================================================================================

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

                                 AMENDMENT NO.1
                                       TO
                                    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 June 30, 1998

                                       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)

                                 (813) 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 August 11,
1998:

Common Stock.........................................................17,847,845
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1 -- FINANCIAL STATEMENTS

                    PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)
<TABLE>
<CAPTION>
                                   Three months ended June 30,      Six months ended June 30,
                                   ---------------------------      -------------------------
                                       1998             1997           1998            1997
                                       ----             ----           ----            ----
<S>                               <C>             <C>             <C>             <C>         
Revenues
  Contract revenue .............. $  1,573,783    $  4,211,557    $  2,328,799    $  6,022,610
  Service and support............    6,226,340       5,100,162      11,210,219      11,384,205
  License fee revenue............    1,633,768       2,774,787       2,563,291       4,734,982
                                  ------------    ------------    ------------    ------------
                                     9,433,891      12,086,506      16,102,309      22,141,797
                                  ------------    ------------    ------------    ------------
   
Cost of Sales, exclusive of      
  depreciation and amortization
  shown separately below.........    4,590,134       5,200,673       8,802,398       9,507,537
                                  ------------    ------------    ------------    ------------
                                     4,843,757       6,885,833       7,299,911      12,634,260
                                  ------------    ------------    ------------    ------------
    
Operating Expenses
  Selling, general, and
    administrative ..............    7,091,353       5,664,101      11,793,737      11,144,778
  Research, engineering and
    development..................    1,068,362       1,199,538       2,233,707       2,235,366
  Depreciation and amortization..      845,418       1,708,456       1,678,208       3,464,861
                                  ------------    ------------    ------------    ------------
                                     9,005,133       8,572,095      15,705,652      16,845,005
                                  ------------    ------------    ------------    ------------
Operating loss                      (4,161,376)     (1,686,262)     (8,405,741)     (4,210,745)
Interest income (expense), net...     (403,402)         55,542        (494,029)        (32,211)
                                  ------------    ------------    ------------    ------------
Loss before income taxes ........   (4,564,778)     (1,630,720)     (8,899,770)     (4,242,956)
Income taxes ....................         --              --              --              --
                                  ------------    ------------    ------------    ------------
Net Loss ........................   (4,564,778)     (1,630,720)     (8,899,770)     (4,242,956)
Preferred stock dividend
  requirements ..................     (176,509)       (169,611)       (347,458)       (255,419)
                                  ------------    ------------    ------------    ------------
Net Loss Applicable to
  Common Stock .................. $ (4,741,287)   $ (1,800,331)   $ (9,247,228)   $ (4,498,375)
                                  ============    ============    ============    ============
Basic and Diluted Loss Per
  Share:
    Net loss .................... $       (.26)   $       (.09)   $       (.50)   $       (.24)
                                  ============    ============    ============    ============
    Net loss applicable to common
       stock .................... $       (.27)   $       (.10)   $       (.52)   $       (.26)
                                  ============    ============    ============    ============
</TABLE>
                                      
The accompanying notes are an integral part of these condensed consolidated 
financial statements.

                                       2
<PAGE>
                    PRECISION SYSTEMS, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                               June 30,          December 31,
                                                                                 1998                1997
                                                                                 ----                ----
                           ASSETS                                             (unaudited)
<S>                                                                            <C>               <C>       
  Current Assets
    Cash and cash equivalents                                                  $1,135,603        $4,582,757
    Accounts and contracts receivable, net                                      8,488,411         9,657,355
    Supplies and other current assets                                           3,247,658         1,980,451
    Costs and earnings in excess of billings on uncompleted
      contracts                                                                 1,910,111         3,333,339
                                                                          ---------------    --------------
         Total current assets                                                  14,781,783        19,553,902
                                                                          ---------------    --------------
  Property, Plant and Equipment, Net                                            8,334,030         8,869,177
  Intangible Assets, Net                                                           42,042            52,474
                                                                          ---------------    --------------
                                                                              $23,157,855       $28,475,553
                                                                          ===============    ==============
  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

  Current Liabilities
    Current portion of long-term debt                                          $8,389,887          $294,375
    Accounts payable                                                            5,415,192         5,505,996
    Accrued expenses                                                            8,593,965         6,110,800
    Billings in excess of costs and earnings on uncompleted
       contracts                                                                  605,797         2,780,251
    Deferred revenue                                                            2,186,568         1,270,825
                                                                          ---------------    --------------
       Total current liabilities                                               25,191,409        15,962,247
                                                                          ---------------    --------------
  Long-term Debt                                                                  239,204         6,240,184
                                                                          ---------------    --------------
  Commitments and Contingencies
  Stockholders' Equity (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 17,974,265 and 17,906,025 shares, respectively                       179,743           179,061
    Additional paid-in capital                                                113,879,198       114,000,071
    Accumulated deficit                                                      (118,193,875)     (109,294,105)
    Treasury stock (132,937 shares)-- at cost                                    (422,360)         (422,360)
    Accumulated preferred stock dividends                                       2,022,659         1,675,201
    Cumulative foreign currency translation adjustment                            350,482           312,609
    Unearned compensation                                                         (88,750)         (177,500)
                                                                          ---------------    --------------
       Total stockholders' equity (deficit)                                    (2,272,758)        6,273,122
                                                                          ---------------    --------------
                                                                              $23,157,855       $28,475,553
                                                                          ===============    ==============
</TABLE>
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)
<TABLE>
<CAPTION>
                                                                                 Six months ended June 30,
                                                                                 -------------------------
                                                                                1998                  1997
                                                                                ----                  ----
<S>                                                                            <C>               <C>         
  Cash Flows -- Operating Activities:
    Net loss                                                                   $(8,899,770)      $(4,242,956)
    Adjustments to reconcile net loss to net cash used in
       operating activities:
         Depreciation and amortization                                           1,678,208         3,464,861
         Provision for losses on accounts receivable                                19,181            81,528
         Amortization of unearned compensation                                      88,750                 -
         Loss on sale of property, plant and equipment                              57,199                 -
         Change in current assets and liabilities:
           Accounts and contracts receivable                                     1,151,362         3,179,619
           Costs and estimated earnings in excess of billings                    1,423,228        (2,486,381)
           Supplies and other current assets                                    (1,277,557)           33,507
           Accounts payable                                                        (90,804)         (523,685)
           Accrued expenses                                                      2,737,271        (1,460,629)
           Billings in excess of earnings on incomplete contracts               (2,174,454)         (562,069)
           Deferred revenue                                                        915,743          (517,337)
                                                                            --------------     -------------
             Net cash used in operating activities                              (4,371,643)       (3,033,542)
                                                                            --------------     -------------

  Cash Flows -- Investing Activities:
    Purchase of property, plant and equipment                                   (1,266,908)       (1,062,061)
    Proceeds from sale of property, plant and equipment                             91,345                 -
                                                                            --------------     -------------
             Net cash used in investing activities                              (1,175,563)       (1,062,061)
                                                                            --------------     -------------

  Cash Flows -- Financing Activities:
    Proceeds from issuance of promissory note                                    2,250,000                 -
    Repayment of note payable                                                     (166,733)       (1,892,955)
    Capital contributions, net                                                           -         4,400,000
    Proceeds from issuance of common stock                                          16,785            14,225
                                                                            --------------     -------------
             Net cash provided by financing activities                           2,100,052         2,521,270
                                                                            --------------     -------------

  Net decrease in cash and cash equivalents                                     (3,447,154)       (1,574,333)
  Cash and cash equivalents at beginning of period                               4,582,757         4,601,818
                                                                            --------------     -------------
  Cash and cash equivalents at end of period                                    $1,135,603        $3,027,485
                                                                            ==============     =============

</TABLE>
The accompanying notes are an integral part of these condensed consolidated 
financial statements.

                                       4
<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 year
ended December 31, 1997, the four month transition period ended December 31,
1996, and the years ended August 31, 1996 and 1995.

     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 1998 presentation.

2. BASIC AND DILUTED LOSS PER SHARE

     Basic and diluted loss per share for the three and six months ended June
30, 1998 and 1997, have been computed based upon the weighted average common
shares outstanding of 17,813,381 and 17,799,819, and 17,584,453 and 17,578,167,
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:

<TABLE>
<CAPTION>

                                                 Three months ended June 30,               Six months ended June 30,
                                           ------------------------------------   -------------------------------------
                                                  1998                1997                  1998                1997
                                           ---------------- -------------------   ----------------- -------------------
<S>                                              <C>                 <C>                 <C>                 <C>      
     Preferred convertible
       securities......................          3,500,198           2,435,081           3,500,198           1,830,145
     Stock options and restricted
       stock...........................          1,834,364           2,188,741           1,817,967           2,090,656
                                          ----------------- -------------------   ----------------- -------------------
                                                 5,334,562           4,623,822           5,318,165           3,920,801
                                          ================= ===================   ================= ===================
    
</TABLE>
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
                                                                               June 30,        December 31,
                                                                                 1998             1997
                                                                                 ----             ----
                                                                               (unaudited)
<S>                                                                           <C>               <C>       
  Notes payable to shareholders, interest at 8 percent, unsecured, and
    due January 1999                                                          $6,000,000        $6,000,000
  Note payable to shareholder, interest at 9.5 percent, unsecured and
    due September 1998                                                         2,250,000                 -
  Capital lease obligation, interest rates varying from 6 percent to
    9 percent; collateralized by assets with net book value of
    approximately $400,000 and maturing through the year 2001                    379,091           534,559
                                                                            ------------      ------------
                                                                               8,629,091         6,534,559
  Less current portion                                                        (8,389,887)         (294,375)
                                                                            ------------      ------------
                                                                                $239,204        $6,240,184
                                                                            ============      ============
</TABLE>
                                       5
<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.
<TABLE>
<CAPTION>
                                                                                    Percentage Increase       
                                                                                         (Decrease)           
                                         Percentage of         Percentage of      Three Months   Six Months   
                                             Revenue               Revenue          Ended          Ended      
                                       Three Months Ended    Six Months Ended      June 30,       June 30,    
                                            June 30,              June 30,         --------       --------    
                                            --------              --------         1998 vs.       1998 vs.    
                                       1998       1997       1998       1997         1997           1997
                                       ----       ----       ----       ----         ----           ----
<S>                                    <C>        <C>        <C>        <C>        <C>            <C>    
  Revenues:
  Contract revenue                     16.7%      34.8%      14.5%      27.2%      (62.6%)        (61.3%)
  Service and support                  66.0%      42.2%      69.6%      51.4%       22.1%          (1.5%)
  License fee revenue                  17.3%      23.0%      15.9%      21.4%      (41.1%)        (45.9%)
                                     ------     ------     ------     ------
    Total revenues                    100.0%     100.0%     100.0%     100.0%      (21.9%)        (27.3%)
                                     ------     ------     ------     ------
  Cost of Sales                        48.7%      43.0%      54.7%      42.9%      (11.7%)         (7.4%)
                                     ------     ------     ------     ------
  Gross Margin                         51.3%      57.0%      45.3%      57.1%      (29.7%)        (42.2%)
                                     ------     ------     ------     ------
  Operating Expenses:
  Selling, general and administrative  75.1       47.0%      73.2%      50.4%       25.2%           5.8%
  Research, engineering and
    development                        11.3%       9.9%      13.9%      10.1%      (10.9%)         (0.1%)
  Depreciation and amortization         9.0%      14.1%      10.4%      15.6%      (50.5%)        (51.6%)
                                     ------     ------     ------     ------
  Operating loss                      (44.1%)    (14.0%)    (52.2%)    (19.0%)     146.8%          99.6%
  Interest income (expense)            (4.3%)      0.5%      (3.1%)     (0.2%)     826.3%        1433.7%
                                     ------     ------     ------     ------
  Loss before income taxes            (48.4%)    (13.5%)    (55.3%)    (19.2%)     179.9%         109.8%
  Net Loss                            (48.4%)    (13.5%)    (55.3%)    (19.2%)     179.9%         109.8%

</TABLE>
Three Months Ended June 30, 1998, Compared to Three Months Ended June 30, 1997

Total Revenues

     Total revenues decreased to $9,433,891 for the three months ended June 30,
1998, compared to $12,086,506 for the three months ended June 30, 1997. The
various components of revenue fluctuated as explained below.
   
     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.
    


                                       6
<PAGE>
Contract Revenue

   
     Contract revenue, consisting primarily of telecommunications equipment
hardware sales, decreased to $1,573,783 for the three months ended June 30,
1998, compared to $4,211,557 during the same period in 1997. The decrease in
contract revenue during the three months ended June 30, 1998 versus 1997 is
primarily due to certain BETEX product sales by Vicorp completed during the
three months ended June 30, 1997, which did not recur during the same period in
1998. In addition, certain ESP product sales to MCI were completed in 1997 which
did not recur 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, increased to
$6,226,340 for the three months ended June 30, 1998, compared to $5,100,162 for
the three months ended June 30, 1997.
    
     Service and support provided to MCI decreased to $356,902 for the three
months ended June 30, 1998, compared to $507,097 for the three months ended June
30, 1997. Maintenance revenue generated from MCI regarding its ESP equipment
decreased to $353,428 for the three months ended June 30, 1998, compared to
$477,364 for the same period in 1997. In addition, the Company' service and
support revenue relating to its software development services provided to MCI
decreased to $3,474 for the three months ended June 30, 1998, from $29,733 for
the same period in 1997.

     Service and support revenue for Vicorp BETEX products was $4,947,200 for
the three months ended June 30, 1998, compared to $3,667,648 for the three
months ended June 30, 1997. Vicorp's service and support revenue includes
maintenance and custom development services provided to its customers.

     Service and support revenue for BFD was $874,953 for the three months ended
June 30, 1998, compared to $950,792 for the three months ended June 30, 1997.
BFD's service and support revenue primarily includes interactive voice response
service bureau activity.

License Fee Revenue

     License fee revenue decreased to $1,633,768 for the three months ended June
30, 1998, compared to $2,774,787 for the three months ended June 30, 1997.
License fee revenue for the three months ended June 30, 1998, relating to its
BETEX product line was $1,568,768 and $65,000 for the UniPort product line. The
Company anticipates generating future license fee revenue for its BETEX and
UniPort products, although no assurance can be given for such future revenue.
   
Cost of Sales 
    

     Cost of sales decreased to $4,590,134 (49 percent of revenue) for the three
months ended June 30, 1998, compared to $5,200,673 (43 percent of revenue) for
the three months ended June 30, 1997. The Company's gross margin decreased to
$4,843,757 (51 percent of revenue) for the three months ended June 30, 1998,
compared to $6,885,833 (57 percent of revenue) for the three months ended June
30, 1997. The primary reason for the decrease in the Company's gross margin
dollar amount is a decrease in the Company's total revenue. The decrease in the
Company's gross margin percentage is primarily associated with a change in
product mix. A greater portion of the Company's revenue for the three months
ended June 30, 1998 related to lower margin service and support sales versus the
same period in 1997.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses increased to $7,091,353 for
the three months ended June 30, 1998, compared to $5,664,101 for the three
months ended June 30, 1997. The increase in selling, general and administrative
expenses for the three months ended June 30, 1998 is primarily due to
restructuring charges of $2,500,000 accrued in June 1998 as a result of office
closings in Boston, Massachusetts; and New York, New York; and a headcount
reduction of approximately 50 individuals.


                                       7
<PAGE>
     Offsetting these restructuring charges was a decrease of approximately
$1,100,000 due to the Company's efforts at managing and controlling costs in
order to improve the alignment of cost outlays against potential revenue
opportunities. Specific cost savings include payroll and related costs due to
consolidation and elimination of certain functions (i.e. sales and marketing,
product management, customer service). In addition, the Company improved its
controls and accountability for the use of third party professional vendors
(legal, public relations, management consultants, etc.) and independent
contractors.

Research, Engineering and Development

     Research, engineering and development expenses decreased to $1,068,362 for
the three months ended June 30, 1998, compared to $1,199,538 for the three
months ended June 30, 1997. 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. However, 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.

     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 $845,418 for the three months ended June
30, 1998, compared to $1,708,456 for the three months ended June 30, 1997. The
decrease is primarily due to amortization expenses incurred during the three
months ended June 30, 1997, relating to intangible assets acquired with The
Renaissance Group, Vicorp, and BFD acquisitions that were written off subsequent
to June 30, 1997 and, therefore, created no amortization during the 1998 period.

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 Income (Expense)

     For the three months ended June 30, 1998, net interest (expense) income was
($403,402) compared to $55,542 during the same period in 1997. The increase in
net interest expense is primarily due to the decrease in the Company's interest
bearing cash and cash equivalent amounts and the issuance of promissory notes of
$6,000,000 in September 1997 that bear interest at 8 percent and $2,250,000 in
April and May 1998 that bear interest at 9.5 percent.


                                       8
<PAGE>
Six Months Ended June 30, 1998, Compared to Six Months Ended June 30, 1997

Total Revenues

     Total revenues decreased to $16,102,309 for the six months ended June 30,
1998, compared to $22,141,797 for the six months ended June 30, 1997. The
various components of revenue fluctuated as explained below.

Contract Revenue
     
     Contract revenue, consisting primarily of telecommunications equipment
hardware sales, decreased to $2,328,799 for the six months ended June 30, 1998,
compared to $6,022,610 during the same period in 1997. The decrease in contract
revenue during the six months ended June 30, 1998, versus 1997 is primarily due
to certain BETEX product sales by Vicorp completed during the six months ended
June 30, 1997, which did not recur during the same period in 1998. Additionally,
certain ESP product sales to MCI were completed in 1997 which did not recur
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
$11,210,219 for the six months ended June 30, 1998, compared to $11,384,205 for
the six months ended June 30, 1997.
    
     Service and support provided to MCI decreased to $826,931 for the six
months ended June 30, 1998, compared to $1,020,824 for the six months ended June
30, 1997. Maintenance revenue generated from MCI regarding its ESP equipment
decreased to $821,068 for the six months ended June 30, 1998, compared to
$904,068 for the same period in 1997. In addition, the Company's service and
support revenue relating to its software development services provided to MCI
decreased to $5,863 for the six months ended June 30, 1998, from $116,756 for
the same period in 1997.

     Service and support revenue for Vicorp BETEX products was $8,347,662 for
the six months ended June 30, 1998, compared to $8,420,103 for the same period
in 1997. Vicorp's service and support revenue includes maintenance and custom
development services provided to its customers.

     Service and support revenue for BFD was $1,905,310 for the six months ended
June 30, 1998, compared to $1,890,254 for the six months ended June 30, 1997.
BFD's service and support revenue primarily includes interactive voice response
service bureau activity.

License Fee Revenue

     License fee revenue decreased to $2,563,291 for the six months ended June
30, 1998 compared to $4,734,982 for the six months ended June 30, 1997. License
fee revenue for the six months ended June 30, 1998, relating to its BETEX
product line was $2,258,216 and $305,075 for the UniPort product line. The
Company anticipates generating future license fee revenue for its BETEX and
UniPort products, although no assurance can be given for such future revenue.

                                       9
<PAGE>
   
Cost of Sales 
    

     Cost of sales decreased to $8,802,398 (55 percent of revenue) for the six
months ended June 30, 1998, compared to $9,507,537 (43 percent of revenue) for
the six months ended June 30, 1997. Additionally, the Company's gross margin
decreased to $7,299,911 (45 percent of revenue) for the six months ended June
30, 1998, compared to $12,634,260 (57 percent of revenue) for the six months
ended June 30, 1997. The primary reason for the decrease in the Company's gross
margin dollar amount is a decrease in the Company's total revenue. The decrease
in the Company's gross margin percentage is primarily associated with a change
in product mix. A greater portion of the Company's revenue for the six months
ended June 30, 1998 related to lower margin service and support sales versus the
same period in 1997.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses increased to $11,793,737 for
the six months ended June 30, 1998, compared to $11,144,778 for the six months
ended June 30, 1997. The increase in selling, general and administrative
expenses is primarily due to restructuring charges of $2,500,000 accrued in June
1998 as a result of office closings in Boston, Massachusetts; and New York, New
York; and a headcount reduction of approximately 50 individuals.

     Offsetting these restructuring charges was a decrease of approximately
$1,900,000 due to the Company's efforts at managing and controlling costs in
order to improve the alignment of cost outlays against potential revenue
opportunities. Specific cost savings include payroll and related costs due to
consolidation and elimination of certain functions (i.e. sales and marketing,
product management, customer service). The Company improved its controls and
accountability for the use of third party professional vendors (legal, public
relations, management consultants, etc.) and independent contractors. In
addition, the Company implemented a restructuring plan, including a 10 percent
headcount reduction in January 1998.

Research, Engineering and Development

     Research, engineering and development expenses decreased to $2,233,707 for
the six months ended June 30, 1998 compared to $2,235,366 for the six months
ended June 30, 1997. 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. However, 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.

     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 $1,678,208 for the six months ended June
30, 1998, compared to $3,464,861 for the six months ended June 30, 1997. The
decrease is primarily due to amortization expenses incurred during the six
months ended June 30, 1997, relating to intangible assets acquired with The
Renaissance Group, Vicorp and BFD acquisitions that were written off subsequent
to June 30, 1997 and, therefore, created no amortization during the 1998 period.

                                       10
<PAGE>

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 six months ended June 30, 1998, net interest expense increased to
$494,029 compared to $32,211 during the same period in 1997. The increase in net
interest expense is primarily due to the decrease in the Company's
interest-bearing cash and cash equivalent amounts and the issuance of promissory
notes of $6,000,000 in September 1997 that bear interest at 8 percent and
$2,250,000 in April and May 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, 1997, 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.

Financial Position, Liquidity, and Capital Resources

     At June 30, 1998, the Company had working capital deficiency of $10,409,626
compared to net working capital of $3,591,655 at December 31, 1997. The decrease
in net working capital is due in part to notes maturing in January 1999 issued
to the Company's shareholders in September 1997 and to restructuring charges
accrued in June 1998. The Company expects that in 1998, as in 1997, 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 and that can be accessed during
1998. The Company has already taken steps regarding the improvement of its cash
flow and cash position, including:

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

     o Analyzing opportunities to sell certain non-core assets, including real 
       estate; and

     o Implemented a restructuring plan to reduce operating expenses.

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

                                       11
<PAGE>
     Under terms of the Agreement, which was initially proposed on March 6,
1998, the Speer entities (Speer Communication Holdings Limited Partnership,
Speer WorldWide Digital Transmission and Vaulting Limited Partnership, Speer
Virtual Media Limited Partnership, and Speer Productions Limited Partnership)
will contribute to Precision Systems $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 Precision Systems' common stock.

     The Agreement further contemplates that all debt and preferred stock of the
Company held by its major stockholders will be converted into common stock at
the rate of $1.00 per share. The agreement provides for a $3,000,000 line of
credit to be made available by Speer upon signing of the Agreement for operating
capital requirements. As of June 30, 1998, the Company's outstanding balance
owed on the line of credit was $2,250,000. After the transaction, Mr. Speer will
control over 80 percent of the outstanding stock of Precision Systems. Mr. Speer
currently controls RMS Limited Partnership, an entity that is one of Precision
Systems' major stockholders. RMS L.P. will also contribute certain real estate
in Nashville as part of the transaction.

     The Company's accounts and contracts receivable decreased to $8,488,411 as
of June 30, 1998, from $9,657,355 as of December 31, 1997. The decrease is
primarily due to collection of certain receivables outstanding at December 31,
1997.

     The Company's supplies and other current assets increased to $3,247,658 as
of June 30, 1998, from $1,980,451 as of December 31, 1997. The increase is
primarily due to an increase in certain deferred costs and inventory items as of
June 30, 1998.

     The Company's costs and earnings in excess of billings on uncompleted
contracts decreased to $1,910,111 as of June 30, 1998, from $3,333,339 as of
December 31, 1997. The decrease is primarily associated with the completion of
certain of Vicorp's product delivery contracts in process for its customers.
Such amounts as of June 30, 1998, are expected to be fully billed by Vicorp by
October 1998.

     The Company's current portion of long-term debt increased to $8,389,887 as
of June 30, 1998, from $294,375 as of December 31, 1997. The Company's long-term
debt decreased to $239,204 as of June 30, 1998, from $6,240,184 as of December
31, 1997. The increase in the current portion of long-term debt and the decrease
in long-term debt is due to a reclassification of $6,000,000 in promissory notes
maturing in January 1999 and to the Company's borrowing of an additional
$2,250,000 during the second quarter of 1998.

     The Company's accounts payable decreased to $5,415,192 as of June 30, 1998,
from $5,505,996 as of December 31, 1997. The decrease is primarily due to the
timing of certain vendor payments.

     The Company's accrued expenses increased to $8,593,965 as of June 30, 1998,
from $6,110,800 as of December 31, 1997. The increase is primarily due to
restructuring charges of $2,500,000 accrued in June 1998 offset by payments made
during 1998 relating to amounts accrued at December 31, 1997.

     The Company's billings in excess of costs and earnings on uncompleted
contracts decreased to $605,797 as of June 30, 1998, from $2,780,251 as of
December 31, 1997. The decrease is primarily associated with the completion of
certain of Vicorp's software development contracts in process for its customers.

     The Company's deferred revenue balance increased to $2,186,568 as of June
30, 1998, from $1,270,825 as of December 31, 1997. The Company's deferred
revenue balance primarily represents prepaid maintenance contracts for services
to be provided to its customers.

                                       12
<PAGE>
     The Company incurred approximately $1,267,000 in expenditures for capital
assets during the six months ended June 30, 1998. 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.

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:

     o 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

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

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

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

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

     o The Company's ability to retain its larger customers, including MCI

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

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

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

     o 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.

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

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

     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.

                                       13
<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, 1997, 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 May 6, 1998, the Company filed a report on Form 8-K announcing its
         Board of Directors approved and the Company entered into a definitive
         agreement with various privately held entities controlled by Roy M.
         Speer to acquire a controlling interest in the Company.

                                       14
<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
                                  President and Chief Financial Officer

October 9, 1998

     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 October 9, 1998.


  Signature                                Title
  
  /s/ KENNETH M. CLINEBELL                 President and Chief Financial Officer
  ----------------------------             (Principal Financial Officer)
  Kenneth M. Clinebell                    

  /s/ CARLA K. NEWSOME                     Controller
  ----------------------------             (Principal Accounting Officer)
  Carla K. Newsome                        


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