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 August 31, 1998

     [ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934

     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 are 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, including treasury shares, as of the latest practicable date:
October 12, 1998

                  Class of                     Number
                  Common Equity               of Shares

                  Common Stock,
                  Par value $.01             13,477,046


<PAGE>

                             PERIPHONICS CORPORATION
                                AND SUBSIDIARIES


                                      INDEX


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


Item 1. Financial Statements

         Consolidated Balance Sheets - August 31, 1998                                          3
         and May 31, 1998

         Consolidated Statements of Earnings - Three Months                                     4
         Ended August 31, 1998 and August 31, 1997

         Consolidated Statements of Cash Flows -Three Months                                    5
         Ended August 31, 1998 and August 31, 1997

         Notes to Unaudited Consolidated Financial Statements                                   6

Item 2. Management's Discussion and Analysis of Financial                                      7-12
         Condition and Results of Operations

Part II. Other Information                                                                      13

         Signatures                                                                             14


</TABLE>

<PAGE>


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

                                                                              August 31, 1998         May 31, 1998
                                                                                (Unaudited)             (Audited)
                                                                              ---------------         ------------
<S>                                                                               <C>                     <C>    

ASSETS
------
Current Assets:
Cash and cash equivalents................................................         $ 10,439            $  14,810
Short-term investments...................................................           11,214               11,033
Accounts receivables, less allowance for doubtful
    accounts of $1,466 and $1,266, respectively..........................           38,052               37,721
Inventories..............................................................           16,036               14,066
Deferred income taxes....................................................            1,794                1,687
Prepaid expenses and other current assets................................            1,272                1,367
                                                                                   -------              -------
   Total current assets..................................................           78,807               80,684

Property, plant and equipment, net.......................................           19,822               19,498
Other assets.............................................................              458                  425
                                                                                   -------             --------
TOTAL ASSETS.............................................................         $ 99,087            $ 100,607
                                                                                   =======             ========

LIABILITIES AND STOCKHOLDERS' EQUITY 
------------------------------------
Current Liabilities:
Accounts payables........................................................         $  6,612            $   8,273
Accrued expenses and other current liabilities...........................           15,706               14,328
                                                                                   -------              -------
    Total current liabilities............................................           22,318               22,601
Deferred income taxes....................................................               51                  146
                                                                                   -------              -------
TOTAL LIABILITIES......................................................             22,369               22,747



Stockholders' Equity:
Preferred stock, par value $.01 per share,                                           ---                  ---
    1,000,000 shares authorized, none issued
Common stock, par value $.01 per share,                                                138                 138
    30,000,000 shares authorized, 13,846,305 issued and
    13,519,305 shares outstanding  as of August 31,  1998; 
    13,843,305 shares issued and outstanding as of May 31, 1998
Additional paid-in capital...............................................           43,785              43,780
Retained earnings.........................................................          35,058              33,942
                                                                                   -------             -------
                                                                                    78,981              77,860
Treasury stock, 327,000 shares.........................................             (2,263)               ---
                                                                                   -------             -------
    Total stockholders' equity...........................................           76,718              77,860
                                                                                  --------            --------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...........................         $ 99,087            $100,607
                                                                                   =======            ========

</TABLE>

<PAGE>


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

<TABLE>
<CAPTION>

                                                                                               Three Months Ended
                                                                                                    August 31,
                                                                                              1998             1997
                                                                                              ----             ---- 
<S>                                                                                         <C>              <C>    
System revenues...............................................................             $ 22,166         $ 15,416
Maintenance revenues..........................................................                8,239            7,144
                                                                                            -------          -------
   Total revenues.............................................................               30,405           22,560
                                                                                            -------          -------
Cost of system revenues.......................................................               10,380            7,857
Cost of maintenance revenues..................................................                4,360            4,009
                                                                                            -------          -------
   Cost of revenues...........................................................               14,740           11,866
                                                                                            -------          -------
Gross profit..................................................................               15,665           10,694
                                                                                            -------          -------
Operating expenses:
    Selling, general and administrative.......................................                9,777            7,449
    Research and development..................................................                4,610            3,213
                                                                                            -------          -------
                                                                                             14,387           10,662
                                                                                            -------          -------
Earnings from operations......................................................                1,278               32
                                                                                            -------          -------
Other income (expense):
    Interest and other income.................................................                  333              379
    Foreign exchange gain (loss)..............................................                  234             (280)
                                                                                            -------          -------
                                                                                                567               99
                                                                                            -------          -------
Earnings before provision for income taxes....................................                1,845              131
Provision for income taxes....................................................                  729               49
                                                                                            -------          -------
Net earnings..................................................................             $  1,116          $    82
                                                                                           ========         ========

Per share data:
Basic earnings................................................................             $   0.08         $   0.01
                                                                                           ========         ========
Diluted earnings..............................................................             $   0.08         $   0.01
                                                                                           ========         ========

Weighted average shares:
Basic.........................................................................               13,852           13,720
                                                                                           ========         ========
Diluted.......................................................................               13,937           14,026
                                                                                           ========         ========


</TABLE>

<PAGE>


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

                                                                                                  Three Months Ended
                                                                                                       August 31,
                                                                                                  1998            1997
                                                                                                  ----            ----
<S>                                                                                             <C>              <C>    

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................................................            $  1,116        $    82
Adjustments to reconcile net earnings to net cash and cash
    equivalents used in operating activities:
   Depreciation and amortization....................................................               1,628          1,266
   Deferred income taxes............................................................                (202)          (157)
   Changes in operating assets and liabilities:
   (Increase) decrease in accounts receivables......................................                (331)         9,739
   Increase in inventories..........................................................              (1,970)          (891)
   Decrease in prepaid expenses and other current assets............................                  95            103
   Increase in other assets.........................................................                 (34)           (64)
   Decrease in accounts payable and accrued expenses
    and other current liabilities...................................................                (277)        (7,167)
                                                                                                 -------        -------
   Net cash and cash equivalents provided by operating activities...................                  25          2,911
                                                                                                 -------        -------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property, plant and equipment....................................              (1,952)        (1,680)
      Proceeds from sales of short-term investment..................................               7,615            ---
      Purchases of short-term investment............................................              (7,796)       (10,788)
                                                                                                 -------        -------
      Net cash and cash equivalents used in financing activities....................              (2,133)       (12,468)
                                                                                                 -------        -------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Purchase of treasury stock....................................................              (2,263)          ---
      Proceeds from stock options exercised.........................................                ---             426
                                                                                                 -------        -------
      Net cash and cash equivalents (used in) provided by financing activities......              (2,263)           426
                                                                                                 -------        -------

NET DECREASE IN CASH AND CASH EQUIVALENTS...........................................              (4,371)        (9,131)

CASH AND CASH EQUIVALENTS beginning of year.........................................              14,810         25,092
                                                                                                 -------         ------
CASH AND CASH EQUIVALENTS, end of period............................................             $10,439        $15,961
                                                                                                ========       ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest............................................................................            $    ---       $    ---
Income Taxes........................................................................            $  2,183       $  2,490

</TABLE>



<PAGE>


                    PERIPHONICS CORPORATION AND SUBSIDIATIES
              NOTES TO UNAUDITED 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 August 31, 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, 1998 Annual Report and Form 10-K as filed with the  Securities
and Exchange Commission.

     The results of  operations  for the three  months ended August 31, 1998 and
August 31, 1997 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. 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.

     3. INVENTORIES
        -----------
       Inventories consist of the following:

                                      August 31, 1998            May 31, 1998
                                      ---------------            ------------

       Raw material                      $ 9,735                    $ 8,528
       Work-in-process                     6,301                      5,538
                                         -------                    -------
                                         $16,036                    $14,066
                                         =======                    =======








<PAGE>


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



Results of Operations

Three Months Ended August 31,1998 compared to Three Months Ended August 31,1997
-------------------------------------------------------------------------------

     Total Revenues.  Total revenues  increased by 34.8% to $30.4 million in the
first three months of fiscal 1999 from $22.6 million in the comparable period of
the prior fiscal year.  System  revenues  increased by 43.8% to $22.2 million in
the first three months of fiscal 1999  compared  with $15.4  million in the same
period in the prior  fiscal year.  The increase in system  revenues was due to a
44.7% increase in domestic sales and a 42.1%  increase in  international  sales.
The increase in system  revenues was  primarily due to an increase in unit sales
volume.  Maintenance  revenues  increased  by 15.3% to $8.2 million in the first
three months of fiscal 1999 compared with $7.1 million in the same period of the
prior fiscal year, primarily due to additions to the service base.

     Gross Profit. The Company's gross profit increased by $5.0 million to $15.7
million in the first three months of fiscal 1999  compared with $10.7 million in
the comparable  period of the prior fiscal year. Gross profit as a percentage of
total  revenues  increased  to 51.5% in the first  three  months of fiscal  1999
compared with 47.4% in the comparable  period of the prior year. Gross profit on
system  revenues  increased by $4.2 million to $11.8  million in the first three
months of fiscal 1999 compared with $7.6 million in the comparable period of the
prior fiscal year. The gross margin on system revenues increased to 53.2% in the
first three months of fiscal 1999  compared with 49.0% in the same period of the
prior fiscal year. The Company attributes this increase primarily to the product
mix during the current  three month period,  with a larger  percentage of higher
margin  standard  hardware  and software  products and to an improved  margin on
custom programming revenues.

     Gross profit on maintenance revenues increased by $0.7 million, or 23.7% to
$3.9 million in the first three months of fiscal 1999 compared with $3.1 million
in the comparable  period of the prior fiscal year. Gross margins on maintenance
revenues  increased to 47.1% in the first three  months of fiscal 1999  compared
with 43.9% in the  comparable  period of the prior fiscal year.  The increase in
margin  was  attributed  to the  addition  of more  units  to the  service  base
partially offset by higher costs to support organizational growth.

     Selling,  General  and  Administrative   Expenses.   Selling,  General  and
Administrative  ("SG&A") expenses were $9.8 million, or 32.2% of total revenues,
compared  with $7.4  million,  or 33.0% of total  revenues,  for the first three
months of fiscal 1999 and 1998, respectively. The increased expense level can be
attributed  primarily  to the  Company's  continued  expansion  of its sales and
marketing  efforts designed to increase its market  penetration and market share
on a global basis.


<PAGE>


     Research  and  Development  Expenses.   Research  and  Development  ("R&D")
expenses,  primarily  for new products  and  features,  increased  43.5% to $4.6
million,  or 15.2% of total  revenues,  compared with $3.2 million,  or 14.2% of
total  revenues,  for the first three months of fiscal 1998. The increase in the
dollar amount of R&D expenses  reflects the continued  efforts of the Company to
broaden  the  scope  of  its  product  offerings  in  order  to  address  growth
opportunities  in the  marketplace.  R&D expenses are charged to  operations  as
incurred,  and no software development costs have been capitalized.  The Company
expects such  expenditures to continue to increase,  although such expenses as a
percentage of total revenues may vary from period to period.

     Other Income (Expense).  Other income was $0.6 million and $0.1 million for
the three  months  ended  August 31, 1998 and 1997,  respectively.  Interest and
other income decreased to $0.3 million in the three months ended August 31, 1998
compared  with $0.4  million in the three  months  ended  August 31,  1997.  The
Company had a foreign  exchange  gain of $0.2  million in the three months ended
August 31, 1998  compared  to a foreign  exchange  loss of $0.3  million for the
three months ended August 31, 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 39.5% and 37.5% for the three months
ended August 31, 1998 and August 31, 1997, respectively.

     Foreign Operations.  The Company's European subsidiary operated at a profit
of  approximately  $0.7 million during the three months ended August 31, 1998 as
compared to a loss of $1.1  million  during the three  months  ended  August 31,
1997.  This  profit was  attributed  to an increase  in gross  profit  primarily
attributable to an increase of  approximately  200% in increased system revenues
and an increase of approximately 27% in maintenance revenues,  offset in part by
increased  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  $0.2
million and $0.1 million of  intercompany  gross profit  earned by the Company's
North American operations on system revenues by the European subsidiary to third
parties  during the three  months  ended  August 31,  1998 and August 31,  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  breakeven  and $2.9
million for the three months ended  August 31, 1998 and 1997,  respectively.  At
August 31,  1998 the Company had  working  capital of $56.5  million,  including
$21.7  million of cash and cash  equivalents  and  short-term  investments.  The
Company  expects its working capital needs to increase along with future revenue
growth.

     At August 31, 1998,  current  assets and current  liabilities  decreased by
$1.9 million and $0.3 million,  respectively,  compared to May 31, 1998. Current
assets  decreased  primarily  as a  result  of  a  decrease  in  cash  and  cash
equivalents resulting primarily from the authorized repurchase of 327,000 shares
of the Company's common stock,  discussed below.  Current liabilities  decreased
primarily due to lower accounts payable.

     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 115 days. The average days sales outstanding were 107
days, 111 days, and 83 days at May 31, 1998, 1997 and 1996 respectively.

     The  Company's  inventory  increased to $16.0 million as of August 31, 1998
from $14.1 million as of May 31, 1998.

     The Company has a $15.0 million  unsecured line of credit with a bank which
expires  on  November  30,  1998.  As of  August  31,  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  $2.0  million and $1.7
million  during the three  months  ended  August 31,  1998 and August 31,  1997,
respectively.

     Financing  activities  during the first quarter of fiscal 1999 included the
repurchase  of  327,000  shares  of the  Company's  common  stock  at a cost  of
approximately $2.3 million,  pursuant to authorization by its Board of Directors
during fiscal 1999 to repurchase up to 1,300,000  shares.  Subsequent to the end
of the first  quarter of fiscal  1999,  the Company  repurchased  an  additional
99,500  shares of the  Company's  common stock at a cost of  approximately  $0.7
million.

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

     Year 2000 Compliance

     The Year 2000 issue exists because many computer  systems and  applications
use  two-digit  date  fields to  designate a year.  As the  century  date change
occurs, date sensitive systems may not be able to recognize the year 2000 or may
do so  incorrectly  as the year 1900.  This  inability  to recognize or properly
interpret the year 2000 may result in the incorrect  processing of financial and
operational information.

<PAGE> 

     The Company has  initiated  a program to upgrade its  internal  information
systems to address any Year 2000  compliance  issues.  This  program  includes a
focus on internal  policies,  methods and tools,  as well as  coordination  with
customers  and  suppliers.  The  Company  expects  its Year 2000  program  to be
completed on a timely  basis.  However,  there is no assurance  that the Company
will  identify  and  resolve  any and all Year 2000  compliance  issues with its
information  systems in a timely manner,  that the expenses associated with such
efforts  will not be  significant,  or that such issues will not have a material
adverse  effect on the  Company's  business,  operating  results  and  financial
condition.

     The Company  has made a thorough  review and  testing of its  products  and
believes  that its  current  products  are Year 2000  compliant.  The  Company's
assessment of its current  products is partially  dependent upon the accuracy of
representations  concerning Year 2000 compliance made by its suppliers,  such as
Sun and Microsoft,  among others.  Many of the Company's customers are, however,
using  earlier  versions of the Company's  products,  which may not be Year 2000
compliant.  The  Company  has  initiated  programs  to  proactively  notify such
customers  of the risks  associated  with using these  products  and to actively
encourage such customers to migrate to the Company's current products.

     In addition,  the  Company's  products are  generally  integrated  within a
customer's  enterprise system,  which may involve products and systems developed
by other vendors.  A customer may mistakenly  believe that Year 2000  compliance
problems with its enterprise system are attributable to products provided by the
Company. The Company may, in the future, be subject to claims based on Year 2000
compliance  issues related to a customer's  enterprise  system or other products
provided by third parties,  custom  modifications to the Company's products made
by third  parties,  or issues  arising  from the  integration  of the  Company's
products  with  other  products.  The  Company  has  not  been  involved  in any
proceeding  involving  its  products or services in  connections  with Year 2000
compliance,  however,  there is no  assurance  that the Company will not, in the
future,  be  required to defend its  products  or  services in such  proceedings
against claims of Year 2000 compliance  issues,  and any resulting  liability of
the Company for damages  could have a material  adverse  effect on the Company's
business, operating results and financial condition.

     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. 132,  "Employers  Disclosures about Pensions and Other
Postretirement  Benefits" ("SFAS 132").  SFAS 131 and SFAS 132 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. 130
effective June 1, 1998 and the adoption had no effect on the Company's financial
statements as the Company had no components of comprehensive income.

     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".  The Company  adopted SOP 97-2
effective June 1, 1998.

<PAGE>

     Based  upon  Periphonics'  reading  and  interpretation  of SOP  97-2,  the
implementation  of SOP 97-2 has not had a material adverse affect on 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.

     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   (primarily
inventories,   accounts   receivable  and  intercompany  debt)  of  the  foreign
subsidiaries  of the  Company  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.

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

     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  forecast 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

     On July  7,  1998  Lucent  Technologies,  Inc.  ("Lucent")  filed a  patent
infringement  action in the United  States  District  Court in the  District  of
Delaware  alleging that Periphonics  infringed some nine patents of Lucent.  The
Company  believes the claims  contained in the lawsuit are without merit and, in
an answer  filed on  September  24,  1998,  denied the  substantive  elements of
Lucent's  lawsuit  and set forth  affirmative  defenses  and made  counterclaims
against  Lucent.  The Company is involved in certain  other legal matters in the
normal  course of  business.  The  Company's  management  does not believe  that
resolution of these matters will have a material adverse effect on the Company's
consolidated financial statements.



     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

     On  August  6,  1998,  the  Company  filed a Form 8-K with  respect  to the
authorization  by its Board of Directors to repurchase up to 1.3 million  shares
of the  Company's  common stock and the Company's  announcement  of its plans to
repurchase the stock in the open market. The timing of repurchases and number of
shares actually  repurchased will depend on a variety of factors,  such as price
and other market considerations.


<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 Account Officer), Secretary
                                        and Director





Date: October 15, 1998