SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                 FORM 10-K/A-2

[X]      Annual Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the fiscal year ended September 30, 1995 
 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 Number 0-10902
                            INTERFACE SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)

         Delaware                                   38-1857379
(State or other jurisdiction                      (I.R.S. Employer
of incorporation or organization)                 Identification No.)

         5855 Interface Drive
         Ann Arbor, Michigan                          48103
(Address of principal executive offices)            (Zip Code)

      Registrant's telephone number, including area code:  (313) 769-5900

       Securities registered pursuant to Section 12(b) of the Act:  None

          Securities registered pursuant to Section 12(g) of the Act:
                        Common Stock Purchase Warrants
                         Common Stock, par value $.10

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, and (2) has been subject to such
filing requirements for the past 90 days.

                           YES    [X]    NO   [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]     

The aggregate market value of the registrant's voting stock held by non-
affiliates as of December 26, 1995, computed by reference to the closing
price per share for such stock on the Nasdaq Stock Market National Market on
such date, was approximately $38,176,196 (assuming, but not admitting for
any purpose, that all executive officers and directors of the registrant may
be deemed affiliates).

The number of shares outstanding of the registrant's common stock as of
December 26, 1996 was 4,212,418.

<PAGE>
                                   PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         Set forth below is certain information relating to the directors and
executive officers of the Company.  The Board of Directors is divided into
three classes of directors, such classes are as nearly equal in number as
possible, with the term of one class expiring each year.  The term of office
of each class of directors is three years.   Directors Robert Seigle and
Graber serve until the Company's 1996 annual meeting, directors Bixby,
Schupp and Horst serve until the Company's 1997 annual meeting, and
directors Handelman, David Seigle and Perrett serve until the Company's 1998
annual meeting.  Except as otherwise noted, each person indicated below
exercises sole voting and investment power with respect to the shares of the
Company's Common Stock owned by him.  Each of the following directors,
except Messrs. Graber, Horst, and David C. Seigle, has been engaged or
employed in the principal occupation reflected in the table for more than
five years.  Mr. Graber retired in 1994, prior to which time he was Chairman
and Chief Executive Officer of Applied Dynamics International for at the
least the five years preceeding the date hereof.  Mr. Horst was President of
Nematron Corporation for at least five years until he retired in May, 1994.
Mr. Seigle retired in November 1991.  Prior to that time, Mr. Siegle was
Vice-President of File Net Corporation, a manufacturer of document image
processors.

                                                            December 8, 1995
                                                      Shares
                                                      Benefi-      Percent
                                            Director  cially       of
Name and Age         Principal Occupation   Since     Owned(1)     Class(1)
------------         --------------------   -----     --------     --------
Carl L. Bixby, 56     President and Chief   1969      333,500       7.7%     
                      Executive Officer of
                      the Company

David O. Schupp, 59   Vice President, Chief 1969       82,602(2)    1.9%
                      Financial Officer and
                      Treasurer of the Company

David C. Seigle, 56   Retired               1969       33,406       0.2%

Robert A. Seigle, 68  President of Concord  1969       80,310       1.9%
                      Personnel, Inc., a
                      personnel recruiting
                      company

Garnel F. Graber, 64  Retired               1971       47,954(3)    1.4%
                 
George W. Perrett, 58 Secretary and Vice    1985       70,847(4)    1.7%
                      President of Corp.
                      Operations of the
                      Company; President of
                      I.G.K. Industries,
                      Inc., a subsidiary of
                      the Company

G. Paul Horst, 45     Retired.              1988      146,609(5)    3.5%

Milton Handelman, 79  Independent Business  1990        5,000       0.1%
                      Consultant
                                       2
<PAGE>
----------
(1)      Includes shares which the following directors have a right to
         acquire within 60 days pursuant to the exercise of stock options:
         Mr. Bixby--96,000 shares; Mr. Schupp--13,000 shares; Mr. David
         Seigle--9,500 shares; Mr. Robert Seigle--9,500 shares; Mr.
         Graber--9,500 shares; Mr. Perrett--35,000 shares; Mr. Horst--4,000
         shares and Mr. Handelman--4,000 shares.  For purposes of computing
         the individual percentages, the shares which can be acquired upon
         the exercise of options within 60 days were added to the shares
         owned beneficially or of record by such persons on December 8, 1995
         and to the shares outstanding on that date.

(2)      Includes 69,602 shares held by the David O. Schupp Revocable
         Trustee, of which Mr. Schupp is a Trustee and beneficiary.

(3)      Mr. Graber has sole voting power over 552 shares of Common Stock
         beneficially owned by him, and  shares investment power with his
         son, Glen F. Graber, with respect to such shares.  Mr. Graber also
         serves on the board of directors of Nematron Corporation.

(4)      Includes 2,000 shares which Mr. Perrett has the option to acquire
         through the exercise of Warrants and 16,669 shares held by the
         George W. Perrett, Jr. Trust, of which Mr. Perrett is a Trustee and
         a beneficiary.  Does not include 1,300 shares owned by Mr. Perrett's
         children, as to which Mr. Perrett disclaims beneficial ownership.

(5)      Mr. Horst also serves on the board of directors of Nematron
         Corporation.

         The executive officers of the Company are elected annually by the
Board of Directors and serve at the pleasure of the Board.  David C. Seigle
and Robert A. Seigle are first cousins.

Reporting of Beneficial Ownership by Directors, Executive Officers and Ten
Percent Holders

         Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten
percent of the Company's Common Stock are required to report their ownership
of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission and the National Association of
Securities Dealers, Inc.  Specific due dates for these reports have been
established and the Company is required to report in this annual report on
Form 10-K any failure to file by these dates during the Company's last
fiscal year.  All of these filing requirements were satisfied by the
Company's officers, directors and ten percent shareholders.  In making these
statements, the Company has relied on the written representations of its
directors, officers and ten percent shareholders and copies of the reports
that have been filed with the Commission.

                                        3
<PAGE>
ITEM II.  EXECUTIVE COMPENSATION.

         The following table sets forth the cash compensation paid by the
Company as well as other compensation paid or accrued during the Company's
last three fiscal years ended September 30, 1995 to the Chief Executive
Officer and each of the two most highly compensated executive officers of
the Company for services rendered in all capacities to the Company:

<TABLE>
<CAPTION>
                                              Summary Compensation Table
                                                                                                                     
                                                               Long-Term Compensation
                                                                       Awards                 
                                                               Securi-
                                                                  ties
                                                              Underly-
                                                                  ing
      Name and              Annual Compensation (1)              Stock         All Other
Principal Occupation     Fiscal Year    Salary     Bonus       Options      Compensation (2)
<S>                         <C>        <C>       <C>           <C>              <C> 
Carl L. Bixby...........    1995       $185,380  $  7,248         --            $20,043
  Chief Executive           1994        165,375   147,978         --             17,166
  Officer, President        1993        157,500    85,932       60,000           27,091
  and Director

George W. Perrett, Jr....   1995         85,000     3,624         --             15,164
  Secretary and Director    1994         85,000    38,150         --              7,389
                            1993         85,000    55,406        7,500            8,578

David O. Schupp.........    1995         86,008     7,248         --             16,321
  Vice President,           1994         82,688    74,326         --             10,901
  Treasurer and             1993         78,750    55,406        7,500    9,854
  Director       
-------------
</TABLE>
                             
(1)      Includes compensation deferred at the election of the executive in
         the category and year earned.

(2)      "All Other Compensation" is comprised of (i) contributions made by
         the Company to the accounts of each of the named executive officers
         under the Company's 401(k) Plan with respect to each of the fiscal
         years ended September 30, 1995, 1994 and 1993, respectively, as
         follows:  Mr. Bixby $9,196, $13,860, and $12,908;  Mr. Perrett
         $9,684, $7,389, and $8,578; and Mr. Schupp $10,676, $9,421, and
         $8,374; (ii) the dollar value of any life insurance premiums paid by
         the Company in the fiscal years ended September 30, 1995, 1994 and
         1993, respectively, with respect to term life insurance for the
         benefit of each of the named executives as follows:  Mr. Bixby
         $4,217, $3,306 and $14,183; and Mr. Schupp $1,480, $1,480 and 1,480
         and (iii) a car allowance paid by the Company in the fiscal year
         ended September 30, 1995, respectively, as follows, for Mr. Bixby
         $6,630, Mr. Perrett $5,480 and Mr. Schupp $4,165.
                                       4
<PAGE>
                Aggregated Option Exercises in Last Fiscal Year
                 and Fiscal Year ("FY")-end Option/SAR Values

         The following table provides information with respect to the named
executive officers concerning the exercise of options during 1995 and
unexercised options held as of the Company's most recent fiscal year end,
September 30, 1995.  All options were granted under the Company's 1992 Stock
Option Plan or the now terminated 1982 Stock Option Plan.

                                                Number of
                                                securities     Value of
                                                underlying   unexercised
                                               unexercised  in-the-money
                                                 options        options 
                     Share        Value        at FY-End (#) exercisable/
                   acquired on  realized       exercisable/    unexer-  
Name               exercise (#)  ($)(1)       unexercisable  cisable (1)
----               ------------ --------     --------------  -------------
Carl L. Bixby......   -0-         -0-         96,000/20,000 $34,372/12,500
George W. Perrett..   -0-         -0-         48,750/ 2,500   7,811/ 1,563
David O. Schupp....   -0-         -0-         13,000/ 2,500   7,811/ 1,563 
--------
(1)      The dollar values in these columns represent the total gain which
         would have been realized if such options had been exercised on
         September 30, 1995 (the Company's fiscal year end) and are
         calculated by determining the difference between the fair market
         value of the securities underlying the options on September 30, 1995
         and the exercise price of the option.  The dollar values in this
         table as well as all other tables contained in this proxy are
         calculated on a pre-tax basis.

Director Compensation

         Non-employee directors receive an annual retainer of $4,000 and a
fee of $1,000 per meeting for attendance at regular board meetings and $500
per meeting for attendance at committee meetings not held in conjunction
with a meeting of the Board.  Travel and lodging expenses incurred by
directors residing outside of the metropolitan Detroit area in order to
attend meetings of the board are typically paid by the Company.

         As additional consideration for their services to the Company, on
April 24, 1987, the non-employee directors were each granted options to
purchase 5,000 shares of the Company's Common Stock at the fair market value
of $7.75 per share.  After adjustment for the Company's stock dividends and
stock split, Messrs. Graber, David Seigle and Robert Seigle each currently
hold options to acquire 5,500 shares at $7.04 per share.  The options are
exercisable for a ten-year period from the date of grant or until the
grantee ceases to serve on the Board, whichever is earlier.

         On March 26, 1993, pursuant to the Company's Non-Employee Directors
Stock Option Plan, the non-employee directors were each granted options to
purchase 6,000 shares of the Company's Common Stock at the fair market value
of $5.25 per share.  The options are exercisable for a ten-year period from
the date of grant or until the grantee ceases to serve on the Board,
whichever is earlier.

                                      5
<PAGE>
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth information as of December 8, 1995,
except as otherwise indicated, concerning all shareholders known by the
Company to be the beneficial owners of more than 5% of its outstanding
Common Stock, and all officers and directors as a group.  Except as noted
below, each shareholder exercises sole voting and investment power with
respect to the shares beneficially owned.

                                                   Amount and
                                                    Nature of
Name and Address of                                Beneficial     Percent
 Benificial Owner                                  Ownership     of Class
-------------------                                ----------    --------
Carl L. Bixby
5855 Interface Drive
Ann Arbor, MI 48103(1)(2)                           333,500        7.7%

All officers and directors as
  a group (8 persons) (2)                           800,228       18.3%
----------
(1)      Based on information contained in Mr. Bixby's Schedule 13D dated
         November 27, 1995 filed with Securities and Exchange Commission.

(2)      Includes shares which certain directors and officers have a right to
         acquire within 60 days pursuant to the exercise of stock options. 
         See the notes to table under Item 10 for information regarding stock
         options and the shared voting and investment powers of officers and
         directors.  For purposes of computing the percentage of class, the
         shares which can be acquired within 60 days pursuant to the exercise
         of stock options were added to the shares owned beneficially or of
         record by such persons on December 8, 1995 and to the shares
         outstanding on that date.

         The security ownership of the individual directors of the Company
and all persons nominated to become directors is set forth under Item 10
hereof and is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In October 1995, the Board of Directors of the Company adopted the
Interface Systems, Inc. Executive Loan Program (the "Executive Loan
Program") which provides for the making of loans to the executive officers 
of the Company to enable such officers to purchase shares of the Company's
Common Stock on the open market or in privately regulated sales.

         The Executive Loan Program was adopted to encourage key executives
in acquiring and maintaining a significant equity interest in the Company's
Common Stock therey aligning their interests with the interests of the
Company's stockholders.  The following summarizes the principal features of
the Executive Loan Program.

         All senior executives of the Company are eligible to participate in
the Executive Loan Program.  The maximum amount of any loan or loans
outstanding to any one executive cannot exceed Five Hundred Thousand Dollars
($500,000).

         Loans under the Executive Loan Program bear interest at a rate equal
to the greater of the Applicable Federal Rate for the month in which the
loan was issued or the interest rate paid by the Company on its corporate
borrowings but shall not exceed the maximum rate permitted by law.  Such
interest is payable annually.  Loans under the Executive Loan Program are
required to be secured by collateral.  Collateral can include among other
things, a pledge of common stock of the Company owned by the executive or a
security interest on the real or other personal property of the executive. 
The Company has the right to offset from the amounts owing by the Company to
the executive any amount of the loan that remains unpaid.

                                     6
<PAGE>
         The Program is administered by Garnel F. Graber or such other
individual or entity selected by the Company's Board of Directors.  The
administrator shall have the power to make all determinations needed in
connection with the Executive Loan Program, to adopt forms of loan
documents, to exercise all rights and powers allocated to the Company and to
do anything else which is helpful or necessary to the proper operation of
the Executive Loan Program.

         On December 1, 1995, the Company made a loan under the Executive
Loan Program to Carl L. Bixby in the principal amount of $500,000.  The loan
bears interest at an annual  rate of 5.79% and is secured by shares of
Common Stock of the Company owned by Mr. Bixby.  As of January 25, 1996,
$500,000 was outstanding under the loan.

         On December 1, 1995, the Company advanced Mr. Bixby the sum of
$150,000 to enable Mr. Bixby to purchase shares of Common Stock of the
Company.  Mr. Bixby repaid such advance on December 31, 1995.
         
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.

(a)      Financial Statements, Schedules and Exhibits

         1-2.  The financial statements and schedules filed herewith are set
forth in the Index to Consolidated Financial Statements (on page F-1 of the
separate financial section which follows page 8 of this report) and are
incorporated herein by reference.

         3.  The exhibits filed herewith are set forth in the Index to
Exhibits (on the first page of the separate exhibit section which follows
the financial section of this report) and are incorporated herein by
reference.

                                     7
<PAGE>
                            Interface Systems, Inc.
                               and Subsidiaries

                   Index to Consolidated Financial Statements
                 Years Ended September 30, 1995, 1994 and 1993

Report of Independent Certified Public Accountants                     F-2

Financial Statements
         Consolidated Balance Sheets                                   F-3
         Consolidated Statements of Income                             F-5
         Consolidated Statements of Stockholders' Equity               F-6
         Consolidated Statements of Cash Flows                         F-7

Notes to Consolidated Financial Statements                             F-9

Financial Statement Schedules
         Report of Independent Certified Public Accountants            S-2
         Schedule II - Valuation and Qualifying Accounts               S-3

                                      F-1
<PAGE>
              Report of Independent Certified Public Accountants


To the Board of Directors
Interface Systems, Inc.
Ann Arbor, Michigan

We have audited the accompanying consolidated balance sheets of Interface
Systems, Inc. and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Interface Systems, Inc.
and subsidiaries at September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1995 in conformity with generally accepted accounting
principles.

/S/ BDO SEIDMAN, LLP
    BDO SEIDMAN, LLP

Troy, Michigan
November 10, 1995, except for Note 15 which is as of January 16, 1996

                                      F-2
<PAGE>
                                       Interface Systems, Inc. and Subsidiaries
                                              Consolidated Balance Sheets

September 30,                                          1995        1994

Assets
Current Assets:
  Cash and equivalents                           $3,735,758  $3,347,282
  Accounts receivable, less allowance for
    doubtful accounts of $248,000 and $133,000   10,068,828   9,447,455
  Inventories (Note 4)                            7,360,204   7,735,229
  Prepaid expenses and other current assets       1,115,256     495,597
  Deferred income taxes (Note 7)                    413,000     361,000
                                                 ----------  ----------
Total Current Assets                             22,693,046  21,386,563
Property and Equipment (Note 6)
  Land                                              231,383     202,300
  Buildings and improvements                      2,603,851   1,757,467
  Machinery and equipment                         5,425,570   4,914,115
                                                  ---------   ---------
                                                  8,260,804   6,873,882
  Less accumulated depreciation                   3,642,880   3,175,689
                                                  ---------   ---------
Net Property and Equipment                        4,617,924   3,698,193
                                                  ---------   ---------
Other
  Goodwill, less accumulated amortization of
    $1,620,983 and $1,260,501 (Note 3)            3,204,694   3,546,452
  Software development costs, less accumulated
    amortization of $2,927,340 and $2,831,377     3,032,987   2,607,061
  Miscellaneous                                     403,799     661,035
                                                  ---------   ---------
Total Other Assets                                6,641,480   6,814,548
                                                  ---------   ---------
                                                $33,952,450 $31,899,304
                                                 ==========  ==========

See accompanying notes to consolidated financial statements.

                                                          F-3
<PAGE>
                                       Interface Systems, Inc., and Subsidiaries
                                              Consolidated Balance Sheets

September 30,                                          1995        1994

Liabilities and Stockholders' Equity
Current Liabilities:
  Notes payable (Note 5)                         $4,367,318  $2,143,060
  Accounts payable                                6,070,074   5,680,798
  Accruals
    Compensation                                    348,147     574,515
    Other                                             2,230     221,605
  Deferred revenue                                  230,663     199,236
  Current maturities of long-term debt (Note 6)      52,400     147,400
                                                    -------     -------
Total Current Liabilities                        11,070,832   8,966,614

Long-Term Debt, less current maturities (Note 6)    286,546     333,816

Deferred Income Taxes (Note 7)                    1,381,000   1,178,000
                                                 ----------  ----------
Total Liabilities                                12,738,378  10,478,430
                                                 ----------  ----------
Commitments and Contingencies (Notes 8, 9 and 15)

Stockholders' Equity (Notes 10 and 11)
  Common stock, $.10 par value, shares
    authorized 8,000,000; outstanding
    4,212,418 and 4,153,368                         421,242     415,337
  Additional paid-in capital                      9,114,577   8,827,685
  Cumulative foreign currency translation
    adjustment                                     (198,169)   (202,076)
  Retained earnings                              11,876,422  12,379,928
                                                 ----------  ----------
Total Stockholders' Equity                       21,214,072  21,420,874
                                                 ----------  ----------
                                                $33,952,450 $31,899,304
                                                 ==========  ==========

See accompanying notes to consolidated financial statements.

                                                          F-4
<PAGE>
                                       Interface Systems, Inc., and Subsidiaries
                                           Consolidated Statements of Income

<TABLE>
<CAPTION>
Year Ended September 30,                          1995          1994          1993
<S>                                        <C>           <C>           <C>
Net Revenues                               $70,243,216   $39,012,086   $33,781,632
Cost of Revenues                            57,516,563    24,500,363    20,534,203
                                            ----------    ----------    ----------
Gross Profit                                12,726,653    14,511,723    13,247,429
                                            ----------    ----------    ----------
Product Development Costs                    1,453,605     1,307,523     1,478,386
Selling, General and Administrative
  Expenses                                  10,506,062     8,786,591     8,547,548
                                            ----------     ---------     ---------
                                            11,959,667    10,094,114    10,025,934
                                            ----------    ----------    ----------
Operating Income                               766,986     4,417,609     3,221,495
                                               -------     ---------     ---------
Other Income (Expense)
  Interest expense                            (263,758)     (171,701)     (209,583)
  Dividend and interest income                 186,064       131,030        39,162
  Net losses and costs of spin-off
    of subsidiary (Note 2)                          --            --       (162,539)
  Miscellaneous                                 17,094        12,839        (6,073)
                                               -------       -------       -------
Net Other Expenses                             (60,600)      (27,832)     (339,033)
                                                ------        ------       -------
Income Before Taxes On Income and Cumulative
  Effect of Change in Accounting Principle     706,386     4,389,777     2,882,462
Taxes On Income (Note 7)                       540,000     1,428,000     1,177,000
                                               -------     ---------     ---------
Income Before Cumulative Effect of Change
  in Accounting Principle                      166,386     2,961,777     1,705,462
Cumulative Effect of Change in
  Accounting Principle (Note 1)                    --       (127,000)        --
                                               -------     ---------     ---------
Net Income                                    $ 166,386   $ 2,834,777   $ 1,705,462
                                                =======     =========     =========
Earnings Per Share Before Cumulative Effect
  of Change in Accounting Principle              $ 0.04        $ 0.71        $ 0.41
Cumulative Effect of Change in
  Accounting Principle                               --          (.03)           --
                                                   ----          ----          ----
Net Earnings Per Share                           $ 0.04        $ 0.68        $ 0.41
                                                   ====          ====          ====
------------
See accompanying notes to consolidated financial statements.
</TABLE>
                                                          F-5
<PAGE>
<TABLE>
<CAPTION>
                                       Interface Systems, Inc., and Subsidiaries
                                    Consolidated Statements of Stockholders' Equity
                                     Years Ended September 30, 1995, 1994 and 1993

                                                            Cumulative
                                                Additional     Foreign                      Total
                                Common Stock       Paid-In    Currency     Retained Stockholders'
                               Shares   Amount     Capital Translation     Earnings        Equity
                               ------   ------   --------- -----------   ----------   -----------
<S>                         <C>       <C>       <C>          <C>        <C>           <C> 
Balance, September 30, 1992 4,147,882 $414,789  $8,817,604   $(153,238) $15,264,659   $24,343,814
  Net income                     --        --         --          --      1,705,462     1,705,462
  Issuance of stock             9,009      900      29,901        --           --          30,801
  Retirement of stock         (24,000)  (2,400)    (84,600)       --           --         (87,000)
  Spin-off of subsidiary
    (Note 2)                     --        --         --        30,601   (6,760,857)   (6,730,256)
  Foreign currency translation   --        --         --      (124,073)        --        (124,073)
                             --------  -------   ---------     -------   ----------    ----------
Balance, September 30, 1993 4,132,891  413,289   8,762,905    (246,710)  10,209,264    19,138,748
  Net income                     --        --         --          --      2,834,777     2,834,777
  Issuance of stock            20,477    2,048      64,780        --           --          66,828
  Cash dividends -
     $.16 per share              --        --         --          --       (664,113)     (664,113)
  Foreign currency translation   --        --         --        44,634         --          44,634
                            ---------  -------   ---------     -------   ----------    ----------
Balance, September 30, 1994 4,153,368  415,337   8,827,685    (202,076)  12,379,928    21,420,874
  Net income                     --        --         --          --        166,386       166,386
  Issuance of stock            59,050    5,905     286,892        --           --         292,797
  Cash dividends -
     $.16 per share              --        --         --          --       (669,892)     (669,892)
  Foreign currency translation   --        --         --         3,907         --           3,907
                            ---------  -------   ---------     -------   ----------    ----------
Balance, September 30, 1995 4,212,418 $421,242  $9,114,577   $(198,169) $11,876,422   $21,214,072
                            =========  =======   =========     =======   ==========    ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                   Interface Systems, Inc., and Subsidiaries
                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
Year Ended September 30,                          1995          1994          1993
<S>                                          <C>         <C>           <C>
Cash Flows From Operating Activities
  Net income                                 $ 166,386   $ 2,834,777   $ 1,705,462
  Adjustments to reconcile net income
    to net cash provided by operating
    activities
      Depreciation and amortization          2,972,277     2,524,367     2,065,999
      Deferred income taxes                    151,000       372,000       287,000
      Loss on sale of fixed assets              24,727           --          4,398
      Decrease (increase) in accounts
        receivable                            (621,373)   (4,561,440)      833,606
      Decrease (increase) in inventories       375,025     1,406,909      (945,386)
      Decrease (increase) in prepaid
        expenses and other current assets     (619,659)      140,532      (127,800)
      Decrease (increase) in other assets       10,591        40,955      (237,739)
      Increase (decrease) in accounts
        payable                                389,276     3,844,025      (108,352)
      Increase (decrease) in accruals         (445,743)      191,844        (9,793)
      Increase (decrease) in deferred
        revenue                                 31,427       (47,504)       91,220
                                               -------     ---------      --------
Net Cash Provided By Operating Activities    2,433,934     6,746,465     3,558,615
                                             ---------     ---------     ---------
Cash Flows From Investing Activities
  Additions to property and equipment       (1,777,370)     (797,863)   (1,014,484)
  Proceeds from disposals of property
    and equipment                               21,134           --         40,395
  Additions to software development costs   (1,998,022)   (1,991,416)   (1,504,449)
  Cash paid for purchase of
     Mekom Distribution                            --     (2,017,200)          --
                                             ---------     ---------     ---------
Net Cash Used In Investing Activities       (3,754,258)   (4,806,479)   (2,478,538)
                                             ---------     ---------     ---------

Cash Flows From Financing Activities
  Net increase in notes payable              2,224,258       207,146       248,488
  Additions to long-term debt                     --             --        110,000
  Reduction of long-term debt                 (142,270)      (88,963)     (255,189)
  Issuance of stock                            292,797        66,828        30,801
  Retirement of stock                             --             --        (87,000)
  Cash dividends paid                         (669,892)     (664,113)          --
                                             ---------       -------       -------
Net Cash Provided By (Used In)
  Financing Activities                       1,704,893      (479,102)       47,100
                                             ---------       -------        ------
Foreign Currency Translation                     3,907        44,634      (124,073)
                                                 -----        ------       -------
Net Increase In Cash and Equivalents           388,476     1,505,518     1,003,104
Cash and Equivalents, beginning of year      3,347,282     1,841,764       838,660
                                             ---------     ---------     ---------
Cash and Equivalents, end of year           $3,735,758    $3,347,282    $1,841,764
                                             =========     =========     =========
</TABLE>

See accompanying notes to consolidated financial statements.
                                      F-7
<PAGE>
                   Interface Systems, Inc., and Subsidiaries
                  Notes to Consolidated Financial Statements

1.       Summary of Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Interface Systems, Inc. (the "Company") and its wholly-owned subsidiaries,
I.G.K. Industries, Inc. ("I.G.K."), Interface Systems International, Ltd.
("ISIL"), Interface Systems International, Inc. ("FSC"), and Scitronix
Corporation.  All significant intercompany transactions and balances have
been eliminated in consolidation.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash, cash equivalents
and accounts receivable. At times such cash and equivalents in banks are in
excess of the respective financial institution's FDIC insurance limit. The
Company attempts to minimize credit risk by reviewing all customers' credit
history before extending credit and by monitoring customers' credit exposure
on a continuing basis. The Company establishes an allowance for possible
losses on accounts receivable, when necessary, based upon factors
surrounding the credit risk of specific customers, historical trends and
other information.

Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect (1) the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities as of the date of
the financial statements, and (2) revenues and expenses during the reporting
period. Actual results could differ from those estimates which are made.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.

                                      F-8
<PAGE>

Property, Equipment and Depreciation

Property and equipment are stated at cost. Depreciation is provided over the
estimated useful lives of the assets, ranging from 3 to 33 years, using
primarily the straight-line method for financial reporting purposes and
accelerated methods for tax reporting purposes.

Goodwill

Goodwill represents the excess of the cost of companies acquired over the
fair value of their net assets at dates of acquisition and is being
amortized on the straight-line method over periods not exceeding 15 years.
The Company reviews goodwill for impairment based upon undiscounted cash
flows over the remaining life of the goodwill. If necessary, impairment will
be measured based on the difference between undiscounted future cash flows
and the net book value of the related goodwill.

Software Development Costs

In compliance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," certain computer software development costs have been
capitalized. Capitalization of computer software development costs begins
upon the establishment of technological feasibility. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized computer software development costs require considerable
judgment by management with respect to certain external factors, including,
but not limited to, anticipated future gross revenues, estimated economic
life and changes in software and hardware technology.

Amortization of capitalized computer software development costs is provided
on a product-by-product basis using the straight-line method over the
remaining estimated economic lives of the respective products, ranging from
two to five years. Amortization amounted to $1,572,096, $1,221,715, and
$771,374 for the years ended September 30, 1995, 1994 and 1993,
respectively, and is included in cost of revenues.

                                      F-9
<PAGE>

Foreign Currency Translation

All assets and liabilities of foreign subsidiaries are translated at
exchange rates in effect on the balance sheet date, and revenue and expenses
are translated using a weighted average exchange rate during the period.
Cumulative adjustments resulting from translation of financial statements
are reflected as a separate component of stockholders' equity. 

Revenue Recognition

Revenues from product sales are recognized upon shipment to the customer.
Lease and service revenues are recognized ratably over the contractual
period or as the services are performed. Revenues from licenses of software
products are recognized when the product is shipped and the Company has no
further obligation to the customer. Deferred revenue represents advance
billings on service contracts.

Research and Development Costs

Research and development costs, excluding the costs capitalized as computer
software development costs, are expensed in the period incurred. These
costs, representing engineering salaries, fringe benefits, other direct
expenses and a portion of the Company's overhead, are included in the
accompanying consolidated financial statements as product development costs.
Research and development expenses for the years ended September 30, 1995,
1994 and 1993 were approximately $712,000, $619,000 and $837,000,
respectively. 

Taxes on Income

Deferred income taxes are recorded to reflect the future tax consequences of
temporary differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end.

                                     F-10
<PAGE>

Effective October 1, 1993, the Company changed its method of accounting for
income taxes to the liability method required by Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."  Prior year
financial statements have not been restated. The cumulative effect of
adopting Statement No. 109 as of October 1, 1993 was to decrease net income
for the year ended September  30, 1994 by $127,000.

Earnings Per Share

Earnings per share amounts have been calculated using the weighted average
number of shares and common stock equivalents outstanding for the respective
periods. The antidilutive effect of outstanding options and warrants of the
Company is excluded from the earnings per share calculations presented in
the consolidated statements of income. The weighted average number of shares
outstanding were 4,238,889, 4,169,781 and 4,141,290 for fiscal years 1995,
1994 and 1993, respectively.

Consolidated Statements of Cash Flows

For the purposes of this statement, the Company considers money market funds
to be cash equivalents.

2.       Common Stock Distribution

In November 1992, the Board of Directors of the Company approved the
distribution of all of the outstanding stock of Nematron to Interface's
stockholders subject to, among other things, the receipt of regulatory
approvals. In February 1993, the Company distributed all of its Nematron
stock, totaling 1,377,776 shares. The transaction was accounted for as a
spin-off and, accordingly, stockholders' equity was decreased by $6,730,256
in fiscal 1993, representing the net asset value of Nematron at the spin-off
date.

The accompanying statement of income for the year ended September 30, 1993
includes the net losses and costs of the spin-off, in excess of the prior
year estimated provision, totaling $162,539.

                                     F-11
<PAGE>

3.       Business Acquisition

In August 1994, ISIL acquired certain assets of Mekom Computer Products PLC
("Mekom"), a British company, for $2,017,200. The acquisition was accounted
for as a purchase and, accordingly, the acquired assets have been recorded
on ISIL's books at the estimated fair values at the date of acquisition. The
excess of the total purchase price over the estimated fair value of assets
acquired was $1,121,617 and is included as goodwill in the accompanying
consolidated balance sheets. The consolidated statements of income include
the operating results of Mekom from August 1994. 


4.       Inventories

Inventories are summarized as follows:

September 30,                             1995          1994
                                          ----          ----
Purchased parts and accessories     $2,853,910    $3,810,521
Finished goods                       2,648,988     2,165,016
Work-in-process                      1,005,203       839,574
Service parts and demo units           852,103       920,118
                                     ---------     ---------
                                    $7,360,204    $7,735,229
                                     =========     =========

5.       Lines-of-Credit and Notes Payable

The Company has a working capital credit facility with a bank, expiring
February 1996, under which the Company may borrow up to $3,500,000.
Borrowings under this agreement are unsecured and bear interest at the
bank's prime rate. There were no borrowings outstanding with respect to this
agreement at September 30, 1995 and 1994.

ISIL has a short-term credit facility with a bank, expiring February 1996,
under which it may borrow up to $4,738,500. Borrowings under this facility
are guaranteed by the Company, bear interest at LIBOR plus 2% (9.00% at
September 30, 1995 and 7.34% at September 30, 1994) and are due on demand.
Borrowings outstanding at September 30, 1995 and 1994 were $4,367,318 and
$2,143,060, respectively.

The ISIL credit facility contains a restrictive covenant requiring ISIL to
maintain positive tangible net worth. ISIL was in compliance with this
covenant at September 30, 1995 and 1994.

                                     F-12
<PAGE>

IGK has a short-term credit facility with a bank under which it may borrow
up to $150,000. Borrowings are collateralized by accounts receivable,
inventory, and machinery and equipment and bear interest at .5% over the
bank's prime rate. There were no borrowings outstanding under this facility
at September 30, 1995 and 1994.

6.       Long-Term Debt

Long-term debt consists of the following:

September 30,                               1995       1994
                                            ----       ----
Installment loan payable-bank, payable
  in monthly installments of $3,696
  including interest at 0.25% over
  the bank's prime rate (9.0% at
  September 30, 1995), due March
  1997, unsecured                        $284,247  $304,972

Installment loan payable-bank, payable
  in monthly installments of $2,212
  plus interest at 7.65%, through
  October 1997, collateralized by
  equipment                                54,699    81,244

Non-compete agreement, paid in full
  during 1995                                 --     95,000
                                          -------   -------
                                          338,946   481,216
Less current maturities                    52,400   147,400
                                          -------   -------
                                         $286,546  $333,816
                                          =======   =======

The aggregate amounts of long-term debt maturing in each of the next three
fiscal years are as follows:  1996 - $52,400; 1997 - $285,000; and 1998 -
$1,546.

                                     F-13
<PAGE>
7.       Taxes on Income

Provisions for taxes on income in the consolidated statements of income are
made up of the following components:

Year Ended September 30,        1995         1994        1993
                                ----         ----        ----

Current - U.S. federal      $389,000   $1,056,000    $890,000
Deferred - U.S. federal      151,000      372,000     287,000
                             -------    ---------     -------
                            $540,000   $1,428,000  $1,177,000
                            ========    =========  ==========

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. 
Significant components of the Company's deferred tax liabilities and assets
are as follows:

September 30,                              1995        1994
                                           ----        ----
Deferred Tax Liabilities
  Tax depreciation and amortization
    greater than book amounts        $1,381,000   $1,178,000
                                      =========    =========
Deferred Tax Assets
  Net operating loss carryforwards
    of ISIL                            $612,000     $322,000
  Receivable and inventory reserves     248,000      195,000
  Employee benefit accruals             107,000      107,000
  Inventory costs under uniform
    capitalization rules                 43,000       47,000
  Other                                  15,000       12,000
                                        -------      -------
                                      1,025,000      683,000
Valuation Allowance for Deferred Tax
  Assets of ISIL                       (612,000)    (322,000)
                                      ---------      -------
Net Deferred Tax Assets                $413,000     $361,000
                                        =======      =======

                                     F-14
<PAGE>
The following reconciles the statutory federal income tax rate to the
Company's effective tax rate:

Year Ended September 30,             1995     1994     1993
                                     ----     ----     ----
Income tax based on the federal
  statutory rate                    34.00%   34.00%   34.00%
Increase (decrease) in taxes
  resulting from:
    Benefits of FSC non-taxable
       income                       (7.29)    (.40)   (2.15)
    Research and development
       credits                      (4.67)   (2.74)      --
    Amortization of goodwill        13.74     2.21     3.43
    Non-deductible losses of
       foreign subsidiaries         41.00      .42     4.93
    Other                            (.34)    (.96)     .62
                                    -----     ----     ----
                                    76.44%   32.53%   40.83%
                                    =====    =====    =====

The domestic and foreign components of income (loss) before taxes on income
were as follows:

Year Ended September 30,             1995         1994         1993
                                     ----         ----         ----
Domestic                       $1,558,281   $4,443,695   $3,299,841
Foreign                          (851,895)     (53,918)    (417,379)
                                ---------    ---------    ---------
                                 $706,386   $4,389,777   $2,882,462
                                 ========    =========    =========

ISIL has net operating loss carryforwards totalling approximately $1,799,000
at September 30, 1995.

                                     F-15
<PAGE>

8.       Retirement Plan 

The Company has established a defined contribution retirement plan for all
eligible employees. Participants may make basic contributions from 2% to 8%
of their compensation pursuant to Section 401(k) of the Internal Revenue
Code. The Company makes a basic contribution of 100% of the amount
contributed by participants, up to 4% of participant compensation, and may
make additional contributions as approved by the Board of Directors. The
Company recognized approximately $299,000, $223,000 and $251,000 of expense
related to this plan for the years ended September 30, 1995, 1994 and 1993,
respectively.

In addition, ISIL maintains a defined contribution pension plan for all
eligible employees. ISIL recognized approximately $112,000, $105,000 and
$89,000 of expense related to this plan for the years ended September 30,
1995, 1994 and 1993, respectively.

9.       Commitments and Contingencies

The Company has various operating leases which require future minimum rental
payments in excess of one year as follows:  1996 - $301,000; 1997 -
$272,000; 1998 - $224,000; 1999 - $207,000; and 2000 - $207,000. Rent
expense for the years ended September 30, 1995, 1994 and 1993 was $375,000,
$243,000 and $210,000, respectively.

In August 1995, the Board of Directors authorized the acquisition by the
Company of up to 400,000 shares of its common stock at prices not to exceed
$5 per share. No common stock was acquired in 1995.

10.      Stock Warrants

On August 3, 1983, the Company sold 300,000 units (consisting of two shares
of common stock and one warrant) through a public offering at $15.00 per
unit. Each warrant entitles the holder to purchase one share of common
stock. The warrants were exercisable at $6.50 per warrant and were to expire
July 1, 1995. In March 1995, the Board of Directors extended the expiration
date of the warrants to December 29, 1995. The Company may call the
warrants, upon 30 days written notice, at a price of $.63 per warrant.
During the year ended September 30, 1995, 3,350 of the warrants were
exercised at a price of $6.50 per warrant, and 296,650 warrants were
outstanding at September 30, 1995.

                                     F-16
<PAGE>
11.      Stock Options

Incentive stock options are granted to executives and key employees for a
ten-year period with the option price being at least the fair market value
at date of grant. The incentive stock options can be exercised in three
annual installments starting one year after the date of the grant.

The Company has also granted non-qualified stock options to five
non-employee directors, which expire ten years and one day from date of
grant. All non-qualified stock options are cancelled if the grantee ceases
to be a director.

The Company has reserved approximately 629,400 shares of its common stock
for issuance under the various stock option plans ("Plans"). Approximately
196,500 shares are available for grant under the Plans at September 30,
1995.

Changes in stock options outstanding, adjusted to reflect stock dividends
and splits, are summarized as follows:

                                          Qualified           Non-Qualified
                                            Option               Option
                                Shares       Price    Shares      Price
                                ------      ------    ------     ------
                                         $                    $
Balance, October 1, 1992       418,132   3.31-7.50    16,500       7.04
  Granted                      150,000        5.25    30,000       5.25
  Exercised                     (9,000)  3.31-3.81       --         --
  Expired or terminated        (90,900)  3.31-7.50       --         --

Balance, September 30, 1993    468,232   3.31-7.50    46,500  5.25-7.04
  Granted                         --         --         --        --
  Exercised                    (20,477)  3.31-3.63      --        -- 
  Expired or terminated        (30,123)  3.31-7.50      --        --

Balance, September 30, 1994    417,632   3.31-7.50    46,500  5.25-7.04
  Granted                       78,000   5.38-7.19      --        --
  Exercised                    (55,700)  3.31-7.50      --        --
  Expired or terminated (37,033)  3.63-7.50             --        --

Balance, September 30, 1995       402,899 3.31-7.50        46,500  5.25-7.04



At September 30, 1995, 282,401 of the qualified and 36,500 of the
non-qualified options are exercisable.

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 "Accounting for Stock-Based Compensation" which is effective for years
beginning after December 15, 1994 for the proforma disclosure requirements
and after December 15, 1995 for the other disclosure requirements. This
statement allows entities to choose between a new fair value based method of
accounting for employee stock options or similar equity instruments and the
current method of accounting prescribed by Accounting Principles Board
Opinion No. 25. Entities electing to remain with the accounting in Opinion
No. 25 must make proforma disclosures of net income and earnings per share
as if the fair value method of accounting had been applied. The Company
expects to continue accounting for employee stock options in accordance with
Opinion No. 25 and has not made a calculation of the proforma effect due to
the complexity involved with such a calculation.

                                 F-17
<PAGE>
12.      Supplemental Disclosures of Cash Flow Information

                                  1995       1994         1993
                                  ----       ----         ----
Cash Paid During The Year For
  Taxes on income             $712,682   $970,694   $1,232,000
  Interest                     263,758    171,701      218,695
                               =======    =======    =========

Non-Cash Investing and Financing Activities

During the year ended September 30, 1994, the Company repaid $190,000 to the
former shareholders of ISIL by reducing a receivable due from these
shareholders for the same amount.

13.      Segment Information and Foreign Revenues

The Company and its subsidiaries are involved in one business segment; the
development, manufacture and sale of computer peripherals and data
communications software.

Financial information, summarized by geographic area, is as follows:

<TABLE>
<CAPTION>
Year Ended
September 30, 1995             United States    Europe   Eliminations  Consolidated
<S>                             <C>          <C>          <C>          <C>                  
Total Revenue
  Unaffiliated customers        $17,108,616  $53,134,600     $ --       $70,243,216
  Inter-area transfers            2,556,049        --      (2,556,049)        --
                                 ----------   ----------    ---------    ----------
Total                           $19,664,665  $53,134,600  $(2,556,049)  $70,243,216
                                 ==========   ==========    =========    ==========
Net Income (Loss)                $1,018,281    $(851,895)    $ --          $166,386
                                  =========      =======      =====         =======
Total Assets                     $3,462,758  $12,925,606  $(2,435,914)  $33,952,450
                                  =========   ==========    =========    ==========
</TABLE>

                                         F-18
<PAGE>
<TABLE>
<CAPTION>
Year Ended
  September 30, 1994          United States       Europe  Eliminations  Consolidated
                              -------------       ------  ------------  ------------
<S>                             <C>          <C>          <C>           <C> 
Total Revenue
  Unaffiliated customers        $21,673,600  $17,338,486    $  --       $39,012,086
  Inter-area transfers            2,685,930        --      (2,685,930)       --
                                 ----------   ----------    ---------    ----------
Total                           $24,359,530  $17,338,486  $(2,685,930)  $39,012,086
                                 ==========   ==========    =========    ==========
Net Income (Loss)                $2,888,695     $(53,918)   $  --        $2,834,777
                                   ========       ======      ====        =========
Total Assets                    $22,962,685  $10,634,228  $(1,697,609)  $31,899,304
                                 ==========   ==========    =========    ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended
  September 30, 1993          United States       Europe  Eliminations  Consolidated
                              -------------       ------  ------------  ------------
<S>                             <C>          <C>          <C>           <C>
Total Revenue
  Unaffiliated customers        $20,136,926  $13,644,706    $  --       $33,781,632
  Inter-area transfers            4,300,690        --      (4,300,690)       --
                                 ----------   ----------    ---------    ----------
Total                           $24,437,616  $13,644,706  $(4,300,690)  $33,781,632
                                 ==========   ==========    =========    ==========
Net Income (Loss)                $2,122,841    $(417,379)   $  --        $1,705,462
                                  =========      =======      ====        =========
Total Assets                    $22,584,216   $3,671,931    $(894,517)  $25,361,630
                                 ==========    =========      =======    ==========
</TABLE>

United States inter-area transfers represent shipments of equipment and
parts to foreign subsidiaries. These inter-area shipments are made at
transfer prices which are discounted from prices charged to unaffiliated
customers and have been eliminated from consolidated net revenues.

14.      Selected Quarterly Financial Data (Unaudited)

The following is a summary of selected quarterly financial data for the
years ended September 30, 1995 and 1994.

<TABLE>
<CAPTION>                      First       Second        Third       Fourth       Fiscal
1995                         Quarter      Quarter      Quarter      Quarter         Year
                             -------      -------      -------      -------        -----
<S>                      <C>          <C>          <C>          <C>          <C>
Net Revenues             $15,914,761  $19,840,268  $18,612,947  $15,875,240  $70,243,216
Gross Profit, as
  previously reported      3,848,965    3,736,267    3,418,863    2,222,157   13,226,252
Adjustment                   (43,530)    (313,961)    (142,108)       --        (499,599)
Gross Profit, as
  restated                 3,805,435    3,422,306    3,276,755    2,222,157   12,726,653
Net Income (Loss),
  as previously reported     757,273      692,006     (223,022)    (560,272)     665,985
Adjustment                   (43,530)    (313,961)    (142,108)       --        (499,599)
Net Income (Loss), as
  restated                   713,743      378,045     (365,130)    (560,272)     166,386
Net Earnings (Loss) Per
  Share, as previously
  reported                      0.18         0.16        (0.05)       (0.13)        0.16
Adjustment                     (0.01)       (0.07)       (0.04)         --  (0.12)
Net Earnings (Loss) Per
  Share, as restated            0.17         0.09        (0.09)       (0.13)        0.04
</TABLE>
                                         F-19
<PAGE>
The adjustment to fiscal 1995 quarterly earnings previously reported relates
to the write-off of certain costs at ISIL that should not have been
capitalized during the year.

In addition, during the fourth quarter of fiscal 1995, the Company recorded
certain year end accounting adjustments relating to inventories and royalty
obligations under license agreements. Such adjustments decreased net income
in the fourth quarter by approximately $298,000 or $.07 per share.

<TABLE>
<CAPTION>
                             First      Second       Third       Fourth       Fiscal
1994                       Quarter     Quarter     Quarter      Quarter         Year
                           -------      ------     -------      -------      -------
<S>                     <C>         <C>         <C>         <C>          <C>
Net Revenues            $9,067,985  $9,961,551  $7,749,323  $12,233,227  $39,012,086
Gross Profit             3,608,699   3,749,283   3,171,241    3,982,500   14,511,723
Income Before
  Cumulative Effect of
  Change In Accounting
  Principle                723,912     737,672     495,599    1,004,594    2,961,777
Net Income                 596,912     737,672     495,599    1,004,594    2,834,777
Net Earnings Per Share         .14         .18         .12          .24          .68

</TABLE>

The cumulative effect of change in accounting principle relates to the
Company's adoption of SFAS 109 during the first quarter, the effect of which
was to reduce net income by $127,000 or $.03 per share.

On November 15, 1995, a class action complaint was filed, by a shareholder
of the Company, against the Company and certain officers of the Company. 
Notice of the action was provided to the Company on December 22, 1995.  The
complaint alleges violations of Rule 10b-5 of the Securities Exchange Act of
1934 (the "Exchange Act"), liability under Section 20 of the Exchange Act
and claims of common law fraud and deceit and negligent misrepresentation,
based upon certain non-disclosures by the Company and certain of its
officers related to the effect of the acquistion of the Mekom distribution
business of the Company.  The plaintiffs seek relief for compensatory and
punitive damages, together with pre-judment interest, and plaintiffs' costs
and disbursements, including reasonable allowances for fees for plaintiffs'
attorneys and experts.  As of January 16, 1996, it is not possible to
determine an estimate of the possible loss, if any, which may result from
the described action, however, the Company believes that the action is
without merit and plans to defend the suit vigorously.

                                     F-20
<PAGE>


FINANCIAL STATEMENT SCHEDULES

Report of Independent Certified Public Accountants

To the Board of Directors
Interface Systems, Inc.
Ann Arbor, Michigan

The audits referred to in our report dated November 10, 1995, except for
Note 15 which is as of January 16, 1996, relating to the consolidated
financial statements of Interface Systems, Inc. and subsidiaries, which is
contained in Item 8 of this Form 10-K included the audits of the financial
statement schedules listed in the accompanying index.

In our opinion, such financial statement schedules present fairly the
information set forth therein.



/S/ BDO SEIDMAN
    BDO SEIDMAN       

Troy, Michigan
November 10, 1995

                                S-2
<PAGE>
                SCHEDULE II--Valuation and Qualifying Accounts
                 Years Ended September 30, 1995, 1994 and 1994

<TABLE>
<CAPTION>
                                                    Additions
                                      Balance at    Charged to                  Balance
                                      Beginning     Cost and                    at End
Description                           of Year       Expenses      Deductions    of Year
-----------                           ----------    ----------    ----------    -------
<S>                                    <C>          <C>         <C>            <C>
Year Ended September 30, 1995
  Allowance for doubtful accounts
  (deducted from accounts receivable)  $133,000     $251,000     $136,000(1)   $248,000
                                        =======     =======       =======       =======   
Year Ended September 30, 1994
  Allowance for doubtful accounts
  (deducted from accounts receivable)   117,000       31,000       15,000(1)   $133,000
                                        =======       ======       ======       =======

Year Ended September 30, 1993
  Allowance for doubtful accounts
  (deducted from accounts receivable)   105,000       27,000       15,000(1)   $117,000
  Provision for estimated losses
  of and costs of spin-off of
  subsidiary                            400,000      155,000      555,000(2)   $   --
                                        =======      =======      =======       =======
---------------
(1)  Accounts deemed to be uncollectible.
(2)  Reduced when actual losses and costs were incurred.

</TABLE>

                                         S-3
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 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.
                           

                                             INTERFACE SYSTEMS, INC.


Dated:  January 29, 1996                     By: /S/ CARL L. BIXBY
                                                -----------------------
                                                Carl L. Bixby, President


<PAGE>
                               INDEX TO EXHIBITS

Exhibit                                                  
Number                        

3(a)     Certificate of Incorporation of the Company, as amended (1)

3(b)     Bylaws of the Company, as amended to date (2)

4        Other instruments, notes or extracts from agreements defining the
         rights of holders of long-term debt of the Registrant or its
         subsidiaries have not been filed because (i) in each case the total
         amount of long-term debt permitted thereunder does not exceed 10% of
         the Registrant's consoli-dated assets, and (ii) the Registrant
         hereby agrees that it will furnish such instruments, notes and
         extracts to the Securities and Exchange Commission upon its request

10(j)    1982 Incentive Stock Option Plan, effective May 21, 1982, as
         amended, with Form of Stock Option Agreement with Stock Appreciation
         Rights (3)

10(1)    Form of Non-Qualified Stock Option Agreement (3)

10(2)    1992 Stock Option Plan, effective May 6, 1992 (4)

10(3)    Non-Employee Director Stock Option Plan (5)

21       Subsidiaries of the Registrant (6)

23       Consent of BDO Seidman  (7)
___________________________________________
(1)      This exhibit was filed with the Registrant's Form 10-K for the
         fiscal year ended September 30, 1988 and is incorporated herein by
         reference.  The exhibit number used herein is identical to the
         exhibit number as originally filed with the Form 10-K.
(2)      This exhibit was filed with the Registrant's Form 10-K for the
         fiscal year ended September 30, 1991 and is incorporated herein by
         reference.  The exhibit number used herein is identical to the
         exhibit number as originally filed with the Form 10-K.
(3)      These exhibits were filed under Item 16 of the Registrant's Form S-1
         Registration Statement filed on July 15, 1986 pursuant to the
         Securities Act of 1933, as amended, File No. 2-84204 and are
         incorporated herein by reference.  The exhibit numbers used herein
         are identical to the exhibit numbers as originally filed with the
         form S-1 Registration Statement.
(5)      This exhibit was filed as Exhibit 19 to the Registrant's Form 10-Q
         for the Quarter ended March 31, 1994 and is incorporated herein by
         reference.
(6)      This exhibit was filed as Exhibit 21 to the Registrant's Form 10-K
         for the year ended September 30, 1994 and is incorporated herein by
         reference.
(7)      Filed herewith.