UNITED STATES
                       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 February 28, 1997

[ ]      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.:                0-25592


                             PERIPHONICS CORPORATION
             (exact name of registrant as specified in its charter)


              Delaware                            11-2699509
(State or other jurisdiction of                (I.R.S. Employer
 incorporation or organization)                Identification No.)


             4000 Veterans Memorial Highway, Bohemia, New York 11716
                    (Address of principal executive offices)


       Registrant's telephone number, including area code: (516) 468-9000

     Check 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(s),  and (2) has been subject to such filing  requirements
for the past 90 days. Yes [X] No [ ]

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date: April 11, 1997


     Class of                                      Number of
     Common Equity                                 Shares

     Common Stock, par value $.01                  13,674,426



<PAGE>



                             PERIPHONICS CORPORATION
                                AND SUBSIDIARIES

                                      INDEX




                                                                    Page No.
Part I.  Financial Information

         Item 1.  Financial Statements

                  Consolidated Balance Sheets -                        3
                  February 28, 1997 and May 31, 1996

                  Consolidated Statements of Earnings                  4
                  - Nine Months Ended February 28, 1997
                  and February 29, 1996

                  Consolidated Statements of Earnings                  5
                  - Three Months Ended February 28, 1997
                  and February 29, 1996

                  Consolidated Statements of Cash Flows                6
                  - Nine Months Ended February 28, 1997
                  and February 29, 1996

                  Notes to Consolidated Financial
                  Statements                                           7

         Item 2.  Management's Discussion and Analysis                8-12
                  of Financial Condition and Results of
                  Operations


Part II. Other Information                                             13

         Signatures                                                    14



<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (In Thousands, Except Share and Per Share Data)


<TABLE>
<CAPTION>
                                                                                 February 28, 1997               May 31, 1996
                                                                                    (Unaudited)                    (Audited)

<S>                                                                                      <C>                          <C>

ASSETS

    CURRENT ASSETS:
        Cash and cash equivalents........................................             $20,460                       $18,664
        Short-term investments...........................................               4,847                         8,603
        Accounts receivable, less allowance
           for doubtful accounts of $990 and
           $890, respectively............................................              33,524                        23,829
        Inventories......................................................              11,381                        11,097
        Deferred income taxes............................................               1,291                         1,261
        Prepaid expenses and other current
           assets........................................................               1,174                           935
                                                                                      -------                       -------
        TOTAL CURRENT ASSETS.............................................              72,677                        64,389

    PROPERTY, PLANT & EQUIPMENT, NET.....................................              15,611                        10,426
    OTHER ASSETS.........................................................                 328                           288
                                                                                      -------                       -------
                                                                                      $88,616                       $75,103
                                                                                      =======                       =======

LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES:
        Accounts payable.................................................             $ 6,257                       $ 4,247
        Accrued expenses and other current
           liabilities...................................................              14,515                        11,666
                                                                                      -------                       -------
        TOTAL CURRENT LIABILITIES........................................              20,772                        15,913

    DEFERRED INCOME TAXES................................................                  57                           409
                                                                                      -------                       -------
                                                                                       20,829                        16,322
                                                                                      -------                       -------


    STOCKHOLDERS' EQUITY
        Preferred stock, par value $.01 per
           share, 1,000,000 authorized, none
           issued                                                                       ---                           ---
        Common stock, par value $.01 per
           share, 30,000,000 shares authorized
           13,665,426 shares outstanding as of
           February 28, 1997 and 13,598,164
           shares outstanding as of
           May 31, 1996                                                                   137                           136
        Additional Paid-in Capital                                                     42,317                        41,770
        Retained Earnings                                                              25,333                        16,875
                                                                                      -------                       -------
                                                                                       67,787                        58,781
                                                                                      -------                       -------
                                                                                      $88,616                       $75,103
                                                                                      =======                       =======

</TABLE>



                                        3

<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                 (In Thousands, Except Share and Per Share Data)

<TABLE>
<CAPTION>
                                                                                                    Nine Months Ended
                                                                                                February         February
                                                                                                28, 1997         29, 1996
                                                                                                       (Unaudited)

<S>                                                                                                <C>              <C>


System sales......................................................................               $63,910         $50,164
Service revenues..................................................................                17,678          12,324
                                                                                                 -------         -------
    Total revenues................................................................                81,588          62,488
                                                                                                 -------         -------
Cost of system sales..............................................................                29,412          23,281
Cost of service revenues..........................................................                10,912           7,808
                                                                                                 -------         -------
    Cost of revenues..............................................................                40,324          31,089
                                                                                                 -------         -------
Gross profit......................................................................                41,264          31,399
                                                                                                 -------         -------
Operating expenses:
    Selling, general and administrative...........................................                20,552          16,468
    Research and development......................................................                 7,832           5,462
                                                                                                 -------         -------
                                                                                                  28,384          21,930
                                                                                                 -------         -------
Earnings from operations..........................................................                12,880           9,469
                                                                                                 -------         -------
Other income (expense):
    Interest and other income.....................................................                   953             544
    Foreign exchange gain (loss)..................................................                    32            (225)
                                                                                                 -------          ------
                                                                                                     985             319
                                                                                                 -------          ------   
Earnings before provision for income taxes........................................                13,865           9,788
Provision for income taxes........................................................                 5,407           4,013
                                                                                                 -------          ------
Net earnings......................................................................                $8,458          $5,775
                                                                                                 =======          ======
Net earnings per common and common equivalent
    share     ....................................................................               $  0.61          $ 0.44
                                                                                                 =======         =======
Weighted average number of common and common
    equivalent shares.............................................................                13,856          13,074
                                                                                                 =======         =======

</TABLE>



                                        4

<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                 (In Thousands, Except Share and Per Share Data)


<TABLE>
<CAPTION>
                                                                                                  Three Months Ended
                                                                                                February        February
                                                                                                28, 1997        29, 1996

<S>                                                                                                <C>             <C>

System sales......................................................................              $23,461          $18,742
Service revenues..................................................................                6,185            4,655
                                                                                                --------         -------
    Total revenues................................................................               29,646           23,397
                                                                                                --------         -------
Cost of system sales..............................................................               10,483            8,686
Cost of service revenues..........................................................                3,961            2,874
                                                                                                --------         -------
    Cost of revenues..............................................................               14,444           11,560
                                                                                                --------         -------
Gross profit......................................................................               15,202           11,837
                                                                                                --------         -------
Operating expenses:
    Selling, general and administrative...........................................                7,273            6,129
    Research and development......................................................                2,797            1,996
                                                                                                --------         -------
                                                                                                 10,070            8,125
                                                                                                --------         -------
Earnings from operations..........................................................                5,132            3,712
                                                                                                --------         -------
Other income (expense):
    Interest and other income.....................................................                  252              251
    Foreign exchange loss ........................................................                 (296)             (93)
                                                                                                --------         --------
                                                                                                    (44)             158
                                                                                                --------         --------
Earnings before provision for income taxes........................................                5,088            3,870
Provision for income taxes........................................................                1,984            1,587
                                                                                                --------         -------- 
Net earnings......................................................................              $ 3,104          $ 2,283
                                                                                                ========         ========
Net earnings per common and common equivalent
    share     ....................................................................              $  0.22          $  0.17
                                                                                                ========         ========
Weighted average number of common and common
    equivalent shares.............................................................               13,872           13,820
                                                                                                ========         ========


</TABLE>


                                        5

<PAGE>



                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                                                    Nine Months Ended
                                                                                                February         February
                                                                                                28, 1997         29, 1996
                                                                                                       (Unaudited)

<S>                                                                                                <C>              <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net earnings..........................................................................      $ 8,458          $ 5,775
    Adjustments to reconcile net earnings to net
        cash and cash equivalents used in operating
        activities:
        Depreciation and amortization.....................................................        2,709            1,805
        Deferred income taxes.............................................................         (382)              52
        Changes in operating assets and liabilities:
           Increase in accounts receivable................................................       (9,695)             (79)
           Increase in inventories........................................................         (284)          (5,168)
           (Increase) Decrease in prepaid expenses
              and other current assets....................................................         (239)             343
           Increase in other assets.......................................................          (40)             (55)
           Increase in accounts payable and accrued
              expenses and other current liabilities......................................        4,859            2,919
                                                                                                 -------          -------
                 Net cash and cash equivalents provided by
                    operating activities..................................................        5,386            5,592
                                                                                                 -------          -------

CASH FLOWS FROM INVESTING ACTIVITIES:.....................................................
    Purchases of property, plant and equipment............................................       (7,894)          (3,594)
    Proceeds from sales of short-term investments.........................................       10,039            4,980
    Purchases of short-term investments...................................................       (6,283)          (9,856)
                                                                                                 -------          -------
               Net cash and cash equivalents used in
                 investing activities.....................................................       (4,138)          (8,470)
                                                                                                 -------          -------

CASH FLOW FROM FINANCING ACTIVITIES:......................................................
    Proceeds from stock options exercised.................................................          548              170
    Proceeds from Secondary Public Offering
    of Common Stock.......................................................................          ---           13,991
                                                                                                --------         --------
               Net cash and cash equivalents provided by
               financing activities.......................................................          548           14,161
                                                                                                --------         --------

NET INCREASE IN CASH AND CASH EQUIVALENTS.................................................        1,796           11,283

CASH AND CASH EQUIVALENTS, beginning of period............................................       18,664            8,753
                                                                                                --------         --------
CASH AND CASH EQUIVALENTS, end of period..................................................      $20,460          $20,036
                                                                                                ========         ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period for:
    Interest..............................................................................          ---               ---
    Income Taxes..........................................................................      $ 3,723          $ 3,314

</TABLE>

                                        6

<PAGE>




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION

     In the opinion of Periphonics Corporation and subsidiaries (the "Company"),
the  accompanying   unaudited  consolidated  financial  statements  contain  all
adjustments  (consisting  only of normal  recurring  adjustments)  necessary  to
present fairly the financial position,  the results of operations,  and the cash
flows at February 28, 1997 and for all periods presented.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted. These financial statements should be read in conjunction with
the  Consolidated  Financial  Statements and Notes included in the Company's May
31, 1996 Annual  Report on Form 10-K as filed with the  Securities  and Exchange
Commission.

     The results of operations  for the three and nine months ended February 28,
1997 and February 29, 1996 are not  necessarily  indicative of the results to be
expected for the full year. Dollar amounts are presented in thousands except per
share amounts.

2.       STOCK SPLIT AND CHANGES IN AUTHORIZED CAPITAL

     On September 20, 1996, the Board of Directors  approved a two-for-one split
of its  common  stock  effected  as a stock  dividend  on  October  31,  1996 to
shareholders  of record at the close of  business  on October  15,  1996.  After
giving  effect  to the  stock  split,  the  shares  outstanding  increased  from
approximately 6,812,566 to approximately 13,625,132.

     All  historical  share and per share  data  appearing  in the  consolidated
financial statements and notes thereto have been retroactively  adjusted for the
stock split.

     Also, on September 20, 1996, the Board of Directors determined it advisable
to amend the Company's  Certificate of  Incorporation  to increase the number of
authorized shares of Common Stock from 15,000,000  shares to 30,000,000  shares.
The proposed amendment to the Amended and Restated  Certificate of Incorporation
was submitted for shareholder  approval.  Shareholder  approval was announced on
November 8, 1996 at the 1996 Annual Meeting of Stockholders.

3.       INVENTORIES

         Inventories consist of the following:

                               February 28, 1997             May 31, 1996
                               -----------------             ------------
         Raw materials             $ 6,231                     $ 6,218
         Work-in-process             5,150                       4,879
                                   -------                     -------
                                   $11,381                     $11,097
                                   =======                     =======

4.       SECONDARY PUBLIC OFFERING

     On November 17, 1995, the Company  consummated a secondary  public offering
of  2,510,000  shares of common  stock at a price of $12.75  per  share.  Of the
shares  offered,  1,200,00 were sold by the Company and  1,310,000  were sold by
certain stockholders of the company.

     Also in November 1995, the underwriters of the secondary offering exercised
their  over-allotment  option to purchase an additional  376,500 shares from the
selling  stockholders.  The Company did not receive any of the proceeds from the
exercise of the over-allotment option.

     The net  proceeds to the Company from the sale of the  1,200,000  shares of
Common Stock  offered was  approximately  $14.0  million  (after  deducting  the
underwriting  discount and offering  expenses  payable by the Company).  The net
proceeds to the Company are to be used for general corporate purposes, including
working  capital,  facilities  expansion and possible  acquisitions of business,
products or technology complementary to the Company's business.

                                        7

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Results of Operations

Nine Months Ended February 28, 1997 compared to Nine Months Ended February 29,
1996

     Total Revenues.  Total revenues  increased by 30.6% to $81.6 million in the
first nine months of fiscal 1997 from $62.5 million in the comparable  period of
the prior fiscal year.  System sales  increased by 27.4% to $63.9 million in the
first nine months of fiscal 1997 from $50.2 million in the comparable  period of
the prior fiscal year.  The  increase in system  sales was  primarily  due to an
increase in unit sales  volume.  Service  revenues  increased  by 43.4% to $17.7
million  in the first  nine  months of fiscal  1997 from  $12.3  million  in the
comparable  period of the prior  fiscal year,  primarily  due to the addition of
more units to the service base as well as an increase in installation revenues.

     Gross Profit.  The  Company's  gross profit  increased by $9.9 million,  or
31.4%,  to $41.3  million  in the first  nine  months of fiscal  1997 from $31.4
million in the  comparable  period of the prior fiscal  year.  Gross profit as a
percentage  of total  revenues  increased  to 50.6% in the first nine  months of
fiscal 1997 from 50.2% in the comparable  period of the prior fiscal year. Gross
profit on system sales increased by $7.6 million,  or 28.3%, to $34.5 million in
the first nine months of fiscal 1997 from $26.9 million in the comparable period
of the prior fiscal year. The gross margin on system sales increased to 54.0% in
the first nine months of fiscal 1997 from 53.6% in the comparable  period of the
prior fiscal year. The Company attributes this increase primarily to the product
mix during the  current  nine month  period.  Gross  profit on service  revenues
increased by $2.3 million, or 49.8%, to $6.8 million in the first nine months of
fiscal 1997 from $4.5 million in the comparable period of the prior fiscal year.
Gross margin on service revenues  increased to 38.3% in the first nine months of
fiscal 1997 from 36.6% in the comparable  period of the prior fiscal year.  This
increase was  attributable to growth in the service base, as well as an increase
in installation revenues.

     Selling,  General  and  Administrative   Expenses.   Selling,  General  and
Administrative  ("SG&A")  expenses  were $20.6 million and $16.5 million for the
first nine months of fiscal 1997 and 1996,  respectively,  or 25.2% and 26.4% of
total revenues, respectively. The increase in the dollar amount of SG&A expenses
was primarily due to both the continued  expansion of the Company's sales effort
in  domestic  and  international  markets  and to  increases  in  SG&A  expenses
necessary to support the increased level of sales. SG&A expenses  decreased as a
percentage of total  revenues due to the Company's  ability to leverage  certain
fixed expenses over its growing revenue base.

     Research  and  Development  Expenses.   Research  and  Development  ("R&D")
expenses  were $7.8 million and $5.5 million for the first nine months of fiscal
1997 and 1996, respectively,  or 9.6% and 8.7% of total revenues,  respectively.
The  increase  in the  dollar  amount of R&D  expenses  reflects  the  continued
expansion  of the  Company's  R&D staff which  increased  to 119 from 94 between
February 28, 1997 and February 29, 1996.  R&D expenses are charged to operations
as  incurred,  and no  software  development  costs have been  capitalized.  The
Company expects the

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



                                        8

<PAGE>



dollar amount of R&D  expenditures  to continue to increase,  although such
expenses as a percentage of total revenues will vary from period to period.

     Other Income (Expense).  Other income was $1.0 million and $0.3 million for
the nine months ended  February  28, 1997 and  February  29, 1996.  Interest and
other income  increased  to $1.0  million in the nine months ended  February 28,
1997 from $0.5 million in the nine months ended  February 28, 1997 primarily due
to increased  cash  balances.  The Company had a foreign  exchange gain of $0.03
million  in the nine  months  ended  February  28,  1997  compared  to a foreign
exchange  loss of $0.2 million for the nine months ended  February 29, 1996.  To
the extent the Company is unable to match revenue received in foreign currencies
with  expenses  paid in the same  currency,  it is  exposed to  fluctuations  in
international currency transactions.

     Income  Taxes.   Variations  in  the  customary  relationship  between  the
provision for income taxes and the statutory  income tax rate  primarily  result
from foreign  subsidiaries'  net operating  losses which did not produce current
tax benefits,  the utilization of research and development tax credits and state
and local income taxes. The Company's  effective income tax rates were 39.0% and
41.0%  for the nine  months  ended  February  28,  1997 and  February  29,  1996
respectively.

     Foreign   Operations.   The  Company's  European   subsidiary  operated  at
approximately  a $0.1 million  profit during the nine months ended  February 28,
1997 as compared to a loss of $0.4 million during the nine months ended February
29, 1996. The improved profit position was attributed to a increase in the gross
profit  margin and a decrease in the exchange  loss offset by an increase in the
dollar  amount  of SG&A  expenses  to  support  the  expansion  of the sales and
marketing efforts. Transfers from the Company's North American operations to its
European  subsidiary are accounted for at cost,  plus a reasonable  profit.  The
cost of revenues for the Company's European  subsidiary  includes  approximately
$0.3  million  and $0.2  million  of  intercompany  gross  profit  earned by the
Company's North American  operations on system sales by the European  subsidiary
to third parties during the nine months ended February 28, 1997 and February 29,
1996.

Three  Months  Ended  February  28,  1997  compared to Three  Months  ended
February 29, 1996

     Total Revenues.  Total revenues  increased by 26.7% to $29.6 million in the
three months ended February 28, 1997 from $23.4 million in the comparable period
of the prior fiscal year.  System sales  increased by 25.2% to $23.5  million in
the three months ended  February 28, 1997 from $18.7  million in the  comparable
period of the prior fiscal year.  The increase in system sales was primarily due
to an increase in unit sales volume. Service revenues increased by 32.9% to $6.2
million in the three  months  ended  February  28, 1997 from $4.7 million in the
comparable  period of the prior  fiscal year,  primarily  due to the addition of
more units to the service base as well as increased installation revenues.

     Gross Profit.  The  Company's  gross profit  increased by $3.4 million,  or
28.4%,  to $15.2 million in the three months ended  February 28, 1997 from $11.8
million in the  comparable  period of the prior fiscal  year.  Gross profit as a
percentage  of total  revenues  increased  to 51.3% in the  three  months  ended
February 29, 1996 from 50.6% in the three months ended February 29, 1996.  Gross
profit on system sales increased by $2.9 million,  or 29.1%, to $13.0 million in
the three months ended  February 28, 1997 from $10.1  million in the  comparable
period of the prior fiscal year.  The gross margin on system sales  increased to
55.3% in the three months ended  February 28, 1997 from 53.7% in the  comparable
period of the prior fiscal year.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



                                        9

<PAGE>



     The Company  attributes  this increase  primarily to the product mix during
the current three month period.  Gross profit on service  revenues  increased by
$0.4  million,  or 24.9% to $2.2 million in the three months ended  February 28,
1997 from $1.8 million in the three months ended February 28, 1997. Gross margin
on service  revenues  decreased to 36.0% in the three months ended  February 29,
1996 from 38.3% in the comparable period of the prior fiscal year. This decrease
was  attributable  to higher  cost to support  organizational  growth  partially
offset by an increase in the service base and higher installation revenues.

     Selling,  General  and  Administrative   Expenses.   Selling,  General  and
Administrative  ("SG&A")  expenses  were $7.3  million and $6.1  million for the
three months ended  February 28, 1997 and February 29, 1996,  or 24.5% and 26.2%
of total  revenues,  respectively.  The  increase  in the dollar  amount of SG&A
expenses was  primarily  due to both the  continued  expansion of the  Company's
sales  effort in domestic  and  international  markets and to  increases in SG&A
expenses  necessary  to support  the  increased  level of sales.  SG&A  expenses
decreased as a percentage  of total  revenues  due to the  Company's  ability to
leverage certain fixed expenses over its growing revenue base.

     Research  and  Development  Expenses.   Research  and  Development  ("R&D")
expenses were $2.8 million and $2.0 million for the three months ended  February
28,  1997  and  February  29,  1996,  or  9.4%  and  8.5%  of  total   revenues,
respectively.  The increase in the dollar  amount of R&D  expenses  reflects the
continued  expansion of the Company's  R&D staff which  increased to 119 from 94
between  February 28, 1997 and  February  29, 1996.  R&D expenses are charged to
operations as incurred, and no software development costs have been capitalized.
The  Company  expects  the dollar  amount of R&D  expenditures  to  continue  to
increase,  although such  expenses as a percentage  of total  revenues will vary
from period to period.

     Other Income  (Expense).  Other income was $0.04  million and other expense
was ($0.2)  million for three  months  ended  February 28, 1997 and February 29,
1996.  Interest  and other income  remained  unchanged at $0.3 million the three
months  ended  February 28, 1997 and the  comparable  period of the prior fiscal
year.  The Company  had a foreign  exchange  loss of $0.3  million for the three
months  ended  February  28,  1997,  compared  to a loss of $.1  million  in the
comparable  period of the prior fiscal year. To the extent the Company is unable
to match revenue  received in foreign  currencies  with expense paid in the same
currency, it is exposed to fluctuations on international currency transactions.

     Income  Taxes.   Variations  in  the  customary  relationship  between  the
provision for income taxes and the statutory  federal  income tax rate primarily
result from foreign  subsidiaries'  net  operating  losses which did not produce
current tax benefits,  the  utilization of research and  development tax credits
and state and local income taxes. The Company's  effective income tax rates were
39.0% and 41.0% for the three  months  ended  February 28, 1997 and February 29,
1996.

Liquidity and Capital Resources

     The Company's  principal cash  requirement to date has been to fund working
capital and  capital  expenditures  in order to support the growth of  revenues.
Historically,  the Company has primarily financed this requirement  through cash
flow from operations, bank borrowings and two public offerings for the Company's
common stock in 1995,  which  resulted in an  aggregate of $41.0  million of net
proceeds to the  Company.  Cash flow from  operations  was $5.4 million and $5.6
million for the nine months ended  February  28, 1997 and February 29, 1996.  At
February 28, 1997, the Company had working  capital of $51.9 million,  including
$25.3 million of cash and cash equivalents and short-term investments. The


                                       10

<PAGE>




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Company  expects its working  capital  needs to increase  along with future
revenue growth.

     At February 28, 1997, current assets and current  liabilities  increased by
$8.3 million and $4.9 million,  respectively,  compared to May 31, 1996. Current
assets increased  principally as a result of an increase in accounts receivable.
During the  period  ended  February  28,  1997,  current  liabilities  increased
primarily due to an increase in accounts  payable due to higher operating levels
in addition to higher accrued expenses resulting from the timing of payments.

     The average days sales outstanding (calculated by dividing the net accounts
receivable  at the balance  sheet date for each period by the average  sales per
day during the  quarter  immediately  preceding  the  balance  sheet  date) were
approximately  102 days,  104 days,  83 days and 98 days at February  28,  1997,
November 30, 1996, May 31, 1996 and 1995, respectively.

     The Company's  inventory as of February 28, 1997 and May 31, 1996 was $11.4
million and $11.1 million respectively.

     In January 1995,  the Company  increased its line of credit to $8.0 million
with interest  charged at the prime rate plus 0.25%.  The line of credit expires
on November 30, 1997.  As of February  28, 1997,  the Company had no  borrowings
under this line of credit.

     The  Company  made  capital  expenditures  totaling  $7.9  million and $3.6
million  during the nine months  ended  February 28, 1997 and February 29, 1996.
The increase in  expenditures  is primarily  due to  facilities  expansion,  the
purchase  of land  adjacent  to the  Company's  headquarters,  the  addition  of
customer  service  equipment to support the installed  base, and the purchase of
computer equipment required for staff and product development efforts.

     The  Company  believes  that its  existing  sources of working  capital and
borrowings  available  under its revolving  line of credit will be sufficient to
fund its operations and capital expenditures for at least 12 months.

Foreign Currency Transaction

     The Company does not currently  engage in  international  currency  hedging
transactions to mitigate its foreign currency exposure.  Included in the foreign
exchange gain (loss) are unrealized  foreign exchange gains and losses resulting
from the currency  remeasurement  of the  financial  statements of the Company's
foreign  subsidiaries into U.S. dollars.  To the extent the Company is unable to
match  revenue  received in foreign  currencies  with  expenses paid in the same
currency,   it  is  exposed  to  possible  losses  on   international   currency
transactions.

Inflation

     In the opinion of  management,  inflation has not had a material  effect on
the operations of the Company.

Recent Accounting Pronouncements

     In October 1995, the Financial  Accounting  Standards Board ("FASB") issued
Statement No. 123,  "Accounting  for  Stock-Based  Compensation",  which must be
adopted by the Company in fiscal  1997.  The Company has chosen not to implement
the fair value based  accounting  method for  employee  stock  options,  but has
elected to  disclose,  commencing  with its fiscal 1997 Annual  Report,  the pro
forma net


                                       11

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


earnings  and net  earnings  per share as if such  method  had been used to
account for stock-based compensation costs as described in Statement No. 123.

     In  March  1997,  the  FASB  issued  Statement  No.  129,   "Disclosure  of
Information  about  Capital  Structure"  ("SFAS No 129") and  Statement  No. 128
"Earnings Per Share" ("SFAS No 128").  SFAS Nos. 129 and 128 specify  guidelines
as to  the  method  of  computation  as  well  as  presentation  and  disclosure
requirements  for earnings per share ("EPS").  The objective of these statements
is to simplify the calculation  and to make the U.S.  standard for computing EPS
more  compatible  with the EPS standards of other countries and with that of the
International Accounting Standards Committee. These statements are effective for
fiscal  years  ending after  December  15, 1997 and earlier  application  is not
permitted.  SFAS  129  and  128  will  have  an  impact  on  the  Company's  EPS
calculations  and  disclosure  requirements  but  management  cannot predict the
outcome at this time.

Certain Factors That May Affect Future Results

     From time to time, information provided by the Company,  statements made by
its employees or  information  included in its filings with the  Securities  and
Exchange Commission  (including this Form 10-Q) may contain statements which are
so-called "forward-looking  statements" and not historical facts. These forward-
looking  statements  are made  pursuant  to the safe  harbor  provisions  of the
Private  Securities  Litigation  Reform Act of 1995. The Company's actual future
results  may  differ  significantly  from  those  stated in any  forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties,  including,  but not limited to, product demand,  pricing, market
acceptance,  litigation,  risks in product and technology  development and other
risk factors detailed from time to time in the Company's Securities and Exchange
Commission  reports  including  this  Form  10-Q for the  fiscal  quarter  ended
February 28, 1997 and its Form 10-K for the fiscal year ended May 31, 1996.

     With particular  regard to the possible  variability of quarterly  results,
fluctuations may occur as a result of factors  including the length of the sales
cycle,  the  timing  of  orders  from and  shipments  to  customers,  delays  in
development and customer acceptance of custom software applications, new product
introductions  or  announcements  by the products and the hiring and training of
additional staff as well as general economic conditions.

     Historically,  the size and timing of the Company's sales transactions have
varied substantially from quarter,  with a substantial  percentage of orders and
deliveries  occurring in the final weeks of a quarter,  and the Company  expects
such variations to continue in future periods.  Because a significant portion of
the Company's  overhead is fixed in the  short-term,  the  Company's  results of
operations  may be  materially  adversely  affected if  revenues  fall below the
Company's  expectations.  Generally,  the  Company's  inventory  of computer and
telephony  hardware is determined by the Company's  forecast of sales during the
future periods. If management's forecasts of product sales and product mix prove
to be inaccurate,  the Company may not have the necessary inventory available to
deliver  systems in a timely  manner which may have a material  averse effect on
the Company's results of operations during such period.

     Due to the foregoing factors, it is possible that securities analysts might
believe that in some future period the Company's sales or operating results will
actually be below their  expectations,  or that such  results will be below such
expectations.  In either of such  events,  the  trading  price of the  Company's
Common  Stock  in the  public  markets  would  likely  be  materially  adversely
affected.



                                       12

<PAGE>




                           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.           Other Information

                  None.

Item 7.           Exhibits and Reports on Form 8-K

                  None.


                                       13

<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.



                                   PERIPHONICS CORPORATION
                                   Registrant




                              By:  /s/ Peter J. Cohen
                                   -------------------------------
                                   Peter J. Cohen
                                   Chairman of the Board,
                                   President and
                                   Chief Executive Officer
                                   (Principal Operating Officer)




                              By:  /s/ Kevin J. O'Brien
                                   -------------------------------
                                   Kevin J. O'Brien
                                   Chief Financial Officer,
                                   Vice President
                                   Finance and Administration
                                   (Principal Accounting Officer),
                                   Secretary and Director




Dated:  April 14, 1997

                                       14