<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                       
                                   FORM 10-Q
                                       
             (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                                       
               FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
                                       
                                      OR
                                       
           (  )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                                       
                 FOR THE TRANSITION PERIOD FROM _____ TO _____
                                       
                        Commission File No. 000-23735
                                       
                        PRECEPT BUSINESS SERVICES, INC.
              ---------------------------------------------------
            (Exact name of registrant as specified in its charter)
                                       
                   Texas                                75-2487353
      -------------------------------               ------------------
        (State of incorporation or                   (I.R.S. Employer
              organization)                         Identification No.)
 
            1909 Woodall Rodgers Frwy.           
                  Dallas, Texas                          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.      YES       NO   X
                                                         ---      ---

Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of the latest practicable date.

<TABLE>
Class                                   Outstanding as of March 25, 1998
----------------------------            --------------------------------
<S>                                     <C>
Common Stock,  Class "A"                           35,509,503
               Class "B"                           10,102,997
</TABLE>
<PAGE>

                        PRECEPT BUSINESS SERVICES, INC.
                                       
                                     INDEX
 

PART I - FINANCIAL INFORMATION                                         Page No.
                                                                       --------
ITEM 1 - FINANCIAL STATEMENTS
     Consolidated Balance Sheet..........................................  2
       December 31, 1997 (unaudited) and June 30, 1997 (audited)

     Consolidated Statement of Income....................................  4
       For the three months ended December 31, 1997 (unaudited) and
       December 31, 1996 (unaudited) and for the six months ended
       December 31, 1997 (unaudited) and December 31, 1996 (unaudited)

     Consolidated Statement of Cash Flows................................  6
       For the six months ended December 31, 1997 (unaudited) and
       December 31, 1996 (unaudited)

     Notes to Consolidated Financial Statements..........................  7

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................  9


PART II - OTHER INFORMATION

Exhibits and Reports on Form 8-K......................................... 15

Signatures............................................................... 16

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                                       
                        PRECEPT BUSINESS SERVICES, INC.
                          CONSOLIDATED BALANCE SHEETS
                                       
ASSETS

<TABLE>
                                                       DECEMBER 31,    June 30,
                                                           1997         1997
                                                      --------------------------
                                                       (Unaudited)    (Audited)
<S>                                                   <C>           <C>
Current assets:
  Cash and cash equivalents                           $ 1,475,075   $ 2,496,029
  Trade receivables, net of $145,000 and 
   $288,000 allowance for doubtful accounts, 
   respectively                                         9,936,150     9,229,452
  Accounts receivable from affiliates                     740,497       503,571
  Other receivables                                       651,616       456,942
  Inventory                                             3,897,419     2,569,498
  Other current assets                                    621,221       642,819
  Income taxes refundable                                 290,043       277,766
  Deferred income taxes                                 1,090,886     1,090,886
  Net assets of discontinued operations                 2,587,664     3,560,246
                                                      --------------------------
Total current assets                                   21,290,571    20,827,209



Property and equipment, net of accumulated 
 depreciation                                           2,651,948     1,857,793
Intangible assets, net of accumulated 
 amortization                                           6,899,459     4,790,608
Deferred income taxes                                     615,019       615,019
Other assets                                            1,647,102     1,200,379
                                                      --------------------------
Total assets                                          $33,104,099   $29,291,008
                                                      --------------------------
                                                      --------------------------
</TABLE>

      THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED 
                            FINANCIAL STATEMENTS
                                       
                                     2
<PAGE>
                        PRECEPT BUSINESS SERVICES, INC.
                    CONSOLIDATED BALANCE SHEETS, CONTINUED
                                       
LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
                                                       DECEMBER 31,    JUNE 30,
                                                          1997           1997
                                                      --------------------------
                                                       (Unaudited)    (Audited)
<S>                                                   <C>            <C>
Current liabilities:
  Current portion of long-term debt                   $    45,915    $    58,160
  Current portion of capital lease obligations            405,243        185,055
  Trade accounts payable                                6,540,768      4,735,411
  Sales taxes payable                                     559,026      1,181,047
  Accrued compensation                                    496,402      1,132,015
  Other accounts payable and accrued expenses           1,254,786      1,192,475
                                                      --------------------------
Total current liabilities                               9,302,140      8,484,163

Long-term debt                                          9,602,766      6,984,644
Capital lease obligations, less current portion           735,997        517,234

Shareholders' equity:
  Class A common stock, $.01 par value:
    Authorized shares - 100,000,000
    Issued shares - 25,897,003                            258,970        258,970
  Class B common stock, $.01 par value:
    Authorized shares -  10,500,000
    Issued and outstanding shares - 10,102,997            101,023        101,023
    Additional paid-in capital                         17,432,448     17,432,448
    Accumulated deficit                                (3,524,998)    (3,475,167)
                                                      --------------------------
                                                       14,267,443     14,317,274
  Class A treasury stock, at cost:
    Shares - 478,844                                     (191,271)      (191,271)
    Shareholder notes for stock purchases                (612,976)      (821,036)
                                                      --------------------------
Total shareholders' equity                             13,463,196     13,304,967
                                                      --------------------------
Total liabilities and shareholders' equity            $33,104,099    $29,291,008
                                                      --------------------------
                                                      --------------------------
</TABLE>

      THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED 
                             FINANCIAL STATEMENTS

                                       3
<PAGE>
                        PRECEPT BUSINESS SERVICES, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                       
<TABLE>
                                                           SIX MONTHS ENDED
                                                              DECEMBER 31,
                                                          1997           1996
                                                       -------------------------
                                                       (Unaudited)   (Unaudited)
<S>                                                    <C>           <C>
Revenues:
  Business products                                    $34,452,759    $37,234,972
  Transportation                                         3,426,633      3,253,092
                                                       --------------------------
                                                        37,879,392     40,488,064
Costs and expenses:
  Cost of goods sold                                    23,270,274     25,239,361
  Selling, general, and administrative                  13,337,253     13,665,339
  Depreciation and amortization                            661,690        636,151
                                                       --------------------------
                                                        37,269,217     39,540,851
                                                       --------------------------
Operating income                                           610,175        947,213

Interest expense                                           286,573        265,305
                                                       --------------------------
Income from continuing operations before
 income taxes                                              323,602        681,908
Income tax provision                                       129,125        272,763
                                                       --------------------------
Income from continuing operations                          194,477        409,145
                                                      
Discontinued operations:                              
  Discontinuation of Precept Holdings, Inc.:          
    Loss from discontinued operations, net of         
     applicable income taxes                              (244,308)      (280,299)
  Discontinuation of Precept Builders, Inc.:          
    Income from discontinued operations,              
     net of applicable income taxes                              -         74,653
                                                       --------------------------
Loss from discontinued operations                         (244,308)      (205,646)
                                                       --------------------------
Net income (loss)                                      $   (49,831)   $   203,499
                                                       --------------------------
                                                       --------------------------

Basic income per share data:
  Income from continuing operations                    $      0.01    $      0.01
  Loss from discontinued operations                          (0.01)         (0.01)
                                                       --------------------------
  Basic income (loss) per common share                 $     (0.00)   $      0.00
                                                       --------------------------
                                                       --------------------------
Weighted average common shares outstanding - 
 Basic                                                  36,000,000     36,000,000
                                                       --------------------------
                                                       --------------------------

Diluted income per share data:
  Income from continuing operations                    $      0.01    $      0.01
  Loss from discontinued operations                          (0.01)         (0.01)
                                                       --------------------------
  Diluted income (loss) per common share               $     (0.00)   $      0.00
                                                       --------------------------
                                                       --------------------------

Weighted average common shares outstanding - 
 Diluted                                                36,324,852     36,324,852
                                                       --------------------------
                                                       --------------------------
</TABLE>
                                       
       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED 
                             FINANCIAL STATEMENTS

                                       4
<PAGE>

                        PRECEPT BUSINESS SERVICES, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
                                                      THREE MONTHS ENDED
                                                         DECEMBER 31,
                                                      1997           1996
                                                  ---------------------------
                                                  (Unaudited)     (Unaudited)
<S>                                               <C>            <C>
Revenues:
  Forms                                           $17,155,828    $19,036,863
  Transportation                                    1,788,086      1,638,546
                                                  --------------------------
                                                   18,943,914     20,675,409
Costs and expenses:
  Cost of goods sold                               11,472,419     12,729,081
  Selling, general, and administrative              6,798,476      7,071,779
  Depreciation and amortization                       416,413        281,767
                                                  --------------------------
                                                   18,687,308     20,082,627
                                                  --------------------------
Operating income                                      256,606        592,782

Interest expense                                      161,214        142,735
                                                  --------------------------
Income from continuing operations before
 income taxes                                          95,392        450,047
Income tax provision                                   37,203        175,381
                                                  --------------------------
Income from continuing operations                      58,189        274,666

Discontinued operations:
  Discontinuation of Precept Holdings, Inc.:
    Loss from discontinued operations, net of 
     applicable income taxes                          (79,331)      (158,253)
  Discontinuation of Precept Builders, Inc.:
    Income from discontinued operations,
     net of applicable income taxes                         -       (133,079)
                                                  --------------------------
Loss from discontinued operations                     (79,331)      (291,332)
                                                  --------------------------
Net income                                        $   (21,142)   $   (16,666)
                                                  --------------------------
                                                  --------------------------

Basic income per share data:
  Income from continuing operations               $      0.00    $      0.01
  Loss from discontinued operations                     (0.00)         (0.01)
                                                  --------------------------
  Basic loss per common share                     $     (0.00)   $     (0.00)
                                                  --------------------------
                                                  --------------------------
Weighted average common shares outstanding - 
 Basic                                             36,000,000     36,000,000
                                                  --------------------------
                                                  --------------------------

Diluted income per share data:
  Income from continuing operations               $      0.00    $      0.01
  Loss from discontinued operations                     (0.00)         (0.01)
                                                  --------------------------
  Diluted loss per common share                   $     (0.00)   $     (0.00)
                                                  --------------------------
                                                  --------------------------
Weighted average common shares outstanding - 
 Diluted                                           36,324,852     36,324,852
                                                  --------------------------
                                                  --------------------------
</TABLE>
 
      THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED 
                            FINANCIAL STATEMENTS

                                      5
<PAGE>
                        PRECEPT BUSINESS SERVICES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
                                                          SIX MONTHS ENDED
                                                             DECEMBER 31
                                                          1997           1996
                                                     ---------------------------
                                                      (Unaudited)    (Unaudited)
<S>                                                  <C>            <C>
NET CASH USED IN OPERATING ACTIVITIES                $(1,619,398)   $(1,613,031)

INVESTING ACTIVITIES
Acquisitions, including earnout payments                (513,356)      (415,795)
Proceeds from sale of property and equipment           1,200,000              -
Acquisition of property and equipment, net              (563,738)      (175,303)
                                                     -----------    -----------
Net cash used in investing activities                   (122,906)      (591,098)

FINANCING ACTIVITIES
Payments on long-term debt                                     -       (476,200)
Principal payments on capitalized lease obligations      (49,462)       (41,322)
Borrowings on revolving line of credit                 3,731,747      1,493,104
Payments on revolving line of credit                  (3,206,747)    (1,263,822)
                                                     -----------    -----------
Net cash provided by (used) in financing activities      475,538       (288,240)
                                                     -----------    -----------
Net decrease in cash and cash equivalents             (1,020,954)    (2,492,369)
Cash and cash equivalents at beginning of period       2,496,029      3,879,458
                                                     -----------    -----------
Cash and cash equivalents at end of period           $ 1,475,075    $ 1,387,089
                                                     -----------    -----------
                                                     -----------    -----------
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

During the six months ended December 31, 1996, the Company entered into
 capitalized leases at a recorded value of $392,466.

During the six months ended December 31, 1997 the Company entered into
 capitalized leases at a recorded value of $488,413.

During the six months ended December 31, 1997, the Company issued $2,114,435 in
 notes payable for consideration in five acquisitions, which included $406,172
 in property and equipment.

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
                             FINANCIAL STATEMENTS

                                      6
<PAGE>

                        PRECEPT BUSINESS SERVICES, INC.
                                       
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                       
                                       
1.   MANAGEMENT'S REPRESENTATION

In the opinion of management, the accompanying unaudited financial statements
present fairly, in all material respects, the financial position of Precept
Business Services, Inc. ("Precept") and the results of its operations and its
cash flows for the six months ended December 31, 1997 and 1996, and,
accordingly, all adjustments (which include only normal recurring adjustments)
necessary to permit fair presentation have been made.  Certain information
and footnote disclosures normally required by financial accounting principles
have been condensed or omitted.  It is recommended that these statements be
read in conjunction with the consolidated financial statements and notes
thereto as of June 30, 1997 and for the three years then ended included in the
Company's Form S-4 filing, which became effective February 9, 1998.  The
results of operations for the period ended December 31, 1997 are not
necessarily indicative of the operating results for the full year.

2.   SELECTED SIGNIFICANT ACCOUNTING POLICIES

EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share.  Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities.  Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share.  All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to
the Statement 128 requirements.

3.   ACQUISITIONS

During the six months ended December 31, 1997, the Company completed 
acquisitions of certain assets of four business products distributors and one 
chauffeured vehicle service company, for a total of $2,695,435, comprised of 
$435,000 in cash, $2,114,435 in convertible notes payable and $146,000 in 
assumed debt, plus up to $670,000 of contingent consideration based on the 
subsequent operating results of the business over a five year period.  The 
acquisitions were accounted for using the purchase method of accounting with 
the majority of the purchase price attributable to customer contracts.

                                   7
<PAGE>

4.   DISCONTINUED OPERATIONS

In February, 1997, the Company decided to reduce its investment in Precept
Builders, Inc. ("Builders"), an indirect subsidiary of Precept that performed
construction activities. The Company owned 810 shares of Builders common stock,
making it an 81% shareholder of Builders. Effective March 31, 1997, the Company
obtained an additional 1,000 shares, increasing its ownership to 90.5%, in
exchange for a contribution of capital of approximately $2.3 million. As of
June 30, 1997, Builders expected to offer 100,000 shares of its common stock in
a private offering to the shareholders of the Company, diluting the Company's
ownership percentage to 1.8%. Consequently, in accordance with Accounting
Principles Board Opinion No. 30, Reporting the Results of Operations--
Discontinued Events and Extraordinary Items, the Company recorded the net
assets of Builders at the estimated expected value remaining at the disposal
date, which was zero. On December 2, 1997, the private offering was
consummated.

During February 1997, the Company also decided to sell nearly all of the assets
of Precept Holdings, Inc. ("Holdings"), which owns and operates certain other
real estate-related investments.  The assets to be sold include two
condominiums, a ranch, a restaurant, and a luxury suite at a local racing
facility.  The assets will be sold to entities controlled by certain officers
and directors of the Company.  During October 1997, the ranch was sold for $1.2
million in cash.

5.   SUBSEQUENT EVENTS

During February 1998, the two condominiums of Holdings were sold for
approximately $1.6 million in cash.

On March 20, 1998 the Company increased its line of credit ("Senior Credit
Facility") to $15.0 million.  The increase in the Senior Credit Facility is
under substantially the same terms and conditions as the existing credit
facility.

Effective March 19, 1997, the Company completed its acquisition of U.S. 
Transportation Systems, Inc. ("USTS").  On March 20,1998 the Company began 
trading on the Nasdaq under the symbol PBSIA.  USTS is engaged in business 
areas which relate to transportation, including providing bus, chauffeured 
vehicle, package and delivery transportation-related services.  The Company 
purchased nearly all of the operating assets and assumed certain liabilities 
of USTS for 9,612,500 shares of the Company's Class A Common Stock (the 
"Exchange Shares").  The transaction was structured as a tax-free 
reorganization under the Internal Revenue Service ("IRS") code Section 
368(a)(1)(C) ("Type C Reorganization").  In conjunction with the acquisition, 
the Company authorized a total of 100 million shares and split its existing 
shares into an aggregate 36 million shares, which represents an approximate 
split ratio of 3.15438 to 1. Accordingly, all per share information presented 
reflects the stock split. USTS is required to liquidate or dissolve as a 
corporation and distribute the Exchange Shares to USTS shareholders for the 
transaction to qualify with the IRS as a Type C Reorganization.  Subsequent 
to the acquisition of USTS by Precept, 45,612,500 shares of the Company will 
be outstanding.  The Company has registered the Exchange Shares and 
approximately 20 million shares for acquisitions in a Form S-4 registration 
statement with the Securities and Exchange Commission.

                                    8
<PAGE>

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

     The following discussion of Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Company should be read in
conjunction with the information contained in the Company's consolidated
financial statements, including the notes thereto, and the other financial
information appearing elsewhere in this report.  Statements regarding future
economic performance, management's plans and objectives, and any statements
concerning its assumptions related to the foregoing contained in Management's
Discussion and Analysis of Financial Condition and Results of Operations
constitute forward-looking statements.  The Company's actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements.  The Company does not
undertake any obligation to revise these forward-looking statements to reflect
any future events or circumstances.  Unless otherwise indicated or the context
otherwise requires, each reference to a year is to the Company's fiscal year
which ends on June 30 of such year.

GENERAL

     The Company is a leading independent distributor of custom and stock
business products and provider of document management services ("Business
Products") to businesses in a variety of industries throughout the United
States.  The Company also operates various corporate transportation services
within the Dallas/Fort Worth metropolitan area ("Transportation Services").
The Company was founded in 1988 as a subsidiary of Affiliated Computer
Services, Inc. ("ACS") (NYSE: AFA) and has grown significantly since then, both
internally and through acquisitions.  In June 1994, the Company was spun-off
from ACS in a tax-free stock exchange to ACS shareholders in connection with
the initial public offering of ACS.

     The Company was one of the first organizations to begin nationwide
consolidation of operating companies in the Business Products industry.  Since
1991, the Company has acquired 15 companies operating in this industry plus
five Transportation Services entities.  During the six months ended December
31, 1997, the Company completed five of the acquisitions discussed above.  Four
of the acquisitions were in the Business Products industry and one in the
Transportation Services sector.  Four of the five acquisitions were completed
with a combination of cash and convertible notes, one for all cash, with all
five accounted for using the purchase method of accounting.  Accordingly, the
results of the acquired operations are included in the Company's consolidated
results of operations from the date of acquisition.  As a result of the effect
of these various acquisitions, the historical operating results of the Company
for a given period may not be comparable to prior or subsequent periods.

     A component of the Company's business strategy is to increase the size of
its operations through strategic acquisitions and internally generated growth.
The Company places substantial emphasis on improving operational and
information system capabilities, while implementing subsequent integration of
the Company's business 

                                  9
<PAGE>

strategy in acquired operations.  The Company's operational focus also 
includes continuous upgrading of management systems allowing improved 
customer access to financial, inventory and order status information; new 
product and service offerings; preferred vendor programs incorporating volume 
purchasing; regional and district management oversight; and recruiting 
experienced sales individuals.  The Company believes these strategies will 
lead to lower costs of goods and increased sales of various products and 
services to existing and new customers.

As part of the implementation of its business strategy, the Company decided to
focus on its core business by discontinuing certain operations in real estate
construction and real estate related investments.  Except where specifically
noted, the Discussion and Analysis of Financial Condition and Results of
Operations that appears below covers only the Company's continuing operations.
For additional information about the results of discontinued operations, see
Note 4 of the Company's "Notes" to consolidated financial statements and
discussion of "Discontinued Operations" below.

RESULTS OF OPERATIONS

     Three Months Ended December 31, 1997 Compared to Three Months Ended
December 31, 1996
     
     Revenues for continuing operations decreased $1.7 million or 8.4% for the
three months ended December 31, 1997, to $18.9 million from $20.7 million for
the three months ended December 31, 1996.  The majority of the decrease was in
the Business Products segment and resulted from lower sales to Business
Products customers due, in part, to the loss of three customers.  The Company
has taken steps to replace the lost revenue through the addition of new
customers and the growth of existing customer relationships.  Revenue in the
1997 three-month period included $2.1 million from the six acquisitions
completed in calendar year 1997.
     
     Cost of goods sold includes product, freight and delivery costs.  Cost of
goods sold were $11.5 million for the three months ended December 31, 1997, a
decrease of $1.2 million from $12.7 million in the same three-month period of
1996.  Cost of goods sold as a percentage of Business Products revenues showed
no change for the three months ended December 31, 1997 at 66.9% compared to the
three months ended December 31, 1996.
     
     Selling, general and administrative expenses include sales commissions, 
drivers' wages, lease expense and corporate overhead.  Selling, general and 
administrative expenses decreased by $273 thousand to $6.8 million for the 
three months ended December 31, 1997 from $7.1 million for the three months 
ended December 31, 1996.  As a percentage of revenues from continuing 
operations, selling, general and administrative expenses increased to 35.9% 
from 34.2%, for the same period in 1996.  The increase as a percentage of 
revenues for the three months ended December 31, 1997 is primarily due to an 
increase in corporate resources to implement the Company's consolidation 
strategy and in preparation for public status.

                                     10
<PAGE>

     Depreciation and amortization expense for the three months ended December
31, 1997 increased by $134 thousand to $416 thousand from $282 thousand for the
three months ended December 31, 1996.  The increase is due to additional
depreciation and amortization recorded for the five acquisitions completed
during the previous six months.
     
     Operating income decreased $336 thousand to $257 thousand for the three
months ended December 31, 1997, compared to $593 thousand for the three months
ended December 31, 1996.  Operating income decreased due to lower revenue,
higher selling, general and administrative expenses as a percentage of revenues
and higher depreciation and amortization.
     
     Interest expense increased $18 thousand to $161 thousand for the three
months ended December 31, 1997 due primarily to debt incurred for acquisitions.
     
     The Company's effective tax rate was 39.0% for the three months ended
December 31, 1997, unchanged from 39.0% for the three months ended December 31,
1996.
     As a result of the foregoing, net income from continuing operations
decreased to $58 thousand for the three months ended December 31, 1997, from
$275 thousand for the three months ended December 31, 1996.
     
     Six Months Ended December 31, 1997 Compared to Six Months Ended December
31, 1996

     Consolidated revenues for continuing operations decreased $2.6 million or
6.4% for the six months ended December 31, 1997, to $37.9 million from $40.5
million for the six months ended December 31, 1996.  The majority of the
decrease was in the Business Products segment and resulted from lower sales to
Business Products customers due, in part, to the loss of three customers.  The
Company has taken steps to replace the lost revenue through the addition of new
customers and the growth of existing customer relationships.  Revenue in the
1997 six-month period included $3.1 million from the six acquisitions completed
in March, July, September, October and November of 1997.
     
     Cost of goods sold were $23.3 million for the six months ended December
31, 1997, a decrease of $1.9 million from $25.2 million in the same six month
period of 1996.  Cost of goods sold as a percentage of Business Products
revenues was essentially unchanged for the six months ended December 31, 1997
at 67.8% compared to the six months ended December 31, 1996.

                                       11
<PAGE>

     Selling, general and administrative expenses decreased by $328 thousand to
$13.3 million for the six months ended December 31, 1997 from $13.7 million for
the six months ended December 31, 1996.  As a percentage of revenues from
continuing operations, selling, general and administrative expenses increased
to 35.2% from 33.8%, for the same period in 1996.  The increase as a percentage
of revenues for the six months ended December 31, 1997 is primarily due to an
increase in corporate resources to implement the Company's consolidation
strategy and in preparation for public status.
     
     Depreciation and amortization expense for the six months ended December
31, 1997 increased by $26 thousand to $662 thousand from $636 thousand for the
six months ended December 31, 1996.
     
     Operating income decreased $337 thousand to $610 thousand for the six
months ended December 31, 1997, compared to $947 thousand for the six months
ended December 31, 1996.  Operating income decreased due to lower revenue,
higher selling, general and administrative expenses as a percentage of revenues
and higher depreciation and amortization.
     
     Interest expense increased $22 thousand to $287 thousand for the six
months ended December 31, 1997 due primarily to debt incurred for acquisitions.
     
     The Company's effective tax rate was 39.9% for the six months ended
December 31, 1997, virtually unchanged from 40.0% for the six months ended
December 31, 1996.
     
     As a result of the foregoing, net income from continuing operations
decreased to $194 thousand for the six months ended December 31, 1997, from
$409 thousand for the six months ended December 31, 1996.

CAPITAL RESOURCES AND LIQUIDITY

     The Company's primary sources of funding have been cash flow from
operations, commercial bank credit facilities and convertible notes issued by
the Company to sellers of acquired companies.  The Company anticipates that
cash flow from operations and borrowings under credit facilities will be its
principal sources of funding.  The Company's principal uses of cash have been,
and will continue to be, the funding of acquisitions, repayment of debt, and
capital expenditures for its information and accounting systems.
     
     In the six months ended December 31, 1997, five acquisitions were 
completed for total consideration of approximately $2.5 million.  Of the 
total consideration paid for the acquisitions, approximately $435 thousand 
was in cash and approximately $2.1 million was in the form of convertible 
debt.  The cash portion of the consideration paid for the acquisitions was 
provided by proceeds from the Company's Senior Credit Facility.

                                   12
<PAGE>
     
     A definitive loan agreement was signed on July 1, 1997, with Wells Fargo
Bank, Texas consisting of a $10.0 million secured revolving credit facility
("Senior Credit Facility"), which expires June 30, 2000.  Borrowings under the
Senior Credit Facility bear interest at Prime or LIBOR plus 1.75%, 2.25% or
2.50% dependent upon a financial ratio of the Company calculated at the
beginning of each month.  The Senior Credit Facility is fully secured by
substantially all of the assets of the Company.  Availability under the Senior
Credit Facility is calculated based upon a borrowing base composed of
receivables and inventory.  An amendment to the Senior Credit Facility was
signed March 20, 1998, which expanded the facility to $15.0 million and
extended the maturity date to March 31, 2001.
     
     The Company incurs capital expenditures primarily for its information and
accounting systems needs.  Capital expenditures, from continuing operations,
for the six months ended December 31, 1997, were $360 thousand.  The majority
of capital expenditures related to the purchase of capitalized software and
computer equipment.

     The Company had cash and cash equivalents totaling $1.5 million at
December 31, 1997 compared to $2.5 million at June 30, 1997. The reason for the
decrease was cash utilized in acquisitions, expenses associated with the USTS
transaction, capital expenditures and reduction of accrued sales tax liability.
     
     Working capital at December 31, 1997 was $12.0 million, comparable to
working capital at June 30, 1997 of $12.3 million.  The Company's
capitalization, defined as the sum of long-term debt and shareholders' equity
at December 31, 1997 was approximately $23.1 million.
     
     The Company's EBITDA, defined as income excluding interest, taxes, 
depreciation and amortization of goodwill and other intangible assets, was 
$1.3 million for the six months ended December 31, 1997 compared to $1.6 
million for the six month period ended December 31, 1996.  Management has 
included EBITDA in its discussion herein as a measure of liquidity because it 
believes that it is a widely accepted financial indicator of a company's 
ability to service and/or incur indebtedness, maintain current operating 
levels of fixed assets and acquire additional operations and businesses.  
EBITDA should not be considered as a substitute for statement of operations 
or cash flow data for the Company's consolidated financial statements, which 
have been prepared in accordance with generally accepted accounting 
principles.
     
     The Company's management believes that capital requirements, other than 
funding of acquisitions, will be met from cash generated from continuing 
operations and additional financing available under the Senior Credit 
Facility. Favorable acquisition or expansion opportunities requiring large 
commitments of capital may arise that the Company may be unable to finance 
internally.  In order to pursue such opportunities, the Company may be 
required to incur additional debt or to issue Common Stock, which would have 
a dilutive effect on existing shareholders.  However, the portion of future 
acquisition costs, which will be funded with such Common Stock, is dependent 
upon the seller's willingness to accept the stock as consideration and the 
Company's willingness to issue such stock based on the market price of the 
stock.  No assurance can be given as to the Company's future acquisition and 
expansion opportunities.

                                   13
<PAGE>

INCOME TAXES

     At December 31, 1997, the Company had $2.3 million of gross deferred tax
assets.  The Company had evaluated its deferred tax assets both individually
and in the aggregate as to the likelihood of realizability of these amounts,
and has concluded that there are no specific realizability issues related to
any one type of temporary difference that gave rise to the deferred tax assets.
However, the Company has concluded that it is more likely that some portion of
its deferred tax assets will not be realized.  After considering the sources of
taxable income that may be available, the Company estimates that it will not
realize $637 thousand of its deferred tax assets, for which a valuation
allowance is recorded.

DISCONTINUED OPERATIONS
     
     As part of its business strategy, the Company decided to focus on its 
core businesses and discontinue certain business operations.  To effect this 
strategy, in February 1997, the Company decided to reduce its investment in 
its real estate construction operation, Precept Builders, Inc. ("Builders"), 
which performs free-standing construction and finish-out of existing 
locations, primarily in the state of Texas, and to sell nearly all of the 
assets of Precept Holdings, Inc. ("Holdings"), which owns and operates 
certain other real estate-related investments.  The assets to be sold of 
Holdings include two condominiums, a ranch, a restaurant, and a luxury suite 
at a local racing facility.
     
     During December 1997, the private offering of Builders was completed.
During October 1997 and February 1998, the ranch and condominiums of Holdings
were sold for $1.2 million and $1.6 million in cash, respectively.
     
YEAR 2000 COMPLIANCE

     All of the Company's software utilized in accounting and operations has
been licensed from third-party vendors and is certified as year 2000 compliant.

                                      14
<PAGE>

INFLATION

     Certain of the Company's product 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.  The Company
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, fuel and other costs in the future could
materially affect the Company's profitability if these costs cannot be passed
on to customers.  In general, the Company 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 the Company's business will not be affected by
inflation in the future.

PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS - None

ITEM 2.   CHANGES IN SECURITIES - None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          None

ITEM 5.   OTHER INFORMATION - None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS:
 
<TABLE>
<CAPTION>
<C>        <S>
   2.1     Agreement and Plan of Reorganization dated as of November 16, 1997 by and among U.S.
             Transportation Systems, Inc., Precept Investors, Inc. and Precept Acquisition Company, L.L.C.
             (1)
   2.2     Plan of Liquidation and Dissolution (1)
   3.1     Amended and Restated Articles of Incorporation (1)
   3.2     Bylaws (1)
   4.1     Warrant Agent Agreement (1)
   4.2     Form of Precept Class A Warrant Certificate (1)
   4.3     Form of Precept Class A Common Stock Certificate (1)
   4.4     Form of Rights Agreement between Precept and Continental Stock Transfer & Trust Co. (1)
   4.5     Form of Irrevocable Proxy granted to Darwin Deason by various Precept shareholders (1)
  10.1     Form of Registration Rights Agreement by and among Precept Investors, Inc., Michael Margolies and
             The Margolies Family Trust (1)
  10.2     Form of Employment Agreement by and between Precept Investors, Inc. and Michael Margolies (1)
  10.3     Form of Employment Agreement by and between Precept Investors, Inc. and Ron Sorci (1)
  10.4     Reciprocal Services Agreement, dated June 30, 1994, between Precept and ACS (1)
  10.5     Form of Directors Indemnification Agreement (1)
  10.6     Precept 1996 Stock Option Plan (1)
  10.7     Precept 1998 Stock Incentive Plan (1)
  10.8     Credit Agreement and Line of Credit Note, dated as of July 1, 1997, between Precept Investors, Inc. and Wells
             Fargo Bank (Texas), National Association (1)
  10.9     First Amended and Restated Credit Agreement and Line of Credit Note, dated as of March 20, 1998, between Precept 
             Business Services, Inc. and Wells Fargo Bank (Texas), National Association (2)
  11.1     Statement re Computation of U.S. Transportation Systems, Inc. Per Share Earnings (1)
</TABLE>
 
------------------------
(1) Previously filed as an exhibit to the Company's registration statement on 
    Form S-4 (file no. 333-42689) and incorporated herein by reference

(2) Filed herewith


(b) Reports on Form 8-K

    The Company did not file any reports on Form 8-K during the three months 
ended December 31, 1997

                                      15
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                              PRECEPT BUSINESS SERVICES, INC.


Date: March 26, 1998          By: /s/ David L. Neely
                                 -----------------------------------------
                                   David L. Neely
                                   Chairman & Chief Executive Officer


                                   /s/ Scott B. Walker
                                 -----------------------------------------
                                   Scott B. Walker
                                   Senior Vice President &
                                   Chief Financial Officer

                                        16