaries  and  benefits  costs,  cost of materials  consumed in  developing  and
designing  new  products  and,  to a lesser  extent,  contract  development  and
equipment rental.  Certain engineering  expenses associated with the development
of software are capitalized and amortized to cost of goods sold. The increase in
research and development  expenses in the current quarter reflects the Company's
ongoing commitment to research and development efforts,  including the expansion
of both hardware and software related to WAN communication adapter products, the
continued  enhancement of the current  LAN/FDDI  offerings,  the next generation
Ethernet switch, expansion of mass storage interface products to encompass Fiber
Channel  and  expanded  communication  server  products  provided  by  UCONx.  A
significant portion of the increased expense during the quarter was attributable
to the number of engineers hired during the past twelve months. In addition, the
product  development  costs associated with new products,  including a new ASIC,
were significantly  higher during the current quarter.  During the first half of
1997,  management expects that research and development  expenses will be higher
as a percentage of sales than in 1996 and will decline somewhat, as a percentage
of sales,  during  the  second  half of the  year.  General  and  administrative
expenses were $688,000,  or 9.3% of sales for the first quarter of 1997 compared
to  $587,000,  or 10.6% of sales  for the first  quarter  of 1996.  The  Company
continues  to  maintain  tight  control  over  its  general  and  administrative
expenses.

Other income (expense), net. Other income consists primarily of interest income.
Available  cash is invested  in money  market  funds,  high  quality  short term
commercial  paper and United States Treasury  securities  maturing within twelve
months.

Income  Taxes.  The  provision for income taxes for the first quarter of 1997 is
based upon the combined federal and state effective tax rate of 38%, compared to
36.6% for the first quarter of 1996.

Liquidity and Capital Resources

At March 31, 1997, the Company's  primary source of liquidity  included cash and
cash  equivalents of $6,503,000,  marketable  securities with a maturity of less
than one year of  $10,100,000  and available  borrowings  of $3,000,000  under a
revolving  credit facility with a bank. No amounts were  outstanding  under this
credit  facility  as of March 31,  1997.  The  Company  had  working  capital of
$22,281,000 at March 31, 1997,  compared to $20,965,000 at December 31, 1996 and
$18,408,000 at March 31, 1996.

Cash  generated  from  operating  activities  was $838,000 for the quarter ended
March 31, 1997, compared to $263,000 for the first quarter of 1996.

Cash used in investing activities was $4,359,000 for the quarter ended March 31,
1997,  compared to $624,000  for the quarter  ended March 31,  1996.  During the
quarter  ended March 31,  1997,  investing  activities  included the purchase of
marketable securities of $3,998,000 and capital equipment purchases of $168,000.
Capital equipment purchases consist primarily of manufacturing equipment, office
equipment and computer and related  equipment used in engineering.  In addition,
the Company capitalized certain software development costs amounting to $193,000
for the quarter  ended March 31, 1997,  compared to $114,000 for the same period
in 1996.

Cash used by  financing  activities  for the  quarter  ended  March 31, 1997 was
$3,000 as compared to $11,403,000  of cash provided by financing  activities for
the same period in 1996. During the first quarter of 1996, the Company completed
its initial  public  offering of Common Stock and the net proceeds of the Public
Offering were approximately $11,421,000.

Assuming there is no significant  change in the Company's  business,  management
believes  that its current cash and  marketable  securities  together  with cash
generated  from  operations  and available  borrowings  under the Company's loan
agreement 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, it is the Company's intention to continue aggressive new
product  introduction  throughout  1997 for a variety of  markets  served by the
Company.  Management  has also  initiated  a  strategic  acquisition  program to
further  accelerate  new product and market  penetration  efforts.  This program
could have an impact on the Company's working capital requirements, liquidity or
capital resources.



<PAGE>


             Performance Technologies, Incorporated and Subsidiaries

                           Part II. Other Information

Item 6.           Exhibits and Reports on Form 8-K

                  A.       Exhibits

                           Exhibit 11 - Computation of earnings per share.

                  B.       Reports on Form 8-K

                           There were no  reports  on Form 8-K filed  during the
                           three month period ended March 31, 1997.





<PAGE>


             Performance Technologies, Incorporated and Subsidiaries
                 Exhibit 11 - Computation of Earnings Per Share
               For the Three Months Ending March 31, 1997 and 1996

<TABLE>
<CAPTION>
<S>                                           <C>           <C>


                                                Three Months Ended
                                                     March 31,
                                                1997          1996
                                             ----------     ----------
Weighted average common and common share equivalents:

Weighted average common shares
  outstanding during the period               4,804,000      4,358,000


Weighted average common share equivalents       113,000        142,000
                                             ----------     ----------

                                              4,917,000      4,500,000
                                             ==========     ==========


Net Income                                   $1,112,000     $  897,000
                                             ==========     ==========



Earnings per share                           $      .23     $      .20
                                             ==========     ==========


</TABLE>



<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





May 13, 1997                            By: s/    Charles E. Maginness
                                            --------------------------
                                                  Charles E. Maginness
                                          Chairman of the Board of Directors and
                                                Chief Executive Officer




May 13, 1997                           By: s/     Dorrance W. Lamb
                                           --------------------------
                                                  Dorrance W. Lamb
                                           Chief Financial Officer and
                                             Vice President, Finance