<PAGE>


                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

                                      FORM 10-Q
      [Mark One]

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

           For the quarterly period ended March 31, 1999

                                          OR

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

           For the transition period from _____________ to _______________

                            Commission File No. 000-20068

                               PRECISION SYSTEMS, INC.                         
                -----------------------------------------------------
                (Exact name of registrant as specified in its charter)

                   Delaware                           41-1425909              
        -------------------------------  -------------------------------------
        (State or other jurisdiction of   (I.R.S. Employer Identification No.)
        incorporation or organization)

                11800 30th Court North, St. Petersburg, Florida  33716         
                ------------------------------------------------------
                       (Address of principal executive offices)

                                    (727) 572-9300                             
                ------------------------------------------------------
                 (Registrant's telephone number, including area code)

                                    Not applicable                             
                ------------------------------------------------------
                 (Former name, former address and former fiscal year,
                            if changed since last report)

           Indicate  by check  mark whether  the registrant  (1) has  filed all
      reports required  to be filed  by Section 13  or 15(d) of  the Securities
      Exchange Act  of 1934 during the preceding 12 months (or for such shorter
      period that  the registrant was required  to file such reports),  and (2)
      has been subject to such filing requirements for the past 90 days. 
                                    Yes [X]  No [ ]

           APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares
      outstanding of  each of the issuer's  classes of capital stock  as of the
      latest practicable date.

           Total number of  shares of outstanding  capital stock as  of May  7,
      1999:

      Common Stock  . . . . . . . . . . . . . . . . . . . . . . . .  17,886,787<PAGE>


                            PART I - FINANCIAL INFORMATION

      ITEM 1   FINANCIAL STATEMENTS

                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

                                                 Three months ended March 31,  
                                                -------------------------------
                                                     1999            1998      
                                                --------------- ---------------
      Revenues                                  
       Contract revenue   . . . . . . . . . . . $    1,449,780  $      999,757 
       Service and support    . . . . . . . . .      3,662,960       4,736,798 
       License fee revenue  . . . . . . . . . .      1,607,204         931,862 
                                                --------------- ---------------
                                                     6,719,944       6,668,417 
                                                --------------- ---------------
      Cost of sales, exclusive of               
       depreciation and amortization shown      
       separately below   . . . . . . . . . . .      3,128,610       5,118,958 
                                                
      Operating Expenses                        
       Selling, general, and administrative   .      2,452,002       3,648,397 
       Research, engineering and development  .        573,221       1,312,638 
       Depreciation and amortization  . . . . .        581,308         832,790 
                                                --------------- ---------------
                                                     3,606,531       5,793,825 
                                                --------------- ---------------
      Operating loss  . . . . . . . . . . . . .        (15,197)     (4,244,366)
      Interest expense, net . . . . . . . . . .        126,477          90,627 
                                                --------------- ---------------
      Loss before income taxes  . . . . . . . .       (141,674)     (4,334,993)
      Income taxes  . . . . . . . . . . . . . .          -               -     
                                                --------------- ---------------
      Net Loss  . . . . . . . . . . . . . . . .       (141,674)     (4,334,993)
      Other Comprehensive Income                
       Foreign currency translation             
         adjustments  . . . . . . . . . . . . .       (153,372)        118,907 
                                                --------------- ---------------
      Comprehensive Loss  . . . . . . . . . . . $     (295,046) $   (4,216,086)
                                                =============== ===============
      Net Loss Applicable to Common Stock       
       Net loss   . . . . . . . . . . . . . . . $     (141,674) $   (4,334,993)
       Preferred stock dividend                 
         requirements . . . . . . . . . . . . .       (174,570)       (170,949)
                                                --------------- ---------------
                                                $     (316,244) $   (4,505,942)
                                                =============== ===============
      Basic and Diluted Loss Per Share          
       Net loss   . . . . . . . . . . . . . . . $         (.01) $         (.24)
                                                =============== ===============
       Net loss applicable to common stock  . . $         (.02) $         (.25)
                                                =============== ===============

                 The accompanying notes are an integral part of these
                     condensed consolidated financial statements.


                                          1<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                        CONDENSED CONSOLIDATED BALANCE SHEETS


                                                   March 31,     December 31,
                                                     1999            1998      
                        ASSETS                  --------------- ---------------
                                                  (unaudited)
      Current Assets                            
       Cash and cash equivalents  . . . . . . . $    2,865,602  $    2,543,763 
       Accounts and contracts receivable, net .      7,114,903       6,823,640 
       Supplies and other current assets  . . .      2,552,854       2,381,153 
       Costs and earnings in excess of billings 
         on uncompleted contracts . . . . . . .      1,195,595       1,425,303 
                                                --------------- ---------------
          Total current assets  . . . . . . . .     13,728,954      13,173,859 
                                                --------------- ---------------
      Property, Plant and Equipment, Net  . . .      6,052,086       6,821,741 
      Intangible Assets, Net  . . . . . . . . .         34,794          37,822 
                                                --------------- ---------------
                                                $   19,815,834  $   20,033,422 
                                                =============== ===============


                 The accompanying notes are an integral part of these
                     condensed consolidated financial statements.































                                          2<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

                                                   March 31,     December 31,
                                                     1999            1998      
        LIABILITIES AND STOCKHOLDERS' DEFICIT   --------------- ---------------
                                                  (unaudited)
      Current Liabilities                       
       Current portion of long-term debt  . . . $    9,836,746  $    9,864,171 
       Accounts payable   . . . . . . . . . . .      4,318,164       5,758,372 
       Accrued expenses   . . . . . . . . . . .      6,123,042       6,985,381 
       Billings in excess of costs and earnings 
         on uncompleted contracts . . . . . . .      1,868,970       1,010,680 
       Deferred revenue   . . . . . . . . . . .      2,264,833         723,464 
                                                --------------- ---------------
         Total current liabilities  . . . . . .     24,411,755      24,342,068 
                                                --------------- ---------------
      Long-term Debt  . . . . . . . . . . . . .        100,832         154,137 
                                                --------------- ---------------
      Commitments and Contingencies . . . . . . 
      Stockholders' Deficit                     
       Non-redeemable preferred stock   $.01    
         par value; authorized 50,000 shares:  
          Series A 6 percent Cumulative         
           Convertible Preferred Stock;         
           convertible at $4.76 per share;      
           issued and outstanding 10,000        
           shares; liquidation preference       
           $5,800,000 . . . . . . . . . . . . .            100             100 
          Series B 8 percent Cumulative         
           Convertible Preferred Stock;         
           convertible at $4.47 per share,      
           issued and outstanding               
           4,500 shares; liquidation            
           preference $4,500,000  . . . . . . .             45              45 
       Common stock   $.01 par value;           
         authorized 30,000,000 shares,          
         issued 18,019,644 and 17,986,106       
         shares, respectively . . . . . . . . .        180,196         179,861 
       Additional paid-in capital   . . . . . .    113,426,639     113,554,218 
       Accumulated deficit  . . . . . . . . . .   (120,794,168)   (120,652,494)
       Treasury stock (132,937 shares)          
         at cost  . . . . . . . . . . . . . . .       (422,360)       (422,360)
       Accumulated preferred stock dividends  .      2,554,119       2,379,549 
       Accumulated other comprehensive income .        358,676         512,048 
       Unearned compensation  . . . . . . . . .          -             (13,750)
                                                --------------- ---------------
         Total stockholders' deficit  . . . . .     (4,696,753)     (4,462,783)
                                                --------------- ---------------
                                                $   19,815,834  $   20,033,422 
                                                =============== ===============

                 The accompanying notes are an integral part of these
                     condensed consolidated financial statements.



                                          3<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (unaudited)

                                                 Three months ended March 31,  
                                                -------------------------------
                                                     1999            1998      
                                                --------------- ---------------
      Cash Flows   Operating Activities:        
       Net loss   . . . . . . . . . . . . . . . $     (141,674) $   (4,334,993)
       Adjustments to reconcile net loss to     
         net cash provided by (used in)
         operating activities:
         Depreciation and amortization  . . . .        581,308         832,790 
         Amortization of unearned compensation.         13,750          88,750 
         Loss on sale of property, plant and    
          equipment . . . . . . . . . . . . . .          -              55,146 
         Change in current assets and           
         liabilities:
          Accounts and contracts receivable . .       (291,263)      1,100,807 
          Costs and earnings in excess of       
           billings on uncompleted contracts  .        229,708      (1,262,157)
          Supplies and other current assets . .       (171,701)        (97,339)
          Accounts payable  . . . . . . . . . .     (1,440,208)        (95,764)
          Accrued expenses  . . . . . . . . . .       (688,734)        (30,705)
          Billings in excess of costs and       
           earnings on uncompleted contracts  .        858,290       1,171,141 
          Deferred revenue  . . . . . . . . . .      1,541,369       1,031,179 
                                                --------------- ---------------
           Net cash provided by (used in)       
            operating activities  . . . . . . .        490,845      (1,541,145)
                                                --------------- ---------------
                                                
      Cash Flows   Investing Activities:        
       Purchase of property, plant and                (198,174)       (941,396)
         equipment  . . . . . . . . . . . . . .
       Proceeds from sale of property, plant    
         and equipment  . . . . . . . . . . . .         45,297           -     
                                                --------------- ---------------
         Net cash used in investing activities.       (152,877)       (941,396)
                                                --------------- ---------------
                                                
                 The accompanying notes are an integral part of these
                     condensed consolidated financial statements.













                                          4<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                      (unaudited)


                                                 Three months ended March 31,  
                                                -------------------------------
                                                     1999            1998      
                                                --------------- ---------------
      Cash Flows   Financing Activities:        
       Repayment of note payable  . . . . . . .        (63,455)        (94,106)
       Proceeds from issuance of common stock .         47,326              64 
                                                --------------- ---------------
         Net cash used in financing             
          activities  . . . . . . . . . . . . .        (16,129)        (94,042)
                                                --------------- ---------------
                                                
      Net increase (decrease) in cash and cash  
       equivalents  . . . . . . . . . . . . . .        321,839      (2,576,583)
      Cash and cash equivalents at beginning    
       of period  . . . . . . . . . . . . . . .      2,543,763       4,582,757 
                                                --------------- ---------------
      Cash and cash equivalents at end of       
       period   . . . . . . . . . . . . . . . . $    2,865,602  $    2,006,174 
                                                =============== ===============
                                                
                 The accompanying notes are an integral part of these
                     condensed consolidated financial statements.





























                                          5<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      1.  BASIS OF PRESENTATION

          The  interim condensed consolidated financial statements of Precision
      Systems,  Inc.  (the  "Company") are  unaudited  and  should  be read  in
      conjunction with the audited financial statements and notes thereto as of
      and for  the  years ended  December  31, 1998  and  1997, the  four-month
      transition period  ended December 31, 1996, and the year ended August 31,
      1996.

          In the opinion of the  Company, all adjustments necessary for  a fair
      presentation  of  such  financial  statements have  been  included.  Such
      adjustments consist  only of normal recurring items.  Interim results are
      not  necessarily indicative  of  results for  a  full year.  The  interim
      financial  statements and notes thereto are presented as permitted by the
      Securities  and  Exchange  Commission  and  do  not  contain  information
      included in the Company's annual financial statements and notes thereto.

          Certain  amounts  for  previous  periods  have been  reclassified  to
      conform with the 1999 presentation.  Such reclassifications had no impact
      on the  Company's total assets,  equity, net  loss or cash  flows in  the
      previous period.

      2.  BASIC AND DILUTED LOSS PER SHARE

          Basic and diluted loss per share for the three months ended March 31,
      1999 and 1998, have been computed based  upon the weighted average common
      shares  outstanding  of  17,871,182  and  17,786,107,  respectively.  The
      diluted loss per share calculation does not include preferred convertible
      securities and  stock  options, which  are common  stock equivalents,  as
      their inclusion would be anti-dilutive.

          The  following table  provides  information on  the  weighted average
      shares of dilutive securities which are not included in the  diluted loss
      per share calculation because their inclusion would be anti-dilutive:

                                                 Three Months Ended March 31,
                                                     1999            1998      
                                                --------------- ---------------
                                                
         Preferred convertible securities . . .      3,500,198       3,500,198 
         Stock options and restricted stock . .      1,087,646       2,193,445 
                                                --------------- ---------------
                                                     4,587,844       5,693,643 
                                                =============== ===============










                                          6<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      3.  LONG-TERM DEBT

                                                   March 31,     December 31,
                                                     1999            1998      
                                                --------------- ---------------
                                                  (unaudited)  
      Notes payable to shareholders, interest   
       at 8 percent, with detachable warrants   
       convertible into 825,000 shares of       
       common stock at $4.00 per share,         
       uncollateralized, and due April to       
       August 1999  . . . . . . . . . . . . . . $    6,000,000  $    6,000,000 
                                                
      Notes payable to shareholder, interest at 
       9.5 percent, uncollateralized, and due   
       upon demand; the Company has $1,250,000  
       of available funding remaining on these  
       notes as of March 31, 1999 and December  
       31, 1998   . . . . . . . . . . . . . . .      3,750,000       3,750,000 
                                                
      Capital lease obligations, interest rates 
       varying from 6 percent to 9 percent;     
       collateralized by certain assets with    
       net book value of approximately          
       $350,000 for 1999 and 1998 and maturing  
       through the year 2001  . . . . . . . . .        187,578         268,308 
                                                --------------- ---------------
                                                     9,937,578      10,018,308 
      Less current portion  . . . . . . . . . .     (9,836,746)     (9,864,171)
                                                --------------- ---------------
                                                $      100,832  $      154,137 
                                                =============== ===============
                                                





















                                          7<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      4.   RESTRUCTURING CHARGES

           During the  year ended  December 31,  1998, in  an effort  to reduce
      overhead  and  cut costs,  the Company  terminated  the employment  of 58
      individuals,  which approximated  the estimate  for the  total number  of
      employee terminations  under the original restructuring  plan, and closed
      several  offices  world-wide. The  effect  of  the restructuring  charges
      associated with  these headcount  reductions and office  closings was  to
      increase the  Company's selling, general and  administrative expenses and
      accrued  expenses  by  approximately  $2,438,000 during  the  year  ended
      December 31, 1998.  The following  tables provide an  itemization of  the
      costs  included   in  the  restructuring  liability   based  on  original
      estimates,  the   amounts  paid   and  charged  against   the  liability,
      adjustments made to the original estimates, and the residual value of the
      restructuring liability as of March 31, 1999, and December 31, 1998:

      Three months ended March 31, 1999
      ----------------------------------

                                Liability                            Liability
                                  as of                                as of
                               December 31,                          March 31,
                                   1998       Charges   Adjustments    1999    
                              ------------- ----------- ----------- -----------
                                            (unaudited) (unaudited) (unaudited)
      Employee termination                             
       benefits   . . . . . . $    139,926  $  (92,689) $    -      $   47,237 
      Non-cancellable                                  
       operating leases   . .      274,046    (123,122)      -         150,924 
      Asset write-offs,                                
       including leasehold                             
       improvements   . . . .      347,366    (244,343)      -         103,023 
      Professional services .      160,712      (7,828)      -         152,884 
                              ------------  ----------- ----------- -----------
                              $    922,050  $ (467,982) $     -     $  454,068 
                              ============  =========== =========== ===========
                                                       

















                                          8<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      4.   RESTRUCTURING CHARGES (continued)

      Year ended December 31, 1998                    
      ----------------------------------
                                                      
                                                                    Liability
                                                                      as of
                                Original                           December 31,
                                Estimate    Charges    Adjustments     1998    
                              ----------  ------------ ----------- ------------
      Employee termination    $  950,000  $  (788,916) $  (21,158) $   139,926 
       benefits   . . . . . . 
      Non-cancellable            524,000     (250,663)        709      274,046 
      operating leases  . . . 
      Asset write-offs,                               
       including leasehold                            
       improvements   . . . .    775,000     (430,088)      2,454      347,366 
      Professional services .    251,000      (46,216)    (44,072)     160,712 
                              ----------  ------------ ----------- ------------
                              $2,500,000  $(1,515,883) $  (62,067) $   922,050 
                              ==========  ============ =========== ============
                                                      
           The "Charges" columns above represent  the actual cash payments made
      to  employees  for  restructuring  plan termination  benefits  and  lease
      payments  associated   with  office  closures  made   subsequent  to  the
      restructuring plan. In addition,  the "Charges" columns represent certain
      asset write-offs disposed  of regarding such  office closures. The  asset
      write-offs  included in  the restructuring  plan primarily  represent the
      historical net  book value of certain  furniture, leasehold improvements,
      and other  miscellaneous equipment  associated with the  office closures.
      The Company  does not expect  to generate  any material proceeds  for the
      sale of such assets upon disposal.

           The restructuring  plan liability as  of March 31,  1999, represents
      management's estimate of the remaining portion of the cash to be paid out
      to  employees regarding  termination benefits,  non-cancellable operating
      leases  for offices closed, and legal and accounting fees associated with
      the completion  of the restructuring  plan. All cash payments  to be made
      for  employee  termination benefits  and  legal and  accounting  fees are
      expected to be made by September 30, 1999. In addition, all cash payments
      on  non-cancellable operating  leases  are expected  to  be completed  by
      December 31, 1999. No cash payments  will occur as a result of  the asset
      impairments.

           The Company's  restructuring plan did not  discontinue any corporate
      business   activities  with   separately  identifiable   operations.  The
      restructuring  plan  was  initiated  to reduce  the  Company's  operating
      expenses  to better match the Company's expected revenue and gross margin
      opportunities. In  addition, the Company centralized its BETEX and Lydian
      product development efforts to its United Kingdom office (versus separate
      offices, Boston and United Kingdom, prior to the restructuring).



                                          9<PAGE>


                       PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      5.   SEGMENT INFORMATION

           In  June 1997,  the  Financial Accounting  Standards Board  ("FASB")
      issued Statement of Financial  Accounting Standards No. 131, "Disclosures
      about  Segments of  an  Enterprise and  Related  Information," which  the
      Company adopted in 1998.

           The Company  identifies  such segments  based  on a  combination  of
      factors including  the  products  and services  from  which  the  Company
      derives its  revenues, management responsibility and  geographic areas of
      operations.    The  Company  has  three  reportable  segments:  The  U.S.
      operations segment produces network-based telecommunications products for
      sale to  large telecommunications carriers. In  addition to network-based
      telecommunications   products,   the  international   operations  segment
      produces customer premises equipment  products that are marketed  to call
      centers  and  customer  contact  centers  in  the  financial,  insurance,
      airline,  retail, telco, and service bureau industries. The third product
      category  is  the  service bureau  segment,  which  is  sold through  the
      Company's subsidiary, BFD  Productions, Inc. ("BFD"). BFD  sells 800, 888
      and 900 services to corporations and other entities, including government
      agencies  and  large  software entertainment  companies.  The  accounting
      policies of the segments are the  same as those described in the "Summary
      of Significant  Accounting Policies" in  the Company's December  31, 1998
      Form  10-K. The Company accounts  for intercompany sales  at a discounted
      price. Intercompany revenues and the related cost of sales are eliminated
      in the Company's consolidated financial statements.

     <TABLE>
      Three months ended March 31, 1999
      ----------------------------------
      <CAPTION>
                                   Telecommunications                
                                        Products         
                               --------------------------
                                   U.S.     International  Service   Intercompany
                                Operations   Operations     Bureau   Eliminations  Consolidated 
                               ----------- -------------- ---------- ------------- -------------
      <S>                      <C>         <C>            <C>        <C>           <C>
      Revenues from                                                  
        external customers  .  $ 1,848,688     4,039,152    832,104         -      $  6,719,944 
      Revenues from other                                            
        segments  . . . . . .  $   515,343         -          -          (515,343) $      -     
         Total revenues . . .  $ 2,364,031     4,039,152    832,104      (515,343) $  6,719,944 
      Depreciation and                                               
        amortization  . . . .  $   297,398       183,847    100,063         -      $    581,308 
      Operating profit         $   (91,338)       36,563     39,578         -      $    (15,197)
        (loss)  . . . . . . .  
      Interest expense, net .  $     3,991       108,616     13,870         -      $    126,477 
      Total assets  . . . . .  $ 27,574,842    9,353,028  1,626,216   (18,738,252) $ 19,815,834 
                                                                     
      </TABLE>



                                                  10<PAGE>


                        PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      5.   SEGMENT INFORMATION

     <TABLE>
      Three months ended March 31, 1998
      ---------------------------------
      <CAPTION>
                                   Telecommunications                
                                        Products         
                               --------------------------
                                   U.S.     International  Service   Intercompany
                                Operations   Operations     Bureau   Eliminations  Consolidated 
                               ----------- -------------- ---------- ------------- -------------
      <S>                      <C>         <C>            <C>        <C>           <C>
      Revenues from external                                         
        customers . . . . . .  $ 2,265,576     3,372,484  1,030,357         -      $  6,668,417 
      Revenues from other                                            
        segments  . . . . . .  $   235,774         -          -          (235,774) $      -     
         Total revenues . . .  $ 2,501,350     3,372,484  1,030,357      (235,774) $  6,668,417 
      Depreciation and                                               
        amortization  . . . .  $   446,434       241,760    144,596         -      $    832,790 
      Operating loss  . . . .  $(2,121,941)   (2,067,249)   (55,176)        -      $ (4,244,366)
      Interest income          $    42,151      (113,602)   (19,176)        -      $    (90,627)
        (expense), net  . . .  
      Total assets  . . . . .  $ 25,208,510   12,757,040  2,243,135   (13,992,856) $ 26,215,829 
                                                                     
      </TABLE>




























                                                  11<PAGE>


       ITEM 2   Management's Discussion and Analysis of Financial Condition 
                and Results of Operations

           Precision Systems, Inc. (the "Company" or "PSI") is a global company
      that, together  with its subsidiaries,  Vicorp N.V. and  BFD Productions,
      Inc.,  delivers  telecommunications solutions  to  service  providers and
      corporations.   Vicorp's software and hardware  products support enhanced
      calling  and  prepaid services,  toll-free  services,  and advanced  call
      center applications.  BFD Productions is a service bureau specializing in
      audiotext and  Internet applications.   Headquartered in  St. Petersburg,
      Florida (USA), Precision  Systems meets  the needs of  customers in  more
      than thirty countries.

           The following table  sets forth  for the periods  indicated (i)  the
      percentage  of  total  revenues  represented  by  certain  items  in  the
      financial  statements of the Company,  and (ii) the  percentage change in
      the dollar amount of such items from period to period.

                                              Percentage of
                                                 Revenue
                                           Three Months Ended     Percentage
                                                March 31,          Increase
                                          --------------------    (Decrease)
                                             1999       1998     1999 vs. 1998 
                                          ---------- --------- ----------------
                                                     
      Revenues:                                      
       Contract revenue   . . . . . . . .     21.6%      15.0%           45.0% 
       Service and support  . . . . . . .     54.5%      71.0%          (22.7%)
       License fee revenue  . . . . . . .     23.9%      14.0%           72.5% 
                                          ---------- ----------
         Total revenues . . . . . . . . .    100.0%     100.0%            0.8% 
      Cost of sales, exclusive of                    
      depreciation and                        46.6%      76.7%          (38.9%)
       amortization shown separately
       below  . . . . . . . . . . . . . . 
                                                     
      Operating Expenses:                             
       Selling, general and                   36.4%      54.7%          (32.8%)
       administrative   . . . . . . . . . 
       Research, engineering and                     
         development  . . . . . . . . . .      8.5%      19.7%          (56.3%)
       Depreciation and amortization  . .      8.7%      12.5%          (30.2%)
                                          ---------- ----------
      Operating loss  . . . . . . . . . .     (0.2%)    (63.6%)         (99.6%)
      Interest expense, net . . . . . . .     (1.9%)     (1.4%)          39.6% 
      Loss before income taxes  . . . . .     (2.1%)    (65.0%)         (96.7%)
      Net Loss  . . . . . . . . . . . . .     (2.1%)    (65.0%)         (96.7%)










                                          12<PAGE>


      Total Revenues

           Effective  January  1,  1998,   the  Company  adopted  the  American
      Institute of Certified Public Accountants ("AICPA") Statement of Position
      ("SOP") 97-2,  "Software Revenue Recognition."  Adoption of SOP  97-2 did
      not have a material impact  on the financial condition or the  results of
      operations of the Company.

           Total revenues  increased to $6,719,944  for the three  months ended
      March 31, 1999,  compared to $6,668,417 for the  three months ended March
      31,  1998. The  various  components of  revenue  fluctuated as  explained
      below.

      Contract Revenue 

           Contract   revenue,   consisting  primarily   of  telecommunications
      equipment hardware  sales, increased to  $1,449,780 for the  three months
      ended March  31, 1999,  compared to  $999,757 during  the same  period in
      1998. The increase is  primarily due to an increase in  contract revenues
      associated with  Vicorp's BETEX products  of $1,449,780 during  the three
      months ended March 31, 1999, compared to $969,757 during the same  period
      in 1998.

      Service and Support

           Service  and  support   revenue,  consisting  primarily   of  custom
      development services, maintenance services, and  service bureau services,
      decreased  to $3,662,960  for  the three  months  ended March  31,  1999,
      compared to $4,736,798 for the three months ended March 31, 1998.

           Service and  support revenue generated from  MCIWorldCom relating to
      its ESP equipment decreased to $330,849 for the three months ended  March
      31, 1999, compared to $470,029  for the same period  in 1998, due to  the
      customer's request for  a lower level  of support to  be provided by  the
      Company in 1999 compared to 1998.

           Service and support revenue  for Vicorp BETEX products  decreased to
      $2,418,954  for  the  three months  ended  March  31,  1999, compared  to
      $3,153,381  for the three months  ended March 31,  1998. Vicorp's service
      and support revenue includes  maintenance and custom development services
      provided to its customers.

           Service  and support revenue for  BFD decreased to  $832,104 for the
      three months ended March 31,  1999, compared to $1,030,357 for  the three
      months  ended March 31, 1998. BFD's service and support revenue primarily
      includes interactive voice response service bureau activity.

      License Fee Revenue

           License fee  revenue increased  to $1,607,204  for the  three months
      ended March  31, 1999, compared  to $931,862  for the three  months ended
      March 31, 1998. License fee revenue for the three months  ended March 31,
      1999, relating to  the Company's  BETEX product line  was $1,185,104  and
      $422,100  for the UniPort product  line. The Company  expects to generate
      future license fee revenue  for its BETEX and UniPort  products, although
      no assurance can be given for such future revenue.


                                          13<PAGE>


      Cost of Sales

           Cost  of sales decreased to  $3,128,610 (47 percent  of revenue) for
      the three months ended March 31, 1999, compared to $5,118,958 (77 percent
      of revenue) for the three months ended March 31, 1998. The reason for the
      decrease in the Company's cost of sales dollar amount is primarily due to
      the lower total contract  revenue and service and support  revenue during
      the three  months ended March  31, 1999, compared  to the same  period in
      1998.  Such revenue historically has had higher cost of sales percentages
      than the Company's license  fee revenue. The  reason for the decrease  in
      the  Company's cost  of sales dollar  percentage is primarily  due to the
      increase  in the  percentage  of license  fee  revenue in  the  Company's
      revenue mix during the three months ended March 31, 1999, compared to the
      same  period in 1998.  License fee revenue  historically has  had a lower
      cost of sales  percentage compared  to contract revenue  and service  and
      support revenue.

      Selling, General and Administrative Expenses

           Selling, general and administrative expenses decreased to $2,452,002
      for the three months ended March 31, 1999, compared to $3,648,397 for the
      three months ended March 31,  1998. The decrease in selling,  general and
      administrative expenses for  the three  months ended March  31, 1999,  is
      primarily due to  the positive  effects of the  Company's efforts  during
      1998 at reducing its overhead costs through restructurings, employee lay-
      offs and  office closures.  Such  restructurings generated  approximately
      $979,000  of cost savings during  the three months  ended March 31, 1999,
      compared to the same period in  1998. In addition, the Company  continued
      its efforts  at managing and  controlling costs  in order to  improve the
      alignment of  cost outlays  against potential revenue  opportunities. The
      Company  reduced  its travel  expenses due  to  increased controls  and a
      decrease in  the Company's  employee base, which  generated approximately
      $300,000 in cost savings.

      Research, Engineering, and Development

           Research, engineering and development expenses decreased to $573,221
      for the three months ended March 31, 1999, compared to $1,312,638 for the
      three  months ended March 31, 1998. The decrease in research, engineering
      and  development   expenses  primarily   relates  to  the   reduction  in
      development  work  associated  with   the  Company's  BETEX  and  UniPort
      products. The Company has reduced its research and development efforts on
      UniPort  due to reduced sales and marketing opportunities for the product
      and  to focus future activities on BETEX and BETEX-related products, such
      as  Lydian. Although the Company is reducing its research and development
      activities for BETEX and BETEX-related products, it does not anticipate a
      material negative effect  on its customer-related  revenue opportunities.
      Resources  will continue to  be directed toward  product improvements and
      enhancements  for future  purchased releases  of the  Company's products.
      Additionally, the Company will continue to evaluate its different product
      lines to maximize the impact of the research, engineering and development
      expenditures.






                                          14<PAGE>


           The Company believes  it operates  in a  highly competitive  market;
      and,  in order to maintain a competitive position, the Company's existing
      products must be continually improved and new products must be developed.
      The amount and  timing of future  research, engineering, and  development
      expenditures will depend  upon, among other factors,  future new contract
      revenue  and  the  Company's ability  to  fund  these  costs from  future
      operating cash flow and bank or other forms of financing.

      Depreciation and Amortization

           Depreciation  and amortization  was  $581,308 for  the three  months
      ended March 31,  1999, compared  to $832,790 for  the three months  ended
      March  31,  1998.  The decrease  is  primarily  due  to certain  computer
      equipment that  became fully  depreciated subsequent  to March  31, 1998,
      and, therefore, generated no depreciation expense during the three months
      ended  March   31,  1999.  In  addition,   certain  furniture,  leasehold
      improvements, and  other miscellaneous equipment that were written off as
      part  of the  1998  restructuring plan  created  no depreciation  expense
      during the three months ended March 31, 1999.

      Income Tax Expense

           The  Company  uses the  asset and  liability  method to  account for
      deferred  income taxes. Under  the asset  and liability  method, deferred
      income  taxes are  recognized  for  the  tax consequences  of  "temporary
      differences" by applying enacted statutory tax rates applicable to future
      years to differences between the financial statement carrying amounts and
      the tax basis  of existing assets and liabilities. The effect on deferred
      taxes of a change in tax rates is recognized in income in the period that
      includes the enactment date.

      Interest Expense

           For the three months  ended March 31, 1999, net interest expense was
      $126,477 compared to $90,627 during the same period in 1998. The increase
      in  net  interest  expense  is  primarily  due  to  promissory  notes  of
      $3,750,000  issued in April and August of  1998 that bear interest at 9.5
      percent.

      Litigation

           Reference is made to the legal proceedings described at Part 1, Item
      3,  in the Company's December 31, 1998  Form 10-K. The Company is subject
      to certain  legal actions arising in the normal course of business. After
      taking  into consideration  legal counsel's  evaluation of  such actions,
      management is  of the opinion that  their final resolution will  not have
      any  significant  adverse  effect  upon  the  Company's  business or  its
      consolidated financial statements.










                                          15<PAGE>


      Financial Position, Liquidity, and Capital Resources

           At March 31,  1999, the  Company had working  capital deficiency  of
      $10,682,801  compared to  $11,168,209 at  December 31,  1998.  During the
      three  months ended  March  31, 1999,  cash  provided by  operations  was
      $490,845. The  Company expects that in 1999, as in 1998, the Company will
      require additional external  sources of capital  to fund its  operations,
      including working capital needs.  The Company's Board of Directors formed
      a  special committee  for the  purpose of  analyzing additional  external
      sources of capital that may be available to the Company.  The Company has
      taken steps regarding the improvement of its cash flow and cash position,
      including:

           *  Retained an investment  banking firm to assist in the  development
              and  evaluation   of  future   strategic  initiatives,   including
              potential financing opportunities;

           *  Analyzed opportunities to sell certain non-core assets,  including
              real estate; and

           *  Implemented a restructuring plan to reduce operating expenses.

           However, there  is no  assurance that  the Company  will be able  to
      obtain  additional financing on  acceptable terms and  conditions or that
      its existing working capital will be sufficient to fund its operating and
      investing activities for 1999.

           In April 1998,  the Company  announced that its  Board of  Directors
      approved  and  the  Company  entered  into  a  definitive agreement  (the
      "Contribution Agreement") with various privately held entities controlled
      by Roy M.  Speer to acquire  a controlling interest  in the Company.  The
      transaction was valued  at approximately $100,000,000 and  was subject to
      shareholder  and certain  antitrust  and regulatory  approvals and  other
      customary conditions.

           Under the terms  of the Contribution Agreement,  which was initially
      proposed  on  March  6, 1998,  the  Speer  entities (Speer  Communication
      Holdings Limited  Partnership, Speer World Wide  Digital Transmission and
      Vaulting Limited  Partnership, Speer  Virtual Media  Limited Partnership,
      and Speer Productions  Limited Partnership) had proposed to contribute to
      the Company  $15,000,000 in cash  and their digital  storage, audiovisual
      production  and telecommunications  assets and  businesses  in Nashville,
      Tennessee and Washington, D.C.  in exchange for approximately 105,000,000
      shares of the Company's  common stock (the "Property Contribution").  The
      Agreement  permitted Speer,  in  its sole  discretion,  to consummate  an
      alternative  transaction in  lieu of  the Property  Contribution, whereby
      Speer could have elected to transfer all of the assets and liabilities of
      Speer  Virtual Media  Limited Partnership,  plus  $36,000,000 in  cash in
      exchange  for 41,000,000 shares of common stock of the Company (the "Cash
      Contribution"). The Contribution Agreement further contemplated  that all
      debt and  preferred stock of the  Company held by its  major stockholders
      would be converted into common stock at the rate of $1.00 per share.  The
      Contribution Agreement provided  for a  $5,000,000 line of  credit to  be
      made  available by Speer upon  signing of the  Contribution Agreement for
      operating capital requirements. As of March 31, 1999, the Company's



                                          16<PAGE>


      outstanding balance owed on the line of credit was $3,750,000.  After the
      transaction,  Mr.  Speer would  have controlled  over  80 percent  of the
      outstanding  stock  of the  Company.  Mr.  Speer  currently controls  RMS
      Limited  Partnership ("RMS"),  an entity  that was  one of  the Company's
      major stockholders prior to March 16, 1999, when RMS sold its interest in
      the  Company  to  Anschutz  Digital  Media,  Inc.  RMS  would  have  also
      contributed certain real estate in Nashville as part of the transaction.

           In  February 1999, the Company announced that its Board of Directors
      received from Speer Communications Holdings Limited Partnership ("Speer")
      notice of termination of the Contribution Agreement dated April 22, 1998.
      In  addition, RMS delivered notice that it  elected to terminate both the
      Real  Estate Transfer Agreement and  Plan of Recapitalization between RMS
      and the Company.

           Also  in February  1999, following  termination of  the Contribution
      Agreement, the  Speer entities entered  into an asset  purchase agreement
      (the  "Asset  Purchase  Agreement")  with Anschutz  Digital  Media,  Inc.
      ("Anschutz"). Under the terms  of the Asset Purchase  Agreement, Anschutz
      agreed to purchase substantially all of the assets of the Speer entities,
      including   RMS's  debt  and  ownership  interest  in  the  Company.  The
      transaction closed on March 16, 1999.

           In March 1999,  the Company  announced that its  Board of  Directors
      unanimously approved and the Company has entered into a definitive merger
      agreement  (the "Agreement")  with  Anschutz.  Under  the  terms  of  the
      Agreement, which  was initially proposed  on February 17,  1999, Anschutz
      would acquire all  of the outstanding  common stock of  the Company in  a
      transaction  wherein the  Company would  be merged  with a  subsidiary of
      Anschutz, and holders of  the Company's common stock would  receive $1.00
      per share  in cash. The  Agreement further contemplates that  all debt to
      the Company's  shareholders will  be repaid  and the  Company's preferred
      stock will be canceled for an amount equal to its liquidation preference,
      plus accrued dividends and interest thereon. The Agreement also  provides
      the Company with a line of credit with available borrowings of $1,250,000
      to be  extended by Anschutz, replacing the line of credit extended to the
      Company  by the Speer entities. The transaction is subject to shareholder
      and  certain  antitrust  and  regulatory approvals  and  other  customary
      conditions.    Anschutz is  an affiliate  of  the Anschutz  Company whose
      operating   divisions   and    wholly-owned   subsidiaries   engage    in
      telecommunications, natural  resources, transportation, real  estate, and
      sports entertainment businesses.

           The  Company's  accounts  and   contracts  receivable  increased  to
      $7,114,903 as of March 31, 1999, from $6,823,640 as of December 31, 1998.
      The  increase  is  primarily due  to  certain  large customer  receivable
      balances outstanding at March 31, 1999, that are expected to be collected
      by June 30, 1999.

           The  Company's  supplies  and  other  current  assets  increased  to
      $2,552,854 as of March 31, 1999, from $2,381,153 as of December 31, 1998.
      The increase is primarily due to an increase in inventory in anticipation
      of customer deliverables subsequent to March 31, 1999.





                                          17<PAGE>


           The  Company's  costs  and   earnings  in  excess  of   billings  on
      uncompleted  contracts decreased to $1,195,595 as of March 31, 1999, from
      $1,425,303  as of December 31, 1998. The decrease is primarily associated
      with the completion of certain BETEX product delivery contracts that were
      in  process for  its customers  at December 31,  1998, which  were billed
      during 1999.

           The  Company's  current  portion  of  long-term  debt  decreased  to
      $9,836,746 as of March 31, 1999, from $9,864,171 as of December 31, 1998.
      The Company's long-term debt decreased to $100,832 as of March 31,  1999,
      from $154,137 as of December 31,  1998. The total decrease in the current
      portion of long-term debt and  long-term debt is due to payments  made on
      the Company's capital lease obligations.

           The Company's accounts payable decreased  to $4,318,164 as of  March
      31,  1999, from  $5,758,372  as of  December  31, 1998.  The  decrease is
      primarily due to the timing of certain vendor payments.

           The Company's accrued expenses  decreased to $6,123,042 as  of March
      31,  1999, from  $6,985,381  as of  December  31, 1998.  The decrease  is
      primarily   due  to  a  decrease  in  accrued  restructuring  charges  to
      approximately $454,000 as of March 31, 1999, from $922,000 as of December
      31, 1998. In  addition, accrued payroll costs  decreased to approximately
      $1,260,000  as of  March 31,  1999, from  approximately $1,489,000  as of
      December 31, 1998, due to the timing of certain payroll related payments.

           The  Company's  billings   in  excess  of  costs   and  earnings  on
      uncompleted  contracts increased to $1,868,970 as of March 31, 1999, from
      $1,010,680  as of December 31, 1998. The increase is primarily associated
      with the billing  of certain BETEX software development  contracts during
      the first  quarter of March 31, 1999, that were  still in process for its
      customers at March 31, 1999.

           The Company's deferred revenue balance increased to $2,264,833 as of
      March 31,  1999, from  $723,464 as  of December  31, 1998.  The Company's
      deferred   revenue  balance  primarily   represents  prepaid  maintenance
      contracts for services to be provided to its customers. 

           The  Company incurred  approximately  $198,000  in expenditures  for
      capital  assets  during the  three months  ended  March 31,  1999. Future
      levels of capital  expenditures will be dependent  upon cash availability
      from operating activities and additional sources of bank funding or other
      forms of financing which may or may  not be available to the Company upon
      acceptable terms and conditions.














                                          18<PAGE>


      Readiness for Year 2000

           The Company is in the  process of developing a plan to  identify and
      resolve all  of its issues relating to  the "Year 2000" problems relating
      to its business. The Year 2000 problem is the result of computer programs
      being  written  using  two  digits  (rather  than  four)  to  define  the
      applicable year. Software programs  that have time-sensitive software may
      recognize a date using  "00" as the year 1900 rather than  the year 2000.
      This  could result  in a  major system  failure or  miscalculations. This
      issue affects the Company's internal information systems and could impact
      software systems  sold and delivered  to customers.  Various task  forces
      have been formed to assess the scope of  the Company's risks in this area
      and  bring  applications  into  compliance.  To  date,  the  Company  has
      experienced very few  problems relating  to Year 2000  testing and  those
      identified  have  been  fixed   in  the  Company's  day-to-day  operating
      environment. The Company has also started coordinating with vendors about
      their progress in identifying and addressing problems that their computer
      systems may face in correctly processing date information relating to the
      Year 2000. The  Company intends to  continue its  efforts to monitor  the
      Year 2000  compliance of vendors.  In the event any  third parties cannot
      timely  provide the  Company  with  products  that  meet  the  Year  2000
      requirements,  then the  Company's abilities  to offer  its  products and
      services could be materially adversely affected. The cost incurred by the
      Company  during  1998  to address  Year  2000  compliance  was less  than
      approximately  $500,000. The  Company estimates it  will incur  less than
      approximately  $500,000 in  direct  costs  during  1999  to  support  its
      compliance initiatives.  Although the Company  expects its systems  to be
      Year 2000 compliant on or before December 31, 1999, it cannot predict the
      outcome or  the success of  its Year 2000  programs, or that  third party
      systems are or will be Year 2000 compliant, or that the costs required to
      address the  Year 2000 issue will  not exceed its estimates,  or that the
      impact of a failure to achieve substantial Year 2000 compliance, will not
      have  a material adverse  effect on  the Company's  businesses, financial
      conditions, or results of operations. In addition, the Company's business
      may be materially  adversely affected  in the event  that its  customers'
      systems  are  not  Year  2000  compliant  to  the extent  that  such  (i)
      customers' systems are  not compatible  with those  products or  services
      offered  by the Company or  (ii) customers delay  purchase of products or
      services from the  Company while  such customers' systems  are made  Year
      2000 compliant. The Company has not adopted a contingency plan to address
      possible risks to its systems.

















                                          19<PAGE>


      Forward-looking Information

           The foregoing discussion in "Management's Discussion and Analysis of
      Financial Condition  and Results of Operations"  contains forward-looking
      statements that reflect management's current views with respect to future
      events and the financial  performance and condition of the  Company. Such
      statements  involve  risks  and  uncertainties,  and  there  are  certain
      important factors  that could cause  actual results to  differ materially
      from  those anticipated. Some of  the important factors  that could cause
      actual results to differ materially from those anticipated include:

           *  The  Company   competes  in   an  industry   marked  by   frequent
              technological  changes which  will  force the  Company  to  expend
              funds to develop new products and implement new technologies

           *  The various markets into which the  Company sells its products are
              undergoing  significant   changes  with  increasing  demands   for
              product innovations

           *  The  Company  must   be  successful  in  competing  against   many
              competitors, many of which have significantly greater assets  than
              the Company

           *  The Company  will  be required  to properly  estimate costs  under
              fixed price contracts

           *  Increased risk of  litigation in the Company's industry  resulting
              from aggressive prosecutions of intellectual property claims

           *  The Company's  ability to retain  its larger customers,  including
              MCIWorldCom

           *  Availability of  certain hardware  and  software components  which
              are incorporated  with the  Company's products  and are  purchased
              from a limited number of vendors

           *  The Company's ability to hire and retain qualified personnel

           *  Legislative  changes  affecting  the Company's  markets, including
              the Telecommunications Act of 1996

           *  Given the  Company's acquisition of  Vicorp and its large presence
              in international  markets, regulatory,  monetary and  inflationary
              factors  can negatively  impact the  Company's operations  in  the
              future

           *  The  Company's reliance  on large  sales orders  that increase the
              risk of significant revenue fluctuations, from quarter to  quarter
              and year to year

           *  The  ability  of  the Company  and its  significant  suppliers and
              large customers to address the Year 2000 issue

           *  The  Company's   ability  to   generate   sufficient  cash,   from
              operations  or   from  external  sources,   to  fund  its   global
              operations


                                          20<PAGE>


           Many of such  uncertainties are  outside the  Company's control  and
      could postpone,  delay, or  eliminate potential sales  opportunities and,
      therefore, affect the Company's operations. Due to such uncertainties and
      risk, readers are cautioned not to place undue reliance on  such forward-
      looking statements, which speak only as of the date hereof.





















































                                          21<PAGE>


                             PART II - OTHER INFORMATION


      ITEM 1   Legal Proceedings

           Reference is made to the legal proceedings described at Part 1, Item
      3, in the Company's December 31, 1998, Form 10-K. The  Company is subject
      to certain legal actions arising in the  normal course of business. After
      taking  into consideration  legal counsel's  evaluation of  such actions,
      management is of the  opinion that their  final resolution will not  have
      any  significant  adverse  effect  upon  the  Company's  business or  its
      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

           (a)  Exhibits

                Exhibit 27 - Financial Data Schedule (for SEC use only)

           (b)  Reports on Form 8-K

                On  March 31,  1999, the  Company filed  a report on  Form 8-K,
                under Item 1,  announcing its Board  of Directors approved  and
                the   Company   entered  into   a  definitive   agreement  (the
                "Agreement") dated March 15, 1999, with Anschutz Digital Media,
                Inc. ("Anschutz").  Under the terms of  the Agreement, Anschutz
                would  acquire  all  of the  outstanding  common  stock  of the
                Company in  a transaction wherein  the Company would  be merged
                with a subsidiary  of Anschutz,  and holders  of the  Company's
                common stock would receive $1.00 per share in cash.











                                          22<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.


                          PRECISION SYSTEMS, INC.


                          By:  /S/ KENNETH M. CLINEBELL                        
                               -------------------------
                               Kenneth M. Clinebell
                               Interim President and Chief Financial Officer

      May 17, 1999

           Pursuant to the requirements  of the Securities and Exchange  Act of
      1934,  this  report has  been signed  below by  the following  persons on
      behalf of the registrant and in the capacities indicated on May 17, 1999.

                      Signature                         Title
          
              /s/ KENNETH M. CLINEBELL     Interim President and 
          -------------------------------  Chief Financial Officer
                Kenneth M. Clinebell       (Principal Financial Officer)
          
                  /s/ CARLA K. LUKE        Controller
          -------------------------------  (Principal Accounting Officer)
                    Carla K. Luke




























                                          23<PAGE>


          

























































                                          24<PAGE>