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, 1998

     [ ]  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 2, 1998

                     Class of                  Number
                     Common Equity             of Shares

                     Common Stock,             13,804,184
                     par value $.01



<PAGE>


                             PERIPHONICS CORPORATION
                                AND SUBSIDIARIES


                                      INDEX
<TABLE>
<CAPTION>


                                                                                 Page No.
<S>                                                                                <C>    
   Part I.   Financial Information

   Item 1.   Financial Statements

             Consolidated Balance Sheets - February 28, 1998 and May 31, 1997        3

             Consolidated  Statements of Earnings - Nine Months Ended  
                February 28, 1998 and February 28, 1997                              4

             Consolidated  Statements of Earnings - Three Months Ended
                February 28, 1998 and February 28, 1997                              5

             Consolidated Statements of Cash Flows - Nine Months Ended
                February 28, 1998 and February 28, 1997                              6

             Notes to Unaudited Consolidated Financial Statements                    7

   Item 2.   Management's  Discussion  and Analysis of Financial
             Condition and Results of Operations                                  8-13

   Part II.  Other Information                                                      14

             Signatures                                                             15

</TABLE>

<PAGE>


                                      
                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (In thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                                 February 28, 1998        May 31, 1997
                                                                                    (Unaudited)             (Audited)
<S>                                                                                   <C>                    <C>    

ASSETS
Current Assets:
Cash and cash equivalents.................................................            $10,989                 $25,092
Short-term investments....................................................             11,033                    ---
Accounts receivable, less allowance for doubtful accounts
    of $1,000 and $1,000, respectively....................................             37,289                  35,735
Inventories...............................................................             13,631                  12,858
Deferred income taxes.....................................................              1,412                   1,357
Prepaid expenses and other current assets.................................              1,256                   1,211
                                                                                       ------                 -------
    Total Current Assets                                                               75,610                  76,253

Property, plant and equipment, net........................................             19,133                  16,952
Other assets..............................................................                412                     378
                                                                                       ------                 -------
TOTAL ASSETS..............................................................            $95,155                 $93,583
                                                                                       ======                 =======


LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable..........................................................           $  5,258                 $ 5,928
Accrued expenses and other current liabilities............................             12,804                  15,125
                                                                                      -------                 -------
     Total Current Liabilities............................................             18,062                  21,053
Deferred Income Taxes.....................................................                691                     322
                                                                                      -------                 -------
TOTAL LIABILITIES.........................................................             18,753                  21,375
                                                                                      -------                 -------

Shareholders' Equity:
Preferred stock, par value $.01 per share,                                               ---                    ---
    1,000,000 shares authorized, none issued
Common stock, par value $.01 per share,                                                   137                     137
    30,000,000 shares authorized;
    13,801,684 shares outstanding as of February 28, 1998;
    13,693,758 shares outstanding as of May 31, 1997
Additional Paid-in Capital................................................             43,394                  42,559
Retained Earnings.........................................................             32,871                  29,512
                                                                                      -------                 ------- 
  Total Shareholders' Equity..............................................             76,402                  72,208
                                                                                      -------                 -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................            $95,155                 $93,583
                                                                                      =======                 =======


</TABLE>

<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                      (In thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                        February 28
                                                                                 1998                 1997
<S>                                                                             <C>                 <C>  


System sales..............................................................      $63,021             $63,910
Service revenues..........................................................       21,777              17,678
                                                                                 ------              ------
    Total revenues........................................................       84,798              81,588
                                                                                 ------              ------
Cost of system sales......................................................       30,768              29,412
Cost of service revenues..................................................       12,723              10,912
                                                                                 ------              ------
    Cost of revenues......................................................       43,491              40,324
                                                                                 ------              ------
Gross profit..............................................................       41,307              41,264
                                                                                 ------              ------
Operating expenses:
    Selling, general and administrative...................................       26,012              20,552
    Research and development..............................................       10,729               7,832
                                                                                 ------              ------
                                                                                 36,741              28,384
                                                                                 ------              ------
Earnings from operations..................................................        4,566              12,880
                                                                                 ------              ------
Other income (expense):
    Interest and other income.............................................        1,032                 953
    Foreign exchange (loss) gain .........................................         (224)                 32
                                                                                 ------              ------
                                                                                    808                 985
                                                                                 ------              ------
Earnings before provision for income taxes................................        5,374              13,865
Provision for income taxes................................................        2,015               5,407
                                                                                 ------              ------
Net earnings .............................................................     $  3,359             $ 8,458
                                                                                =======              ======
Per Share Data:
Basic earnings............................................................     $   0.24            $   0.62
                                                                                =======             =======
Diluted earnings..........................................................     $   0.24            $   0.60
                                                                                =======             =======
Weighted Average Shares:
Basic.....................................................................       13,744              13,627
                                                                                =======              ======
Diluted...................................................................       13,931              14,031
                                                                                =======              ======
</TABLE>


<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                     Three Months Ended
                                                                                         February 28,
                                                                                    1998             1997
<S>                                                                                 <C>                <C>  

System sales..............................................................          $25,852          $23,461
Service revenues..........................................................            7,795            6,185
                                                                                     ------           ------
    Total revenues........................................................           33,647           29,646
                                                                                     ------           ------
Cost of system sales......................................................           12,159           10,483
Cost of service revenues..................................................            4,371            3,961
                                                                                     ------           ------
    Cost of revenues......................................................           16,530           14,444
                                                                                     ------           ------
Gross profit..............................................................           17,117           15,202
                                                                                     ------           ------
Operating expenses:
    Selling, general and administrative...................................            9,546            7,273
    Research and development..............................................            3,968            2,797
                                                                                     ------           ------
                                                                                     13,514           10,070
                                                                                     ------           ------
Earnings from operations..................................................            3,603            5,132
                                                                                     ------           ------
Other income (expense):
    Interest and other income.............................................              322              252
    Foreign exchange loss ................................................             (162)            (296)
                                                                                     ------           ------
                                                                                        160              (44)
                                                                                     ------           ------
Earnings before provision for income taxes................................            3,763            5,088
Provision for income taxes................................................            1,411            1,984
                                                                                     ------           ------
Net earnings..............................................................        $   2,352         $  3,104
                                                                                     ======           ======
Per Share Data:
Basic earnings............................................................        $    0.17         $   0.23
                                                                                     ======           ======
Diluted earnings..........................................................        $    0.17         $   0.22
                                                                                     ======           ======

Weighted Average Shares:
Basic.....................................................................          13,784            13,650
                                                                                    ======            ======
Diluted...................................................................          13,909            14,102
                                                                                    ======            ======

</TABLE>

<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                        Nine Months Ended
                                                                                           February 28,
                                                                                      1998            1997
<S>                                                                                   <C>             <C>  

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings.............................................................       $ 3,359            $ 8,458
   Adjustments to reconcile net earnings to net cash and cash  
     equivalents used in operating activities:
   Depreciation and amortization..........................................           3,918              2,709
   Deferred income taxes..................................................             314               (382)
   Changes in operating assets and liabilities:
     Increase in accounts receivable ......................................         (1,554)            (9,695)
     Increase in inventories.............................................             (773)              (284)
     Increase in prepaid expenses and other current assets...............              (45)              (239)
     Increase in other assets............................................              (34)               (40)
     (Decrease) increase in accounts payable and accrued expenses
       and other current liabilities......................................          (2,991)              4,859
                                                                                    ------              ------
   Net cash and cash equivalents provided by operating activities......              2,194               5,386
                                                                                    ------              ------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment..........................              (6,099)             (7,894)
  Proceeds from sales of short-term investments.......................              10,691              10,039
  Purchases of short-term investments.................................             (21,724)             (6,283)
                                                                                    ------              ------
  Net cash and cash equivalents used in investing activities..........             (17,132)             (4,138)
                                                                                    ------              ------
CASH FLOW FROM FINANCING ACTIVITIES:

  Proceeds from stock options exercised...............................                 835                 548
                                                                                    ------              ------
  Net cash and cash equivalents provided by financing activities......                 835                 548
                                                                                    ------              ------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..................             (14,103)              1,796
 
CASH AND CASH EQUIVALENTS, beginning of period..............................        25,092              18,664
                                                                                    ------              ------
CASH AND CASH EQUIVALENTS, end of period....................................       $10,989             $20,460
                                                                                    ======              ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
  Interest .................................................................         ---                   ---
  Income Taxes..............................................................       $ 3,294             $ 3,723


</TABLE>


<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

     1. BASIS OF PRESENTATION

     In the  opinion of  management,  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,  1998 and for all
periods presented.

     Certain  information and footnote  disclosures  normally included in annual
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, 1997 Annual Report and Form 10-K as filed with the  Securities
and Exchange Commission.

     The results of operations  for the three and nine months ended February 28,
1998 and February 28, 1997 are not  necessarily  indicative of the results to be
expected for the full year.  Amounts are presented in thousands except share and
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. EARNINGS PER SHARE

     In the third  quarter of fiscal  1998,  the Company  adopted  Statement  of
Financial  Accounting  Standards No. 128 "Earnings Per Share".  Basic income per
share is determined  using the weighted average number of shares of common stock
outstanding  during each period.  Diluted  income per share further  assumes the
issuance of common shares for all dilutive securities including stock options.

     4. INVENTORIES

        Inventories consist of the following:

                                         February 28, 1998        May 31, 1997
                                         -----------------        ------------

         Raw materials                      $    7,617              $    7,624
         Work-in-process                         6,014                   5,234
                                              ---------              ---------
                                             $  13,631               $  12,858
                                               ========               ========





<PAGE>


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

     Results of Operations

     Nine Months Ended  February 28, 1998 compared to Nine Months Ended February
28, 1997

     Total  Revenues.  Total revenues  increased by 3.9% to $84.8 million in the
first nine months of fiscal 1998 from $81.6 million in the comparable  period of
the prior fiscal year.  System sales were $63.0 million in the first nine months
of fiscal  1998  compared  with $63.9  million  in the same  period in the prior
fiscal year.  Service revenues  increased by 23.2% to $21.8 million in the first
nine months of fiscal 1998 from $17.7  million in the  comparable  period of the
prior  fiscal year,  primarily  due to the addition of more units to the service
base.

     Gross  Profit.  Gross profit of $41.3  million for the first nine months of
fiscal 1998 was unchanged from the  comparable  period of the prior fiscal year.
Gross  profit as a  percentage  of total  revenues  was 48.7% in the first  nine
months of fiscal 1998 compared with 50.6% in the same period in the prior fiscal
year. Gross profit on system sales decreased by $2.2 million to $32.3 million in
the first nine months of fiscal 1998 from $34.5 million in the comparable period
of the prior  fiscal  year.  The gross  margin on system  sales was 51.2% in the
first nine months of fiscal 1998  compared  with 54.0% in the same period of the
prior fiscal year. The Company  attributes this decrease primarily to the normal
variations  in  product  mix  and  the  continued   investments  in  application
development infrastructure to support growth in all markets.

     Gross profit on service  revenues  increased by $2.3 million,  or 33.8%, to
$9.1  million in the first nine months of fiscal  1998 from $6.8  million in the
comparable  period of the prior  fiscal year.  Gross margin on service  revenues
increased  to 41.6% in the first  nine  months of fiscal  1998 from 38.3% in the
comparable  period  of the  prior  fiscal  year.  This  increase  was  primarily
attributable to the addition of more units to the service base partially  offset
by higher cost to support organizational growth.

     Selling,  General  and  Administrative   Expenses.   Selling,  General  and
Administrative  ("SG&A")  expenses  were $26.0 million and $20.6 million for the
first nine months of fiscal 1998 and 1997,  respectively,  or 30.7% and 25.2% of
total revenues, respectively. The increase in the dollar amount of SG&A expenses
was  primarily  related to the continued  expansion of the  Company's  sales and
marketing efforts in domestic and international markets and to increases in SG&A
expenses  necessary  to support  anticipated  future  increases  in the level of
sales.

     Research  and  Development  Expenses.   Research  and  Development  ("R&D")
expenses were $10.7 million and $7.8 million for the first nine months of fiscal
1998 and 1997, respectively, or 12.7 % and 9.6% 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 170 from 119 between
February  28,  1998 and 1997,  respectively  to support  continuing  new product
development. 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.


<PAGE>


     Other Income (Expense).  Other income was $0.8 million and $1.0 million for
the nine months  ended  February 28, 1998 and 1997,  respectively.  Interest and
other  income of $1.0  million for the nine months  ended  February 28, 1998 was
unchanged from the prior year period. The Company had a foreign exchange loss of
$0.2  million in the nine months ended  February 28, 1998  compared to a foreign
exchange gain of $0.03  million for the nine months ended  February 28, 1997. 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 the utilization of research and  development  tax credits,  state and local
income taxes, and exempt income of the Company's foreign sales corporation.  The
Company's  effective  income tax rates were 37.5% and 39.0% for the nine  months
ended February 28, 1998 and 1997, respectively.

     Foreign Operations. The Company's European subsidiary operated at a loss of
approximately  $1.2 million  during the nine months  ended  February 28, 1998 as
compared to a profit of $0.1 million  during the nine months ended  February 28,
1997.  The increase in such losses was  attributed  to an increase in the dollar
amount of SG&A  expenses to support  the  expansion  of the sales and  marketing
effort.  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  $0.4
million and $0.3 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, 1998 and 1997, respectively.


     Three  Months  Ended  February  28,  1998  compared to Three  Months  Ended
February 28, 1997

     Total Revenues.  Total revenues  increased by 13.5% to $33.6 million in the
three months ended February 28, 1998 from $29.6 million in the comparable period
of the prior fiscal year.  System sales  increased by 10.2% to $25.9  million in
the three months ended  February 28, 1998 from $23.5  million in the  comparable
period of the prior fiscal year. The increase in system sales was due to a 45.0%
increase in domestic sales which was partially and offset by a 29.2% decrease in
international  sales compared with the prior year period. The increase in system
sales was primarily due to an increase in unit sales  volume.  Service  revenues
increased by 26.0% to $7.8  million in the three months ended  February 28, 1998
from $6.2 million in the comparable  period of the prior fiscal year,  primarily
due to the addition of more units to the service base.

     Gross Profit. The Company's gross profit increased by $1.9 million to $17.1
million in the three months ended  February 28, 1998 compared with $15.2 million
in the same period in the prior  fiscal year.  Gross  profit as a percentage  of
total  revenues was 50.9% in the three months ended  February 28, 1998  compared
with 51.3% in the same period in the prior year.  Gross  profit on system  sales
increased  by $0.7 million to $13.7  million in the three months ended  February
28, 1998 from $13.0 million in the  comparable  period of the prior fiscal year.
The gross margin on system  sales was 53.0% in the three  months ended  February
28, 1998  compared  with 55.3% in the same period in the prior fiscal year.  The
Company  attributes this decrease  primarily to the normal variations in product
mix and the continued investments in application  development  infrastructure to
support growth in all markets.


<PAGE>



     Gross profit on service  revenues  increased by $1.2 million,  or 54.0%, to
$3.4 million in the three  months  ended  February 28, 1998 from $2.2 million in
the comparable period of the prior fiscal year. Gross margin on service revenues
increased to 43.9% in the three months ended February 28, 1998 from 36.0% in the
comparable  period of the prior fiscal year.  This increase was  attributable to
the addition of more units to the service base  partially  offset by higher cost
to support organizational growth.

     Selling,  General  and  Administrative   Expenses.   Selling,  General  and
Administrative  ("SG&A")  expenses  were $9.5  million and $7.3  million for the
three months ended February 28, 1998 and 1997, respectively,  or 28.4% and 24.5%
of total  revenues,  respectively.  The  increase  in the dollar  amount of SG&A
expenses was primarily related to the continued expansion of the Company's sales
and marketing efforts in domestic and international  markets and to increases in
SG&A expenses necessary to support  anticipated future increases in the level of
sales.

     Research  and  Development  Expenses.   Research  and  Development  ("R&D")
expenses were $4.0 million and $2.8 million for the three months ended  February
28,  1998  and  1997,  respectively,  or  11.8%  and  9.4%  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 170 from 119
between  February  28, 1998 and 1997,  respectively  to support  continuing  new
product development.  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 $0.1 million and other expense was
$0.04  million  for  the  three  months  ended   February  28,  1998  and  1997,
respectively.  Interest  and other  income of $0.3  million for the three months
ended  February 28, 1998 was  unchanged  from the prior fiscal year period.  The
Company had a foreign  exchange  loss of $0.2  million in the three months ended
February 28, 1998 compared to a loss of $0.3 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 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 the utilization of research and  development  tax credits,  state and local
income taxes, and exempt income of the Company's foreign sales corporation.  The
Company's  effective  income tax rates were 37.5% and 39.0% for the three months
ended February 28, 1998 and 1997, respectively.



<PAGE>



     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 $41.1  million of net
proceeds to the  Company.  Cash flow from  operations  was $2.2 million and $5.4
million for the nine months ended February 28, 1998 and 1997,  respectively.  At
February 28, 1998, the Company had working  capital of $57.5 million,  including
$22.0  million of cash and cash  equivalents  and  short-term  investments.  The
Company  expects its working capital needs to increase along with planned future
revenue growth.

     At February 28, 1998, current assets and current  liabilities  decreased by
$0.6 million and $3.0 million, respectively, compared with May 31, 1997. Current
assets  decreased  primarily  as a  result  of  a  decrease  in  cash  and  cash
equivalents and short term investments.  Current liabilities decreased primarily
due to reduced levels of accrued expenses.

     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) for this
period were  approximately 100 days. The average days sales outstanding were 111
days, 83 days and 98 days at May 31, 1997, 1996 and 1995, respectively.

     The Company's  inventory increased to $13.6 million as of February 28, 1998
from $12.9 million as of May 31, 1997.

     The Company has a $15.0 million  unsecured line of credit with a bank which
expires on November  30,  1998.  As of  February  28,  1998,  the Company had no
borrowings under this line of credit.  Any borrowing on this line of credit will
bear interest at the prime rate.

     The  Company  made  capital  expenditures  totaling  $6.1  million and $7.9
million  during the nine months  ended  February 28, 1998 and February 28, 1997,
respectively.

     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.


<PAGE>


     Inflation

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

     Recent Financial Accounting Standards Board Statements

     Recent  pronouncements of the Financial Accounting Standards Board ("FASB")
which  are not  required  to be  adopted  at this  date  include,  Statement  of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise  and Related  Information  ("SFAS  131"),  and Statement of Financial
Accounting  Standards No. 130,  "Reporting  Comprehensive  Income" ("SFAS 130").
SFAS 131 and SFAS 130 are effective for fiscal years  beginning  after  December
15,  1997.  The  adoption  of these  pronouncements  is not  expected  to have a
material impact on the Company's consolidated financial statements.

     The Company adopted  Statement of Financial  Accounting  Standards No. 129,
"Disclosure of Information  about Capital  Structure" ("SFAS 129") and Statement
of Financial  Accounting  Standards  No. 128,  "Earnings per Share" ("SFAS 128")
during the quarter ended February 28, 1998.

     In October of 1997, the  Accounting  Standards  Executive  Committee of the
American  Institute of Certified Public Accountants issued Statement of Position
97-2  "Software  Revenue  Recognition"  ("SOP 97-2").  This  statement  provides
guidance on applying  generally  accepted  accounting  principles in recognizing
revenues  on software  transactions.  This  Statement  supercedes  Statement  of
Position 91-1 "Software  Revenue  Recognition".  This Statement is effective for
transactions entered into in fiscal years beginning after December 15, 1997.

     Based upon Periphonics' reading and interpretation of SOP 97-2, the Company
believes that the  implementation  of SOP 97-2 will not have a material  adverse
affect on  expected  revenues  or  earnings.  However,  detailed  implementation
guidelines  for this  standard  have  not yet been  issued.  Once  issued,  such
detailed  guidance could lead to unanticipated  changes in the Company's current
revenue  accounting  practices  and material  adverse  changes in the  Company's
reported revenues and earnings. In the event implementation guidance is contrary
to the Company's revenue  accounting  practices,  the Company believes it may be
possible to change its current  business  practices to comply with this guidance
and  avoid any  material  adverse  effect on  reported  revenues  and  earnings.
However, there can be no assurance this will be the case.





<PAGE>


     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, 1998 and its Form 10-K for the fiscal year ended May 31, 1997.

     The Company  undertakes  no  obligation  to  publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

     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 shipments to customers,  delays in developments
and  customer   acceptance  of  custom   software   applications,   new  product
introductions or announcements by the Company and/or competitors, 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  adverse effect on
the Company's results of operations during such period.



<PAGE>


                           PART II - OTHER INFORMATION

     Item 1. Legal Proceedings

     In April, 1997, Lucent  Technologies,  Inc. ("Lucent") notified the Company
that certain of the Company's  products  were, in Lucent's  opinion,  infringing
certain Lucent patents.  In September,  1997, Lucent advised the Company that in
Lucent's opinion additional Lucent patents were being infringed by the Company's
products  and  offered a license on the  identified  patents.  The  Company  has
reviewed the information  which Lucent furnished  concerning these patents,  and
the Company currently believes that its products do not violate any valid claims
of the identified patents.

     If the Company does determine that, for business or legal reasons, it needs
to obtain licenses from Lucent for the use of one or more patents,  there can be
no assurance that the terms of such licenses,  including  payments to Lucent for
products previously sold and for future sales, would not have a material adverse
affect on the Company's  financial  condition or results of  operations.  In the
event the Company  decides not to seek such  licenses,  or if the Company cannot
reach a  satisfactory  agreement  with  Lucent  as to the  terms  of one or more
licenses,  the Company could become involved in litigation which could be costly
and distracting to its management.  There can be no assurance as to the ultimate
outcome of any  litigation,  or that the costs and  effects  of such  litigation
would not have a material  adverse affect on the Company's  business,  financial
condition or results of operations.

     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

     None


<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 13, 1998