<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                  FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
   ACT OF 1934 (Fee required)
   For the fiscal year ended December 31, 1996, 
          or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities 
   Exchange Act of 1934 (No fee required)
   For the transition period from            to

                         Commission file number 0-3035

                            COGNITRONICS CORPORATION  
             (Exact name of registrant as specified in its charter)

                  NEW YORK                          13-1953544      
     (State or other jurisdiction of             (I.R.S. Employer    
      incorporation or organization)             Identification No.)

    3 Corporate Drive, Danbury, Connecticut             06810  
   (Address of principal executive offices)           (Zip Code)

Registrant's telephone number, including area code (203) 830-3400

Securities registered pursuant to Section 12(b) of the Act:
                                                                                
                                            Name of each exchange on
            Title of each class                 which registered 
  Common Stock, par value $0.20 per share      American Stock Exchange

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

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 at least 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. [   ]

The aggregate market value of the voting stock held by non-affiliates of the 
registrant as of March 1, 1997:

Common Stock, par value $0.20 per share -- $16,438,000 

The number of shares outstanding of each of the issuer's classes of common 
stock as of March 1, 1997

Common Stock, par value $0.20 per share -- 3,484,073 shares

Documents incorporated by reference:   Portions of the Proxy Statement for the 
annual meeting of stockholders to be held on May 8, 1997, are incorporated by 
reference into Part III.
<PAGE>   2
                               TABLE OF CONTENTS


                                    PART I

Item                                                                     Page

 1. Business                                                                3
 2. Properties                                                              5
 3. Legal Proceedings                                                       5
 4. Submission of Matters to a Vote of Security Holders                     6
    Executive Officers of the Company                                       7


                                    PART II

 5. Market for Company's Common Equity and Related Stockholder Matters      9
 6. Selected Financial Data                                                 9
 7. Management's Discussion and Analysis of Financial Condition and 
    Results of Operations                                                  10
 8. Financial Statements and Supplementary Data                            12
 9. Changes in and Disagreements with Accountants on Accounting and 
    Financial Disclosure                                                   28


                                   PART III

10. Directors and Executive Officers of the Company                        29
11. Executive Compensation                                                 29
12. Security Ownership of Certain Beneficial Owners and Management         29
13. Certain Relationships and Related Transactions                         29


                                    PART IV

14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K       29

















McIAS is a trademark of Cognitronics Corporation.
UNIX is a registered trademark of Santa Cruz Operation, Inc.
DART is a registered trademark of Dacon Electronics Corp., a subsidiary of 
 Cognitronics Corporation.
<PAGE>  3
                                    PART I

Item 1.    Business

     (a)  Cognitronics Corporation (the "Company") was incorporated in January 
1962 under the laws of the State of New York. The Company designs,
manufactures and markets voice processing systems.  

     (b)  The Company operates in one industry segment: voice processing 
products.

     (c)     (i) A description of the fields of voice processing in which the 
Company operates and its products are as follows:  

     Passive Announcers. These announcers are used by the telephone operating 
companies to inform callers about network conditions or procedures. The 
Company has been a major supplier to telephone companies of passive 
announcers, such as the Company's Speech Recorder/Announcer , Automatic Number 
Announcer  and the McIAS(TM) 1500. The McIAS 950, introduced in 1995, is 
also capable of use as a passive announcer. These products are generally sold 
to telephone companies directly.

     Intelligent Announcers. The Company's McIAS 1100 and 2100 have been 
primarily used by the telephone companies to provide voice announcements in 
connection with custom calling features (CLASS), such as selective call 
forwarding and caller originator trace. Number change intercept is another 
important feature provided.

     Introduced in 1994, a new generation of central office grade systems 
became available.  Known as the McIAS 16xx series, two models (McIAS 1607 and 
1610/68) provide a range of capacity and a flexible voice platform which 
delivers enhanced features to the telephone network. Features include all 
those provided by the Company's earlier products as well as partitioning for 
multiple end users, music on hold, message on hold and Centrex ACD 
announcements. The Company's sales effort was to sell this equipment into new 
installations, and to transition existing customers from the McIAS 1100 and 
2100 to these new products.  In 1996, the Company ceased production of the 
McIAS 1100 and 2100.

      Introduced in the first quarter of 1995 were the McIAS 950 and 1685, and 
UNIX® based versions of the McIAS 16xx, named McIAS 16xx/IP. A new, larger 
capacity member of the product family, McIAS 1623/IP, was introduced in 
October 1995. The McIAS 950 and 1685 are fixed application systems designed to 
deliver important features to the market at low price points. The UNIX, RISC 
CPU-powered McIAS 16xx/IP series provides the ability to run multiple 
applications for multiple users simultaneously. Application examples include, 
or will include, number change with call completion, automated attendant, 
interactive voice response, fax, voice mail, voice activated dialing, prepaid 
debit card,  audiotex, a graphical service creation environment and a number 
of application programming interfaces (APIs). All earlier installations of the 
McIAS 16xx series are fully upgradable to the UNIX version. A continuing 
evolution of these products can be expected in 1997. Additionally, a new 
digital interface card is planned for introduction later in 1997. This new 
card will utilize the robust VMEbus architecture and will further enhance the 
Company's ability to deliver the scalable, advanced functionality required in 
the Advanced Intelligent Network (AIN). The Company believes that this 
technology will provide for a successful entry into the Intelligent Peripheral 
and wireless markets.
<PAGE>   4
     Call Processing Systems. The Company's McIAS 950 is also an automated 
attendant and audiotex system with the flexibility to offer the caller various 
choices (dial and extension, talk to an operator, etc.) and provides 
menu-selected information. Another product, DART(RM), offers automated 
attendant features in a single line, low cost system.

     European Distributorship Operations. Dacon Electronics Plc., based in 
Hertfordshire, England, distributes call management and other voice processing 
products, including products manufactured by the Company, in Europe.
          (ii)  Status of publicly announced new products or industry segments 
requiring material investment.  Inapplicable.

          (iii)  The Company has adequate sources for obtaining raw materials, 
components and supplies to meet production requirements and did not 
experience  difficulty during 1996 in obtaining such materials and components; 
however, the components for the Company's older products, such as the McIAS 
2100, have become more difficult or impossible to obtain. These products have 
been replaced with the current McIAS 16xx series products.

          (iv)  The Company relies on technological expertise, responsiveness 
to users' needs and innovations and believes that these are of greater 
significance in its industry than patent protection. There can be no 
assurance  that patents owned or controlled by others will not be encountered 
and asserted  against the Company's voice processing products or that licenses 
or other rights under such patents would be available, if needed. The Company 
has registered trademarks and names which the Company considers important in 
promoting the business of the Company and its products. 

          (v)  Seasonality.   Inapplicable.

          (vi)  The discussion of liquidity and sources of capital as set  
forth in Management's Discussion and Analysis of Financial Condition and 
Results of Operations is included in Item 7 of this Annual Report on Form 10-K 
and is incorporated herein by reference.

          (vii) In 1996, revenues included sales of  $4.0 million to Northern 
Telecom, Inc. and sales of $2.4 million to GTE Corp. The Company's U.K. 
operation had sales of  $5.4 million to British Telecommunications Plc in 
1996. Over the past several years, a major portion of the revenues of the 
domestic operations have come  from two large customers, and substantially all 
of the revenues of the UK operation come from one customer.  Accordingly,  the 
loss of any of these customers  could have a material adverse impact on the 
Company's results of operations.

          (viii) The dollar amount of orders believed by the Company to be 
firm as of December 31, 1996 and 1995, amounted to $2.0 million and  $1.4 
million, respectively. Substantially all of the orders as of December 31, 
1996, can reasonably be expected to be filled during 1997.

          (ix) Business subject to renegotiation.  Inapplicable.

          (x)  The Company competes, and expects to compete, in fields noted 
for rapid technological advances and the frequent introduction of new 
products  and services. The Company's products are similar to those 
manufactured, or capable of being manufactured, by a number of companies, some 
of which are well-established corporations with financial, personnel and 
technical resources  substantially larger than those of the Company. The 
Company's ability to compete in the future depends on its ability to maintain 
the technological and performance advantages of its current products and to 
<PAGE>   5
introduce new products and applications that achieve market acceptance. Future 
research and development expenditures will be based, in part, on future 
results of operations. There are no assurances that the Company will be able 
to successfully develop and market new products and applications.

          (xi) Expenditures for research and development activities of  
continuing operations, as determined in accordance with generally accepted 
accounting principles, amounted to $1.6 million in 1996 and $1.5 million in 
1995 and 1994.  In addition, the estimated dollar amount spent on the  
improvement of existing products or techniques and customer-sponsored research 
activities relating to the development of new products and techniques was $.1 
million in each of the years 1996, 1995 and 1994.  
          (xii) Material effects of compliance with Federal, State or local 
provisions regulating the discharge of materials into the environment or 
otherwise relating to the protection of the environment.     Inapplicable.

          (xiii) At December 31, 1996, the Company and its subsidiaries 
employed 85 people.

     (d)  Sales to foreign customers primarily represent sales of Dacon 
Electronics Plc. (incorporated in the United Kingdom) of $7.3 million in 
1996,  $7.5 million in 1995 and  $4.8 million in 1994. Additional information 
about foreign operations is included in Note L to Consolidated Financial 
Statements included in Item 8 of this Annual Report on Form 10-K and is 
incorporated herein by reference. 

     Further, there were export-type sales (primarily North America) of  
approximately $.1 million in 1996 and 1995 and $.2 million in 1994. Export 
sales do not involve any greater business risks than do sales to domestic 
customers and, in certain instances, the Company obtains an irrevocable letter 
of credit or payment prior to shipment of products to the customer.  Selling 
prices and gross profit margins on export-type sales are comparable to sales 
to domestic customers.  

Item 2.   Properties

     The facilities of the Company and its subsidiaries are located as 
follows:
                                                                       Lease 
                                                           Square   Expiration
Location                Description                         Feet       Date

Danbury, Connecticut:   Office, engineering, production     40,000    10/31/03
3 Corporate Drive       and service facility
                                   
Hemel Hempstead         Office, distribution
Hertfordshire,          and service facility                12,000     7/31/01
United Kingdom                                                     
1 Enterprise Way

     The company considers each of these facilities to be in good condition 
and adequate for the company's business.


Item 3.   Legal Proceedings

     In 1993, purported class action lawsuits were filed against the Company 
and certain of its officers as follows:
<PAGE>   6
     1.  Michael Germano v. Cognitronics Corporation and Matthew J. Flanigan 
in the United States District Court, District of Connecticut, dated March 15, 
1993;

     2.  Barry L. Bragger and Eve Gerber vs. Matthew J. Flanigan and 
Cognitronics, Inc. in the United States District Court, District of 
Connecticut dated March 16, 1993; and

     3.  John M. Mitnick, on behalf of himself and all other similarly 
situated v. Cognitronics Corp., Matthew J. Flanigan and G. Sullivan in the 
United States District Court for the Northern District of Georgia, Atlanta 
Division, dated March 15, 1993.

     These actions were consolidated in the United States District Court in 
Connecticut and a consolidated amended complaint was filed on July 8, 1993. 
The consolidated lawsuit alleges securities law violations in connection with 
the purchase of the Company's common stock by members of the purported classes 
during the period from October 29, 1992 through March 12, 1993. The plaintiffs 
seek unspecified damages and related costs. On July 28, 1993, the Company and 
the other defendants filed a motion to dismiss the consolidated amended 
complaint. After briefing by the parties, the motion was submitted to the 
Court in October 1993 and since that time has been sub judice. On July 28, 
1993, defendants moved to stay discovery pending resolution of defendants' 
motion to dismiss. On October 7, 1994, the Court denied that motion. Since 
that time the parties have engaged in limited discovery. The Company has 
denied any wrongdoing and believes it has presented viable grounds to support 
the motion to dismiss.  Management has not made provision for liability, if 
any, in the financial statements of the Company which may result from this 
litigation.


Item 4.   Submission of Matters to a Vote of Security Holders

     Inapplicable.


<PAGE>   7
                       Executive Officers of the Company

The executive officers of the Company, their positions with the Company and 
ages as of March 1, 1997 are as follows:

Name                      Position(s) and Office(s)                       Age

Brian J. Kelley           President and Chief Executive Officer;           45
                          Director               

Kenneth G. Brix           Vice President                                   50

Harold F. Mayer           Secretary                                        67

Michael N. Keefe          Vice President                                   41

Roy A. Strutt             Vice President; Director                         40

Garrett Sullivan          Treasurer and Chief Financial Officer            51

Emmanuel A. Zizzo         Vice President                                   56  

     No family relationships exist between the executive officers of the 
Company. Each of the executive officers was elected to serve until the next  
annual meeting of the Board of Directors or until his successor shall have 
been elected and qualified.

     Mr. Kelley has been President and Chief Executive Officer of the Company 
since January 1994. Prior to that he was Executive Vice President of 
TIE/Communications, Inc. from 1991 to 1994 with responsibility for business 
development, acquisitions and product management, President of CTG Inc., a 
subsidiary of TIE/Canada, Inc., from 1990 to 1991 and President of TIE 
National Accounts, Inc., a subsidiary of TIE/Communications, Inc., from 1986 
to 1990.

     Mr.  Brix has been  a Vice President of the Company since March 1994 with 
responsibility for U.S. sales and marketing. Prior to that he was Director of 
Sales and Marketing of Syntellect Network Systems, Inc. from December 1993 to 
March 1994, Regional Vice President of Voicetek Corp. from 1990 to 1993 and 
President of Voicecom Associates, Inc. from 1987 to 1990.

     Mr. Mayer has been Secretary of the Company since 1975. He was Treasurer 
from 1974 to 1989 and a Vice President of the Company from 1986 to 1996. 

     Mr. Keefe has been a Vice President of the Company since 1993 with 
responsibility for engineering, prior to which he was Manager of Software 
Planning and Development from 1992 until 1993 and senior engineer for more 
than five years. He has been employed by the Company since 1980.

     Mr. Strutt has been a Vice President of the Company since July 1994 with 
responsibility for European operations. Since 1992, he has been Managing 
Director of Dacon Electronics Plc, which was acquired by the Company in 
November 1992, and Director of Sales and Operations from 1990 to 1992. Prior 
to that he was Managing Director of Automatic Answering Ltd. for four years.

     Mr. Sullivan has been Treasurer and Chief Financial Officer of the 
Company since 1989. Prior to that he was Treasurer and Chief Financial Officer 
of Fundsnet, Inc., an electronic funds transfer company, from 1986 until 1989. 
He was employed by The Singer Co. from 1977 to 1986, where his most recent 
<PAGE>   8
position was Vice President-Finance, Asia Division. 

     Mr. Zizzo has been a Vice President of the Company since March 1995 with 
responsibility for operations, primarily manufacturing, purchasing and 
physical facilities, prior to which he had been Director of Operations since 
May 1994. He was an independent consultant from 1993 to April 1994. Prior to 
that he was a Vice President of TIE/Communications, Inc. from 1991 to 1992, a 
Vice President of CTG Inc., a subsidiary of TIE/Canada, Inc., from 1990 to 
1991 and Director of Customer Support Services of TIE/Communications, Inc. for 
more than five years.
<PAGE>   9
PART II

Item 5.   Market for Company's Common Equity and Related Stockholder Matters

     (a) and (b) Cognitronics' stock is traded on the American Stock Exchange 
under the symbol CGN. On March 1, 1997, there were 994 shareholders of 
record.  Information on quarterly stock prices is set forth in Item 8 of this 
Annual Report on this Form 10-K and is incorporated herein by reference.

     (c) The Company has never paid a cash dividend on its Common Stock and 
has used its cash for the development of its business. The Company has no 
present intention of paying a cash dividend, and payment of any future 
dividends will depend upon the Company's earnings, financial condition and 
other relevant factors.

Item 6.  Selected Financial Data
                                                Year ended December 31,
                                          (in thousands except per share data)
-------------------------------------------------------------------------------
OPERATING RESULTS                     1996     1995     1994     1993     1992
------------------------------------------------------------------------------
Revenues                           $17,343  $17,485  $14,576  $16,417  $16,178
Income (loss) from continuing
 operations                          1,099    1,321     (297)  (1,942)   1,915
Income (loss) from discontinued
 operations                                                      (386)    (277)
Cumulative effect of accounting
 changes                                                         (471)
Net income (loss)                    1,099    1,321     (297)  (2,799)   1,638
Income (loss) per share:
  Continuing operations               $.31     $.39    ($.09)   ($.60)    $.59
  Discontinued operations                                        (.12)    (.08)
  Cumulative effect of accounting changes                        (.15)
  Net income (loss)                    .31      .39     (.09)    (.87)     .51
Weighted average number of common
 shares outstanding                  3,585     3,424    3,144    3,206   3,240
-------------------------------------------------------------------------------
FINANCIAL POSITION
------------------------------------------------------------------------------
Working capital                    $ 8,745  $ 7,374  $ 4,956  $ 2,726  $ 6,664
Total assets                        17,511   15,040   14,180   15,449   16,670
Common stock subject to repurchase                     1,250    1,250    1,400
Stockholders' equity                10,612    9,044    7,042    7,193   10,698
Stockholders' equity per share       $3.05    $2.63    $2.25    $2.37    $3.42
Cash dividends paid                   None     None     None     None     None
-------------------------------------------------------------------------------

On November 13, 1992, the Company acquired all the outstanding stock of Dacon 
Electronics Plc in a purchase transaction.

The above Selected Financial Data should be read in conjunction with the 
Consolidated Financial Statements of the Company, including the notes thereto, 
and the unaudited quarterly financial data included in Item 8 of this Annual 
Report on Form 10-K. 


<PAGE>  10
Item 7.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations

     The Company reported net income of $1.1 million and $1.3 million for 1996 
and 1995, respectively, versus a net loss of $.3 million in 1994.

     In 1996, sales decreased $.2 million (1%) to $17.3 million from $17.5 
million in 1995 primarily due to lower sales of the Company's UK 
distributorship operations.  Sales of the Company's domestic operations, which 
for the first nine months of 1996 were down $.9 million from the comparable 
period of 1995, were essentially unchanged from the prior year due to a strong 
performance in the fourth quarter of 1996.  The Company's backlog at December 
31, 1996 was $2.0 million versus $1.4 million at December 31, 1995, primarily 
due to the strengthening of the Company's domestic operations.  The Company's 
domestic operations  is experiencing an increased demand for its products due 
to the changing landscape of the telecommunications industry as new entrants, 
such as competitive access providers and competitive local  exchange carriers, 
purchase equipment.  The Company anticipates that the domestic operations will 
continue this momentum into 1997.  During 1996, the Company completed the 
changeover from its older product lines (McIAS 2100s, 1100s and 1500s) to the 
McIAS 16xx family of products.  Gross margin percentages for 1996 were 
comparable to 1995.  A major portion of the Company's domestic revenues comes 
from two customers, and substantially all of its U.K. distributorship revenues 
come from one customer.  The loss of any of these customers would have a 
material adverse impact on the Company.

In 1995, sales increased $2.9 million (20%) to $17.5 million from $14.6 
million in 1994, primarily due to increased sales of $2.7 million in its UK 
distributorship operations.  Sales of domestic operations increased $.2 
million due to sales of McIAS upgrade kits ($2 million) and higher volumes of 
McIAS 16xxs and 2100s substantially offset by lower sales of McIAS 1100s and 
1500s.  Gross margins increased $2.4 million (35%) to $9.2 million in 1995 
from $6.8 million in 1994.  Gross margins of the UK distributorship operations 
increased $1.8 million due to higher volume and improved product mix; the 
domestic operations gross margin increased $.9 million due to improved product 
mix and lower costs.
      
     In 1996, research and development increased $.1 million (9%) primarily 
due to expenses related to certification  testing of  McIAS 950 and McIAS 16xx 
products and higher personnel expenses.    Such certification testing will 
continue into 1997.  In 1995, research and development expense was comparable 
to the prior year.

     In 1996, selling , general and administrative costs increased $.4 million 
(8%) to $5.4 million from $5.0 million in 1995 primarily due to increased 
expenses in the Company's UK distributorship operations related to the 
relocation to new facilities and increased personnel.  These expenses were 
incurred in preparation of expanding the product line; however, these new 
products have yet to make a significant contribution to the results of 
operations.  Selling, general and administrative costs decreased $.1 million 
(2%) in 1995 due to a decrease of $.5 million in the domestic operations, 
attributable to lower personnel costs offset by a $.4 million increase in the 
UK distributorship operations primarily attributable to higher personnel 
costs.

     Other income, net, was $.1 million in 1996 versus expense of $.1 million 
in 1995 (see Note H to the Consolidated Financial statements). 
<PAGE>  11
     The provision for income taxes is discussed in Note G to the Consolidated 
Financial Statements. Under Financial Accounting Standards Board ("FASB") 
Statement No. 109, the Company has recognized future tax benefits that 
management believes will be realized. In order to realize these  benefits, the 
Company, exclusive of the results of Dacon Electronics Plc, will have to 
generate pretax income of $3.9 million. The current deferred tax benefit of 
$.6 million is primarily attributable to inventory provisions and the 
recognition of such loss, for tax purposes, is, in large measure, within the 
control of the Company. The non-current tax benefit, $.8 million, primarily 
relates to deferred compensation and benefit plans and, as such, would be 
recognized over a long period of time. The Company's U.S. pretax income (loss) 
from continuing operations was $.8 million,  $1.0 million and $(.3) million in 
1996, 1995 and 1994, respectively. In 1994, the benefit of cost reduction 
programs initiated in 1993 and 1994 were not fully realized and also reflect a 
decline in the demand for the Company's McIAS 2100 series of products. The 
Company anticipates additional revenue contributions from the growing 
acceptance of the McIAS 16xx family of products. Based on this,  management 
anticipates that the Company will generate sufficient taxable income in the 
future to realize these benefits.

     The effect of inflation has not had a major impact on the operating 
results of the Company over the past few years. However, technological 
advances and productivity improvements are continually being applied to reduce 
costs, thus reducing inflationary pressures on the operating results of the 
Company.

Liquidity and Sources of Capital

     Net cash flow from operations was $1.2 million,  $2.3 million and $.9 
million in 1996, 1995 and 1994, respectively.

     Working capital increased to $8.7 million at December 31, 1996 from $7.4 
million at December 31, 1995 and  $5.0 million at December 31, 1994. The ratio 
of current assets to current liabilities was 3.1:1 at December 31, 1996 versus 
3.3:1 at December 31, 1995 and 2.2:1 at December 31, 1994.  The decrease in 
1996 is primarily due to the buildup of inventory at the end of 1996.

      The Company anticipates making capital expenditures of approximately $.5 
million and incurring increased research and development expenditures in 
1997.  Management believes that the cash and cash equivalents  at December 31, 
1996 and the cash flow from operations in 1997 will be sufficient to meet its 
needs.

     In 1993, a purported consolidated class action lawsuit was filed against 
the Company and certain of its officers (see Note K to the Consolidated 
Financial Statements and Item 3 - Legal Proceedings).  Due to the 
uncertainties involved in litigation, the ultimate outcome cannot be 
determined at this time. If adversely determined, the resolution of this 
matter could have a material negative affect on the Company's financial 
condition, results of operations and cash flows.

Certain Factors That May Affect Future Results

     From time to time, information provided by the Company, statements made 
by its employees or information included in its filings with the Securities 
and Exchange Commission (including this Form 10K) may contain statements which 
are not historical facts, so-called "forward-looking statements". These 
forward-looking statements are made pursuant to the safe harbor provisions of 
the Private Securities Litigation Reform Act of 1995. The Company's actual 
<PAGE>  12
future results may differ significantly from those stated in any 
forward-looking statements. Forward-looking statements involve a number of 
risks and uncertainties, including, but not limited to, product demand, 
pricing, market acceptance, litigation, risk of dependence on significant 
customers, third party suppliers and intellectual property rights, risks in 
product and technology development and other risk factors detailed in this 
Annual Report on Form 10-K and in the Company's other Securities and Exchange 
Commission filings.

Item 8.  Financial Statements and Supplementary Data

                      QUARTERLY FINANCIAL DATA (UNAUDITED)
                    (in thousands except per share amounts)

1996                                      First    Second     Third    Fourth 

Sales                                    $3,765    $5,051    $3,720    $4,807 
Gross profit                              1,790     2,685     1,989     2,652 
Net income                                  108       430       128       433 
Net income per share                       $.03      $.12     $ .04      $.12 

Common Stock price range:
    High                               $6-13/16    $5-1/2     $5     $4-13/16
    Low                                 3-3/4       3-7/8      3-3/8  3-3/16  

1995                                      First    Second     Third    Fourth 

Sales                                    $4,388    $5,010    $4,038    $4,049 
Gross profit                              2,270     2,693     2,163     2,033 
Net income                                  252       410       344       315 
Net income per share                       $.08      $.12      $.10      $.09 

Common Stock price range:
    High                                 $3-1/2    $4-3/4    $6-3/8    $7-1/4 
    Low                                   2-1/8     2-1/2     3-1/16    4-3/8 



The above financial information should be read in conjunction with the 
Consolidated Financial Statements, including the notes thereto.



<PAGE>  13



Report of Independent Auditors

Stockholders and Board of Directors
Cognitronics Corporation

We have audited the accompanying consolidated balance sheets of Cognitronics 
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related 
consolidated statements of operations, stockholders' equity, and cash flows 
for each of the three years in the period ended December 31, 1996.  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 consolidated financial position of Cognitronics 
Corporation and subsidiaries as of December 31, 1996 and 1995, and the 
consolidated results of their operations and their cash flows for each of the 
three years in the period ended December 31, 1996, in conformity with 
generally accepted accounting principles.


                                          /s/ ERNST & YOUNG LLP


Stamford, Connecticut                         
March 10, 1997





<PAGE>  14
CONSOLIDATED BALANCE SHEETS
COGNITRONICS CORPORATION AND SUBSIDIARIES
(dollars in thousands)                                                       
                                                               December 31,     
                                                              1996       1995  
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                $ 4,169    $ 3,668
  Accounts receivable, less allowances of $103 and $83       3,624      2,832 
  Inventories                                                3,877      2,983 
  Deferred income taxes                                        625        500 
  Other current assets                                         587        601 
                                                           -------    -------
          TOTAL CURRENT ASSETS                              12,882     10,584 
PROPERTY, PLANT AND EQUIPMENT, net                           1,701      1,275 
GOODWILL, less amortization of $1,396 and $1,064             1,981      2,313 
DEFERRED INCOME TAXES                                          822        808 
OTHER ASSETS                                                   125         60 
                                                           -------    -------
                                                           $17,511    $15,040 
                                                           =======    =======

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable                                                       $    78 
  Accounts payable                                         $ 1,700        705 
  Accrued compensation and benefits                            748        769 
  Income taxes payable                                         772        786 
  Other accrued expenses                                       917        872 
                                                           -------    ------- 
          TOTAL CURRENT LIABILITIES                          4,137      3,210 
LONG-TERM DEBT                                                 379        350 
OTHER NON-CURRENT LIABILITIES                                2,383      2,436 
COMMITMENTS AND CONTINGENCIES (Notes I and K)

STOCKHOLDERS' EQUITY
  Common Stock, par value $.20 a share; authorized
   10,000,000 shares; issued 3,475,573 and
   3,437,936 shares                                            695        687 
  Additional paid-in capital                                12,250     12,146 
  Accumulated deficit                                       (2,354)    (3,453)
  Currency translation adjustment                              177        (71)
  Unearned compensation                                       (156)      (265)
                                                           -------    -------
          TOTAL STOCKHOLDERS' EQUITY                        10,612      9,044 
                                                           -------    -------
                                                           $17,511    $15,040 
                                                           =======    =======

The accompanying notes to consolidated financial statements are an integral 
part of these statements.
<PAGE>  15
CONSOLIDATED STATEMENTS OF OPERATIONS
COGNITRONICS CORPORATION AND SUBSIDIARIES
(in thousands except per share data)                                
Year ended December 31,       
                                                        1996     1995     1994
                                                        ----     ----     ----
SALES                                                $17,343  $17,485  $14,576 
                                   
COSTS AND EXPENSES
  Cost of products sold                                8,227    8,326    7,806
  Research and development                             1,600    1,472    1,523 
  Selling, general and administrative                  5,394    4,990    5,083 
  Amortization of goodwill                               332      333      332 
  Other (income) expense, net                            (80)     129       17
                                                     -------  -------  -------
                                                      15,473   15,250   14,761
                                                     -------  -------  -------
  Income (loss) before income taxes                    1,870    2,235     (185)
PROVISION FOR INCOME TAXES                               771      914      112 
                                                     -------  -------  -------
NET INCOME (LOSS)                                    $ 1,099  $ 1,321  $  (297)
                                                     =======  =======  =======
INCOME (LOSS) PER SHARE:                                $.31     $.39    $(.09)
                                                        ====     ====    ===== 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1994, 1995 and 1996
(dollars in thousands)
<TABLE>
<CAPTION>
                                        Common Stock       Additional    Accumu-    Currency     Unearned    Treasury
                                      Shares                 Paid-In      lated     Transla-    Compensa-     Shares 
                                    Outstanding  Amount      Capital     Deficit      tion         tion      Amount
-----------------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>       <C>         <C>          <C>         <C>        <C> 
Balance at January 1, 1994            3,031,550    $633      $11,839     $(4,477)     $(31)       $   0      $(771)
Shares issued to management as 
  compensation                          100,000                 (416)                                          579 
Effect of exchange rate                                                                (17) 
Net loss                                                                    (297)
-----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994          3,131,550     633       11,423      (4,774)      (48)           0       (192)
Shares issued to Dacon shareholders     106,383      21          189 
Warrants issued to Dacon 
  shareholders                                                    35 
Shares issued pursuant to 
  employee stock plans                  198,568      33          495                               (265)       192 
Shares issued to Directors 
  as compensation                         1,435                    4 
Effect of exchange rate                                                                (23)          
Net Income                                                                 1,321 
-----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995          3,437,936     687        12,146     (3,453)      (71)        (265)         0 
Shares issued pursuant to
  employee stock plans                   37,637       8           104                               109 
Effect of exchange rate                                                                248 
Net Income                                                                 1,099  
-----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996          3,475,573    $695        $12,250   $(2,354)     $177        $(156)     $   0 
=======================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral 
part of these statements.
<PAGE>  16
CONSOLIDATED STATEMENTS OF CASH FLOWS
COGNITRONICS CORPORATION AND SUBSIDIARIES
(in thousands)                                        Year ended  December 31,
                                                      1996      1995      1994  
                                                      ----      ----      ----
OPERATING ACTIVITIES
 Net income (loss)                                  $1,099    $1,321    $ (297) 
 Adjustments to reconcile net income (loss) to
  net cash provided by operating activities:
    Income tax expense                                 771       914       112 
    Depreciation and amortization                      690       684       709 
    Loss on disposition of  assets                      62        21        27
    Shares issued as compensation                      109       198       163
    Net (increase) decrease in:
      Accounts receivable                             (667)     (546)     (133)
      Inventories                                     (741)     (311)      315
      Other assets                                      15       150       650
    Net increase (decrease) in:
      Accounts payable                                 904      (337)     (364)
      Accrued compensation and benefits                (78)      121      (817)
      Other accrued expenses                           (19)      195        49
                                                    ------    ------    ------
                                                     2,145     2,410       414
    Income taxes (paid) refunded                      (974)      (80)      522 
                                                    ------    ------    ------
      NET CASH PROVIDED BY OPERATING ACTIVITIES      1,171     2,330       936 
-------------------------------------------------------------------------------

INVESTING ACTIVITIES
 Proceeds from disposition of assets                    24        26        31
 Additions to property, plant and equipment           (846)     (286)     (284)
 Acquisition of Dacon, net of cash acquired                                (77)
                                                    ------    ------    ------
      NET CASH USED BY INVESTING ACTIVITIES           (822)     (260)     (330)
-------------------------------------------------------------------------------

FINANCING ACTIVITIES
 Shares subject to repurchase pursuant to the
   Dacon acquisition                                            (500)
 Principal payments on debt                           (213)   (1,715)     (952)
 Issuance of debt                                      192       725       952
 Purchase of short-term investments                                     (1,600)
 Proceeds from sale of short-term investments                            1,600 
 Shares issued pursuant to employee stock plans         93       165
 Proceeds from sale of note receivable                                   1,893
                                                    ------    ------    ------
      NET CASH PROVIDED (USED) BY
       FINANCING ACTIVITIES                             72    (1,325)    1,893
-------------------------------------------------------------------------------

EFFECT OF EXCHANGE RATE DIFFERENCES                     80       (17)        5 
------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS                  501        728    2,504 
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR        3,668      2,940      436
                                                    ------     ------   ------
CASH AND CASH EQUIVALENTS - END OF YEAR             $4,169     $3,668   $2,940 
==============================================================================
The accompanying notes to consolidated financial statements are an integral 
part of these statements.
<PAGE>  17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COGNITRONICS CORPORATION AND SUBSIDIARIES

Note A.  Summary of Significant Accounting Policies

Organization.  The Company designs, manufactures and markets voice processing 
products in the United States and, through a subsidiary, distributes call 
management and voice processing equipment in Europe.

Risks and Uncertainties.  A major portion of the Company's domestic revenues 
is generated by sales to two customers, and substantially all of its European 
distributorship revenue comes from one customer.  The loss of any of these 
customers would have a material adverse impact on the Company. The Company's 
receivables are primarily from major, well-established companies in the 
telecommunications industry, and at December 31, 1996, three such companies 
accounted for 65 % of the accounts receivable. The Company's markets are 
subject to rapid technological change and frequent introduction of new 
products. The Company's products are similar to those manufactured, or capable 
of being manufactured, by a number of companies, some of which are 
well-established corporations with financial, personnel and technical 
resources substantially larger than those of the Company. The Company's 
ability to compete in the future depends on its ability to maintain the 
technological and performance advantages of its current products and to 
introduce new products and applications that achieve market acceptance.

Principles of Consolidation.  The financial statements include the accounts of 
the Company and its subsidiaries, all of which are wholly-owned. Intercompany 
accounts and transactions have been eliminated in consolidation.

Use of Estimates.  The preparation of the financial statements in conformity 
with generally accepted accounting principals requires management to make 
estimates and assumptions that affect the amounts reported in the financial 
statements and accompanying notes. Actual results could differ from those 
estimates.

Fair Value of Financial Instruments.  The carrying amounts of the Company's 
financial instruments (trade receivables/payables and other short-term and 
long-term debt) approximate fair value.

Cash and Cash Equivalents.  The Company considers financial instruments with a 
maturity of three months or less from the date of purchase to be cash 
equivalents. At December 31, 1996, essentially all of the Company's cash and 
cash equivalent balances were with three financial institutions.

Inventories.  Inventories are stated at the lower of cost (first-in, first-out 
method) or market.

Property, Plant and Equipment.  Property, plant and equipment is carried at 
cost less allowances for depreciation, computed in accordance with the 
straight-line method based on estimated useful lives.

Foreign Exchange.  Results of operations for the Company's foreign subsidiary 
were  translated into U.S. dollars using average exchange rates during the 
period, while assets and liabilities were translated using current rates at 
the end of the period.

Stock Based Compensation. The Company grants stock options for a fixed number 
of shares to employees with an exercise price equal to the fair value at the 
date of grant. The Company  accounts for stock option grants in accordance 
<PAGE>  18
with Accounting Principles Board ("APB")  Opinion No. 25, "Accounting for 
Stock Issued to Employees", and therefore recognizes no compensation expense 
for stock options granted.   In 1996, the Company adopted the disclosure 
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, 
"Accounting for Stock-Based Compensation" (see Note J). 

Income (Loss) Per Share.  Income (loss) per share are based on the weighted 
average number of common and dilutive common equivalent shares outstanding 
during the year as follows: 3,585,269 in 1996,  3,423,688 in 1995 and  
3,144,183 in 1994.   Fully diluted income per share did not differ 
significantly from primary income per share in any year.

Goodwill.  The Company has classified as goodwill the cost in excess of fair 
value of the net assets of companies acquired in purchase transactions. 
Goodwill is amortized using the straight-line method over its estimated useful 
life (10 years). Goodwill in excess of associated expected operating cash 
flows is considered to be impaired and is written down to fair value.


Note B. Valuation and Qualifying Accounts

The allowance for doubtful accounts was increased by $35,000, $84,000 and  
$67,000 in 1996, 1995 and 1994, respectively, by  charges to cost and expense. 
In 1995, the Company reclassified an allowance of $169,000, together with the 
related receivables to other assets. In 1996, the company wrote off 
uncollectible accounts, net of recoveries, of $15,000.

Note C.  Inventories (in thousands):
                                                                                
                                                              1996        1995 
                                                              ----        ----
Finished and in process                                     $2,682      $2,012
Materials and purchased parts                                1,195         971
                                                            ------      ------
                                                            $3,877      $2,983
                                                            ======      ======

Note D.  Property, Plant and Equipment (in thousands):
                                                                                
                                                             1996         1995 
                                                             ----         ----
Building                                                   $  425       $  383
Machinery and equipment                                     1,230        1,066
Furniture and fixtures                                      1,694        1,172
                                                           ------       ------
                                                            3,349        2,621
Less allowances for depreciation                            1,648        1,346
                                                           ------       ------
                                                           $1,701       $1,275
                                                           ======       ====== 
<PAGE>  19
Note E.  Other Non-current Liabilities (in thousands):
                                                              1996        1995 
                                                              ----        ----
Accrued officers' supplemental pension plan expense         $  702      $  738
Accrued deferred compensation                                  332         335
Accrued pension expense                                        713         776
Accrued postretirement benefit liability                       813         798
                                                            ------      ------
                                                             2,560       2,647
     Less current portion                                      177         211
                                                            ------      ------
                                                            $2,383      $2,436
                                                            ======      ======

Note F.  Debt and Credit Arrangements

At December 31, 1995, the Company had a note payable from an installment 
finance agreement, bearing interest at 6.5% with a balance of $78,000.

The Company has a $1,000,000 line of credit maturing in September, 1997. 
Borrowings under this arrangement are subject to various financial covenants, 
are due on demand, are based on the amount of eligible accounts receivable, as 
defined, bear interest at the prime rate plus 1% and are secured by 
substantially all of the Company's assets. In 1996, no amounts were borrowed 
under this line of credit. Prior to September 1995, the Company had a line of 
credit with a financial services company. In addition, in connection with the 
shares subject to repurchase, the Company, in 1995, issued notes aggregating 
$750,000, which were repaid in 1995. The average outstanding balance of these 
borrowings was $615,000 for 1995, and the weighted average interest rate was 
13.0%.

Dacon Electronics Plc has a bank line of credit of $170,000 expiring in 1997.  
During 1996 and 1995, no amounts were borrowed under this facility.

Long term debt (in thousands):                                  
                                                                 1996     1995
                                                                 ----     ----
     Mortgage note, interest at 12% per annum                    $267     $269
     Installment finance agreements, interest at 10% to 12%
        per annum expiring through 2001                           198      157
                                                                 ----     ----
                                                                  465      426
     Less current portion, included in other accrued expenses      86       76
                                                                 ----     ----
                                                                 $379     $350
                                                                 ====     ====
The mortgage note is secured by Dacon Electronics Plc's land and building (net 
book value $400,000 at December 31, 1996), and is payable over fourteen 
years.  Approximately $14,000 is due in each of the five years ending December 
31, 2001. 

Payments on the installment finance agreements in each of the five years in 
the period ending December 31, 2001 are $72,000, $61,000, $36,000, $19,000 and 
$10,000, respectively.

Interest of $63,000, $141,000 and $127,000  was paid in 1996, 1995 and 1994, 
respectively.
<PAGE>  20
Note G.  Income Taxes

At December 31, 1996, the consolidated accumulated deficit included 
approximately $1.5 million of retained earnings applicable to Dacon 
Electronics Plc, a foreign subsidiary. If the undistributed earnings were 
remitted, any resulting federal tax would be substantially reduced by foreign 
tax credits.

The components of the provision (benefit) for income taxes for the years ended 
December 31 are as follows (in thousands):
                                                                                
                                                      1996      1995      1994 
Continuing operations                                 ----      ----      ----
Current:
     Federal                                          $359       $245    $(405)
     Foreign                                           480        515       49 
     State                                              71         40       42 
                                                      ----       ----    -----
          Total current                                910        800     (314)

Deferred:
     Federal                                          (135)        97      308 
     Foreign                                                                48 
     State                                              (4)        17       70 
                                                      ----       ----     ----
          Total deferred                              (139)       114      426 
                                                      ----       ----     ----
                                                      $771       $914     $112 
                                                      ====       ====     ====

Not reflected in the 1996 and 1995 tax provisions are $19,000 and $97,000, 
respectively,  of income tax benefits related to the exercise of stock 
options; such amounts were credited to additional paid-in capital.

Domestic and foreign pretax income (loss) for the years ended December 31 are 
as follows (in thousands):

                                                                                
                                                1996         1995         1993  
                                                ----         ----         ----
Domestic operations                           $  815       $1,015        $(285)
Foreign Operations                             1,055        1,220          100
                                              ------       ------        -----
                                              $1,870       $2,235        $(185)
                                              ======       ======        =====


Deferred income taxes reflect the net tax effects of temporary differences 
between carrying amounts of assets and liabilities for financial reporting 
purposes and amounts used for income tax purposes. Significant components of 
the Company's deferred tax liabilities and assets as of December 31, 1996 and 
<PAGE>  21
1995 are as follows (in thousands):
                                                              1996        1995 
                                                              ----        ----
Deferred tax liabilities
     Tax over book depreciation                              $   69     $   61 
     Other                                                                  30 
                                                             ------     ------
          Total deferred tax liabilities                         69         91 
                                                             ------     ------
Deferred tax assets:
     Inventory valuation                                        597        464 
     Accrued liabilities and employee benefits                  417        402 
     Accrued deferred compensation                              385        399 
     Other post-retirement benefits                             309        298 
     Separate return federal operating loss carryforwards
          expiring in 2008 and 2009                             445        445 
     Other                                                        9         47 
                                                             ------     ------
          Total deferred tax assets                           2,162      2,055 
     Valuation allowance                                       (646)      (656)
                                                             ------     ------
                                                              1,516      1,399 
                                                             ------     ------
               Net deferred tax assets                       $1,447     $1,308 
                                                             ======     ======

Valuation allowance at January 1                              $(656)     $(580)
Credited (charged) to tax expense                                10        (76)
                                                              -----      -----
Valuation allowance at December 31                            $(646)     $(656)
                                                              =====      =====

A reconciliation of the statutory federal income tax rate to the effective tax 
rate of income (loss) for the years ended December 31, are as follows:

                                                 1996         1995       1994  
                                                 ----         ----       ----
Statutory federal income tax rate                34.0%        34.0%     (34.0)%
State income taxes, net of federal tax benefit    2.4          1.7       40.0
Losses with no tax benefit                                               56.4
Utilization of foreign loss carryforwards                               (43.4)
Lower foreign tax rate                           (0.8)        (0.5)      (9.5)
Goodwill amortization                             6.0          5.1       61.0
Other                                            (0.4)          .6      (10.0)
                                                 ----         ----       ----
                                                 41.2%        40.9%      60.5%
                                                 ====         ====       ====
<PAGE>  22

Note H.  Other (Income) Expense, Net (in thousands):
                                                       Year Ended December 31,
                                                      1996      1995      1994 
                                                      ----      ----      ----
Interest expense                                      $ 82      $194      $151 
Interest income                                       (164)      (70)     (129)
Severance                                                                  (75)
Curtailment of benefit plans                                               113 
Foreign exchange gain                                    2         5       (43)
                                                      ----      ----      ----
                                                      $(80)     $129      $ 17 
                                                      ====      ====      ====

Note I. Commitments
Leases.  Total rental expense amounted to $377,000 in 1996,  $265,000 in 1995 
and $269,000 in 1994. Future annual payments for long-term noncancellable 
leases for each of the five years in the period ending December 31, 2001 are 
approximately $442,000, $431,000, $381,000, $366,000 and $303,000, 
respectively,  and  approximately $217,000 per year thereafter through the 
year 2003.

Pension Plan.  The Company and its domestic subsidiaries have a defined 
benefit pension plan covering substantially all employees. The benefits are 
based on years of service and the employee's compensation. The Company's 
funding policy is to contribute amounts to the plan sufficient to meet the 
minimum funding requirements set forth in the Employee Retirement Income 
Security Act of 1974, plus such additional amounts as the Company may 
determine to be appropriate from time to time.  In 1994, the Company amended 
the plan so that no additional service cost benefits would be earned 
subsequent to June 30, 1994. With respect to this curtailment, the Company 
recognized an expense of $210,000 in 1994. Also due to this modification of 
the plan, the service cost-benefits earned was reduced from prior years in 
1994 and was eliminated in 1995. In addition, the Projected Benefit Obligation 
was reduced to an amount equal to the Accumulated Benefit Obligation resulting 
in a reduction in the interest cost component of the net periodic pension 
cost.

The components of net cost of the plan for the years ended December 31 are as 
follows (in thousands):
                                                                                
                                                      1996      1995      1994 
                                                      ----      ----      ----
Service cost-benefits earned during the period                            $ 63 
Interest cost on projected benefit obligation         $103      $111       128 
Actual return on plan assets                          (117)     (199)       23 
Net amortization and deferral                           24       120       (77)
                                                      ----      ----      ----
     Net periodic pension cost                          10        32       137 
Effect of curtailment                                                      210 
                                                      ----      ----      ----
     Total pension cost                               $ 10      $ 32      $347 
                                                      ====      ====      ====
<PAGE>  23
The following table sets forth the plan's funded status and the accrued 
pension expense recognized in the Company's Consolidated Balance Sheets at 
December 31 (in thousands):
                                                               1996       1995 
Actuarial present value:                                       ----       ----
     Accumulated benefit obligation - Vested                  $1,390    $1,453 
                                      Non-vested                  22        78 
                                                              ------    ------
                                                              $1,412    $1,531 
     Projected benefit obligation for service rendered to 
        date                                                  $1,412    $1,531 
Plan assets at fair value                                      1,085     1,115 
                                                              ------    -------
Plan assets less than projected benefit obligation              (327)     (416)
Unrecognized net asset, less accumulated amortization of                   
   $140 and $131                                                 (41)      (50)
Unrecognized net gain                                           (345)     (310)
                                                              ------    ------
Accrued pension expense (included in other non-current                      
   liabilities)                                               $ (713)   $ (776)
                                                              ======    ======

The discount rate used in determining the projected benefit obligation was  
7.25%, in 1996 and 1995. The expected long-term rate of return on plan assets 
used in determining the net periodic pension cost was 7% for all years 
presented.

The plan assets at December 31, 1996 and 1995 were principally invested in 
corporate debt and equity securities.

401(k) Retirement Plan.  The Company has a defined contribution plan covering 
substantially all domestic employees. The Company's contribution is based upon 
the participants' contributions. The expense was $32,000, $15,000 and $17,000 
in 1996, 1995 and 1994, respectively.


Officers' Supplemental Pension Plan.  The Company has an unfunded, 
noncontributory defined benefit pension plan covering certain retired 
officers.  Benefits under the plan are the greater of a percentage of final 
salary of qualified officers or an annual amount that, when combined with 
other retirement plans of the Company, is equal to $44,000 per year. In 1994, 
the Company curtailed the supplemental pension plan by limiting the benefits 
to officers who retire by June 30, 1996, and recorded a curtailment expense of 
$312,000, primarily reflecting the write-off of substantially all of the 
unamortized prior service cost. 

The components of net pension cost of the plan for the years ended December 31 
are as follows (in thousands):
                                                      1996      1995      1994 
                                                      ----      ----      ----
Service cost-benefits earned during the period                           $  15 
Interest cost on projected benefit obligation          $40       $40        46 
Amortization of prior service cost                                13        28 
Amortization of actuarial gains                         (7)       (9)       (5)
Net periodic pension cost                               33        44        84 
Effect of curtailment                                                      312 
                                                       ---       ---      ----
     Total pension cost                                $33       $44      $396 
                                                       ===       ===      ====
<PAGE>  24
The following table sets forth the plan's status and the accrued pension 
expense recognized in the Company's Consolidated Balance Sheets at December 31 
(in thousands):
                                                                                
                                                               1996       1995 
                                                               ----       ----
Actuarial present value of vested accumulated benefit
   obligation                                                  $577       $588 
Unrecognized net gain                                           125        150 
                                                               ----       ----
Accrued pension expense (included in other non-current 
liabilities)                                                   $702       $738 
                                                               ====       ====

The discount rate used in determining the projected benefit obligation in all 
years was 7.25%. All participants are retired and receiving benefits under the 
Plan and therefore future increases in compensation are not applicable.

Other Postretirement Benefit Plans.  In addition to the Company's pension 
plans, the Company has a contributory , unfunded defined benefit plan 
providing certain health care benefits for retired domestic employees. Prior 
to 1994, substantially all of the Company's employees became eligible if they 
reached normal retirement age while working for the Company. The participants' 
contributions are adjusted periodically and are based on age and length of 
service at time of retirement. In 1994, the Company curtailed this benefit 
plan, limiting benefits to eligible employees who retired prior to March 31, 
1996. This modification has the effect of reducing in 1994 and eliminating in 
future years the service cost component of the post retirement benefit costs. 
The assumed rate of increase in the per capita cost of covered benefits was 
8.4% decreasing to 6% after 9 years. Increasing the health care cost trend 
rate by one percentage point each year would increase the accumulated 
postretirement benefit obligation by $31,000 at December 31, 1996 and the 
aggregate service and interest cost component of net periodic postretirement 
benefit cost for 1996 by $2,000. The weighted average discount rate used in 
determining the net periodic postretirement benefit cost and accumulated 
benefit obligation was 7.0% for all periods presented.

The following sets forth the plan's status and accrued postretirement benefit 
liability recognized in the Company's Consolidated Balance Sheets at December 
31 (in thousands):
                                                                                
                                                                1996      1995 
Actuarial present value of accumulated postretirement
   benefit obligation:    Retirees                              $618      $560 
                          Active plan participants                58       239 
                                                                ----      ----
                                                                 676       799 
Unrecognized net gain (loss)                                     137        (1)
                                                                ----      ----
Accrued postretirement benefit liability (included in
   other non-current liabilities)                               $813      $798 
                                                                ====      ====
<PAGE>  25
The components of postretirement benefit cost for the years ended December 
31, are as follows (in thousands):
                                                     1996       1995      1994 
                                                     ----       ----      ----
          Service cost                                                  $   26 
          Interest cost                               $44        $52        67 
          Net amortization                             (6)                   
                                                      ---        ---     -----
                Net periodic cost                      38         52        93 
          Curtailment gain                                                (409)
                                                      ---        ---     -----
               Total plan cost (income)               $38        $52     $(316)
                                                      ===        ===     =====

Deferred Compensation. At December 31, 1996 and 1995, the liability relating 
to a deferred compensation arrangement between the Company and a director and 
former officer of the Company aggregated $332,000 and $335,000, respectively.

Note J  Stock Plans

At December 31, 1996, the Company has reserved 518,949 shares of its common 
stock for issuance to key employees under the 1990 Stock Option Plan. The plan 
provides for the grant, at fair market value on the date of grant, of 
nonqualified stock options and incentive stock options. Options generally 
become exercisable in three equal annual installments on a cumulative basis 
commencing six months from the date of grant and expire five years (maximum 
ten years) after the date granted.

The Company also has the 1967 Employee Stock Purchase Plan under which 88,792 
shares were reserved at December 31, 1996. The purchase price is 85% of the 
fair market value of the stock on the date offered. Generally, rights to 
purchase shares under this plan expire up to 27 months after the date of 
grant.


Share information pertaining to these plans is as follows:
                                                                                
                                                        Option        Purchase
                                                         Plan           Plan    
                                                        -------       --------
Outstanding at January 1, 1994                          267,045         17,794 
     Granted                                            482,250         49,160 
     Cancelled or expired                              (348,032)       (20,167)
                                                        -------         ------
Outstanding at December 31, 1994                        401,263         46,787 
     Granted                                             37,500      
     Cancelled or expired                               (45,509)        (7,385)
     Exercised                                          (40,322)       (19,246)
                                                        -------         ------
Outstanding at December 31, 1995                        352,932         20,156 
     Granted                                             90,000         37,545
     Cancelled or expired                                (2,168)        (1,527)
     Exercised                                          (17,481)       (20,156)
                                                        -------         ------
Outstanding at December 31, 1996                        423,283         36,018 
                                                        =======         ======
<PAGE>  26
The exercise price for options granted during 1994 ranged from $2.75 to $4.56, 
for options granted during 1995 ranged from $2.38 to $6.75 and was $3.63 for 
options granted in 1996. The weighted average exercise price for the 423,283 
options outstanding under the Option Plan is $2.95  with expiration dates 
ranging from 1999 to 2001. Options were exercised under the Option Plan at 
weighted average exercise prices of $2.80 and $2.70 in 1995 and 1996, 
respectively. Shares exercisable under the Option Plan at December 31, 1994, 
1995 and 1996 were  15,188,  132,693 and 224,237,  respectively.

Rights were granted under the Purchase  Plan at exercise  prices of  $2.34 and 
$3.72 in 1994 and 1996, respectively. In 1995 and 1996, shares were exercised 
under the Purchase Plan at a  weighted average price of   $2.34. The exercise 
price for the 36,018 rights outstanding under the Purchase Plan is $3.72, 
which rights expire September 30, 1997.

The Company has elected to follow APB No. 25 and related interpretations in 
accounting for its stock option plans, and has adopted the disclosure-only 
provisions of  SFAS No. 123.  If the Company had elected to recognize 
compensation expense for the 1990 Stock Option Plan and the 1967 Stock 
Purchase Plan based on the fair value at the grant date , consistent with the 
method presented by SFAS No. 123, the pro forma net income and net income per 
share would be as follows (in thousands except per share information):

                                                                 1996     1995
                                                                 ----     ----
     Net income                 As reported                    $1,099   $1,321
                                Pro forma                      $1,047   $1,303

     Net income per share       As reported                     $ .31    $ .39
                                Pro forma                       $ .29    $ .38
               
Because SFAS 123 method of accounting has only been applied to options granted 
subsequent to December 31, 1994, the resulting pro forma compensation cost may 
not be representative of that to be expected in future years.

 The fair value for the Stock Option and Stock Purchase Plans was estimated at 
the date of grant using a Black-Scholes option pricing model with the 
following weighted-average assumptions for 1996 and 1995, respectively: 
risk-free interest rates of 5.8% and 5.1%; no dividend yields; volatility 
factors of the expected market price of the Company's common stock of 0.64 in 
both years; and a weighted-average expected life of the option of 4.2 years 
for the Option Plan and 9 months for the Purchase Plan.

The Black-Scholes option valuation model was developed for use in estimating 
the fair value of traded options which have no vesting restrictions and are 
fully transferable.  In addition, option valuation models require the input of 
highly subjective assumptions including the expected stock price volatility.  
Because the Company's employee stock options have characteristics 
significantly different from those of traded options, and because changes in 
the subjective input assumptions can materially affect the fair value 
estimate, in management's opinion, the existing models do not necessarily 
provide a reliable single measure of the fair value of its employee stock 
options.

In 1995, the Company adopted the Restricted Stock Plan, a time accelerated 
restricted stock plan, under which 150,000 shares of its common stock were 
reserved. The plan provides for the award of shares to key employees; 
<PAGE>  27
generally, the awards vest in five equal annual installments commencing two 
years after the date of the award. Vesting may be accelerated based on the 
achievement of certain financial performance goals. In 1995, 139,000 shares 
were awarded under the plan, of which 41,700 became vested, and $198,000 of 
compensation expense was recognized.  In 1996, $109,000 of compensation 
expense was recognized and at December 31, 1996, 11,000 shares were reserved 
for issuance under the plan.

Pursuant to the February 1995 renegotiated terms with certain sellers of Dacon 
Electronics Plc, the sellers were given warrants, expiring on December 14, 
1998, to purchase 50,000 shares of common stock at $2.375 per share.


Note K.  Contingencies

In 1993, a purported consolidated class action lawsuit was filed against the 
Company and certain of its officers alleging securities law violations in 
connection with the purchase of the Company's common stock by members of the 
purported classes during the period from October 29, 1992 through March 12, 
1993. The plaintiffs seek unspecified damages and related costs. The Company 
and the other defendants submitted a motion to dismiss the consolidated 
amended complaint. The Company has denied any wrongdoing and believes it has 
presented viable grounds to support the motion to dismiss. The motion is sub 
judice. Due to the uncertainties involved in litigation, the ultimate outcome 
cannot be determined at this time, and no provision for any liability that may 
result from this litigation, if any, has been made in the financial 
statements. If adversely determined, the resolution of this matter could have 
a material negative affect on the Company's financial condition, results of 
operations and cash flows.
<PAGE>  28
Note L.  Operations by Industry Segment and Geographic Areas

The Company operates in one industry segment: voice processing products.

The Company operates in the United States and Europe (United Kingdom). 
Information about the Company's operations by geographic area for the years 
ended December 31, is as follows (in thousands):
                                                                                
                                                1996         1995         1994
Net sales                                       ----         ----         ----
     United States:
          Unaffiliated customers              $10,051      $ 9,970     $ 9,785 
          Inter-company transfers                 544          636         411 
                                              -------      -------     -------
                                               10,595       10,606      10,196 
     Europe                                     7,292        7,515       4,791 
     Eliminations                                (544)        (636)       (411)
                                              -------      -------     -------
                                              $17,343      $17,485     $14,576 
                                              =======      =======     =======
Operating profit
     United States                            $ 1,977      $ 2,429     $ 1,009
     Europe                                     1,067        1,256         237
     Inter-company eliminations                   (58)                      (8)
                                              -------      -------     -------
                                                2,986        3,685       1,238 
General corporate expenses                      1,196        1,321       1,444 
Interest (income) expense, net                    (82)         124          22 
Foreign exchange (gain) loss                        2            5         (43)
Income (loss) before income taxes             $ 1,870      $ 2,235     $  (185)
                                              =======      =======     =======

Identifiable assets
     United States                            $10,774      $ 9,427     $ 9,353 
     Europe                                     6,790        5,642       4,856 
     Inter-company eliminations                   (53)         (29)        (29)
                                              -------      -------     -------
                                              $17,511      $15,040     $14,180 
                                              =======      =======     =======

Revenues include sales of $4.0 million, $3.5 million and $4.2 million  in 
1996, 1995 and 1994, respectively, to one major customer; sales of $2.4 
million and $2.7 million in 1996 and 1995, respectively, to another customer; 
sales of $1.0 million in 1994 to another customer; and foreign sales of $5.4 
million, $5.5 million and  $3.3 million  in 1996, 1995 and 1994, respectively, 
to another customer.




Item 9. Changes in and Disagreements with Accountants on Accounting and 
Financial Disclosure

     None.
<PAGE>  29
                                    PART III

Item 10.   Directors and Executive Officers of the Registrant

     1.     (a)     The identification of the directors of the Company as of 
March 1, 1997 and persons nominated to become directors set forth under the 
caption Information Concerning Nominees in the Proxy Statement for the annual 
meeting of stockholders to be held on May 8, 1997 is incorporated herein by 
reference.

          (b)     The identification of the executive officers of the Company 
and their positions with the Company and ages as of March 1, 1997, is set 
forth under the caption Executive Officers of the Company in Part I of this 
Annual Report on Form 10-K.

     2.     The information regarding compliance with Section 16(a) of the 
Securities Exchange Act of 1934 set forth under the caption Section 16(a) 
Beneficial Ownership Reporting Compliance in the Proxy Statement for the 
annual meeting of stockholders to be held on May 8, 1997 is incorporated 
herein by reference.

Item 11.   Executive Compensation

          The information on executive compensation set forth under the 
caption Executive Compensation in the Proxy Statement for the annual meeting 
of stockholders to be held on May 8, 1997 is incorporated herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management

          (a) and (b)  Security ownership of certain beneficial owners and 
management set forth under the caption Security Ownership in the Proxy 
Statement for the annual meeting of stockholders to be held on May 8, 1997 is 
incorporated herein by reference.

          (c)     Changes in Control.  None.

Item 13.   Certain Relationships and Related Transactions

          The information on certain relationships and related transactions 
set forth under the caption Certain Relationships and Related Transactions in 
the Proxy Statement for the annual meeting of stockholders to be held on May 
8, 1997 is incorporated herein by reference.


                                PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)(1) and (2) and (d)  The response to this portion of Item 14 is 
submitted as a separate section beginning on page 26 of this Annual Report on 
Form 10-K.

     (a)(3) and (c)  The response to this portion of Item 14 is submitted as a 
separate section beginning on page 27 of this Annual Report on Form 10-K.

     (b) There were no reports filed on Form 8-K during the fourth quarter of 
1996. 
<PAGE>  30
SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities  
and Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized, on March 
27, 1997.

                                                  COGNITRONICS CORPORATION
                                                          Registrant

                                                  by  /s/  Garrett Sullivan    
                                                          Garrett Sullivan
                                                          Treasurer

     Pursuant to the requirements of the Securities 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 March 27, 1997.


     Signature                               Title

Chief Executive Officer:

     /s/ Brian J. Kelley                     President and Chief 
          Brian J. Kelley                    Executive Officer
                                     


Chief Financial and Accounting Officer:

     /s/ Garrett Sullivan                    Treasurer 
          Garrett Sullivan                       


A Majority of the Board of Directors:

     /s/ Edward S. Davis                     Director
          Edward S. Davis
 

     /s/ Jack Meehan                         Director
          Jack Meehan 


     /s/ William A. Merritt                  Director
          William A. Merritt     


     /s/ Timothy P. Murphy                   Director
          Timothy P. Murphy
<PAGE>  31
Form 10-K -- Item 14 (a) (1) and (2) and (d)

     (a)     (1)  Financial Statements

The following financial statements of the Company are included in Item 8.

Financial Statements Covered by Report of Independent Auditors:           Page

Report of Independent Auditors                                              13

Consolidated Balance Sheets, December 31, 1996 and December 31, 1995        14

Consolidated Statements of Operations for each of the three years in the 
period ended December 31, 1996                                              15

Consolidated Statements of Stockholders' Equity for each of the three
years in the period ended December 31, 1996                                 15
      
Consolidated Statements of Cash Flows for each of the three years in the 
period ended December 31, 1996                                              16


Notes to Consolidated Financial Statements                                  17


  

     (2) and (d) Financial Statement Schedules 

Schedules for which provision is made in the applicable accounting regulation 
of the Securities and Exchange Commission are not required under the related 
instructions or are inapplicable and therefore, have been omitted.
<PAGE>  32
                             Item 14(a)(3) and (c)
                               INDEX TO EXHIBITS
Exhibit
-------
3.1   Certificate of Incorporation as filed on January 2, 1962 (Exhibit 
      3-1-A to Form S-1 Registration Statement No. 2-27439 
      and incorporated herein by reference).

3.2   Amendment, dated June 28, 1965 (Exhibit 3-1-B to Form S-1 Registration 
      Statement No. 2-27439 and incorporated herein by reference).

3.3   Amendment, dated October 3, 1966 (Exhibit 3-1-C to Form S-1 Registration 
      Statement No. 2-27439 and incorporated herein by reference).

3.4   Amendment, dated October 30, 1967 (Exhibit 3-1-D to Form S-1 Registration 
      Statement No. 2-27439 and incorporated herein by reference).

3.5   Amendment, dated July 27, 1981 (Exhibit 3.5 to Annual Report on Form  10-K
      for the fiscal year ended December 31, 1983 and incorporated herein by 
      reference).

3.6   Amendment, dated September 27, 1984 (Exhibit 3.6 to Annual Report on Form 
      10-K for the fiscal year ended December 31, 1984 and incorporated herein
      by  reference).

3.7   Amendment dated June 13, 1988 (Exhibit 3.7 to Annual Report on Form 10-K 
      for the fiscal year ended December 31, 1988 and incorporated herein by 
      reference).

3.8   Amendment dated November 3, 1994 (Exhibit 3.8 to Annual Report on
      Form 10-K for the year ended December 31, 1994 and incorporated herein by
      reference).

3.9   By-laws of the Company (Exhibit 3.9 to Annual Report on Form 10-K for the 
      year ended December 31, 1994 and incorporated herein by reference).

4.    Specimen Certificate for Common Stock (Exhibit 4-1 to Form S-1
      Registration Statement No. 2-27439 and incorporated herein by reference).

10.1  1990 Stock Option Plan, as amended (Exhibit 10.1 to Quarterly Report on 
      Form 10-Q for the quarter ended September 30, 1994 and incorporated
      herein by reference).

10.2  Lease, dated April 30, 1993, between Seymour R.Powers and The Danbury 
      Industrial Corporation, landlord, and Cognitronics Corporation, tenant 
      (Exhibit 10.3 to Annual Report on Form 10-K for the year ended
      December 31, 1993 and incorporated herein by reference).

10.3  Form of Indemnity Agreement, dated October 27, 1986, between each Director
      (with equivalent form for each Officer) and Cognitronics Corporation
      (Exhibit 10.7 to Annual Report on Form 10-K for the year ended
      December 31, 1986 and incorporated herein by reference).  

10.4  Supplemental Pension Plan for Officers, as amended November 2, 1993
      (Exhibit 10.6 to Annual Report on Form 10-K for the year ended
      December 31, 1993 and incorporated herein by reference).

10.5  1996 Executive Bonus Plan (attached as Exhibit 10.5 to this Annual Report
      on Form 10-K).
<PAGE>  33
Exhibit
-------
10.6  Form of Warrant Agreement dated February 9, 1995 between Cognitronics 
      Corporation and each of the former shareholders (other than Inkel) of
      Dacon Electronics Plc, granting warrants to purchase up to an aggregate of
      50,000 shares of the Company's Common Stock (Exhibit 10.9 to Annual Report
      on Form 10-K for the year ended December 31, 1994 and incorporated herein
      by reference).

10.7  Cognitronics Corporation Restricted Stock Plan (Exhibit 10.1 to Quarterly 
      Report on Form 10-Q for the quarter ended 
      June 30, 1995 and incorporated herein by reference).

10.8  Revolving Loan Agreement between Cognitronics Corporation and People's 
      Bank dated September 8, 1995 (Exhibit 10.1 to Quarterly Report on
      Form 10-Q for the quarter ended September 30, 1995 and incorporated herein
      by reference).

22.   List of subsidiaries of the Company as of December 31, 1996  (attached as 
      Exhibit 22 to this Annual Report on Form 10-K).

23.   Consent of Independent Auditors, dated March 24, 1997 (attached as
      Exhibit 23 to this Annual Report on Form 10-K).

27.   Financial Data Schedule (attached as Exhibit 27 to this Annual Report on 
      Form 10-K).






     Copies of the Exhibits to this Annual Report on Form 10-K are available 
upon written request to the Secretary of the Company at 3 Corporate Drive, 
Danbury, CT 06810-4130 and payment of $35.00 for a complete set of the 
Exhibits or $.25 per page for any part thereof (minimum $5.00).