<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549


                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                       FOR THE PERIOD ENDED MARCH 31, 2000

                        Commission file number: 000-23735
                                                ---------


                         PRECEPT BUSINESS SERVICES, INC.
             (Exact name of registrant as specified in its charter)

                Texas                                           75-2487353
   (State or other jurisdiction of                          (I.R.S. Employer
   incorporation or organization)                          Identification No.)

1909 Woodall Rodgers Freeway, Suite 500                            75201
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (214) 754-6600





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. [X] Yes [ ] No



As of May 12, 2000, there were 10,191,925 outstanding shares of Class A Common
Stock and 592,142 outstanding shares of Class B Common Stock.




================================================================================

<PAGE>

<TABLE>
<CAPTION>

                         PRECEPT BUSINESS SERVICES, INC.

                               INDEX TO FORM 10-Q

DESCRIPTION                                                                                    PAGE
-----------                                                                                    ----
<S>               <C>                                                                          <C>
PART I            FINANCIAL INFORMATION

Item 1            Condensed Consolidated Balance Sheets as of
                      March 31, 2000 and June 30, 1999..................................        3
                  Condensed Consolidated Statements of Operations
                      for the three-month and nine-month periods ended
                      March 31, 2000 and 1999...........................................        4
                  Condensed Consolidated Statements of Cash Flows for the
                      nine-month periods ended March 31, 2000 and 1999..................        5
                  Condensed Consolidated Statements of Changes in
                      Shareholders' Equity for the nine-month periods
                      ended March 31, 2000 and 1999.....................................        6
                  Notes to Condensed Consolidated Financial Statements..................        7

Item 2            Management's discussion and analysis of financial
                      condition and results of operations...............................       14

Item 3            Quantitative and Qualitative Disclosure for Market Risk...............       22

PART II           OTHER INFORMATION

Item 1            Legal Proceedings.....................................................       22

Item 2            Changes in Securities and Use of Proceeds.............................       22

Item 3            Defaults Upon Senior Securities.......................................       23

Item 4            Submission of Matters to a Vote of Security Holders...................       23

Item 6            Exhibits and Reports on Form 8-K......................................       23

                  Signature.............................................................       23
</TABLE>

                                       2

<PAGE>

PART I - FINANCIAL INFORMATION - ITEM 1

                         PRECEPT BUSINESS SERVICES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (Amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                                  March 31,          June 30
                                                                                    2000               1999
                                                                               ------------        ------------
                                      ASSETS                                    (Unaudited)
<S>                                                                            <C>                 <C>
Current assets:
   Cash and cash equivalents ..............................................    $       --          $       --
   Trade accounts receivable, net .........................................          19,999              17,071
   Accounts receivable from affiliates ....................................             929               1,054
   Inventory ..............................................................           7,595               4,782
   Other current assets ...................................................           2,705               1,335
   Deferred income taxes and income taxes receivable ......................           4,012               1,734
   Net assets of discontinued operations ..................................          20,699              30,546
                                                                               ------------        ------------
       Total current assets ...............................................          55,939              56,522

Property and equipment, net ...............................................           2,781               2,518
Intangible assets, net ....................................................          19,734              16,854
Deferred income taxes .....................................................           1,010               1,010
Other assets ..............................................................              20                 613
                                                                               ------------        ------------
       Total assets .......................................................    $     79,484        $     77,517
                                                                               ============        ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Trade accounts payable .................................................    $     14,042        $      7,985
   Accrued expenses .......................................................           2,219               3,007
   Accrued compensation ...................................................           2,286               1,705
   Current portion of long-term debt ......................................           1,383               1,364
                                                                               ------------        ------------
       Total current liabilities ..........................................          19,930              14,061

Long-term debt ............................................................          43,726              34,334
Mandatory redeemable convertible preferred stock ..........................           2,592                 194
Commitments and contingencies
Shareholders' equity:
   Preferred stock, $1.00 par value; 3,000 authorized shares,
       none issued ........................................................            --                  --
   Class A Common Stock, $0.01 par value; 100,000 shares authorized
       and 9,748 and 8,877 shares issued
       in 2000 and 1999, respectively .....................................              97                  89
   Class B Common Stock, $0.01 par value; 10,500 shares authorized
       and 592 shares issued ..............................................               6                   6
   Additional paid-in capital .............................................          39,757              39,717
   Retained earnings (accumulated deficit) ................................         (25,413)             (9,673)
                                                                               ------------        ------------
                                                                                     14,447              30,139
   Class A treasury stock - 149 shares ....................................          (1,211)             (1,211)
                                                                               ------------        ------------
       Total shareholders' equity .........................................          13,236              28,928
                                                                               ------------        ------------
           Total liabilities and shareholders' equity .....................    $     79,484        $     77,517
                                                                               ============        ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3


<PAGE>

                         PRECEPT BUSINESS SERVICES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                   Three months                 Nine months
                                                      Ended                        Ended
                                                     March 31,                   March 31,
                                                  2000          1999        2000          1999
                                                ---------    ---------    ---------    ---------
                                                                   (Unaudited)
<S>                                             <C>          <C>          <C>          <C>
CONTINUING OPERATIONS
Revenue - Business Products .................   $  36,728    $  35,096    $ 106,815    $ 103,874
Costs and expenses:
   Cost of goods sold .......................      24,844       23,424       71,701       70,010
   Sales commissions ........................       5,195        4,881       14,712       14,005
   Selling, general and administrative ......       5,919        6,051       15,839       16,551
   Goodwill write-down and
       other non-recurring charges ..........        -           6,727         -           6,727
   Depreciation and amortization ............         599          363        1,612        1,019
                                                ---------    ---------    ---------    ---------
                                                   36,557       41,446      103,864      108,312
                                                ---------    ---------    ---------    ---------
Operating income (loss) .....................         171       (6,350)       2,951       (4,438)
Interest expense ............................         552          201        2,322        1,148
                                                ---------    ---------    ---------    ---------
Income (loss) before income taxes ...........        (381)      (6,551)         629       (5,586)
Income tax provision (benefit) ..............        (171)      (3,038)         284       (2,526)
                                                ---------    ---------    ---------    ---------
Net income (loss) from continuing operations         (210)      (3,513)         345       (3,060)

DISCONTINUED OPERATIONS
Net income (loss) from discontinued
   operations, net of income tax provision
   (benefit) ................................        (588)      (6,886)         546       (6,000)
Net loss from sale of discontinued operations     (16,500)        -         (16,500)        -
                                                ---------    ---------    ---------    ---------
Net loss from discontinued operations .......     (17,088)      (6,886)     (15,954)      (6,000)
                                                ---------    ---------    ---------    ---------
Net income (loss) ...........................   $ (17,298)   $ (10,399)   $ (15,609)   $  (9,060)
                                                =========    =========    =========    =========
Basic net income (loss) per share:
   Continuing operations ....................   $   (0.02)   $   (0.41)   $    0.04    $   (0.37)
   Discontinued operations ..................       (1.68)       (0.81)       (1.62)       (0.73)
                                                ---------    ---------    ---------    ---------
   Net income (loss) per share ..............   $   (1.70)   $   (1.22)   $   (1.58)   $   (1.10)
                                                =========    =========    =========    =========
   Weighted average shares outstanding ......      10,153        8,512        9,859        8,208

Diluted net income (loss) per share:
   Continuing operations ....................   $   (0.02)   $   (0.41)   $    0.04    $   (0.37)
   Discontinued operations ..................       (1.68)       (0.81)       (1.55)       (0.73)
                                                ---------    ---------    ---------    ---------
   Net income (loss) per share ..............   $   (1.70)   $   (1.22)   $   (1.51)   $   (1.10)
                                                =========    =========    =========    =========
   Weighted average shares outstanding ......      10,153        8,512       10,325        8,208
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4

<PAGE>

                         PRECEPT BUSINESS SERVICES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)

<TABLE>
<CAPTION>

                                                                                          Nine Months Ended March 31,
                                                                                          ---------------------------
                                                                                            2000               1999
                                                                                          --------           --------
                                                                                                  (Unaudited)
<S>                                                                                       <C>                <C>
Continuing operations:
   Cash flows from operating activities: ............................................     $  5,433           $  9,073

   Cash flows provided by (used in) investing activities:
       Acquisitions of businesses, including earnout payments .......................       (5,798)            (8,851)
       Acquisition of property and equipment, net ...................................         (106)              (325)
       Sale of assets of discontinued operations ....................................         -                 1,115
                                                                                          --------           --------
           Net cash used in investing activities ....................................       (5,904)            (8,061)
                                                                                          --------           --------
   Cash flows provided by (used in) financing activities:
       Payments on long-term debt and other long-term liabilities, net ..............       (1,149)            (1,034)
       Preferred stock redemption and dividend payments .............................         (809)              -
       Borrowings (repayments) on revolving line of credit, net .....................        9,566              8,535
                                                                                          --------           --------
           Net cash provided by financing activities ................................        7,608              7,501
                                                                                          --------           --------

   Net change in cash and cash equivalents - continuing operations ..................        7,137              8,513

Discontinued operations:
   Cash flows used in operating activities ..........................................         (145)            (2,156)
   Cash flows used in investing activities - primarily acquisitions of businesses ...       (4,982)            (7,181)

   Cash flows used financing activities - net repayments of debt ....................       (2,010)              (957)
                                                                                          --------           --------
   Net change in cash and cash equivalents - discontinued operations ................       (7,137)           (10,294)
                                                                                          --------           --------

Net change in cash and cash equivalents .............................................         -                (1,781)

Cash and cash equivalents at beginning of period ....................................         -                 2,291
                                                                                          --------           --------
Cash and cash equivalents at end of period ..........................................     $   -              $    510
                                                                                          ========           ========
Supplemental disclosure:
   Cash paid for:
       Interest .....................................................................     $  3,439           $  1,420
       Income taxes .................................................................     $    651           $    213
</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                                5

<PAGE>

                         PRECEPT BUSINESS SERVICES, INC.
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                             (Amounts in thousands)

<TABLE>
<CAPTION>

                                                                             RETAINED
                                CLASS A      CLASS B       ADDITIONAL        EARNINGS                         TOTAL
                                COMMON       COMMON         PAID-IN        (ACCUMULATED                   SHAREHOLDERS'
                                 STOCK        STOCK         CAPITAL          DEFICIT)         OTHER           EQUITY
                               ---------    ---------     ------------   ----------------  ----------   ----------------
                                                                  (Unaudited)
<S>                            <C>          <C>           <C>            <C>               <C>          <C>
Balance, June 30, 1998 .....   $      69    $       6     $     23,515   $       (1,396)   $    (192)   $      22,002

Issuance of shares to
   acquire businesses ......          11           -            12,533             -             -             12,544
Exercise of stock options ..          -            -                20             -             (20)            -
Repurchase of Class A
common shares ..............                       -                                            (999)            (999)
Conversion of seller notes .          -            -               383             -                              383
Net loss ...................          -            -              -              (9,060)         -             (9,060)
                               ---------    ---------     ------------   ----------------  ----------   ----------------

Balance, March 31, 1999 ....   $      80    $       6     $     36,451   $      (10,456)   $  (1,211)   $      24,870
                               =========    =========     ============   ================  ==========   ================




Balance, June 30, 1999 .....   $      89    $       6     $     39,717   $       (9,673)   $  (1,211)   $      28,928

Issuance of shares to
   acquire businesses and
   conversion of seller
   note payable ............           8           -                40             -             -                 48
Dividends on preferred
   stock ...................          -            -              -                (131)         -               (131)
Net loss ...................          -            -              -             (15,609)         -            (15,609)
                               ---------    ---------     ------------   ----------------  ----------   ----------------


Balance, March 31, 2000 ....   $      97    $       6     $     39,757   $      (25,413)   $  (1,211)   $      13,236
                               =========    =========     ============   ================  ==========   ================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       6

<PAGE>

                         PRECEPT BUSINESS SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


1.       BUSINESS

         Precept Business Services, Inc. and its subsidiaries ("Precept" or
the "Company") primarily engage in business products distribution management
and services. The Business Products Division arranges for the manufacture,
storage, and distribution of business forms, computer supplies, advertising
information and other related business products for medium- to large-sized
corporate customers. Precept operates from offices throughout the United
States.

         DISCONTINUED OPERATIONS - TRANSPORTATION SERVICES DIVISION

         The Transportation Services Division provides chauffeured corporate
transportation, livery and courier services from locations in the tri-state
New York metropolitan area and in the states of Texas, Michigan, Kentucky and
Ohio. During the quarter ended March 31, 2000, our Board of Directors approved
a plan to sell the Transportation Division, and we signed a revised letter of
intent to sell substantially all the assets and liabilities of the
Transportation Division to a company funded by a group of investors, led by
Holding Capital Group and certain members of the Transportation Division's
executive management. The sale of the Transportation Division, which is
subject to a number of conditions including the execution of a definitive
purchase agreement, is expected to be completed by the end of September 2000.
The revised letter of intent contemplates the Transportation Division is to be
sold for five times the annual pro forma free cash flow of the division and
for an earnout based on future earnings of the new company. Free cash flow
would be defined as the earnings before interest, income taxes, depreciation
and amortization less the annual debt service for the division. Under the
foregoing, the purchase price for the Transportation Division would be
approximately $20.0 million. In addition, the new company would assume the
debt of the Transportation Division.

         PUBLICLY TRADED COMPANY

         Our Class A common stock trades under the Nasdaq symbol "PBSI".

         CONSOLIDATED FINANCIAL STATEMENTS

         The consolidated financial statements comprise the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

         PRO FORMA INFORMATION

         The pro forma information included in these financial statements and
notes is unaudited.

         FISCAL YEAR END AND QUARTERLY REPORTING PERIODS

         We maintain a June 30 fiscal year end and report our quarterly
operating results for the periods that end on September 30, December 31, and
March 31, respectively. For purposes of the Company's current report on Form
10-Q, references to 2000 and 1999 are meant to be the three-month and
nine-month reporting periods ended March 31, 2000 and 1999, respectively.
References to fiscal years 2000 and 1999 are meant to be for the fiscal year
ending June 30, 2000 and the fiscal year ended June 30, 1999, respectively.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Significant accounting policies followed in the preparation of the
consolidated financial statements are consistent with the accounting policies
described in the Company's notes to consolidated financial statements included
in the Company's Annual Report to Shareholders and Form 10-K for the fiscal
year ended June 30, 1999.

                                      7

<PAGE>

                         PRECEPT BUSINESS SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


         INTERIM FINANCIAL INFORMATION

         The accompanying interim financial statements and information are
unaudited. We have omitted or condensed certain information and disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles, although we believe that the
disclosures included herein are adequate to make the information presented not
misleading. You should read these interim financial statements in conjunction
with the Company's consolidated financial statements for the year ended June
30, 1999. We have included in the interim financial statements all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the Company's financial position, its results of
operations and its cash flows. We do not believe that the operating results
for any particular interim period are necessarily indicative of the operating
results for a full fiscal year.

         We derived the financial information for the year ended June 30, 1999
from our audited financial statements for the same year that are included in
the Company's Annual Report to Shareholders and Form 10-K for fiscal year 1999.

         DISCONTINUED OPERATIONS

         We reported the historical operating results for the Transportation
Division as "Discontinued operations" on the accompanying condensed
consolidated statements of operations for all periods presented. We have
aggregated and separately identified the Transportation Division's related
assets and liabilities on the condensed consolidated balance sheets as "Net
assets of discontinued operations." We also separated the cash flow from
discontinued operations on the condensed consolidated statements of cash
flows. We have recognized the net income (loss) from these operations during
the three and nine-month periods ended March 31, 2000 in the statement of
operations. Based on the current letter of intent between the Company and
Holding Capital Group, Inc., we have recorded an estimated loss on the sale of
the Transportation Division.

         The loss on the sale of the discontinued operations does not include
the expected future net income or loss expected to be generated by the
Transportation Division. Since we are endeavoring to sell the Transportation
Division within the next six months, we do not expect that the amount of such
net income would have a material effect on the size of the net loss from
discontinued operations. As a result, the expected future net income of the
Transportation Division is not included in the net loss from discontinued
operations.

         We did not include a provision for tax benefit in the loss on the
sale of the discontinued operations. We expect that the majority of the loss
from the sale of the Transportation Division will not be able to be deducted
for tax purposes. We estimate that the tax basis of the Transportation
Division will be close to the amount of the taxable sales price for the
division. If there is a taxable loss, the future tax benefit of such loss will
be evaluated at the time of the completion of the sale. If there is a taxable
gain, we expect that the Company's tax net operating loss carryforward amounts
will be used to offset the taxable gain.

         We have included in the net income (loss) from the Transportation
Division an allocation of our interest expense on the outstanding debt under
our Credit Agreement. We based the allocation of this interest expense on the
operating results of the Transportation Division, on its capital expenditures,
on its contribution towards corporate expenses and on its changes in working
capital. We did not allocate any corporate selling, general and administrative
expenses to the net income (loss) from the Transportation Division.

3.       ACQUISITIONS

         During the first quarter of fiscal year 2000 we acquired two business
products distribution companies with combined annual revenues of $10.2
million. We accounted for these acquisitions using the purchase method of
accounting. For each of these purchase acquisitions, we allocated the
aggregate

                                      8

<PAGE>

                         PRECEPT BUSINESS SERVICES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


acquisition cost to the net assets acquired based on the fair market value of
such net assets. We have included the operating results of such companies in
our historical results of operations for all periods following the
acquisition. The aggregate acquisition cost for such purchased businesses
amounted to $5.0 million and consisted of $1.0 million in cash, funded by the
Company's revolving line of credit, $3.0 million in redemption value of
mandatory redeemable convertible preferred stock and $1.0 million in assumed
debt and deal costs.

         During the first quarter of fiscal year 1999, we acquired four
business products distribution companies with combined annual revenues of
$34.3 million. We accounted for these acquisitions using the purchase method
of accounting. For each of these purchase acquisitions, we allocated the
aggregate acquisition cost to the net assets acquired based on the fair market
value of such net assets. We included the operating results of such companies
in our historical results of operations for all periods following the
acquisitions. The aggregate acquisition cost for such purchased businesses
amounted to $18.6 million and consisted of $5.7 million in cash, funded by
working capital and the Company's revolving line of credit, 0.7 million shares
of Class A common stock with an aggregate fair market value of $9.6 million,
and $3.3 million in seller notes, assumed debt and deal costs.


<TABLE>
<CAPTION>

                                                                            Nine months ended
                                                                                March 31,
                                                                        ------------------------
                                                                           2000          1999
                                                                        ----------    ----------
<S>                                                                     <C>           <C>
Purchase consideration:
     Cash paid.....................................................     $    1,000    $    5,736
     Amounts due sellers of acquired businesses....................          -             1,380
     Common stock and mandatory preferred stock issued.............          3,000         9,604
     Liabilities assumed...........................................            900         1,777
     Other.........................................................             75           107
                                                                        ----------    ----------
Fair value of net assets acquired..................................     $    4,975    $   18,604
                                                                        ==========    ==========


</TABLE>


<TABLE>
<CAPTION>

                                                                            Nine months ended
                                                                                March 31,
                                                                        ------------------------
                                                                           2000          1999
                                                                        ----------    ----------
<S>                                                                     <C>           <C>
Allocation of fair value of net assets acquired:
     Goodwill and intangible assets................................     $    3,474    $   13,323
     Accounts receivable...........................................          1,237         3,704
     Inventory and other, net......................................            264         1,577
                                                                        ----------    ----------
                                                                        $    4,975    $   18,604
                                                                        ==========    ==========

</TABLE>


         The following table presents the pro forma results of continuing
operations as if all the acquisitions described above had occurred at the
beginning of each period presented. Pro forma adjustments reflect additional
amortization expense since the excess of acquisition cost over the fair value
of the assets acquired is amortized for a full period. Pro forma adjustments
also reflect additional interest expense due to the related debt being
outstanding for a full period. The income tax effect of the pro forma
adjustments has also been reflected. These pro forma results are presented for
comparative purposes only and do not purport to be indicative of what would
have occurred had the businesses actually been acquired as of those dates or
of results which may occur in the future.


<TABLE>
<CAPTION>

                                             Nine months ended                Three months ended
                                                  March 31,                        March 31,
                                        ---------------------------       --------------------------
                                            1999            2000              1999            2000
                                        -----------     -----------       ----------      ----------
<S>                                     <C>             <C>               <C>             <C>
Total revenues .......................  $   111,427     $   121,196       $   36,728      $   38,984
Income (loss) before income taxes ....  $     1,461     $     2,009       $     (381)     $      311
Net income (loss).....................  $       760     $     1,045       $     (210)     $      162
Diluted net income (loss) per share...  $      0.07     $      0.12       $    (0.02)     $     0.02


</TABLE>


                                                9

<PAGE>

                             PRECEPT BUSINESS SERVICES, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     MARCH 31, 2000

         The following table presents the same information as the table above
except that the information below includes the goodwill write-down and other
non recurring charges recorded during the quarter ended March 31, 1999.

<TABLE>
<CAPTION>

                                                          Nine months ended                    Three months ended
                                                              March 31,                             March 31,
                                                    ----------------------------            -------------------------
                                                       2000              1999                  2000            1999
                                                    ----------        ----------            ---------       ---------
<S>                                                 <C>               <C>                   <C>             <C>
Total revenues                                      $  111,427        $  121,196            $  36,728       $  38,984
Income (loss) before income taxes ....              $    1,461        $   (4,859)           $    (381)      $  (6,537)
Net income (loss).....................              $      760        $   (5,823)           $    (210)      $  (6,687)
Diluted net income (loss) per share...              $     0.07        $    (0.69)           $   (0.02)      $   (0.77)

</TABLE>

4.       PROPERTY AND EQUIPMENT

         Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                                March 31,          June 30,
                                              Estimated Lives                      2000              1999
                                              ---------------                  -----------       -----------
     <S>                                      <C>                              <C>               <C>
     Land                                                                      $         -       $         -
     Buildings                                15 to 40 years                           106               733
     Leasehold improvements                    1 to 10 years                         1,479             1,296
     Equipment and vehicles                    3 to 5 years                          5,484             4,416
     Capitalized leasehold rights              3 to 5 years                            440               440
                                                                               -----------       -----------
                                                                                     7,509             6,885
     Accumulated depreciation and amortization....................                   4,728             4,367
                                                                               -----------       -----------
                                                                               $     2,781       $     2,518
                                                                               ===========       ===========

</TABLE>

5.       INTANGIBLE ASSETS

         Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                                                March 31,          June 30,
                                                                                   2000              1999
                                                                               -----------       -----------
     <S>                                                                       <C>               <C>
     Goodwill.....................................................             $    24,215       $    20,378
     Other........................................................                     570               570
                                                                               -----------       -----------
                                                                                    24,785            20,948
     Accumulated amortization.....................................                   5,051             4,094
                                                                               -----------       -----------
                                                                               $    19,734       $    16,854
                                                                               ===========       ===========

</TABLE>

6.       LONG-TERM DEBT

         Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                March 31,          June 30,
                                                                                   2000              1999
                                                                               -----------       -----------
     <S>                                                                       <C>               <C>
     Revolving line of credit.....................................             $    40,666       $    31,100
     Convertible notes payable to sellers.........................                   1,123             3,285
     Mortgage and equipment notes payable.........................                   2,652               292
     Capitalized lease obligations................................                     194               777
     Other........................................................                     474               244
                                                                               -----------       -----------
                                                                                    45,109            36,698
     Less current portion due within one year.....................                   1,383             1,364
                                                                               -----------       -----------
     Long-term debt...............................................             $    43,726       $    34,334
                                                                               ===========       ===========

</TABLE>

         In April 2000, our Credit Agreement with our banking group was
amended to increase the amount available for borrowing to $42.3 million. To
satisfy a lender condition to this amendment, the Company's Chairman and
controlling shareholder guaranteed $2.3 million of bank debt, and we agreed to
use our best


                                       10

<PAGE>

                             PRECEPT BUSINESS SERVICES, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     MARCH 31, 2000

efforts to sell our Transportation Division or our Business Products Division
with the proceeds to be applied to our bank debt. If we sell the
Transportation Division for more than $17.5 million by October 24, 2000, the
guaranty will be removed. If the Transportation Division is not sold by
October 24, 2000, the banking group has the option to request the Company's
Chairman to provide common stock of Affiliated Computer Services, Inc. as
collateral for the guaranty. If such a request is made, then the Chairman has
the right to request Precept to provide the requested collateral. Since all of
Precept's assets are pledged as collateral to the banking group and other
lenders, we would not be able to provide the collateral. In consideration of
the personal guaranty provided by our Chairman, Precept has agreed to
reimburse the Chairman for any amounts he may have to pay under the guaranty
and, if he is required by the bank to collateralize the guaranty, Precept has
agreed to deliver to him as a guaranty fee securities equal to what he would
have received if the guaranteed amount had been invested in preferred stock
and warrants on the same terms as the recent investment by the Shaar Fund
described elsewhere in this report or, at his election, consideration of
reasonably equivalent value.

         As part of the amendment to the Credit Agreement, the banking group
changed the total debt to pro forma EBTIDA (earnings before interest, income
taxes, depreciation and amortization) ratio to 3.53 to 1 for the measurement
period ended December 31, 1999. The mandatory redeemable convertible preferred
stock that was issued by the Company in April, July and September of calendar
year 1999 will be included in the total debt amount for the ratio.

         As of March 31, 2000, we did not comply with three of the financial
covenants in the Credit Agreement: specifically, the total debt to pro forma
EBITDA, the historical EBITDA to interest and the net worth financial
covenants. Our banking group has indicated in writing that they are willing
to amend or waive the applicable covenants as of March 31, 2000. As a result
of such written agreement, we have continued to present the outstanding debt
under the Credit Agreement as long-term debt.

7.       PREFERRED STOCK

         In April 2000, we sold $2.0 million in convertible preferred stock to
The Shaar Fund Ltd. and used the net proceeds to pay vendors. The preferred
stock is convertible into Class A Common Stock at a rate of $2.75 or 85% of
the market price of the Class A Common Stock, defined as the average of the
five days closing price of the stock prior to the conversion. No conversion is
permitted for the first five months. In addition, we may redeem the preferred
stock at 120% of the face value during the first five months. We will pay a
quarterly dividend of 8% of the face value in cash or Class A Common Stock. As
part of the transaction, we issued warrants to purchase 125,000 shares of
Class A Common Stock at an exercise price of $2.50 per share. We also provided
registration rights to The Shaar Fund Ltd. for the shares of Class A Common
Stock which may be issued upon conversion and for the dividends to be paid.

         In consideration of the personal guaranty provided by our Chairman,
we have agreed to reimburse the Chairman for any amounts he may have to pay
under the guaranty, and if he is required by the bank to collateralize the
guaranty, Precept has agreed to deliver to him as a guaranty fee securities
equal to what he would have received if the guaranteed amount had been
invested in preferred stock and warrants on the same terms as the investment
by the Shaar Fund described above or, at his election, consideration of
reasonably equivalent value.

8.       MANDATORY REDEEMABLE CONVERTIBLE PREFERRED STOCK

         As part of its acquisition of two businesses during the first quarter
of fiscal year 2000 and one acquisition during the third quarter of fiscal
year 1999, the Company issued 3,200 shares of mandatory redeemable preferred
stock in three series with an aggregate initial redemption value of
$3,260,000. The preferred stock pays dividends at annual rates ranging from
6.0% to 9.0% on a monthly and quarterly basis. The preferred stock includes a
mandatory redemption in the following annual amounts: $0.1 million for the
remainder of fiscal year 2000; $0.3 million in 2001; $0.3 million in 2002;
$1.8 million in 2003; and $0.1


                                       11

<PAGE>

                             PRECEPT BUSINESS SERVICES, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     MARCH 31, 2000


million in 2004. The preferred stock is generally convertible at the option of
the holder at a range of $8.00 to $30.00 for one share of Class A Common Stock.

         Dividends on the mandatory redeemable preferred stock of $0.1 million
for fiscal year 2000 are not reflected on the face of the condensed
consolidated statement of operations as the amount was not considered
significant to the net loss for the three- and nine-month periods ended March
31, 2000.

9.       DISCONTINUED OPERATIONS

         The net assets for the discontinued operations of the Transportation
Division as of March 31, 2000 and June 30, 1999 are shown below:

<TABLE>
<CAPTION>
                                                                                March 31,          June 30,
                                                                                   2000              1999
                                                                               -----------       -----------
     <S>                                                                       <C>               <C>
     Trade accounts receivable, net...............................             $     2,674       $     2,720
     Other current assets.........................................                   1,686             1,260
                                                                               -----------       -----------
     Total current assets.........................................                   4,360             3,980
     Property and equipment, net..................................                   7,945             8,491
     Intangible and other assets, primarily goodwill, net.........                  31,054            26,801
                                                                               -----------       -----------
     Total assets.................................................                  43,359            39,272
     Accounts payable, accrued expenses and
         other current liabilities................................                  (1,261)           (3,562)
     Current portion of long-term debt............................                  (2,521)           (2,554)
                                                                               -----------       -----------
     Total current liabilities....................................                  (3,782)           (6,116)
     Long-term debt...............................................                  (2,378)           (2,610)
     Loss on sale of discontinued operations......................                 (16,500)             -
                                                                               -----------       -----------
     Net assets of discontinued operations........................             $    20,699       $    30,546
                                                                               ===========       ===========
</TABLE>

         The condensed results of operations for the discontinued operations of
the Transportation Division are shown below for the three-month and the nine
month periods ended March 31, 2000 and 1999.

<TABLE>
<CAPTION>

                                                  Three months ended                   Nine months ended
                                                       March 31,                           March 31,
                                             ----------------------------        ---------------------------
                                                2000              1999             2000               1999
                                             ----------        ----------        ---------         ---------
<S>                                          <C>               <C>               <C>               <C>
Revenue.............................         $    7,502        $    7,115        $  23,609         $  17,992
Cost of goods sold..................              4,997             4,059           14,682            10,474
Other operating expenses............              1,821             8,639            4,335            10,374
Depreciation and amortization.......                811               570            2,377             1,441
Interest expense....................                932               463            1,222               709
Income (loss) before income tax
         provision (benefit)........             (1,059)           (6,616)             993            (5,006)
Net income (loss)...................               (588)           (6,886)             546            (6,000)

</TABLE>

         The results of operations for the discontinued operations include an
allocation of interest expense on the Company's debt outstanding under the
Credit Agreement. The allocation is based on the amount of debt used by the
Transportation Division for acquisitions, capital expenditures and working
capital, offset by the cash flow generated from its operations.

         During the second quarter of fiscal year 1999, we acquired one
corporate transportation services company located in North Arlington, New
Jersey, which provides executive limousine and town car service to the
tri-state New York metropolitan area and had annual revenues of $14.0 million.
We accounted for this acquisition using the purchase method of accounting. We
allocated the aggregate acquisition cost to the net assets acquired based on
the fair market value of such net assets. We have included the operating
results of this company in our historical results of operations for all
periods following the acquisition. The


                                       12

<PAGE>

                             PRECEPT BUSINESS SERVICES, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     MARCH 31, 2000


aggregate acquisition cost for this purchased business amounted to $9.0
million and consisted of $3.4 million in cash, funded by working capital and
the Company's revolving line of credit, 0.3 million shares of Class A common
stock with an aggregate fair market value of $2.9 million, and $4.4 million in
assumed debt and transaction costs.

10.      WEIGHTED AVERAGE SHARES OUTSTANDING

         The following table provides information to reconcile the basic and
diluted weighted average shares outstanding for the three-month and nine-month
periods ended March 31, 2000 and 1999.

<TABLE>
<CAPTION>

                                                                   Three months ended                  Nine months ended
                                                                        March 31,                           March 31,
                                                              ----------------------------        ---------------------------
                                                                 2000              1999             2000               1999
                                                              ----------        ----------        ---------         ---------
<S>                                                           <C>               <C>               <C>               <C>
Basic weighted average shares outstanding:
   Common shares, Class A and Class B, outstanding
         at the beginning of the period..............              9,944             8,459            9,320             7,394
   Common shares repurchased.........................                  -               (79)               -               (79)
   Common shares issued upon exercise of options.....                  -                45                -                45
   Common shares issued upon conversion of note
         receivable..................................                 15                47               15                47
   Common shares used to acquire businesses during
         the period..................................                233               251              857             1,066
                                                              ----------        ----------        ---------         ---------
   Common shares, Class A and Class B, outstanding
         at the end of the period....................             10,192             8,723           10,192             8,473
                                                              ==========        ==========        =========         =========
   Weighted average number of common shares
         outstanding during the period based on the
         number of days outstanding (A)..............             10,153             8,512            9,859             8,208
                                                              ==========        ==========        =========         =========

Diluted weighted average shares outstanding:
   Common stock options:
      Number of outstanding options..................                                                 1,331
      Number of options which would be exercised
         based on average market value of common
         stock during the period.....................                                                   853
      Proceeds from exercise of options..............                                             $   3,119
      Common shares repurchased with proceeds........                                                   803
      Common shares issued from exercise of options,
         net (B).....................................                                                    50
                                                                                                  =========
      Warrants to purchase common stock:
      Number of warrants outstanding.................                                                    43
      Number of warrants which would be exercised
         based on average market value of common
         stock during the period.....................                                                     -
      Net proceeds from exercise of warrants.........                                             $       -
      Common shares repurchased with proceeds........                                                     -
      Common shares issued from exercise of warrants
         (C).........................................                                                     -
                                                                                                  =========
   Convertible notes payable:
      Face value of notes which would be converted
         based on average market value of common
         stock during the period.....................                                             $   1,614
      Interest expense savings, net of tax effect,
         on notes which would be converted...........                                             $      85
      Common shares issued upon conversion (D).......                                                   416
                                                                                                  =========
   Diluted weighted average common shares
         outstanding  (A + B + C + D)................             10,153             8,512           10,325             8,208
                                                              ==========        ==========        =========         =========

</TABLE>


                                       13
<PAGE>

ITEM 2     -      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
HISTORICAL RESULTS OR ANTICIPATED RESULTS.

OVERVIEW

         Precept is an independent distributor of custom and stock business
products and is a provider of document management services ("Business
Products Division") to businesses in a variety of industries throughout the
United States. We were one of the first distribution companies to begin
nationwide consolidation of operating companies in the Business Products
industry.

         We also operate corporate transportation services ("Transportation
Services Division") companies in the United States. As discussed more fully
below under "Discontinued Operations" we have signed a letter of intent to
sell the operating assets and liabilities of the Transportation Services
Division. Unless otherwise indicated, discussion of the operating results of
the Company relates only to continuing operations.

STRATEGIC ALTERNATIVES REVIEW

         In July 1999, the Company announced its engagement of Southwest
Securities as financial advisor to the Company as it evaluated its strategic
alternatives. Southwest Securities and Precept have worked together on the sale
of the Transportation Division discussed elsewhere in this Report. Currently,
the Company has directed Southwest Securities to continue to investigate future
sources of equity and debt financing, as well as acquisition and disposition
transactions.

ACQUISITIONS

         Our results of operations and the comparability of our results of
operations from period to period have been affected significantly by
businesses acquired in each period. From 1991 through the date of this
report, we completed 21 acquisitions of Business Products distribution
companies.

         In the three-month period ended September 30, 1999, we completed the
acquisition of two Business Products companies located in North Carolina with
aggregate annual revenues of $10.2 million. We paid for such acquisitions
with $1.0 million in cash, financed by the Company's working capital and its
revolving line of credit, $3.0 million in mandatory redeemable convertible
preferred stock and $1.0 million in assumed debt and deal costs.

         In the three-month period ended September 30, 1998, we completed the
acquisition of four Business Products companies located in Salt Lake City, Utah;
Houston, Texas; Bangor, Maine; and Florence, South Carolina with combined annual
revenues of $34.3 million. We paid for such acquisitions with an aggregate of
$5.7 million in cash, financed by the Company's working capital and revolving
line of credit, $1.4 million in seller notes, 0.7 million shares of Class A
common stock with a fair market value of $9.6 million and $1.9 million in
assumed debt and deal costs.

         PURCHASE ACCOUNTING EFFECTS

         We have accounted for our acquisitions using the purchase accounting
method. We have included the historical results of operations for our
acquisitions in our results of operations from the dates of acquisition. The
acquisitions have affected, and will prospectively affect, the Company's
results of operations in certain significant respects. Our revenues and
operating expenses have been directly affected


                                      14
<PAGE>


by the timing of the acquisitions. We have allocated the aggregate
acquisition costs, including assumption of debt, to the net assets acquired
based on the fair market value of such net assets. The allocation of the
purchase price results in an increase in the historical book value of certain
assets, including property and equipment, and will generally result in the
allocation of a portion of the purchase price to goodwill, which results in
incremental annual and quarterly amortization expense.

RESULTS OF CONTINUING OPERATIONS

         The following table sets forth various items from continuing operations
as a percentage of revenues for the three-month and nine-month periods ended
March 31, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                          Three months ended     Nine months ended
                                                                               March 31,             March 31,
                                                                           2000        1999       2000       1999
                                                                          ------      ------     ------     ------
<S>                                                                       <C>         <C>        <C>        <C>
Revenue:                                                                  100.0%      100.0%     100.0%     100.0%
                                                                          ------      ------     ------     ------
Costs and operating expenses:
     Cost of goods sold...........................................         67.6%       66.7%      67.1%      67.4%
     Sales commissions............................................         14.1%       13.9%      13.8%      13.5%
     Selling, general and administrative..........................         16.2%       17.2%      14.8%      15.9%
     Goodwill write-down and other non-recurring charges..........          0.0%       19.3%       0.0%       6.5%
     Depreciation and amortization................................          1.6%        1.0%       1.5%       1.0%
                                                                           ------     ------     ------      ------
                                                                           99.5%      118.1%      97.2%     104.3%
                                                                           ------     ------     ------      ------
Operating income (loss)...........................................          0.5%      (18.1)%      2.8%      (4.3)%
Interest and other expense........................................          1.5%        0.6%       2.2%       1.1%
                                                                           ------     ------     ------      ------
Income (loss) from continuing operations before income taxes......         (1.0)%     (18.7)%      0.6%      (5.4)%
Income tax provision (benefit)....................................         (0.4)%      (8.7)%      0.3%      (2.5)%
                                                                           ------     ------     ------      ------
Net income (loss) from continuing operations......................         (0.6)%     (10.0)%      0.3%      (2.9)%
                                                                           ======     ======     ======      ======
</TABLE>


THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999

         REVENUE for 2000 increased by $1.6 million, or 4.7%, from $35.1
million in 1999 to $36.7 million in 2000. Our revenue increased by $2.9
million due to the effect of two companies acquired during the first quarter
of fiscal year 2000. The Business Products internal growth rate of 4.4%, or
$1.4 million, excludes the effect of $2.7 million of lost revenue from MBF
Corporation ("MBF"). On February 16, 1999 substantially all of the
management, sales force and employees of MBF resigned to join a competitor
that had been founded by the same individuals. We are in litigation with the
competitor and former MBF officers over this matter.

         COST OF GOODS SOLD during 2000 increased by $1.4 million, or 6.1%,
from $23.4 million to $24.8 million. The dollar change was due to the effects
of the companies acquired ($2.0 million) and internal growth of the Company
($1.2 million), offset by lower cost of goods related to the lower MBF
revenue ($1.8 million). As a percentage of revenue, cost of goods sold
increased from 66.7% in 1999 to 67.6% in 2000. Changes in the mix of products
sold, changes in the geographic markets served and vendor pricing all
contributed to this change. As a percentage of revenue, the effect of cost of
goods sold from companies acquired was offset by the effect of the cost of
goods sold from the lost MBF revenue.

         SALES COMMISSIONS for 2000 increased by $0.3 million, or 6.4%, from
$4.9 million, or 13.9% of revenue in 1999, to $5.2 million, or 14.1% of
revenue in 2000. The increase in both the dollar amount and percentage of
revenue for sales commissions was due to a greater proportion of the sales
revenue being generated by salespersons with higher commission rates. The
higher level of gross profit also contributed to the increase in sales
commissions as our sales force is compensated on a percentage of gross
profit.

                                      15
<PAGE>

Increases in commission expense from the companies acquired were offset by
lower commission expense as a result of the lost MBF revenue.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSE for 2000 decreased by
$0.1 million, or 2.2%, from $6.1 million in 1999 to $5.9 million in 2000. As
a percentage of revenue, such expense decreased from 17.2% in 1999 to 16.2%
in 2000. The Company reduced its selling, general and administrative expense
from existing operations due to integration and cost control efforts.
Increased selling, general and administrative expenses of $0.5 million from
companies acquired were offset by $0.5 million of expenses from MBF that did
not recur.

         DEPRECIATION AND AMORTIZATION EXPENSE increased $0.2 million in 2000
from $0.4 million in 1999 to $0.6 million in 2000 due largely to the size and
timing of the acquisitions completed since October 1, 1998.

         INTEREST EXPENSE increased $0.4 million, or 174.6%, from $0.2
million in 1999 to $0.6 million in 2000 due to the additional debt used to
finance acquisitions and fund the working capital needs of the Company.

         NET LOSS was reduced by $3.3 million in 2000 due primarily to the
non-recurrence of $6.7 million in goodwill write-down and non-recurring
charges recorded during the third quarter of 1999. The loss per basic share
was lowered from $0.41 in 1999 to $0.02 in 2000 for the same reasons.

NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO NINE MONTHS ENDED MARCH 31, 1999

         REVENUE for 2000 increased by $2.9 million, or 2.8%, from $103.9
million in 1999 to $106.8 million in 2000. During the first nine months of
fiscal year 2000, Business Products revenue increased from internal growth by
$9.7 million or 10.7%. In addition, revenue increased by $5.7 million due to
the effect of two companies acquired during the first quarter of fiscal year
2000 and two companies acquired during the first quarter of fiscal year 1999.
The internal growth rate excludes the effect of $12.5 million of lost revenue
from MBF.

         COST OF GOODS SOLD for 2000 increased by $1.7 million, or 2.4%, from
$70.0 million in 1999 to $71.7 million in 1999. In dollar amounts, such
change was due to the effects of the companies acquired ($3.8 million) and
the internal growth of the Company ($6.3 million) offset the effect of the
lower cost of goods sold from the lost MBF revenue ($8.4 million). As a
percentage of revenue, cost of goods sold improved from 67.4% in 1999 to
67.1% in 2000 due primarily to the effects of changes in product mix,
geographic markets served and vendor pricing. As a percent of revenue, the
effect of cost of goods sold from companies acquired was offset by the effect
of the lower cost of goods sold from the lost MBF revenue.

         SALES COMMISSIONS for 1999 increased by $0.7 million, or 5.0%, from
$14.0 million, or 13.5% of revenue in 1999, to $14.7 million, or 13.8% of
revenue in 2000. The change in the percentage of revenue is due primarily to
the higher dollar amount of commissions paid to existing salespersons due to
improved gross profit levels. The increase in the dollar amount is due to
internal growth ($1.8 million), and to companies acquired ($0.6 million),
offset by lower commissions due to the lost MBF revenue ($1.7 million).

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSE decreased by $0.7
million, or 4.3%, in 2000 from $16.6 million in 1999 to $15.8 million in
2000. The Company increased its selling, general and administrative expense
from existing operations by $0.3 million to support the revenue growth.
Increased selling, general and administrative expenses of $1.0 million from
companies acquired were offset by $2.0 million of expenses from MBF that did
not recur. As a percentage of revenue, selling, general and administrative
expenses have decreased from 15.9% in 1999 to 14.8% in 2000. The percentage
decrease reflects the results of the Company's continued revenue growth while
controlling costs and continuing its integration efforts.

                                      16
<PAGE>

         DEPRECIATION AND AMORTIZATION EXPENSE increased $0.6 million in 2000
from $1.0 million in 1999 to $1.6 million in 2000 due largely to acquisitions
completed since July 1, 1998.

         INTEREST EXPENSE increased by $1.2 million or 102.3% during 2000,
from $1.1 million in 1999 to $2.3 million in 2000 principally due to
additional debt incurred by us in fiscal years 1999 and 2000 to finance our
business acquisitions and our investment in working capital.

         NET INCOME increased by $3.4 million, or 111.3% in 2000, from a net
loss of $3.1 million in 1999 to net income of $0.3 million in 2000, as the
goodwill write-down and non recurring charges did not recur. The improvement
in the net income per share is due primarily to the same reason.

DISCONTINUED OPERATIONS

         The discontinued operations consist of the Transportation Division.

         During March 2000, we signed a revised letter of intent to sell
substantially all the assets and liabilities of the Transportation Division to a
company funded by a group of investors, led by Holding Capital Group and certain
members of the Transportation Division's executive management. The sale of the
Transportation Division, which is subject to a number of conditions including
the execution of a definitive purchase agreement, is expected be completed by
the end of September 2000. The revised letter of intent contemplates the
Transportation Division is to be sold for five times the annual pro forma free
cash flow of the division and for an earnout based on future earnings of the new
company. Free cash flow would be defined as the earnings before interest, income
taxes, depreciation and amortization less the annual debt service for the
division. Under the foregoing, the purchase price for the Transportation
Division would be approximately $20.0 million. In addition, the new company
would assume the debt of the Transportation Division.

         Revenue for the three months ended March 31, 2000 increased by $0.4
million, or 5.4%, to $7.5 million in 2000 as compared to $7.1 million in 1999.
Companies acquired since September 30, 1998 accounted for $2.0 million of the
revenue increase. Revenue from existing operations declined by $1.6 million due
principally to the loss of a bus service contract with Ford which was not
renewed after June 30, 1999 ($0.6 million) and to lower ride volume and lower
ride rates for the town car and limousine operations in the tri-state New York
market ($1.0 million). Revenue for the nine months ended March 31, 2000
increased by $5.6 million, or 31.2%, to $23.6 million in 2000 as compared to
$18.0 million in 1999. Companies acquired since September 30, 1998 accounted for
$9.7 million of the revenue change. Revenue from existing operations declined by
$2.4 million due principally to the loss of a bus service contract with Ford
which was not renewed after June 30, 1999 ($1.7 million) and to lower ride
volume and lower ride rates for the town car and limousine operations in the
tri-state New York market.

         Cost of goods sold for the Transportation Division for the three months
ended March 31, 2000 increased by $0.9 million, or 23.1%, from $4.1 million in
1999 to $5.0 million in 2000, primarily as a result of companies acquired since
September 30, 1998. Cost of goods sold for the Transportation Division for the
nine months ended March 31, 2000 increased by $4.2 million, or 40.2%, from $10.5
million in 1999 to $14.7 million in 2000. Companies acquired since September 30,
1998 accounted for $5.4 million of this change. Cost of goods sold from existing
operations decreased by $1.2 million due primarily to the loss of the Ford bus
contract at the end of June 1999 ($0.4 million), to lower ride volume at the
town car and limousine operations in the tri-state New York markets ($1.1
million) offset by increases in ride volume from the Transportation Division's
bus operations in Kentucky and Ohio and town car and limousine operations in
Texas.

         Selling, general and administrative expenses for the three months ended
March 31, 2000 increased by $0.8 million, or 78.4%, from $1.0 million in 1999 to
$1.8 million in 2000. Selling, general and administrative expenses for the nine
months ended March 31, 2000 increased by $1.5 million, or 14.9%, from $2.7
million in 1999 to $4.2 million in 2000. The increases in selling, general and
administrative expenses are primarily related to the acquisitions completed
since September 30, 1998.

                                      17
<PAGE>

         Depreciation and amortization expense for the three months ended March
31, 2000 increased by $0.2 million, or 33.3%, from $0.6 million in 1999 to $0.8
million in 2000. Depreciation and amortization expense for the nine months ended
March 31, 2000 increased by $1.0 million, or 71.4%, from $1.4 million in 1999 to
$2.4 million in 2000.

         Interest expense for the three months ended March 31, 2000 increased by
$0.4 million, or 83.0%, from $0.5 million in 1999 to $0.9 million in 2000.
Interest expense for the nine months ended March 31, 2000 increased by $0.5
million, or 72.4%, from $0.7 million in 1999 to $1.2 million in 2000. The
increase in interest expense is primarily due to the additional debt incurred to
finance acquisitions after September 30, 1999. Interest expense for the
Transportation Division includes an allocation of interest expense on the
outstanding debt under the Company's Credit Agreement.

         The net loss for the Transportation Division decreased by $6.3 million
for the three months ended March 31, 2000 from $6.9 million in 1999 to $0.6
million in 2000. Excluding the goodwill and asset write-downs of $7.6 million
recorded in the third quarter of 1999, the division's operating results declined
by $1.7 million during the third quarter of 2000. This deterioration is
primarily due to three reasons. The division's town car and limousine operations
in the tri-state New York market have not performed as well in 2000 due to price
competition and higher fuel costs. Secondly, the division did not benefit from
the Ford contract during 2000. Lastly, during the third quarter of 2000, the
division recorded $0.6 million in adjustments to revenue and operating expenses
for its town car and limousine operation based in N. Arlington, New Jersey. Such
adjustments relate to matters which became evident after the middle of the third
quarter of fiscal year 2000 and after a change in management at the operation.

         Net income for the nine months ended March 31, 2000 improved by $6.5
million, from a loss of $6.0 million in 1999 to net income of $0.5 million in
2000. Excluding the goodwill and asset write-downs of $7.6 million recorded
in the third quarter of 1999, the division's operating results declined by
$1.6 million during 2000. This deterioration is primarily due to two reasons.
The division's town car and limousine operations in the tri-state New York
market have not performed as well in 2000 due to price competition and higher
fuel costs. Secondly, the division did not benefit from the Ford contract
during 2000.

LIQUIDITY AND CAPITAL RESOURCES - CONTINUING OPERATIONS

         DEBT AND EQUITY FINANCING. Since October 1999, the Company has been at
or near its borrowing limit under its Credit Agreement. The Company's cash flow
from its operations, both continuing and discontinued, has been sufficient to
service the Company's debt and mandatory redeemable preferred stock and finance
its capital expenditures; however, the cash flow from its operations has not
been sufficient to lower the accounts payable financing provided by the
Company's vendors.

         Prior to October 1999, the Company's policy was to take advantage of
prompt payment discounts offered by the Company's vendors and pay vendors who
did not offer discounts within 30 to 45 days. Since October 1999, the Company
has, for the most part, not been able to take advantage of prompt pay discounts
and has been paying its vendors within 50 to 65 days. We estimate that on an
annual basis, we have lost approximately $1.5 million to $2.0 million in prompt
pay discounts due to a lack of adequate working capital, debt and equity
financing to support the operating needs of our operations. During the month of
April, we experienced a reduction in the monthly collections of accounts
receivable of approximately $2.0 million. We have recently added collections
personnel to improve the timeliness of the collection of accounts receivable
from our customers. If we are able to improve the collection of accounts
receivable, then we will be able to reduce the level of vendor financing which
is provided by accounts payable. Should the timeliness of the collections not
improve, we will not be able to reduce the level of vendor financing unless we
are able to raise additional cash through equity or debt financing transactions.

         Management of the Company believes that our current level of debt
financing and our expected cash flows from operations will be sufficient during
the next twelve to twenty four months to service our debt, meet capital
expenditure requirements and maintain adequate employee and vendor relations.
However, if we are not able to obtain additional equity or debt financing and we
are not able to improve the

                                      18
<PAGE>

timeliness of the collection of our trade accounts receivable, our relations
with our vendors could suffer somewhat and this could lead to reduced revenue
and operating income in the next twelve to twenty four months.

         In April 2000, we sold $2.0 million in convertible preferred stock to
The Shaar Fund Ltd. and used the net proceeds to pay vendors. The preferred
stock is convertible into Class A Common Stock at a rate of $4.00 or 85% of the
market price of the Class A Common Stock, defined as the average of the five
days closing price of the stock prior to the conversion. No conversion is
permitted for the first five months. In addition, we may redeem the preferred
stock at 120% of the face value during the first five months. We will pay a
quarterly dividend of 8% of the face value in cash or Class A Common Stock. As
part of the transaction, we issued warrants to purchase 125,000 shares of Class
A Common Stock at an exercise price of $2.50 per share. We also provided
registration rights to The Shaar Fund Ltd. for the shares of Class A Common
Stock which may be issued upon conversion and for the dividends to be paid.

         In April 2000, our Credit Agreement with our banking group was amended
to increase the amount available for borrowing to $42.3 million. To satisfy a
lender condition to this amendment, the Company's Chairman and controlling
shareholder guaranteed $2.3 million of bank debt, and we agreed to use our best
efforts to sell our Transportation Division or our Business Products Division
with the proceeds to be applied to our bank debt. If we sell the Transportation
Division for more than $17.5 million by October 24, 2000, the guaranty will be
removed. If the Transportation Division is not sold by October 24, 2000, the
banking group has the option to request the Company's Chairman to provide common
stock of Affiliated Computer Services, Inc. as collateral for the guaranty. If
such a request is made, then the Chairman has the right to request Precept to
provide the requested collateral. Since all of Precept's assets are pledged as
collateral to the banking group and other lenders, we would not be able to
provide the collateral. In consideration of the personal guaranty provided by
our Chairman, Precept has agreed to reimburse the Chairman for any amounts he
may have to pay under the guaranty and, if he is required by the bank to
collateralize the guaranty, Precept has agreed to deliver to him as a guaranty
fee securities equal to what he would have received if the guaranteed amount had
been invested in preferred Stock and warrants on the same terms as the recent
investment by the Shaar Fund described elsewhere in this report or, at his
election, consideration of reasonably equivalent value.

         As part of the amendment to the Credit Agreement, the banking group
changed the total debt to pro forma EBTIDA (earnings before interest, income
taxes, depreciation and amortization) ratio to 3.53 to 1. The mandatory
redeemable convertible preferred stock that was issued by the Company in April,
July and September of calendar year 1999 is included in the total debt amount
for the ratio.

         As of March 31, 2000, we did not comply with three of the financial
covenants in the Credit Agreement: specifically, the total debt to pro forma
EBITDA, the historical EBITDA to interest and the net worth financial
covenants. Our banking group has indicated in writing that they are willing
to amend or waive the applicable covenants as of March 31, 2000. As a result
of such written agreement, we have continued to present the outstanding debt
under the Credit Agreement as long-term debt.

         NET CASH FLOWS FROM OPERATING ACTIVITIES. In the first nine months of
fiscal year 2000, the Company generated $5.4 million of cash for operating
needs. During this period, the Company's net income, adjusted for non-cash
charges of $1.6 million, amounted to $2.0 million. We used an increase in
accounts payable vendor financing of $5.6 million to fund an increase in
inventory of $1.9 million and an increase in trade accounts receivable of $1.2
million. Overall, we reduced our investment in working capital by $3.4 million
during the nine months ended March 31, 2000. During the nine months ended March
31, 1999, we generated $9.1 million in cash from operations. Despite incurring a
loss of $2.0 million, excluding non-cash charges such as depreciation,
amortization and goodwill write-down, the Company significantly lowered its
investment in working capital during this period. We reduced the level of trade
accounts receivable by $1.5 million and lowered our carrying level of inventory
by $0.9 million. During the same period, we increased the level of vendor
financing in accounts payable and accrued expenses by $8.2 million.

                                      19
<PAGE>

         NET CASH FLOWS FROM INVESTING ACTIVITIES. During the first nine months
of fiscal year 2000, Precept used $5.9 million in cash for investing activities
as compared to a use of $8.1 million for investing activities in the first nine
months of fiscal year 1999. During 2000, the Company acquired two Business
Products distribution companies. During the first nine months of 1999, the
Company acquired four Business Products distribution businesses for a total of
$8.9 million, acquired $0.3 million of equipment and received $1.1 million in
proceeds from the sale of land, building and an investment in a restaurant
company.

         NET CASH FLOWS FROM FINANCING ACTIVITIES. In the first nine months of
fiscal year 2000, $7.6 million of cash was generated by financing activities as
compared to $7.5 million of cash generated by financing activities in the first
nine months of fiscal year 1999. During the first nine months of 2000, Precept
increased its outstanding revolving line of credit balance by approximately $9.6
million, primarily to finance acquisitions, service existing debt ($1.1
million), redeem preferred stock and pay preferred dividends ($0.8 million) and
provide cash to fund operating cash flow needs of the Transportation Division.
During the first nine months of 1999, the Company decreased its long-term debt
and capital lease obligations by $1.0 million and increased its outstanding
revolving line of credit balance by $8.5 million to fund acquisitions.

         NET CASH FLOWS FROM DISCONTINUED OPERATIONS. For the nine months ended
March 31, 2000, the Transportation Division used $0.1 million of cash to fund
its operating activities. Excluding non cash charges of $2.4 million during this
period for depreciation and amortization, $2.9 million was generated by
operating activities, before changes in working capital. This was used primarily
to reduce accounts payable and accrued expenses ($3.0 million).

         For the nine months ended March 31, 1999, the Transportation Division
used $2.2 million of cash to fund its operating activities. Excluding non cash
charges of $8.7 million during this period for depreciation, amortization and
goodwill write-down, $2.7 million was generated by operating activities, before
changes in working capital. During the same period, the Transportation Division
financed an increase in trade accounts receivable ($2.4 million) primarily from
its town car and limousine operations. In addition, the Transportation Division
reduced its accounts payable by $1.0 million and its accrued expenses by $1.4
million as it paid for liabilities assumed as part of its acquisitions. During
the nine months ended March 31, 1999, the Transportation repaid $1.0 million in
other debt, primarily vehicle notes and capitalized leases. The Transportation
Division's net use of $10.3 million in cash was funded by the continuing
operations of the Company and by advances under the Company's Credit Agreement.

OTHER

         INFLATION

         Certain of Precept's Business Products offerings, particularly paper
products, have been and are expected to continue to be subject to significant
price fluctuations due to inflationary and other market conditions. In the last
five to ten years, prices for commodity grades of paper have shown considerable
volatility. Precept generally is able to pass such increased costs on to its
customers through price increases, although it may not be able to adjust its
prices immediately. Significant increases in paper and other costs in the future
could materially affect Precept's profitability if these costs cannot be passed
on to customers. In addition, Precept Transportation Division's operating
results may be affected by increases in the prices of fuel if the division is
not able to pass along such increases to its customers on a timely basis. In
general, Precept does not believe that inflation has had a material effect on
its results of operations in recent years. However, there can be no assurance
that Precept's business will not be affected by inflation, the price of paper
and the price of fuel in the future.

         IMPACT OF YEAR 2000

         In prior years, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of these planning and
implementation efforts, the Company experienced no significant disruptions in
mission

                                      20
<PAGE>

critical information technology and non-information technology systems and
believes those systems successfully responded to the Year 2000 date change.
The Company is not aware of any material problems resulting from Year 2000
issues, either with its services and products, its internal systems, or the
products and services of third parties. The Company will continue to monitor
its mission critical computer applications and those of its suppliers and
vendors throughout the Year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.

         FINANCIAL ACCOUNTING STANDARDS

         The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES, that is effective for reporting periods beginning after
June 15, 2000. Precept is required to adopt this standard for its fiscal year
ending June 30, 2001. The Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, REVENUE RECOGNITION, that is required to be adopted
beginning with the quarterly reporting period ending June 30, 2000. Management
is in the process of evaluating the effects, if any, of adopting these two new
pronouncements.

FORWARD-LOOKING STATEMENTS

         The Company is including the following cautionary statement in this
Form 10-Q to make applicable and take advantage of the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995 for any
forward-looking statements made by, or on behalf of, the Company. This
section should be read in conjunction with the "Risk Factors Affecting the
Company's Prospects" located in Item I of the Company's annual report on Form
10-K for the year ended June 30, 1999 and in the "Risk Factors" included in
the Company's Prospectus dated November 12, 1999. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements which
are other than statements of historical facts. From time to time, the Company
may publish or otherwise make available forward-looking statements of this
nature. All such subsequent forward-looking statements, whether written or
oral and whether made by or on behalf of the Company, are also expressly
qualified by these cautionary statements. Certain statements contained herein
are forward-looking statements and accordingly involve risks and
uncertainties that could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements. The
forward-looking statements contained herein are based on various assumptions,
many of which are based, in turn, upon further assumptions. The Company's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectations,
beliefs or projections will result or be achieved or accomplished. In
addition to the other factors and matters discussed elsewhere herein, the
following are important factors that, in the view of the Company, could cause
actual results to differ materially from those discussed in the
forward-looking statements.

     1.  Changes in economic conditions, in particular those that affect the end
         users of business products and transportation services, primarily
         corporations.
     2.  Changes in the availability and/or price of paper, fuel and labor, in
         particular if increases in the costs of these resources are not passed
         along to the Company's customers.
     3.  Changes in executive and senior management or control of the Company.
     4.  Inability to obtain new customers or retain existing customers and
         contracts.
     5.  Significant changes in the composition of the Company's sales force.
     6.  Significant changes in competitive factors, including product-pricing
         conditions, affecting the company.
     7.  Governmental and regulatory actions and initiatives, including those
         affecting financing.
     8.  Significant changes from expectations in operating revenues and
         expenses.
     9.  Occurrences affecting the Company's ability to obtain funds from
         operations, debt, or equity to finance needed capital acquisitions and
         other investments, including the inability to formalize our oral
         agreement with our banking group discussed elsewhere in this report.
     10. Significant changes in rates of interest, inflation, or taxes.

                                      21
<PAGE>

     11. Significant changes in the Company's relationship with its employees
         and the potential adverse effects if labor disputes or grievances were
         to occur.
     12. Changes in accounting principles and/or the application of such
         principles to the Company.
     13. The ability of Precept to sell one or both of its divisions or raise
         additional capital.

         The foregoing factors could affect the Company's actual results and
could cause the Company's actual results during fiscal year 2000 and beyond to
be materially different from any anticipated results expressed in any
forward-looking statement made by or on behalf of the Company.

         The Company disclaims any obligation to update any forward-looking
statements to reflect events or other circumstances after the date of this
report on Form 10-Q.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE FOR MARKET RISK

         The Company's revolving line of credit provides for interest to be
charged at the prime rate or at a LIBOR rate plus a margin of 3.75%. Based on
the Company's current level of outstanding revolving line of credit, a 1.0%
increase in interest rate would result in a $0.5 million annual change in
interest expense. The remainder of the Company's debt is at fixed interest
rates that are not subject to changes in interest rates. The Company currently
has outstanding $1.6 million in notes payable and $2.0 million in preferred
stock, all of which may be converted to Class A Common Stock at the prevailing
market prices for the Company's Class A Common Stock. Based on a market price
of $2.00 for a share of Class A Common Stock, the current shareholders would
be diluted approximately 18%. Based on a hypothetical market price of $1.00
for a share of Class A Common Stock, the current shareholders would be diluted
approximately 35%. The Company does not own, nor is the Company obligated
under, other significant debt or equity securities that would be affected by
fluctuations in market risk. The Company does not hold or issue derivative
financial instruments for speculation or trading purposes.


PART II - OTHER INFORMATION


ITEM 1   LEGAL PROCEEDINGS

         There have been no significant changes to ongoing litigation matters
during the quarter ended March 31, 2000.

ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS

         As of March 31, 2000, there were no changes in securities and use of
proceeds. As disclosed more fully in Note 7 to the consolidated condensed
financial statements and in Part I Item 2, Precept Business Services, Inc.
sold $2.0 million of convertible preferred stock on April 19, 2000 to The
Shaar Fund Ltd. and used the net proceeds of $1.8 million to pay vendors.

                                     22

<PAGE>

ITEM 3   DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES

As of March 31, 2000 and subject to the oral agreement with our banking group
discussed under "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and capital resources
-continuing operations," the Company was not in default of any of its debt or
equity securities.

ITEM 4   RESULTS OF VOTES OF HOLDERS

         No matters were submitted to a vote of security holders during the
quarter ended March 31, 2000.

ITEM 6            EXHIBITS AND REPORTS ON FORM 8-K

ITEM 6(a)         EXHIBITS


<TABLE>
<CAPTION>

Exhibit No.       Description
-----------       -----------

<S>      <C>      <C>
3.1               Securities Purchase Agreement, dated as of April 19, 2000, by
                  and between Precept Business Services, Inc. and The Shaar
                  Fund Ltd. (1)

3.2               Common Stock Warrant for The Shaar Fund Ltd. to purchase
                  125,000 shares of Class A Common Stock. (1)

3.3               Registration Rights Agreement, dated as of April 19, 2000, by
                  and between Precept Business Services, Inc. and The Shaar
                  Fund Ltd. (1)

5.1               Letter agreement dated April 25, 2000 among Precept Business
                  Services, Inc. and Darwin Deason, Chairman (1)

5.2               Amendment and Waiver No. 3 dated as of April 27, 2000 to
                  Credit Agreement dated as of March 22, 1999 and related
                  Limited Guaranty by Darwin Deason. (1)

27.1              Financial Data Schedule (1)

(1)      Included as an exhibit to this report.

ITEM 6(b)         REPORTS ON FORM 8-K FILED DURING THE PERIOD FROM JANUARY 1,
                  2000 THROUGH MAY 17, 2000


</TABLE>


         The Company has not filed any reports on Form 8-K for the period from
January 1, 2000 through May 17, 2000.


                                    SIGNATURE

                  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, as of May 17, 2000.

PRECEPT BUSINESS SERVICES, INC.



/s/ William W. Solomon, Jr.
---------------------------
William W. Solomon, Jr.
Executive Vice President and Chief Financial Officer

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