SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
   
                                   FORM 10-K/A 
                                AMENDMENT NO. 1
    
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 (Fee Required)

      For the fiscal year ended October 31, 1996
                                                                                

[   ] 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 0-13284

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

        New York                                        13-2990015
(State or other jurisdiction of                        (IRS Employer
incorporation or organization)                         Identification No.)

                    565 Taxter Road, Elmsford, New York 10523

              (Address and zip code of principal executive office)

                                 (914) 789-5000

              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
                                (Title of class)

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

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

The number of shares of Common Stock  outstanding,  as of December 31, 1996, was
5,328,303 shares.

The  aggregate  market  value  of the  Common  Stock of the  registrant  held by
non-affiliates, as of December 31, 1996, was $7,824,776 *.
<PAGE>
* The  Company  has  assumed  that all of the  outstanding  shares  were held by
non-affiliates  except  for the  shares  beneficially  owned by any  officer  or
director of the Company who owns 1% or more of the Company's  outstanding common
stock and persons  known by the Company  beneficially  to own 10% or more of the
Company's  outstanding  common stock.  The market value was based on the closing
price of these shares on December 31, 1996.

Documents incorporated by reference

None.
<PAGE>
                               V BAND CORPORATION
                             FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996


                                TABLE OF CONTENTS

                                                                                
                                     PART I

Item 1.             Business                                                    

Item 2.             Properties                                                  

Item 3.             Legal Proceedings                                           

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

                                     PART II

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

Item 6.             Selected Financial Data                                     

Item 7.             Management's Discussion and Analysis of Financial Condition 
                        and Results of Operations    
                                                                                
Item 8.             Financial Statements and Supplementary                      
                        Data 

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

                                    PART III

Item 10.            Directors and Executive Officers of the Registrant          

Item 11.            Executive Compensation                                     

Item 12.            Security Ownership of Certain Beneficial Owners and 
                        Management                  

Item 13.            Certain Relationships and Related Transactions              

                                     PART IV

Item 14.            Exhibits, Financial Statement Schedule, and Reports 
                        on Form 8-K               
<PAGE>
                                     PART I

Item 1.    Business

General

V Band Corporation,  which commenced business operations in 1980, (together with
its  subsidiaries,  the "Company") is a leading supplier of instant access voice
communications  systems.  These  systems  include  sophisticated  software-based
communications workstations,  switching equipment,  peripheral products, project
management  services, technical services  and wide-area network (WAN) solutions.
V  Band's  products  and  services  are used  worldwide  by  financial  services
organizations for the trading of stocks, bonds and other financial  instruments.
Other applications include the mission critical  communications  requirements of
the electric power industry and emergency service providers.

The largest share of the Company's  sales derives from the sale of voice trading
systems to the financial services industry.  Traders and dealers require instant
access communication to a large constituency,  including peers,  customers,  and
market  information  providers.  In contrast to conventional  business telephone
systems,  voice trading systems utilize more network access lines than telephone
handsets.  Each workstation  provides the user with immediate push button access
to as  few as 30  and  as  many  as 320  telephone  lines  along  with a  visual
indication of the current  operational  status of each line. The Company's voice
trading systems offer a distributed  switching  architecture  (without a central
controller) and full software control for ease of moves, additions, and changes.
Other  markets  for these  systems  include  communication  control  centers for
utilities,  government and military agencies,  emergency service E9-1-1 dispatch
centers, airlines, and railroads.

Beginning in 1994, the Company has implemented significant changes in the manner
in which it conducts  business.  During 1994,  the Company  established a direct
sales and  service  network  in the  United  States  and the  United  Kingdom by
acquiring four companies which  distributed and serviced the Company's  products
in the principal  markets of New York,  London and Boston.  The Company  further
increased  its direct sales and service  network in the United States by opening
sales  offices in  Atlanta,  Chicago  and San  Francisco.  In 1995,  the Company
restructured its  manufacturing  process by out-sourcing the manufacture of many
sub-assemblies of the Company's products.  In 1995, the Company also reorganized
its management, engineering, manufacturing and administrative organizations, and
reduced the number of its employees. During 1996, the Company established V Band
Asian Partners,  a strategic alliance of thirteen  distributors of the Company's
products in the Asian market.

In 1994, the Company  acquired certain assets of Windmill  Communications,  Inc.
("Windmill"),   Advantage  Communications,   Inc.  ("Advantage"),  ACT  Computer
Support,  LTD.  ("ACT") and acquired the  outstanding  capital  stock of Mercury
Dealing Systems ("Mercury").  The Windmill and Advantage  acquisitions  provided
the Company with a service presence and increased sales strength in the New York
City  and  Boston  Markets,  respectively.  The  Mercury  and  ACT  acquisitions
increased the Company's sales and service  presence in the London market.  These
acquisitions,  coupled with the opening of sales offices in Atlanta, Chicago and
San  Francisco,  implemented  the Company's  strategy of enhancing  market share
through  the direct sale and full  service of its  products,  including  project
management,  maintenance  and other  services.  The Company's  sales offices are
complemented  in certain  regions of the  domestic  and  global  marketplace  by
distributors which sell and service the Company's products.
<PAGE>
During 1995,  the Company  transferred  the  production  of its printed  circuit
boards   from  an   internal   manufacturing   process  to   external   contract
manufacturers.  This action was  undertaken  to reduce the cost of the Company's
products  and  permitted  the  Company to  substantially  reduce the size of its
production facilities. The Company also reorganized its management, engineering,
manufacturing and  administrative  organizations  and substantially  reduced the
number of the Company's employees.

During  1996,  the  Company  established  V Band  Asian  Partners,  a  strategic
partnership  with The Trade Wind Group, a long-time distributor of the Company's
products  based in Australia.  V Band Asian  Partners is an alliance of thirteen
distributors whose marketing efforts and servicing  capabilities are coordinated
and supported by The Trade Wind Group. Through this partnership, the Company has
improved  its ability to  capitalize  on the current  growth  trend in the Asian
financial marketplace.

During fiscal 1995, the Company  executed an agreement with the Chicago Board of
Trade for the sale and  installation  of a major  trading  floor  communications
system  that  includes   approximately  1,700  custom-designed   exchange  floor
telephones  and  various  peripheral   equipment  in  transactions   valued,  in
aggregate,  at  approximately  $9 million.  The exchange  phones employ the same
advanced  technology base used in the Company's Power Deck product.  The Company
is providing  full  installation  services,  including  project  management  and
cabling for the 9,000 line  communication  system.  Construction  of the trading
floor began in the Company's  second fiscal  quarter of 1995 and the first group
of phones was installed  and activated in July 1995.  The project is expected to
be completed in 1997.  The Company  recognizes  revenue from this contract under
the percentage-of-completion method.

In fiscal  1996,  the Company  executed an agreement  with the Chicago  Board of
Trade (through a general contractor) for a major expansion and relocation of the
Chicago Board of Trade's financial trading floor. This contract, which augmented
the  agreement  mentioned  above,  is valued in  excess of $2.5  million  and is
expected to be completed during the Company's second fiscal quarter of 1997.

In addition,  in November 1996,  the Company  executed an agreement with the New
York Mercantile  Exchange for the sale,  installation and maintenance of a major
two-floor  trading   communications  system  that  includes   approximately  660
custom-designed exchange floor telephones and various peripheral equipment. This
transaction  is valued,  in aggregate,  at over $5.0  million.  This contract is
expected to be completed during 1997.

Through  a  subsidiary,   Licom,  Inc.  ("Licom"),  the  Company  also  designs,
manufactures   and  sells  fiber   optic-based   voice  and  data   multiplexers
specifically designed for the "mission critical"  communications of the electric
power industry, such as inter-substation communications. Other markets for Licom
multiplexers   include  command  and  control  applications  for  "right-of-way"
companies such as utilities,  transportation  companies,  and emergency  service
organizations.

The Company's United Kingdom operation, which carries on business under the name
of V Band PLC, performs assembly,  sales, installation and maintenance services.
For the fiscal  years ended  October 31, 1996 and 1995,  V Band PLC had sales of
$7.4 and $8.1, respectively. At October 31, 1996, V Band PLC had 47 employees.
<PAGE>
Products and Markets

The Company  introduced its first voice trading system in 1981.  Since then, the
Company has developed,  manufactured and distributed  several new generations of
systems,   increasing  power,  features,   flexibility  and  network  management
capabilities while reducing repair cost and space requirements.

In June 1990,  the Company  introduced  the  industry's  first all digital voice
trading  system,  the VIAX  DN.  Digital  connectivity  reduces  network  costs,
improves  reliability,  and offers  users the ability to program  their  station
options  directly from the console.  Digital  technology has sharply reduced the
space required for the common  equipment.  The Company's current digital system,
the "Broad  Band DN",  requires  as little as  one-eighth  of the space that was
required by the systems first introduced in 1987.

In  1993,  the  Company   introduced  Power  Deck,  a  highly  advanced  digital
communications  workstation  for the  financial  community.  The Power Deck user
interface  is  fully  compatible  with the  Company's  BroadBand  DN  technology
platform,  and  features  state-of-the-art  surface  mount  design.  Significant
innovations   include  a  high  resolution   graphics  display,   enhanced  user
programmability  and an ergonomically  designed  detachable keypad that improves
productivity and gives users precise control of critical phone functions.

In 1995,  the Company  introduced  BroadBand  DN which is the latest  generation
distributed  digital  switch  system.  BroadBand  DN is  built  on a  high-speed
computing  platform allowing direct connection to the digital  facilities of the
public network and providing digital  connectivity to the desktop.  The system's
basic architecture allows for software feature enhancements and reduces the risk
of future  obsolescence.  The  administration  software  empowers  the user with
system control and configuration  capability,  allows diagnostic reporting,  and
eases the ability to perform moves,  adds, and changes from a personal computer.
The  Company's  digital  trading  consoles  give the users  access to all system
lines,  paperless button labeling and fully programmable  loudspeaker monitoring
of multiple lines simultaneously.

In 1995,  the  Company  introduced  DXi,  a high  speed  digital  communications
console.  The DXi is fully compatible with the Company's BroadBand DN technology
platform  and employs the same base  technology  as the Power Deck.  The Company
also  introduced  its digital  eXchange  Phone which is installed at the Chicago
Board of Trade. The eXchange Phone employs the technology base of the Power Deck
product line. The eXchange Phone  provides  state-of-the-art  telecommunications
designed  specifically for the hectic and demanding  environment of an exchange.
The eXchange Phone was  ergonomically  designed to optimize  trading floor space
and maintain high efficiency for the member brokers.

In 1995,  the  Company  introduced  a suite of highly  sophisticated  networking
products  and tools  designed  to address  the needs of its  current  and future
customers.   These  products,   Global   Switching   Module  ("GSM"),   WAN  ONE
inter-networking  products,  PassPort Network  Management  Platform and F.A.S.T.
(Fast Access  Support  Technology),  represent  the leading  edge in  networking
capabilities for the financial trading environment.

GSM allows firms to take advantage of advanced communications architectures such
as  Asynchronous  Transfer  Mode ("ATM").  The GSM,  which employs a one gigabit
switch for information  throughput,  can support a trading floor with over 2,400
user consoles and delivers access to over 16,000 lines without system  blocking.
The Company installed GSM at several of its customer locations during 1996.
<PAGE>
The WAN ONE  product  enables  remote  trading  floor  communication  systems to
operate as if they were located  together.  For  example,  traders in London can
have instant,  local access to lines in New York,  Canada, or virtually anywhere
in the world.  The Company  believes WAN ONE  provides a  foundation  for remote
trading and advanced network services of the next generation.

The PassPort Network Management Platform is a sophisticated  UNIX-based suite of
tools that controls and maintains large systems in a cost-effective manner. True
multi-tasking  and  simultaneous   multi-user  operations  allows  large  system
managers to effectively  administer  distributed trading systems across existing
corporate  LANs and WANs.  Higher level  protocols  such as SNMP,  CMIP/CMIS and
TCP/IP are all capable of being addressed.

The Company's F.A.S.T.  service enables service  technicians to troubleshoot and
modify system parameters remotely through phone lines, thereby increasing system
performance.   Management  believes  that  F.A.S.T.  constitutes  a  competitive
advantage and no competitors have introduced similar service technology.

In 1996,  the Company  re-engineered  its eXchange Phone to meet the feature and
function requirements of the New York Mercantile Exchange, for which the Company
has an agreement to sell, install and maintain approximately 660 positions.

In 1996, the Company  introduced the Clarity Speaker System. The Clarity Speaker
System allows  traders and brokers to  simultaneously  monitor an  unprecedented
number of lines  without the need for numerous  individual  speaker cube arrays.
The Clarity Speaker System employs virtual stereo  capabilities that helps users
to more readily manage  incoming  communications  in a high traffic  environment
while requiring minimal space at the trading desk. The Company also introduced a
DXi  hard-key  button  module  that will  enable its Power Deck and DXi  trading
consoles to support hard keys as well as softkeys, or a combination of both. The
Company  expects to ship the Clarity  Speaker System and its DXi Hard-key module
in 1997.

Through  Licom's  product  ProMX,  the  Company is a leading  supplier  of fiber
optic-based  multiplexers  to the  electric  power  industry.  The  ProMX  is an
integrated,  modular  multiplexing  unit  designed to carry  "mission  critical"
communications and operate in circumstances and physical  environments for which
conventional  equipment is not usually  designed to withstand.  ProMX interfaces
with protective relays, supervisory control and data acquisition (SCADA), voice,
data and  telemetry.  The ProMX units,  or nodes,  communicate  with fiber optic
networks at data transmission rates of 1.544 million bits per second (T1), 2.048
million bits per second (E1) or 51.84 million bits per second (SONET OC1). ProMX
nodes,  common in  transmission  substations,  are often  located  together with
console  systems  equipment  in the  command  center.  Licom,  based in Herndon,
Virginia, continues to develop, market, test, ship and support the ProMX product
line, which is manufactured by a contract manufacturer.

Product Development

The Company's product development strategy is to continually improve its current
product lines and to develop  advanced new products and technologies to meet the
evolving needs of the markets it serves.  The Company's  emphasis is on software
and features that  facilitate the  integration of computer  networks and digital
voice systems within the trading floor environment.
<PAGE>
During 1995, the Company  developed and  implemented the second phase of the WAN
ONE product, which enables traders at remote sites, globally, to share telephone
lines and line  status  as if they were in the same  location.  In  addition,  a
remote system administration  function was developed which allows modifications,
or moves,  adds and changes  (MAC's),  to be performed  from a remote  location.
Combined  with  the  Company's  F.A.S.T.  remote  system  servicing  and WAN ONE
capabilities, the Company can provide service and enhancements to the customer's
system from remote locations.

The Company  developed the APL (Audio Processing Line) card, which increases the
capacity of telephone  lines that can be handled by each Broad Band DN node,  by
combining the AP-ACC (Audio Processing-Analog Control Card) and ALC (Analog Line
Card) cards into a single  card.  This card  enables the Company to decrease the
space  requirements  of its  backroom  cabinets  and racks.  Also, a new speaker
interface was developed which allows speakers to be dynamically  programmed from
the Power Deck and DXi consoles. The Company also developed an ISDN PRI (private
rate  interface) for Broad Band DN, advanced  intercom  features for its digital
trading consoles and a speakerphone for its Power Deck trading console.

During  1995,  the  Company   finalized  the   development  of  several  product
initiatives  that were  undertaken in 1994.  DXi, a new digital  trading console
features  an  internal  speaker  phone  and  a  streamlined,  high-speed  trader
interface.  PassPort, a sophisticated  UNIX-based suite of tools maintains large
systems in a cost-effective manner. The Global Switching Module, which employs a
one gigabit switch,  can unite up to 2,400 digital voice trading stations and is
the centerpoint of the Company's Large System Support package.

In 1996,  the Company  introduced  the Clarity  Speaker  System.  Clarity allows
traders and brokers to simultaneously  monitor an unprecedented  number of lines
without  the need for  numerous  individual  speaker  cube  arrays.  The Clarity
Speaker System  employs  virtual  stereo  capabilities  that helps users to more
readily  manage  incoming  communications  in a high traffic  environment  while
requiring minimal space at the trading desk.

Also in 1996, a new digital  exchange  floor phone  product was  developed  that
enables the use of up to eight  handsets per phone.  In November  1996,  the New
York Mercantile Exchange entered into an agreement to purchase approximately 660
of these new exchange phones. The Company feels it is well positioned to compete
effectively for business in the exchange floor marketplace, which is expected to
be robust over the next two years.

In 1996, the Company  developed a new hard key button module that will allow its
Power Deck and DXi trading consoles to support hard keys as well as softkeys, or
a combination of the both. In addition,  numerous software feature  enhancements
for the Broad Band DN system architecture were developed and released.

The Company continues its research efforts into the practical application of ATM
(Asynchronous  Transfer  Mode)  technology  to  the  trading  room.  Application
development efforts also continue on CTI (Computer Telephone Integration), which
unites the computer and the telephone.  The Company  believes the CTI will serve
as the enabling technology for ATM in the trading room. The Company has deployed
CTI at several  customer sites during 1995,  utilizing  various client  database
applications.

The Company continues to develop hardware and software enhancements to its ProMX
product line such as the  development  of an interface for  Synchronous  Optical
Network  (SONET),  an  international   standard  for  very  high  speed  digital
communications.
<PAGE>
During the years ended October 31, 1996,  1995 and 1994,  the  Company's  annual
research and development  expenditures were $3.1 million,  $3.9 million and $3.3
million or 9%, 13% and 11% of sales, respectively.

Sales, Service and Distribution

In 1994, the Company completed the  transformation of its distribution  channels
into a direct sales and service  network in the United States and United Kingdom
with the acquisition of certain assets of four unrelated companies  distributing
and or servicing the Company's products.  These business  acquisitions  provided
the Company with a service  presence and increased its sales strength in the New
York City, Boston and London markets.  These acquisitions advanced the Company's
strategy to enhance market share through the direct sale and full service of its
products,  which includes project management,  maintenance and other services in
the United States and United Kingdom.

The Company  currently  maintains  direct sales and service  centers in New York
City,  Boston,  Chicago,  San  Francisco,  Atlanta and London to provide  sales,
services  and  support to  customers  in the United  States and London  markets.
Through these centers, the Company sells equipment,  including  modifications to
existing systems,  and support  services,  including  maintenance  contracts and
project  management.  The Company utilizes  several  distributors to support its
operations throughout other regions of the United States.

The Company  utilizes a network of  international  distributors to deliver sales
and service  support in other global markets,  such as Canada,  the Pacific Rim,
South America and Europe. To accommodate the increased  activity level of global
financial markets, V Band expanded its base of foreign distributors during 1996.
At present,  there are 23  authorized V Band  distributors  worldwide,  with new
digital systems recently placed in Russia, Greece and South Africa. During 1996,
V Band Corporation and Australia-based  Trade Wind Group announced the formation
of V Band  Asian  Partners,  a  strategic  partnership  to  expand  distribution
channels for V Band's  products in Pacific Rim countries.  Licom uses direct and
distributor  sales,  service,  project  management and maintenance in the United
States and Canada, and uses independent distributors for international sales and
service.

Sales to Morgan  Guaranty Trust Company of New York and  affiliates  represented
10%,  14% and 14% of sales in 1996,  1995 and 1994,  respectively.  Sales to the
Chicago  Board of Trade and its general  contractor  represented  21% and 13% of
sales in 1996 and 1995, respectively.

Equipment sales,  excluding  Licom's ProMX,  consisting of new systems installed
and modifications to existing systems, in all markets, were $25.3 million, $20.5
million and $23.0 million,  representing 77%, 69% and 74% of the Company's sales
in 1996, 1995 and 1994, respectively. Licom sales represented 7%, 11% and 13% of
the Company's sales in 1996, 1995 and 1994,  respectively.  Service sales, which
consists of  maintenance  contract  sales,  support,  service and  miscellaneous
repairs  accounted  for 16%, 20% and 13%, of sales  during 1996,  1995 and 1994,
respectively.

The  Company's  foreign sales for 1996,  1995 and 1994 were $9.7 million,  $10.5
million  and  $8.7  million,  or  29%,  36%  and  27%,  respectively,  of  total
consolidated sales. For further information  regarding foreign sales, see Note 8
-- Notes to Consolidated Financial Statements.
<PAGE>
The Company's sales of systems for application in "non-financial" communications
control centers of utilities,  railroads and other  "right-of-way"  companies as
well as E9-1-1 emergency  service centers and  government/military  applications
were, in the aggregate,  20%, 16% and 16% of the Company's  sales for 1996, 1995
and 1994, respectively.

Manufacturing and Sources of Supply

During 1995, the Company restructured its manufacturing operations to reduce the
cost of its  products by  out-sourcing  the  production  of its printed  circuit
boards. As part of this restructuring,  the Company significantly down-sized its
production  facility by  relocating  its  operations,  in July 1995, to a 15,000
square foot facility in Elmsford,  New York,  from its former 67,000 square foot
leased  facility in Yonkers,  New York.  This new facility  houses the Company's
purchasing,  production control,  final assembly,  quality control,  testing and
repair operations.

The Company primarily  utilizes three outside  subcontractors to manufacture its
custom  fabricated,  printed  circuit boards.  The Company  provides the product
designs,  engineering  bill of materials  and testing  procedures  to ensure the
suppliers meet the Company's quality and reliability standards.  The Company has
been be able to reduce some of its product  cost due to the  economies  of scale
afforded by the outside contractors in the purchase of components.

The  Company's  Licom  subsidiary  performs  final  assembly  of  sub-assemblies
received  from one of the  Company's  outside  contractors,  tests and ships the
product at its  headquarters  in Herndon,  Virginia.  During  1995,  the Company
relocated its Licom facility to a nearby location, to provide better utilization
of space.

The  Company's  United  Kingdom  manufacturing  operation,  consisting  of final
product  assembly and addition of local  content and testing,  is located at its
facility in Beckton, England, approximately 20 miles southeast of London.

The Company  believes that relations with its  subcontractors  and suppliers are
good.  Most  components  and parts used in the Company's  products are available
from a number of different  sources.  A few components  are currently  available
from a single source of supply. The Company believes that alternative components
should be readily  available;  however,  there can be no assurance  that, in the
event of a supply shortage, such components will be available in the quality and
quantity  necessary to meet the Company's  needs.  To date,  the Company has not
experienced  any  significant  delays in the  delivery of  material  from either
subcontractors or vendors. The Company seeks to maintain inventory in quantities
sufficient to ship products within four to eight weeks of receipt of orders.

Patents

In 1994,  the Company was  granted a U.S.  patent  relating to the design of the
Power Deck  console  system.  In 1993,  the Company  was  granted a U.S.  patent
relating  to the  design of the VIAX DN console  system.  In 1992,  the  Company
received  patents  on its  system  digital  switch  architecture  and its  power
supplies.

The Company  believes that patent  protection  for its designs could enhance its
ability  to  successfully  market its  product  technology  at  reduced  risk to
competitors'  imitation of the Company's products.  However, no assurance can be
given  that  any  patent  issued  will  effectively  limit  competition  for the
<PAGE>
Company's  products and the Company's  protection of its market position through
technological  development  has, to date,  derived  primarily from the Company's
ability to keep secret its  proprietary  information  and knowledge.  The unique
design  features of the Company's  products may be  susceptible  to discovery by
third  persons who have access to such  products.  Technological  changes in the
telephone  terminal  equipment  industry  occur  rapidly  and  new  patents  are
constantly  being issued for products sold in the industry.  No assurance can be
made that claims  will not be brought  against  the  Company  alleging  that the
Company's products,  or aspects thereof,  infringe on competitors'  patents. The
Company has no such claims pending. The Company seeks to protect its proprietary
rights to computer  software through  copyright,  non-disclosure  agreements and
software licenses.

Distributor Support and Warranty Policy

The Company's service personnel, together with third-party service firms engaged
by the Company or by the Company's customers,  perform all necessary maintenance
of products  sold by the Company or by its  distributors,  including  components
manufactured   by  others.   The  Company   performs   maintenance  and  assists
distributors and third-party  maintenance  companies under its standard warranty
policy.  The Company generally  warrants its products to be free from defects in
material and  workmanship for a period of one year from the date of installation
and repairs or replaces  defective products under warranty without charge to its
customers.

Competition

The market for the  Company's  products  is highly  competitive.  The  Company's
industry is characterized by advanced technology, rapid change and broad product
support.  Many of the  Company's  competitors,  both in the  United  States  and
globally,  are large  companies that  manufacture and distribute a wide range of
telephone  products,  and provide services such as installation and maintenance.
Management believes that the competitive factors in its product lines are price,
quality,  reliability,  product innovation, timely delivery, service and product
support.

The  Company's  largest  competitors  in the United  States are IPC  Information
Systems,  Inc.  ("IPCI").  and British Telecom plc. In the United  Kingdom,  the
Company  competes with British  Telecom plc,  IPCI,  and Wyatts (a subsidiary of
Reuters Holdings plc). The Company  believes that these two markets,  the United
States and United  Kingdom,  comprise 65% of the global market for the Company's
products.  The competitors in markets served by ProMX products are primarily RFL
Technologies, Pulsar Technologies,  Centronics Division of NORTEL and ASEA Brown
Boveri.

Backlog

As of October 31, 1996, 1995 and 1994, the Company's  backlog of purchase orders
that  management  believes to be firm was $8.3  million,  $10.5 million and $2.8
million,  respectively.  The Company  expects to deliver all  products  from its
October 31, 1996 backlog  during  fiscal 1997.  The Company  generally  delivers
large system  configured  products to customers within six to eight weeks of its
receipt of firm orders.  Where the Company makes direct end-user  installations,
deliveries  generally  occur four to eight  weeks from  receipt of firm  orders.
Management  does  not  believe  that  the  Company's  backlog  is  a  meaningful
indication of future sales.
<PAGE>
Employees

As of October 31, 1996, the Company had 199 full-time employees, of whom 29 were
product  development  personnel,  110 were sales,  marketing and service support
personnel, 28 were production personnel,  and 32 were administrative  personnel.
This  compares  to 241 at October  31,  1995 and 288 at October  31,  1994.  The
decrease  from  1995  was  primarily  attributable  to a  reorganization  of the
Company's  engineering,  manufacturing and administrative  functions in November
1995.  The  reduction  from 1994 was  attributable  to a  reorganization  of the
Company's   management  and   restructuring   of  the  Company's   manufacturing
operations,  which included the  out-sourcing of the production of the Company's
printed circuit boards,

Many of the Company's employees are highly skilled,  and the Company's continued
success  will  depend,  in part,  on its  ability  to attract  and  retain  such
employees.  None  of  the  Company's  employees  are  covered  by  a  collective
bargaining  agreement;  however,  four employees of a wholly owned subsidiary of
the Company,  all of whom work in the Boston  service  center,  are members of a
local  collective  bargaining  unit. The Company believes its relations with its
employees are good.

Item 2.    Properties

The  Company's   leases   executive   offices  and  engineering   facilities  of
approximately  22,800  square feet,  located at 565 Taxter Road,  Elmsford,  New
York.

The Company conducts its assembly and quality  assurance  operations at a 15,000
square feet at Three Westchester Plaza, Elmsford, New York.

Leases for the Company's  domestic sales and service support  locations  include
approximately:  5,900 and 2,500  square  feet  located in New York  City;  1,300
square  feet  located in Boston,  Massachusetts;  1,800  square feet in Chicago,
Illinois; and 1,800 square feet in San Francisco, California.  Subsequent to the
fiscal year end October 31, 1996 the Company executed a lease for  approximately
2,600 square feet of office space at its existing location in Chicago, Illinois.
The Company is currently  re-negotiating  its lease in San Francisco and expects
to either renew at its existing  site or relocate to a similar space in the same
building.

Licom's  headquarters  consist of approximately  8,600 square feet of office and
production assembly space, located at 620 Herndon Parkway, Herndon, Virginia.

The Company  leases office and  production  space related to its United  Kingdom
operation.  It has a leased  sales  office of  approximately  1,700  square feet
located in London.  The  production  facility  and  administrative  offices with
approximately 20,000 square feet located within 20 miles southeast of London.

Management believes that all of its facilities are in good condition and working
order and have adequate capacity to meet its needs for the foreseeable future.

Item 3.    Legal Proceedings

In October 1994,  the Company  commenced an action against  Technical  Telephone
Systems, Inc. ("TTSI") in New York State Supreme Court,  Westchester County, for
minimum  payments  due  to the  Company  in  the  amount  of  $650,000  under  a
distribution  agreement  between the Company and TTSI.  In November  1994,  TTSI
<PAGE>
filed a counterclaim  against the Company denying all allegations  stated in the
Company's  complaint and alleging a breach of good faith and fair dealing by the
Company,  claiming damages of $1 million. The Company believes its claim against
TTSI is meritorious and believes TTSI's counterclaim against the Company,  which
the Company will vigorously defend, is without merit.

There are no other material pending legal proceedings as of December 31, 1996.

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

No matters were submitted to a vote of security holders during the fourth fiscal
quarter of the year ended October 31, 1996.

                                     Part II

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

The  Company's  Common  Stock is traded in the  over-the-counter  market  and is
included  in  the  National   Association   of  Securities   Dealers   Automated
Quotation-National Market System ("NASDAQ") under the symbol VBAN. The following
table shows the high and low sales prices for the Company's  Common Stock quoted
in the over-the-counter  market for the fiscal quarters indicated as reported on
the NASDAQ.  The  quotations  represent  prices in the  over-the-counter  market
between  dealers in securities and do not include retail  markup,  markdown,  or
commissions.
<TABLE>
<CAPTION>

Fiscal 1996                            High                 Low
-----------                            ----                 ---
<S>                                   <C>                 <C>
Fourth Quarter                        $ 3.38              $ 1.88
Third Quarter                         $ 3.88              $ 1.63
Second Quarter                        $ 3.38              $ 1.63
First Quarter                         $ 2.38              $ 1.25
<CAPTION>

Fiscal 1995                            High                 Low
-----------                            ----                 ---
<S>                                   <C>                 <C>
Fourth Quarter                        $ 2.75              $ 1.88
Third Quarter                         $ 3.50              $ 1.88
Second Quarter                        $ 3.25              $ 1.88
First Quarter                         $ 5.25              $ 2.75
</TABLE>

As of December 31, 1996, there were  approximately  550 holders of record of the
Company's Common Stock.

The  Company  has never  paid a regular  dividend  on its  shares,  and does not
anticipate paying dividends in the near future.
<PAGE>
Item 6.  Selected Financial Data

The selected  financial data presented  below have been derived from the audited
financial statements of the Company, and should be read in connection with those
statements, which are included herein.
<TABLE>
<CAPTION>

                                                             For the Year Ended October 31,

                                               1996        1995           1994         1993          1992
                                               ----        ----           ----         ----          ----
                                                            (in 000's, except per share data)
<S>                                         <C>          <C>           <C>          <C>           <C>

Sales .................................     $ 32,886     $ 29,351      $ 31,078     $ 25,741      $ 28,888
Income (loss) before cumulative effect
      of accounting change ............           27      (11,594)          627       (1,134)          248
Cumulative effect of accounting change.           --           --         1,242           --            --
                                            --------     --------      --------     --------      --------
Net income (loss) .....................     $     27     $(11,594)     $  1,869     $ (1,134)     $    248
                                            ========     ========      ========     ========      ========

Per share data:
Income (loss) before cumulative
      effect of accounting change .....     $    .01     $  (2.18)     $    .12     $   (.21)     $    .04
Cumulative effect of accounting  change           --           --           .23           --            --
                                            --------     --------      --------     --------      --------
Net income (loss) .....................     $    .01     $  (2.18)     $    .35     $   (.21)     $    .04
                                            ========     ========      ========     ========      ========

Weighted average number of shares  of
    common stock and common stock
    equivalent ........................        5,323        5,322         5,311        5,285         6,069
Cash dividends per common share .......     $    .00     $    .00      $    .00     $    .00      $    .00
Working capital .......................     $ 10,619     $  9,622      $ 18,935     $ 19,684      $ 19,931
Total assets ..........................     $ 22,042     $ 21,212        $36,02     $ 30,639      $ 29,944
Shareholders' equity ..................     $ 14,488     $ 14,398      $ 26,039     $ 23,963      $ 25,273
</TABLE>
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Results of Operations

As an aid to understanding the Company's operating results,  the following table
shows, for the periods  indicated,  the percentage  relationship which each item
bears to sales.
<TABLE>
<CAPTION>

                                                    Fiscal Year Ended October 31,
                                                    -----------------------------
                                                     1996       1995       1994
                                                     ----       ----       ----
<S>                                                 <C>        <C>        <C>
Sales
    Equipment ..................................     84.2 %     80.4 %     86.7 %
    Service ....................................     15.8       19.6       13.3
                                                    -----      -----      -----
Total sales ....................................    100.0      100.0      100.0
Cost of sales
    Equipment(*) ...............................     59.2       85.7       55.4
    Service(*) .................................     62.2       61.0       71.6
                                                    -----      -----      -----
Total cost of sales ............................     59.7       80.8       57.5
                                                    -----      -----      -----
Gross Profit ...................................     40.3       19.2       42.5
Selling, general and administrative expenses ...     31.0       44.6       30.7
Research and development expenses ..............      9.5       13.4       10.7
                                                    -----      -----      -----
Operating income (loss) ........................     (0.1)     (38.8)       1.1
                                                    =====      =====      =====
Income  (loss)  before  cumulative  effect  of
    accounting change ..........................      0.1      (39.5)       2.0
Cumulative effect of accounting change .........      --         --         4.0
                                                    -----      -----      -----
Net income (loss) ..............................      0.1 %    (39.5)%      6.0 %
                                                    =====      =====      =====

*  Presented as a percentage of the related sales categories.
</TABLE>
Sales

Sales for the year ended October 31, 1996 were $32.9 million, a $3.5 million, or
12%,  increase  from  sales  for  1995.  The  increase  in sales  was  primarily
attributable  to the  increase in sales of the  Company's  Power  Deck,  DXi and
eXchange  Phone  products  which  increased  to $15.4  million in 1996 from $9.9
million  in  1995,  or 56%,  as  product  migration  continued  in  favor of the
Company's  newer products.  Sales for the Company's older products,  Viax DN and
Viax Analog,  decreased to $4.9 million in 1996 from $9.4 million in 1995,  or a
48% decrease. Sales for the Company's Licom ProMX decreased to $2.4 million from
$3.1  million,  or 23%,  due to  increased  competition  in the  market  for the
Company's product. Excluding Licom's ProMX sales, the Company's sales were $30.5
million in 1996  compared to $26.3 in 1995,  or an  increase  of 16%.  Equipment
sales,  which include new equipment  installations  plus moves, adds and changes
for customers' existing systems, were $27.7 million in 1996 as compared to $23.5
in 1995, or an increase of 18%.  Excluding  Licom's  ProMX sales,  the Company's
<PAGE>
equipment  sales were $25.3  million in 1996  compared  to $20.5 in 1995,  or an
increase  of 23%.  Service  sales  decreased  to $5.2  million in 1996 from $5.8
million in 1995, or a 10% decrease.  This decrease is primarily  attributable to
several  factors - a reduction in the Company's  repairs and other sales related
to E-911  products,  older Viax  products  and  miscellaneous  products  to $1.0
million in 1996 from $1.5 million in 1995.  Maintenance  sales remained level at
$4.2  million  for 1996 and 1995 as several  customers  historically  covered by
maintenance  contracts  upgraded to new systems during 1996 and those customers'
systems were covered under warranty contracts for all or part of the year.

Sales in 1996 to non-financial  customers (i.e.,  communication  control centers
for utilities and  government  agencies)  accounted for $6.0 million,  or 18% of
sales,  a $1.2 million  increase from 1995  non-financial  customer  sales.  The
increase  was  related  primarily  to several  specific  sales of the  Company's
product in diverse applications.

Sales for the year ended October 31, 1995 were $29.4 million,  a $1.7 million or
a 5% decrease from sales for 1994. The decrease in sales was attributable to the
decrease in equipment  sales.  Equipment sales for the year,  which included new
equipment  installations  plus moves,  adds and changes for customers'  existing
systems  were $23.5  million in 1995 as compared to $27.0 in 1994.  Sales of the
Company's Power Deck product increased from $2.6 million in 1994 to $9.9 million
in 1995,  or a 281%  increase,  as product  migration  continued in favor of the
Power Deck and away from older products. Sales for the Company's older products,
Viax DN and Viax Analog, decreased from $19.0 million in 1994 to $9.4 million in
1995, or a 51% decrease.  Sales for the Company's Licom ProMX product  decreased
from $3.3 million to $3.1 million,  or 6%,  primarily due to higher  discounting
for the  product.  Service  sales  increased  from $4.1  million in 1994 to $5.8
million  in  1995,  or a 39%  increase,  reflecting  the  transformation  of the
Company's distribution channels to a direct sales and service network.

Sales in 1995 to non-financial  customers (i.e.,  communication  control centers
for utilities and government agencies), which accounted for $4.8 million, or 15%
of sales, remained relatively unchanged from 1994 non-financial customer sales.

Since the Company sells products to its foreign  customers and  distributors for
U.S. dollars,  it is unaffected by currency  translations.  The Company's United
Kingdom operation transacts sales in pounds sterling or US dollars.  Those sales
transacted in pounds sterling were not materially  impacted by foreign  exchange
rate  fluctuations  during  1996 or 1995.  The Company  has,  from time to time,
hedged foreign currency transactions when deemed necessary.

Reflecting the transformation of the Company's  distribution channels from third
party distributors to a direct sales and service network,  $28.4 million, or 86%
of total  sales were  direct in 1996,  as  compared  to $24.1  million and $21.5
million, or 82% and 70% of sales in 1995 and 1994, respectively.

Gross Profit Margins

Gross  profit  margins  for 1996 and 1995  were 40% and 19%,  respectively.  The
equipment  gross profit margin was 41% in 1996, as compared to 14% in 1995.  The
increase in equipment  gross margins for 1996 were  attributable  to the matters
relating to 1995 described below. The equipment gross profit margin for 1995 was
adversely affected by the special fourth quarter adjustment of $3.8 million, the
manufacturing  restructuring  program  initiated by the Company and  competitive
discounting for the Company's products.
<PAGE>
The 1995 gross  profit was  affected  by several  special  fourth  quarter  1995
expense adjustments,  including a $2.6 million charge for increases in inventory
reserves and inventory  write-offs related to older product lines, a $.9 million
write-off of an intangible asset related to a license for product  technology no
longer used, and a $.3 million increase in warranty reserves.  Additionally, the
Company restructured its production  operations during the year from an internal
manufacturing   process  to  one  which  relies  to  a  significant   extent  on
out-sourcing of the Company's  sub-assemblies.  This  restructuring  enabled the
Company to reduce its gross  manufacturing  expenses by $3.0 million,  from $5.3
million in 1995 to $2.3 million in 1996. Also, the Company found it necessary to
offer larger discounts for its products in order to meet competitive challenges.
The service  gross profit margin  decreased  slightly to 38% in 1996 from 39% in
1995.  This was primarily  attributable  to a decrease in the  Company's  repair
sales for older  products,  which have  generally  yielded  higher  gross profit
margins.

The  gross  profit  margin  was 19% in  1995 as  compared  to 42% in  1994.  The
equipment gross profit margin was 14%, in 1995, as compared to 45%, in 1994. The
decrease in equipment gross profit margins was  attributable  primarily to three
factors  -- $3.8  million of  special  fourth  quarter  expense  adjustments,  a
manufacturing  restructuring  program initiated by the Company,  and competitive
discounting  for  the  Company's  products.  The  service  gross  profit  margin
increased to 39%, in 1995 from 28% in 1994.  Service  sales  increased  39% over
1994 levels as the Company  transformed  from a  distributor-based  network to a
direct sales and service network,  while the service cost of sales decreased 6%,
due to  economies  of scale and better  efficiencies  brought  about by a larger
customer base.

Operating Expenses

Total operating expenses for 1996 decreased to $13.3 million, representing a 22%
decrease  from $17.0  million for 1995.  Operating  expenses as a percentage  of
sales were 40% in 1996 as  compared  to 58% in 1995.  The  selling,  general and
administrative  expenses  decrease as a percentage  of sales to 31% in 1996 from
45% in 1995 was attributable primarily to the restructuring program initiated by
the Company during 1995.

Total operating expenses for 1995 increased to $17.0 million, representing a 33%
increase  from $12.8  million for 1994.  Operating  expenses as a percentage  of
sales were 58% in 1995 as  compared  to 41% in 1994.  The  selling,  general and
administrative  expenses  increase as a percentage  of sales to 45% in 1995 from
31% in 1994 was  attributable  primarily to the costs of the service  businesses
acquired in 1994,  combined with non-recurring  charges related to the Company's
restructuring during the year.

Selling,  general and  administrative  costs for 1996  decreased $2.9 million to
$10.2  million,  or 22%,  from $13.1  million in 1995.  The decrease in selling,
general and  administrative  expenses was  attributable  to the  Company's  1995
restructuring.  Overall,  the  Company  reduced  the  number  of  its  full-time
employees  to 199 at October  31,  1996 from 241 at October  31, 1995 and 288 at
October  31,  1994.  Overall,  sales,  general  and  administrative  payroll and
benefits  were  $2.2  million  lower  in  1996.   Part  of  this  reduction  was
attributable to severance  costs incurred in 1995 related to the  aforementioned
restructuring.  The Company was able to reduce  headcount  while  increasing its
operational  efficiency by  implementing  a new  management  information  system
towards the end of 1995.  This new system enabled the Company to streamline many
of its operational and administrative functions.
<PAGE>
Selling,  general and  administrative  costs for 1995  increased $3.6 million to
$13.1 million, or 38%, from $9.5 million in 1994. Of the increase,  $2.4 million
was attributable to the full year impact of the Company's  London,  New York and
Boston sales and service  center  operations  which were  acquired  during 1994.
Additionally, the Company exercised its right to terminate its current lease for
67,000 square feet of manufacturing space in Yonkers, New York,  relocating to a
15,000 square foot production and assembly  facility in Elmsford,  New York. The
Company  recorded a $.4 million  non-recurring  restructuring  charge related to
expenses to be incurred  and assets to be disposed of during the  transition  of
the  manufacturing  facility  to the new  location.  Additionally,  the  Company
further   restructured  its   manufacturing,   engineering  and   administrative
departments,  resulting in severance  accrual and other  miscellaneous  costs at
year-end of $.8 million.

Research  and  development  expenses  for  1996 of $3.1  million  decreased  $.8
million, or 21%, from $3.9 million in 1995. Research and development expenses as
a percentage  of sales  decreased to 9% in 1996 as compared to 13% in 1995.  The
decrease in research and development expenses was primarily  attributable to the
restructuring  of the Company's  engineering  department  which placed a greater
emphasis on software  development as opposed to hardware  development,  which is
less costly. In addition,  the products  introduced during the year require less
development expense to bring to the market.

Research  and  development  expenses  for  1995 of $3.9  million  increased  $.6
million, or 18%, from $3.3 million in 1994. Research and development expenses as
a percent of sales  increased to 13% in 1995,  as compared to 11% in 1994.  This
increase  was a result  of the  development  of the new  products  and  services
introduced during the latter part of the year,  including DXi, BroadBand DN, WAN
ONE and the eXchange  phone,  which is being  installed at the Chicago  Board of
Trade.

Other Income and Expense

Net  investment  income for 1996 and 1995 remained  relatively  unchanged at $.1
million.

Net investment  income for 1995 was $.1 million,  a decrease of $.3 million from
1994.  The decrease  was  attributable  primarily to the decrease in  marketable
securities,  of which  $4.2  million  was used to fund the  current  year's  net
operating loss and net realized losses on certain securities sold.

Provision for Income Taxes

Effective   November  1,  1993,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 109 ("SFAS 109"),  "Accounting for Income Taxes." Under
SFAS 109, the deferred tax provision is determined  under the liability  method.
Under this method,  deferred tax assets and liabilities are recognized  based on
differences between the financial statement carrying amount and the tax basis of
assets and liabilities  using presently enacted tax rates. The cumulative effect
of the  adoption  of SFAS 109 as of November  1, 1993 was  $1,242,000,  net of a
valuation allowance of $150,000.  There was no change in the valuation allowance
during 1994. During 1995, the Company recorded an additional  deferred tax asset
of $4,325,000 and also recorded an additional valuation allowance of $4,876,000.
During 1996, the Company reduced the deferred tax asset and valuation  allowance
by $208,000.  The total valuation allowance as of October 31, 1996 of $4,818,000
<PAGE>
reduces the  deferred  tax asset to the amount  that  management  believes  will
ultimately  be realized.  During 1995,  the Company  reversed  $250,000 of prior
years' tax  accruals  which are no longer  required.  There was no change in the
valuation  allowance  during  1996.  The  Company's  1996,  1995  and  1994  tax
provisions of $5,000,  $301,000 and $150,000 reflect effective tax rates of 19%,
(3)% and 19%, respectively.

Net Income (Loss) Per Share

For 1996,  the  Company  recorded  net income of  $27,000 or $.01 per share,  as
compared to net loss of $11.6 million, or $2.18 per share in 1995. The Company's
Licom subsidiary  recorded a net operating loss of $.5 million compared to a net
operating loss of $.1 million in 1995.  Excluding  Licom's results,  the Company
had net income of $.5 million, or $.09 per share.

For 1995, the Company recorded a net loss of $11.6 million,  or $2.18 per share,
as  compared  to net  income  of $.6  million,  or $.12 per  share,  before  the
cumulative effect in 1994 of the accounting  change for income taxes.  Inclusive
of the cumulative effect of the accounting  change, net income was $1.9 million,
or $.35 per share, in 1994.

Liquidity and Capital Resources

The Company's  aggregate of cash, cash equivalents and marketable  securities at
October 31, 1996 declined $.7 million, to $2.3 million, compared to the balances
reported at October 31, 1995.  Accounts  receivable  increased $1.9 million,  to
$6.7 million in 1996 from $4.8 million in 1995, primarily due to the increase in
sales for the Company's  fourth  quarter  compared to the fourth quarter of 1995
and an  increase in amount  outstanding,  (including  retainage)  related to the
Chicago Board of Trade contracts. Total current liabilities increased due to the
timing of  inventory  purchases in the fourth  quarter to support  sales for the
fourth  quarter  of 1996 and the  first and  second  quarters  of 1997.  Capital
expenditures were $.3 million in 1996 as compared to $.9 million in 1995.

The Company's  aggregate of cash, cash equivalents and marketable  securities at
October  31,  1995  declined  $4.8  million,  to $2.9  million,  compared to the
balances reported at October 31, 1994. This decline was largely  attributable to
the use of funds to support the Chicago Board of Trade  contract and to fund the
net operating loss.  Inventory,  net of accounts payable decreased $2.1 million,
from $8.2  million  in 1994 to $6.1  million  in 1995,  as the  Company  reduced
inventory  as part of the  Company's  restructuring  during  the year.  Accounts
receivable decreased $2.9 million,  from $7.7 million in 1994 to $4.8 million in
1995,  primarily  attributable  to a decrease  in fourth  quarter  sales of $2.3
million for 1995 as compared to 1994.  Capital  expenditures were $.9 million in
1995 as compared to $.6 million in 1994.

The Company has taken a number of steps to create  additional  liquidity for its
operations and to take advantage of marketing  opportunities.  The restructuring
of the Company's  production  operations in 1995 and the reduction of the number
of  Company  employees  in 1995  and  1996  have  contributed  to the  Company's
liquidity.  The  Company  is also  seeking  to obtain a credit  facility  from a
lending  institution.  In January  1997,  the  Company  borrowed  $200,000  on a
short-term basis from the Company's  Chairman and Chief Executive  Officer.  The
Company  has no other  indebtedness  and  believes  it will be able to  obtain a
credit facility which,  together with other resources,  would provide sufficient
liquidity to meet projected requirements.

<PAGE>
The Company's  working  capital was $10.6 million as of October 31, 1996, a $1.0
million  increase from $9.6 million as of October 31, 1995.  Working capital was
$9.6 million as of October 31, 1995, a $9.3 million  decrease from $18.9 million
as of October 31, 1994.
 
The Company  has no  significant  commitments  for  capital  expenditures  as of
October 31, 1996.


Item 8.   Financial Statements and Supplementary Data

The response to this item is incorporated by reference to pages F-1 through F-12
and S-1 herein.

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

None.
<PAGE>
                                    PART III

Item 10.      Directors and Executive Officers of the Registrant
<TABLE>
<CAPTION>

Name                                Age                        Office Held
----                                ---                        -----------
<S>                                  <C>         <C>
Thomas E. Feil (1)                   55          Chairman, Chief Executive Officer, Director
Thomas Hughes                        37          Chief Operating Officer
Mark R. Hahn                         39          Vice President - Chief Financial Officer, Treasurer and Secretary
Gerald C. Walsh                      50          Senior Vice President - Sales and Operations
Luke P. La Valle, Jr. (2)(3)         54          Director
Thomas H. Lenagh (2)                 72          Director
Brian S. North (1)                   45          Director
Joseph M. O'Donnell (3)              50          Director
A. Eugene Sapp, Jr. (1)              60          Director
J. Stephen Vanderwoude (2)(3)        53          Director
                                   
(1)  Member of stock option committee.
(2)  Member of audit committee.
(3)  Member of compensation committee.
</TABLE>

There is no family relationship among any of the directors or executive officers
of the Company. Information with respect to the directors and executive officers
of the Company, based upon information furnished by them, is set forth below.

Thomas E. Feil has served as Chairman of the Company from April 1985 to present,
as a Director since its inception and as Chief Executive Officer from April 1985
to August 1988 and from August 1993 to  present.  From the  Company's  inception
until April 1985, Mr. Feil was President of the Company.

Thomas Hughes was  appointed  Chief  Operating  Officer of the Company in August
1995.  Previously,  he served the Company as Vice  President  of  Marketing  and
Product Planning from 1993 to 1995. Mr. Hughes began his career with the Company
in 1988 as a Staff Engineer and held various engineering management positions of
increasing  responsibility  until his  appointment as Vice  President.  Prior to
joining the Company,  he worked as a researcher at CBS Laboratories'  Technology
Center and a Systems Engineer at United Technologies.

Mark R. Hahn was appointed  Vice  President and Chief  Financial  Officer of the
Company in August 1995. He was elected Secretary of the Company in December 1995
and  elected  Treasurer  of the  Company in May 1996.  Previously,  he served as
Controller of the Company since November 1994. Prior to joining the Company,  he
was a consultant to American  Airlines in Fort Worth,  TX. From 1991 to 1994, he
served  as Vice  President  of  Finance  and  Controller  for  Business  Express
Corporation in Westport,  CT. He joined Business  Express in 1990 as Controller.
From 1987 to 1990, he held the positions of Corporate Controller and Director of
Corporate Planning and Accounting with Waldenbooks in Stamford, CT. He began his
career as a certified public accountant with Price  Waterhouse. 

Gerald C. Walsh was appointed Senior Vice President, Sales and Operations of the
Company in May 1996.  Prior to joining  the  Company,  he was  Eastern  Regional
Manager,  National Accounts at Executone Information Systems, Inc., From 1993 to
1995, Mr. Walsh served as Chief  Operating  Officer for Glasgal  Communications,
Inc., in Northvale,  New Jersey. From 1987 to 1992, he was Senior Vice President
and General Manager for Contel IPC.
<PAGE>
Luke P. La Valle,  Jr. has served as a Director of the Company  since June 1992.
Since 1980,  Mr. La Valle has been  President  and Chief  Investment  Officer of
American Capital Management,  Inc., a New York City based investment  management
firm for  individuals,  trusts,  pension and profit sharing  accounts.  Prior to
forming American Capital Management, Inc., Mr. La Valle worked for United States
Trust Company of New York for 13 years  specializing in small company  investing
in the Pension and Institutional Investment Division.

Thomas H. Lenagh has served as a Director of the  Company  since June 1993.  Mr.
Lenagh has served as an independent financial consultant for the last six years.
He was formerly Chairman and Chief Executive Officer of Greiner Engineering from
1984 to 1986.  Prior to that he was Financial Vice President of Aspen  Institute
until 1984.  Previously,  he was  Treasurer  and  Portfolio  Manager of the Ford
Foundation.  Mr. Lenagh is a retired Captain of the United States Naval Reserve.
Mr.  Lenagh is also a  Director  of CML,  Inc.,  Gintel  Funds,  Adams  Express,
Clemente Growth Fund, ICN Pharmaceuticals,  Inc., Irvine Sensors Corporation and
Franklin Quest.

Brian S. North has served as a Director of the Company since September 1988. Mr.
North has been an attorney  with the law firm of White and Williams  since 1995.
From  1987 to  1994,  he was a  member  of the law  firm  of  Elliott,  Reihner,
Siedzikowski,  North & Egan, P.C. and predecessor law firms.  From 1980 to 1987,
he was Senior Corporate Counsel of Sun Company, Inc.

Joseph M.  O'Donnell  has served as a Director of the  Company  since June 1991.
Since  July 1994,  Mr.  O'Donnell  has been the Chief  Executive  Officer  and a
Director of Computer Products, Inc., a manufacturer in Boca Raton, Florida. From
1993 to 1994, he was Chief Executive  Officer for Savin  Corporation,  after one
year of being an independent business consultant. From 1990 to 1992 he served as
President   and  Chief   Executive   Officer  of  GO/DAN   Industries   Inc.,  a
Connecticut-based  manufacturer  of  automobile  parts  sold  primarily  in  the
aftermarket.  He is also a Director of  Cincinnati  Microwave,  Inc., a publicly
held company and Boca Research.

A. Eugene Sapp,  Jr. has served as a Director of the Company  since August 1994.
Mr. Sapp,  employed by SCI Systems  since 1962,  has been its  President,  Chief
Operating Officer and Director since 1981. Mr. Sapp also serves as a Director of
Irvine Sensors Corp., and CMS, Inc. of Tampa, Florida.

J. Stephen Vanderwoude has served as Director of the Company since May 1994. Mr.
Vanderwoude is currently  Chairman and Chief Executive  Officer of Madison River
Telephone  Company LLC. He was President,  Chief Executive  Officer and Director
for Video Lottery  Technologies in Atlanta,  Georgia from 1994 to 1995. Prior to
that, he was the President and Chief Operating  Officer of Sprint  Corporation's
Local  Telecommunication  Division until September 1993.  Prior to the merger of
Sprint and Centel  corporations in March 1993, Mr. Vanderwoude was President and
a  Director  of Centel  Corporation  from 1988 and held  various  executive  and
management  positions  with  Centel  since  joining  the  company  in 1971.  Mr.
Vanderwoude is a Director of First Midwest, a bank holding company.

Each officer is elected by and serves at the pleasure of the Board of Directors.
Directors  are elected  annually by the  shareholders,  except when the Board of
Directors  may elect a director  to fill a vacancy on the Board.  The  executive
officers of the Company are elected annually by the Board of Directors.
<PAGE>
The Board of Directors has three standing  committees:  Stock Option,  Executive
Compensation  and Audit  Committees.  The Stock Option  Committee  exercises the
responsibilities  of the Board in granting options under and  administering  the
Company's 1982  Incentive  Stock Option Plan and its 1984 Stock Option Plan. The
Executive  Compensation  Committee's principal functions are to recommend to the
Board of Directors the compensation  arrangements for the executive  officers of
the  Company.  The Audit  Committee's  principal  functions  are to review  with
internal financial staff and the Company's  independent  public accountant,  the
Company's   reporting  process  and  internal  controls  and  to  recommend  the
selection,  retention or termination of the independent public accountants.  The
Company has entered into  Indemnity  Agreements  with each of its  directors and
certain of its officers, pursuant to which the Company is obligated to reimburse
or pay certain  expenses  incurred by its directors and officers  arising out of
claims made against them in connection with their services to the Company.

Item 11.      Executive Compensation

SUMMARY COMPENSATION TABLE

The following  table sets forth  information  for each of the fiscal years ended
October 31, 1996,  1995 and 1994  concerning the  compensation  of the Company's
Chairman and Chief Executive  Officer and each of its other  executive  officers
whose salary and bonus for fiscal 1996 exceeded $100,000:
<TABLE>
<CAPTION>
                                                                            Long-term
                                               Annual Compensation        Compensation(1)
                                        --------------------------------  --------------
                                                                           Securities 
Name/                                                       Other Annual   Underlying     All Other
Principal Position            Year      Salary     Bonus    Compensation   Options (#)  Compensation (2)
------------------            ----      ------     -----    ------------   -----------  ---------------
<S>                           <C>      <C>          <C>       <C>          <C>          <C>
Thomas E. Feil,               1996     $200,000     $--       $   --       $   --       $  2,000
Chairman, Chief Executive     1995      199,000      --           --           --          1,528
Officer and Director          1994      199,998      --           --           --           --



Thomas Hughes, (3)            1996      150,000      --           --         90,000        1,500
Chief Operating Officer       1995      103,616      --           --         16,000        1,036
                              1994       88,858     3,276         --          6,000          889

Mark R. Hahn, (3)             1996      105,000      --           --         60,000        1,050
Vice President-               1995       85,077      --           --         17,000          285
Chief Financial Officer       1994         --        --           --           --           --
--------------------------------
(1)  Other  than the  Company's  401(k)  Plan and its  stock  option  and  stock
     purchase plans, the Company does not have any long-term incentive plans and
     does not grant restricted stock awards.
(2)  Includes amounts contributed.by the Company under the Company's 401(k) Plan
     during   the  fiscal   year  and  any   additional   discretionary   annual
     contributions related to the prior fiscal year.
(3)  Mr. Hughes and Mr. Hahn entered into agreements with the Company in January
     1996 whereby  they are each  entitled to receive  approximately  one year's
     compensation  should there be a change of control of the Company within one
     year from the date of the agreement.
</TABLE>
<PAGE>
STOCK OPTIONS

The  following  tables  summarize  option  grants  during the fiscal  year ended
October 31, 1996 to the named officers and the value of the options held by such
persons at the end of such fiscal year. None of the named officers exercised any
stock options  during the fiscal year ended  October 31, 1996.  The Company does
not maintain any pension plans or any supplementary pension award plans.

Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
                                                                                Potential Realizable Value
                                                                                at Assumed Annual Rates of
                                                                                Stock Price Appreciation
                                          Individual Grants                           for Option Term
                     ------------------------------------------------------------------------------------- 
                     Number of       Percentage of
                     Securities      Total Options
                     Underlying       Granted to
                      Options        Employees in   Exercise Price   Expiration
Name                  Granted        Fiscal Year     (per share)       Date         5%          10%
----                  -------        -----------     -----------       ----         --          ---
<S>                    <C>               <C>            <C>            <C>      <C>           <C>
Thomas Hughes          90,000            25%            $1.88          2006     $142,326      $326,853
Mark  Hahn             60,000            17%             1.88          2006       94,884       217,902
</TABLE>

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-end Option Value
<TABLE>
<CAPTION>
                                                                                      Value of Unexercised In-the
                                                     Number of Unexercised Options          Money Options at
                                                               at FY-End                        FY-End
                                                    ------------------------------  -----------------------------
                           Shares
                         Acquired on      Value
Name                      Exercise      Realized    Excercisable    Unexercisable   Excercisable   Unexercisable
----                      --------      --------    ------------    -------------   ------------   -------------
<S>                          <C>         <C>           <C>              <C>            <C>            <C>
Thomas E. Feil               -           $  -          25,000             -            $   -          $  -
Thomas Hughes                -              -          26,900           88,667          2,917          20,833    
Mark R. Hahn                 -              -          15,667           61,333          1,708          13,917
</TABLE>
COMPENSATION OF DIRECTORS

The Company pays each outside  director an annual  director's fee of $7,500 plus
$500 for each board  meeting  attended (up to a limit of six meetings per year),
plus  deferred  cash  compensation  payable  upon  termination  of  service as a
director  in an amount  equal to $2,000 for each year of service as a  director.
Pursuant to the Company's Stock  Compensation  Plan for Non-Employee  Directors,
each  outside  director  may elect to have all or a portion of his  compensation
paid by the Company by means of the  issuance of the  Company's  Common Stock in
lieu of cash. Additionally, each director is reimbursed for out-of-pocket travel
expenses  incurred  to  attend  a  board  meeting  and  may  receive  reasonable
compensation  for chairing any committee of the board.  Outside  directors  also
receive,  upon election or re-election  as a director,  a grant of stock options
under  the  Company's  1984  Stock  Option  Plan  covering  2,000  shares of the
Company's  Common Stock,  at an exercise price equal to the fair market value on
the date of grant.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. La Valle, O'Donnell and Vanderwoude comprise the Compensation Committee.
Messrs.  Feil, North and Sapp comprise the Stock Option  Committee.  Messrs.  La
Valle,  Lenagh and  Vanderwoude  comprise  the Audit  Committee.  Mr. Feil is an
officer  and  employee of the  Company,  but is not  eligible  to receive  stock
options while serving on the stock option committee.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Set forth below is  information  concerning  the stock  ownership of all persons
known by the Company to own beneficially more than 5% of the Company's shares of
Common Stock, each director of the Company,  each executive officer named in the
executive  compensation  table, and all directors and executive  officers of the
Company as a group, as of December 31, 1996.
<TABLE>
<CAPTION>
                                                                          Number of Shares                 Percentage of
Name                                                                     Beneficially Owned                   Class
----                                                                     ------------------                   -----
<S>                                                                        <C>                                <C>
Thomas E. Feil                                                             1,461,472 (2)(4)                   26.8%                 
565 Taxter Road, Elmsford, NY  10523

Thomas Hughes                                                                 29,900 (4)                        *                   
565 Taxter Road, Elmsford, NY  10523

Mark R. Hahn                                                                  29,549 (4)                        *                   
565 Taxter Road, Elmsford, NY 10523

Luke P. La Valle, Jr.                                                         18,000 (1)(4)                     *                   
50 Broad Street, Suite 1609, New York, NY  10004

Thomas H. Lenagh                                                              11,000 (1)(4)                     *                   
6 Greenwich Office Park, Greenwich, CT 06831

Brian S. North                                                               101,000 (1)(3)(4)                 1.9%                 
1800 One Liberty Place, Philadelphia, PA  19103

Joseph M. O'Donnell                                                           18,000 (1)(4)                     *                   
7900 Glades Road, Suite 500, Boca Raton, FL 33434

A. Eugene Sapp, Jr.                                                            4,000 (1)(4)                     *                   
2101 West Clinton Ave., Huntsville, AL  35807

J. Stephen Vanderwoude                                                         6,000 (1)(4)                     *                   
2316 Young Road, Southern Pines, NC  28388

All directors and  executive officers as a group  (10 persons)             1,678,921 (4)                      30.6%   
-----------------------------------------------------------------
* - less than 1%
</TABLE>
(1)  Excludes  options granted upon his election to serve as an outside director
     at the last  annual  meeting of  shareholders,  covering  2,000  additional
     shares, exercisable at and after the 1997 annual meeting of shareholders.

(2)  Excludes  80,000  shares  held  in an  irrevocable  trust  for  Mr.  Feil's
     daughter, over which Mr. Feil holds no voting or investment power.
<PAGE>
(3)  Includes 80,000 shares held in an irrevocable  trust for which Mr. North is
     a trustee.  Mr. North has no economic  interest in the trust.  However,  he
     holds investment and voting authority over such shares.

(4)  Includes  shares that may be acquired upon  exercise of options,  which are
     currently  exercisable or are exercisable  within 60 days, as follows:  Mr.
     Feil, 25,000 shares;  Mr. Hughes,  28,900 shares;  Mr. Hahn, 19,667 shares;
     Mr. La Valle,  8,000 shares; Mr. Lenagh,  6,000 shares;  Mr. North,  21,000
     shares;  Mr.  O'Donnell,   18,000  shares;  Mr.  Sapp,  4,000  shares;  Mr.
     Vanderwoude,  4,000 shares;  and all directors and executive  officers as a
     group, 134,567 shares.


Item 13.     Certain Relationships and Related Transactions

On January 10,  1997,  Mr.  Thomas E. Feil,  the  Company's  Chairman  and Chief
Executive  Officer,  made a loan  to the  Company  in the  principal  amount  of
$200,000.  The loan to the Company is payable upon demand,  bears interest at an
annual  rate of nine  percent  and is  secured  by a  security  interest  in the
Company's accounts receivable.
<PAGE>
                                     Part IV

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

                  (a)      1.  Financial Statements:

                           Description                                          
                           -----------                                          

     Independent Auditors' Report                                               
     Consolidated Balance Sheets as of October 31, 1996 and 1995                
     Consolidated  Statements of Operations  for the Years Ended October        
       31, 1996, 1995 and 1994
     Consolidated  Statements  of  Shareholders'  Equity  for the  Years        
      Ended October 31, 1996, 1995 and 1994
     Consolidated  Statements  of Cash Flows for the Years Ended October        
      31, 1996, 1995 and 1994
     Notes to Consolidated Financial Statements                                 



                           2.  Financial Statement Schedule:

VIII Valuation and Qualifying  Accounts S-1 All other schedules not listed above
have been omitted  because the  information  has been otherwise  supplied in the
financial  statements  or the notes thereto or they are not  applicable,  or the
amounts are insignificant or immaterial.

                  (b)      Reports on Form 8-K:

                           None

                  (c)      Exhibits:

3.1                Restated Certificate of Incorporation. (5)
3.2                Amended By-Laws. (1)
10.1               Lease  dated  April 22, 1988  between  registrant  and URBCO,
                   Inc. for premises at 565 Taxter Road, Elmsford, New York. (2)
10.2               Amended and Restated  1982  Incentive  Stock Option Plan,  as
                   amended. (10)
10.3               1984 Stock  Option  Plan  adopted by  Registrant  on June 27,
                   1984, as amended. (7)
10.4               1986 Employee  Stock  Purchase Plan, as adopted by Registrant
                   in December 1985, as amended. (7)
10.5               Rights  Agreement,  dated as of February 20, 1989 between the
                   Company and Registrar & Transfer Company, as rights agent.(4)
10.6               Letter of  Registrant  to Thomas E.  Feil  dated  August  29,
                   1989.(1)
10.7               Adoption  of  Non-Standardized   Retirement  Plan  and  Trust
                   (401-K) dated January 1, 1989, as amended. (5)
10.8               Amendment  dated  October 14, 1991 to a lease dated April 22,
                   1988 between the Company and URBCO,  Inc. for premises at 565
                   Taxter Road, Elmsford, New York. (7)
10.9               Second  Amendment  dated  February  20, 1992 to a lease dated
                   April 22,  1988  between  the  Company  and URBCO,  Inc.  for
                   premises at 565 Taxter Road, Elmsford, New York.(7)
10.10              Third  Amendment  dated May 28,  1993 to a lease  dated 
                   April 22, 1988 between the Company and URBCO,  Inc. for
                   premises at 565 Taxter Road, Elmsford, New York. (6)
<PAGE>
10.11              Fourth  Amendment  dated June 8, 1994 to a lease  dated
                   April  22, 1988 between the Company and URBCO,  Inc. for
                   premises at 565 Taxter Road, Elmsford, New York. (6)
10.12              Agreement   dated  July  1,  1992  between  the  Company  and
                   California Institute of Technology. (9)
10.13              Share Acquisition  Agreement dated July 28, 1994, relating to
                   TR  Financial  Communications  plc,  together  with  Deed  of
                   Covenant  of the same date  between  the  Company and Mercury
                   Communications Limited. (8)
10.14              Stock Compensation Plan for Non-Employee Directors.(10)
16                 Letter regarding change in certifying accountant (3)
21                 Subsidiaries
23.1               Consent of Deloitte & Touche  LLP

                              Footnotes to Exhibits 

   (1)     Filed as an exhibit to the Company's  Annual Report on Form 10-K for
           the  year  ended  October  31,  1989,  and  incorporated  herein  by
           reference.
       
   (2)     Filed as an exhibit to the Company's  Annual Report on Form 10-K for
           the  year  ended  October  31,  1988,  and  incorporated  herein  by
           reference.

   (3)     Filed as an  exhibit  to the  Company's  Current  Report on Form 8-K
           filed March 18, 1994, and incorporated herein by reference.
       
   (4)     Filed as an exhibit to the Company's  registration statement on Form
           8-A filed February 22, 1989, and incorporated herein by reference.
       
   (5)     Filed as an exhibit to the Company's  Annual Report on Form 10-K for
           the  year  ended  October  31,  1990,  and  incorporated  herein  by
           reference.
  
   (6)     Filed as an exhibit to the Company's  annual Report on Form 10-K for
           the period  ended  October  31,  1994,  and  incorporated  herein by
           reference.
   
   (7)     Filed as an exhibit to the Company's  Annual Report on Form 10-K for
           the  year  ended  October  31,  1992,  and  incorporated  herein  by
           reference.
       
   (8)     Filed as an  exhibit  to the  Company's  Current  Report on Form 8-K
           filed August 12, 1994, and incorporated herein by reference.
       
   (9)     Filed as an exhibit to the Company's  Quarterly  Report on Form 10-Q
           for the period ended January 31, 1994,  and  incorporated  herein by
           reference.
       
  (10)     Filed as an exhibit to the Company's  registration statement on Form
           S-8 filed November 29, 1996, and incorporated herein by reference.
   
  (11)     Filed as an exhibit to the Company's  registration statement on Form
           S-8 filed November 29, 1996, and incorporated herein by reference.
<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized

                                     V BAND CORPORATION

Dated:  January 27, 1997       By:/s/Mark R. Hahn
                                     ---------------
                                     Mark R. Hahn, Chief Financial Officer

                                    (Principal Financial and Accounting Officer)

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears below
constitutes  and  appoints  each of Thomas E. Feil and Mark R. Hahn his true and
lawful   attorney-in-fact  and  agent,  with  full  power  of  substitution  and
resubstitution  for  him  and in his  name,  place  and  stead,  in any  and all
capacities,  to sign any or all  amendments  to this Annual Report on Form 10-K,
and to file  the  same,  with all  exhibits  thereto,  and  other  documents  in
connection therewith, with the Securities and Exchange Commission, granting unto
each of said  attorneys-in-fact  and agents full power and  authority  to do and
perform each and every act and thing  requisite  and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in   person,   hereby   ratifying   and   confirming   all  that  each  of  said
attorneys-in-fact and agents, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
<PAGE>
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 in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature                                  Title                                    Date
---------                                  -----                                    ----
<S>                                   <C>                                        <C>
/s/ Thomas E. Feil                    Chairman, Chief Executive Officer and      January 27, 1997
------------------                    Director (Principal Executive Officer)
    Thomas E. Feil


/s/ Thomas Hughes                     Chief Operating Officer                    January 27, 1997
-----------------
    Thomas Hughes
  

/s/ Mark R. Hahn                      Chief Financial Officer (Principal         January 27, 1997
----------------                      Financial and Accounting Officer)
    Mark R. Hahn


/s/ Luke P. La Valle, Jr.             Director                                   January 27, 1997
-------------------------
    Luke P. La Valle, Jr.


/s/ Thomas H. Lenagh                  Director                                   January 27, 1997
--------------------
    Thomas H. Lenagh
  

/s/ Brian S. North                    Director                                   January 27, 1997
------------------
    Brian S. North
  

/s/ Joseph M. O'Donnell               Director                                   January 27, 1997
-----------------------
    Joseph M. O'Donnell


/s/ A. Eugene Sapp, Jr.               Director                                   January 27, 1997
-----------------------
    A. Eugene Sapp, Jr.
 

/s/ J. Stephen Vanderwoude            Director                                   January 27, 1997
--------------------------
    J. Stephen Vanderwoude
 
</TABLE>
<PAGE>
                          INDEPENDENT AUDITORS' REPORT 





Board of Directors and Stockholders
V Band Corporation

We  have  audited  the  accompanying  consolidated  balance  sheets  of  V  Band
Corporation  and  subsidiaries  as of October 31, 1996 and 1995, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the three years in the period ended  October 31,  1996.  Our audits also
included the financial statement schedule listed at Item 14(a)2. These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and financial statement schedule 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,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of V Band Corporation and subsidiaries
as of October 31, 1996 and 1995,  and the results of their  operations and their
cash flows for each of the three years in the period  ended  October 31, 1996 in
conformity with generally accepted accounting principles.  Also, in our opinion,
such  financial  statement  schedule,  when  considered in relation to the basic
consolidated  financial  statements  taken as a whole,  presents  fairly  in all
material respects the information set forth therein.


As discussed in Note 7 to the  consolidated  financial  statements,  the Company
changed its method for accounting for income taxes during the year ended October
31, 1994.



DELOITTE & TOUCHE  LLP

Stamford, Connecticut
December 19, 1996
<PAGE>
<TABLE>
<CAPTION>
                         V BAND CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                              OCTOBER 31, 1996 AND 1995
                            (in 000's, except share data)
                                                                             
                                                                             
                                                                             
                                                                             
                                                                             
         ASSETS                                                              
<S>                                                           <C>           <C>                           
Current Assets:
Cash and cash equivalents ...............................     $  2,258      $  2,740
Marketable securities, at cost
    (approximates market) ...............................         --             187
Accounts receivable, less allowance for
    doubtful accounts of $381 in 1996 and $456 in 1995 ..        6,737         4,783
Inventories, net ........................................        7,798         7,596
Deferred tax asset ......................................          700           700
Prepaid expenses and other current assets ...............          680           430
                                                              --------      --------
                        Total current assets ............       18,173        16,436
                                                              --------      --------
Fixed Assets:
Furniture, fixtures, equipment and leasehold improvements        9,701         9,392
Less: Accumulated depreciation and amortization .........       (8,591)       (7,821)
                                                              --------      --------
                        Total fixed assets ..............        1,110         1,571
                                                              --------      --------

Other Assets ............................................        2,759         3,205
                                                              --------      --------

    TOTAL ASSETS ........................................     $ 22,042      $ 21,212
                                                              ========      ========


    LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ........................................     $  3,196      $  1,538
Accrued wages ...........................................          973         1,097
Customer deposits .......................................        1,773         1,846
Other accrued expenses ..................................        1,612         2,333
                                                              --------      --------

                        Total  current liabilities ......        7,554         6,814
                                                              --------      --------
<PAGE> 
<CAPTION>                                                                    
                                V BAND CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED BALANCE SHEETS
                                     OCTOBER 31, 1996 AND 1995
                                   (in 000's, except share data)
                                            (continued)
                                                                             
                                                                             
                                                                             
                                                                             
                                                                             
<S>                                                           <C>         <C>                             
     Shareholders' Equity:                                                   
     Common stock, $.01 par value; authorized 
         20,000,000 shares;  issued 7,042,492  shares.....        70            70     
     Capital in excess of par value ......................    19,776        19,776     
     Retained earnings....................................     6,242         6,215     
     Cumulative translation adjustment....................       168           105     
                                                              ------       -------                      
                                                              26,256        26,166 
     Less Treasury Stock, at cost; 1,719,322 shares.......   (11,768)      (11,768)   
                                                             -------      --------     
                             Total shareholders' equity...    14,488        14,398      
                                                             -------      --------     
                                                                               
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......  $ 22,042     $  21,212    
                                                            =========     =========    
                                                                             
                                                                             
                                                                             
                 See notes to consolidated financial statements              
</TABLE>   
<PAGE>
<TABLE>                                                                       
<CAPTION>   
                             V BAND CORPORATION AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                     FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
                              (in 000's except per share data)
<S>                                                    <C>           <C>           <C>        
Sales
     Equipment ...................................     $ 27,703      $ 23,591      $ 26,944
     Service .....................................        5,183         5,760         4,134
                                                       --------      --------      --------
        Total sales ..............................       32,886        29,351        31,078
                                                       --------      --------      --------
Cost of  Sales
     Equipment ...................................       16,404        20,214        14,925
     Service .....................................        3,224         3,514         2,959
                                                       --------      --------      --------
        Total cost of sales ......................       19,628        23,728        17,884
                                                       --------      --------      --------

        Gross profit .............................       13,258         5,623        13,194
                                                       --------      --------      --------
Operating Expenses
     Selling, general and administrative .........       10,189        13,076         9,539
     Research and development ....................        3,118         3,935         3,308
                                                       --------      --------      --------
        Total operating expenses .................       13,307        17,011        12,847
                                                       --------      --------      --------

        Operating income (loss) ..................          (49)      (11,388)          347

Net Investment Income ............................           54            73           427
Other Income (Expense) ...........................           27            22             3
                                                       --------      --------      --------
       Income (loss) before cumulative
           effect of accounting change ...........           32       (11,293)          777

Provision for Income Taxes .......................            5           301           150

       Income (loss) before cumulative
           effect of accounting change ...........         --            --           1,242
                                                       --------      --------      --------
       Net income (loss) .........................     $     27      $(11,594)     $  1,869
                                                       ========      ========      ========

Per share data
     Income (loss) before cumulative
          effect of accounting change ............     $    .01      $  (2.18)     $    .12
     Cumulative effect of accounting change ......         --            --             .23
                                                       --------      --------      --------
     Net income (loss) ...........................         $ 01      $  (2.18)     $    .35
                                                       ========      ========      ========

Weighted average number of shares of common
    stock and common stock equivalents ...........        5,323         5,322         5,311
                                                       ========      ========      ========

                      See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               V BAND CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                       FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
                                            (in 000's)

                                                Capital                  Cumulative
                                  Common     Excess of Par  Retained    Translation     Treasury
                                  Stock         Value       Earnings     Adjustment      Stock 
                                  -----         -----       --------     ----------      ----- 
<S>                              <C>          <C>          <C>           <C>          <C>
Balance, November 1, 1993 ..     $     70     $ 19,636     $ 15,940      $     85     $(11,768)

Proceeds from employee stock
  purchase plan ............         --             25         --            --           --
Stock options exercised ....         --             95         --            --           --
Net income .................         --           --          1,869          --           --
Translation adjustment .....         --           --           --              87         --
                                 --------     --------     --------      --------     --------
Balance, October 31, 1994 ..           70       19,756       17,809           172      (11,768)

Proceeds from employee stock
  purchase plan ............         --             20         --            --           --
Net loss ...................         --           --        (11,594)         --           --
Translation adjustment .....         --           --           --             (67)        --
                                 --------     --------     --------      --------     --------
Balance, October 31, 1995 ..           70       19,776        6,215           105      (11,768)

Net income .................         --           --             27          --           --
Translation adjustment .....         --           --           --              63         --
                                 --------     --------     --------      --------     --------
Balance, October 31, 1996 ..     $     70     $ 19,776     $  6,242      $    168     $(11,768)
                                 ========     ========     ========      ========     ========


                         See notes to consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                   V BAND CORPORATIONS AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                          FOR THE YEARS ENDED OCTOBER 31, 1996 AND 1995 AND 1994
                                                (in 000's)

<S>                                                                 <C>           <C>           <C>
Cash Flows from Operating Activities
     Net income (loss) ........................................     $     27      $(11,594)     $  1,869
     Adjustments to reconcile net income (loss) to
     net cash used in operating activities:
         Cumulative effect of accounting change ...............                                   (1,242)
         Depreciation .........................................          742           731           836
         Amortization and write off of other assets ...........          458         1,967           707
         (Benefit) provision for doubtful accounts ............          (53)          237           133
         Provision for inventory reserves .....................                        206           456
         Deferred income taxes ................................                        551            (9)
         Gain on disposal of  fixed assets ....................                       (166)
         Changes in assets and liabilities (net of business
                   acquisitions):
              Accounts receivable .............................       (1,901)        2,649        (2,394)
              Inventories .....................................         (202)        3,971        (2,512)
              Prepaid expenses and other current assets .......         (250)           75           333
              Other assets ....................................           (9)          449          (952)
              Accounts payable and other current liabilities ..          740        (3,174)        1,114
              Foreign currency translation adjustment .........           63           967)           87
                                                                    --------      --------      --------

                   Net cash used in operating activities ......         (385)       (4,165)       (1,574)
                                                                    --------      --------      --------
Cash Flows from Investing Activities
     Purchases of marketable securities .......................                     (3,530)       (5,642)
     Sales of marketable securities ...........................          187         7,946        12,150
     Capital  expenditures ....................................         (284)         (910)         (570)
     Proceeds from the sale of fixed assets ...................                        257
     Payments for business acquisitions .......................                                   (4,365)
                                                                    --------      --------      --------
                   Net cash provided by investing
                   activities .................................          (97)        3,763         1,573
                                                                    --------      --------      --------
Cash Flows from Financing Activities
     Proceeds from issuance of common stock ..................                          20           120
                                                                    --------      --------      --------
     Net (decrease) increase in cash and cash equivalents ....          (482)         (382)          119
     Cash and Cash Equivalents, at beginnning of year ........         2,740         3,122         3,003
                                                                    --------      --------      --------
     Cash and Cash Equivalents, at end of year ...............       $ 2,258      $  2,740       $ 3,122
                                                                     =======      ========       ======= 
Supplementary Disclosures
     Income taxes paid .......................................       $    65      $    215       $   146
                                                                     =======      ========       =======


                                                                 
                              See notes to consolidated financial statements.
</TABLE>
<PAGE>
                       V BAND CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:  The Company

V Band Corporation and its wholly-owned  subsidiaries  (the "Company")  designs,
manufactures,   sells,  installs  and  services  specialized  telephone  systems
consisting of sophisticated  telephone  consoles and supporting common equipment
for switching and access to telephone network facilities. These systems are sold
primarily  to  financial  services  firms for use by traders in the  trading and
dealing of stocks,  bonds,  commodities  and other  financial  instruments.  The
Company  also  designs,   manufactures  and  distributes  a  family  of  digital
communications  multiplexers  specifically  designed for the "mission  critical"
communications of the electric power industry. Other markets include command and
control  applications  for  "right-of-way"   companies  such  as  utilities  and
transportation companies, and emergency service organizations.

Note 2:  Significant accounting policies

Consolidation

The  accompanying  consolidated  financial  statements  include  the accounts of
V Band Corporation and its subsidiaries.  All significant  intercompany balances
and transactions have been eliminated.

Reclassifications

Certain  prior year amounts have been  reclassified  to conform with the current
year's presentation.

Inventories

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

Furniture, fixtures, equipment and leasehold improvements

Furniture,  fixtures,  equipment and leasehold improvements are carried at cost.
Depreciation  is computed using the  straight-line  method over 3-10 years,  the
estimated useful lives of the assets.  Leasehold improvements are amortized over
the lesser of the term of the related lease or the estimated useful lives of the
improvements.

Revenue recognition

Equipment   revenue,   which  includes   equipment  and  labor  for  new  system
installations  and modifications to existing systems at customer  locations,  is
recognized as the product is shipped. For long-term contracts, equipment revenue
is recognized under the percentage-of-completion  method. Service revenue, which
includes  maintenance  contract  revenue and  repairs,  is  recognized  when the
service has been completed.

Investment income

The Company's investment income is substantially comprised of interest earned on
tax-exempt  municipal  bonds  and  United  States  Treasury  and  United  States
Government  Agency  securities.  The Company  primarily  invests in medium-grade
(BBB) to high-grade (AAA) instruments with maturities  ranging from 90 days to 3
years.
<PAGE>
Income taxes

Deferred  income taxes are provided for the  temporary  differences  between the
financial  reporting basis and the income tax basis of the Company's  assets and
liabilities using presently enacted tax rates.

Income (loss) per share

Income (loss) per share has been computed  using the weighted  average number of
shares of common stock and common stock equivalents (stock options) outstanding,
unless anti-dilutive, during each year.

Cash and cash equivalents

The Company  considers  all highly  liquid debt  instruments  purchased  with an
original maturity of three months or less to be cash equivalents.

Foreign currency translation

For  translation of the financial  statements of its United Kingdom  operations,
the Company has determined  that the local currency is the functional  currency.
Assets and liabilities of foreign operations are translated at year end exchange
rates and income statement accounts are translated at average exchange rates for
the  year.  The  resulting  translation  adjustments  are made  directly  to the
Cumulative  Translation  Adjustment component of Shareholders'  Equity.  Foreign
currency  transactions  are  recorded at the  exchange  rate  prevailing  at the
transaction date.

Management estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues and  expenses  during the  reported  periods.
Actual results could differ from those estimates.

Note 3:  Inventories

Inventories are as follows, at October 31:
<TABLE>
<CAPTION>
                                                    1996                1995
                                                    ----                ----
<S>                                            <C>                  <C>
Finished goods .......................         $ 4,757,000          $ 4,154,000
Parts and components .................           5,144,000            5,586,000
                                               -----------          -----------
                                                 9,901,000            9,740,000
Less:  Inventory reserves ............          (2,103,000)          (2,144,000)
                                               -----------          -----------
                                               $ 7,798,000          $ 7,596,000
                                               ===========          ===========
</TABLE>
<PAGE>
Note 4: Other assets

The Company capitalized  software costs of $1,106,000 which were being amortized
on a  straight-line  basis  over a five-year  period.  Such  amounts  were fully
amortized as of October 31, 1996.

In July 1994,  the Company  acquired all of the issued share  capital of Mercury
Dealing Systems ("MDS"), a subsidiary of Mercury Communications Limited. MDS had
been a distributor  of the Company's  products in the United Kingdom since 1987.
The  aggregate  purchase  price for the  share  capital  of MDS was  $4,634,000,
inclusive of liabilities  assumed.  The  acquisition was accounted for under the
purchase method, whereby the excess of the purchase price over the fair value of
the net assets acquired was  $3,389,000,  and is being amortized over a ten-year
period.

During the year ended October 31, 1995, the Company  wrote off the remaining net
book value of certain  intangible  assets no longer being utilized in the amount
of $867,000.

The following schedule reflects other assets at October 31:
<TABLE>
<CAPTION>
                                                    1996                1995
                                                    ----                ----
<S>                                             <C>                 <C>
MDS acquisition goodwill ...............        $ 3,389,000         $ 3,389,000
Software capitalization ................               --             1,106,000
Other ..................................            399,000             665,000
                                                -----------         -----------
                                                  3,788,000           5,160,000
Less:  Accumulated amortization ........         (1,029,000)         (1,955,000)
                                                -----------         -----------
                                                $ 2,759,000         $ 3,205,000
                                                ===========         ===========
</TABLE>
If the MDS acquisition had occurred on November 1, 1993,  management  estimates,
on an unaudited pro forma consolidated basis, the following:
<TABLE>
<CAPTION>

                                                                     1994
                                                                     ----
<S>                                                              <C>
Sales ...................................................        $37,200,000
Income before cumulative effect of
    accounting change ...................................        $   300,000
Net income ..............................................        $ 1,500,000
Per share data
Income before cumulative effect of
    accounting change ...................................        $       .06
Net income ..............................................        $       .28
</TABLE>

The Company  periodically  evaluates  the  recoverability  of goodwill and other
intangible assets by assessing whether the unamortized  intangible assets can be
recovered through cash flows.
<PAGE>
Note 5:  Commitments and contingencies

(a) Litigation

In October 1994,  the Company  commenced an action against  Technical  Telephone
Systems,  Inc.  ("TTSI") in New York State Supreme Court,  New York County,  for
minimum  payments  due  to the  Company  in  the  amount  of  $650,000  under  a
distribution  agreement  between the Company and TTSI.  In November  1994,  TTSI
filed a counterclaim  against the Company denying all allegations  stated in the
Company's  complaint and alleging a breach of good faith and fair dealing by the
Company,  claiming damages of $1 million. The Company believes its claim against
TTSI is meritorious and believes TTSI's counterclaim against the Company,  which
the  Company  will  vigorously  defend,  is  without  merit  and will not have a
material impact on the consolidated financial condition of the Company.

(b) Operating leases

The Company leases office and  production  space under leases  expiring  through
2005.  Certain of these lease  agreements  provide the option for  renewals  and
include escalations based on increases in certain costs. Based upon an amendment
to the Company's office lease agreement,  executed in 1994, the Company reversed
a lease cancellation fee in the amount of $365,000 in 1994.

Future minimum annual rental payments under these leases are as follows:

             1997                                 $919,000
             1998                                  858,000
             1999                                  569,000
             2000                                  327,000
             2001                                  185,000
          Thereafter                               227,000

Rent expense for the fiscal  years ended 1996,  1995,  and 1994 was  $1,007,000,
$1,152,000 and $1,011,000, respectively.

(c) Employment contracts

The Company has  employment  agreements  with certain  officers that provide for
compensation  and other  benefits  upon  change of control of the  Company.  The
aggregate  compensation  to be paid  under  existing  employment  agreements  is
$255,000  as of October 31,  1996,  and such  future  compensation  has not been
reflected  in  the  accompanying   consolidated   financial  statements.   These
agreements have an expiration date of January 1997.

Note 6:  Stock options

The Company has stock option plans that provide for the granting of options,  at
fair market value,  to certain key  employees  and  directors to acquire  common
stock of the Company.
<PAGE>
The following is a summary of stock option  transactions for the two years ended
October 31, 1996:
<TABLE>
<CAPTION>

                                              Shares           Exercise Prices
                                              ------           ---------------
<S>                                          <C>            <C>
Shares under option - November 1, 1994        752,028       $2.50   to     $6.88
    Options granted                            77,500        2.00   to      5.00
    Options canceled                         (149,333)       2.13   to      6.88
                                             -------- 
Shares under option - October 31, 1995        680,195        2.00   to      6.88
                                             -------- 
    Options granted                           358,700        1.88   to      2.50
    Options canceled                         (169,637)       1.88   to      6.88
                                             --------
Shares under option - October 31, 1996        869,258
                                              =======

Options exercisable at:
    October 31, 1995                          546,894       $2.50   to     $6.88
                                              ======= 
    October 31, 1996                          634,393        1.88   to      5.00
                                              ======= 

Options available for grant at:
    October 31, 1995                          245,526
                                              =======
    October 31, 1996                          356,463
                                              =======

</TABLE>
In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  (SFAS) No. 123,  "Accounting  for  Stock-Based
Compensation,"  which will be effective  for the Company  beginning  November 1,
1996.  SFAS No. 123 requires  expanded  disclosure of  stock-based  compensation
arrangements  with employees and encourages (but does not require)  compensation
cost to be measured  based on the fair value of the equity  instrument  awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes  compensation  cost  based  on the  intrinsic  value  of  the  equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation  awards to employees and will disclose the required pro
forma effect on net income and earnings per share.

Note 7:  Income taxes

Effective   November  1,  1993,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 109 ("SFAS 109"),  "Accounting for Income Taxes." Under
SFAS 109,  deferred income taxes reflect the tax consequences on future years of
differences  between the tax basis of assets and liabilities and their financial
reporting  amounts.  The  cumulative  effect of the  adoption of SFAS 109, as of
November 1, 1993, was to increase net income by  $1,242,000,  net of a valuation
allowance of $150,000. The valuation allowance reduces the deferred tax asset to
the amount that management believes will ultimately be realized.  Realization of
the deferred tax asset is dependent upon sufficient future taxable income during
the period  that  temporary  differences  and  carryfowards  are  expected to be
available to reduce taxable income.
<PAGE>
As  of  October  31,  1996,   the  Company  had  available  net  operating  loss
carryfowards for tax return purposes of approximately  $8,900,000 which begin to
expire in 2009.  During 1995, the Company reversed  $250,000 of prior years' tax
accruals which were no longer required.

The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>

                                     1996              1995              1994
                                     ----              ----              ----
<S>                               <C>               <C>               <C>
Current
    Federal ..............        $                 $(250,000)        $ 101,000
    State and local ......            5,000                              58,000
                                  ---------         ---------         ---------
                                      5,000          (250,000)          159,000
                                  ---------         ---------         ---------
Deferred
    Federal ..............                            520,000            (1,000)
    State and local ......                             31,000            (8,000)
                                  ---------         ---------         ---------
                                                      551,000            (9,000)
                                  ---------         ---------         ---------
                                  $   5,000         $ 301,000         $ 150,000
                                  =========         =========         =========
</TABLE>

The  difference  between the recorded  income tax  provision  (benefit)  and the
income taxes computed by applying the statutory  Federal income tax rate was the
following:
<TABLE>
<CAPTION>

                                                    1996            1995              1994
                                                    ----            ----              ----
<S>                                            <C>              <C>              <C>
U.S. statutory rate applied to pretax
    income (loss) ........................     $    11,000      $(3,840,000)     $   264,000
Dividends received deduction and
    tax-exempt interest ..................                          (15,000)         (80,000)
Goodwill amortization ....................         127,000          127,000
State and local taxes, net of federal tax
    benefit ..............................           3,000         (641,000)          33,000
(Decrease) increase in valuation allowance        (208,000)       4,876,000
                                                             
Reversal of current liability for taxes ..                         (250,000)         (85,000)
Other, net ...............................          72,000           44,000           18,000
                                               -----------      -----------      -----------
                                               $     5,000      $   301,000      $   150,000
                                               ===========      ===========      ===========
</TABLE>
<PAGE>
The  components  of the deferred  income tax  provision  (benefit) for the years
ended October 31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>

                                                         1996           1995
                                                         ----           ----
<S>                                                <C>              <C>
Net operating loss carryfowards ..............     $                $(2,931,000)
Bad debt reserve .............................          26,000          (96,000)
Depreciation .................................         (50,000)         (51,000)
Amortization .................................         (65,000)          (7,000)
Inventory reserves ...........................          14,000         (117,000)
Accrued expenses .............................         295,000         (464,000)
Capitalization of software development costs .         (18,000)         (18,000)
State taxes ..................................           6,000         (641,000)
                                                   -----------      -----------
                                                       208,000       (4,325,000)
Less: Valuation allowance ....................        (208,000)       4,876,000
                                                   -----------      -----------
                                                   $      --        $   551,000
                                                   ===========      ===========

</TABLE>
The net deferred income tax asset at October 31, 1996 and 1995,  consists of the
following:
<TABLE>
<CAPTION>

Deferred tax liabilities                                    1996             1995
                                                            ----             ----
<S>                                                   <C>              <C>
Capitalization of software development costs ....     $   (48,000)     $   (66,000)

Deferred tax assets
Depreciation ....................................         318,000          268,000
Amortization ....................................         130,000           65,000
Inventory reserves ..............................         715,000          729,000
Accrued expenses ................................         321,000          616,000
Bad debt reserve ................................         177,000          203,000
State and local taxes, net of federal tax benefit         781,000          787,000
Net operating loss carry forwards ...............       3,027,000        3,027,000
Tax credits .....................................          97,000           97,000
                                                      -----------      -----------
                                                        5,518,000        5,726,000
Valuation allowance .............................      (4,818,000)      (5,026,000)
                                                      -----------      -----------
                                                      $   700,000      $   700,000
                                                      ===========      ===========
</TABLE>

Note 8:  Segment information

(a) Significant customers

Morgan Guaranty Trust Company of New York and affiliates  accounted for 10%, 14%
and 14% of the Company's sales in 1996, 1995 and 1994, respectively. During 1996
and 1995,  the Chicago Board of Trade and its general  contractor  accounted for
21% and 13%, respectively, of the Company's sales.
<PAGE>
(b) Foreign sales

In 1996, 1995 and 1994, foreign sales represent 29%, 36% and 28%,  respectively,
of consolidated sales and include the following geographical areas:
<TABLE>
<CAPTION>

                                       1996             1995             1994
                                       ----             ----             ----
<S>                                <C>              <C>              <C>
Pacific Rim .................      $ 1,900,000      $ 1,900,000      $ 3,300,000
Europe (including UK) .......        6,900,000        7,200,000        3,300,000
All others ..................          900,000        1,400,000        2,100,000
                                   -----------      -----------      -----------
                                   $ 9,700,000      $10,500,000      $ 8,700,000
                                   ===========      ===========      ===========
</TABLE>
Note 9:  Capital transactions

 (a) Stock rights plan

On February  20, 1989,  the Board of  Directors of the Company  adopted a common
share purchase  rights plan and declared a dividend  distribution  of one common
share purchase right (the "Right") on each of its common shares to  shareholders
of record on March 7, 1989.  Each Right will  entitle the  registered  holder to
purchase  from the  Company one  outstanding  common  share,  par value $.01 per
share,  at a  purchase  price of $45.00  per  share,  subject  to  anti-dilutive
adjustments (the "Purchase Price"). The Rights generally become exercisable if a
person or group  acquires,  or tenders for, 20% or more of the Company's  common
shares.  In such  event,  the holder of a Right will have the right to  receive,
upon  exercise  of the Right at the then  current  Purchase  Price,  a number of
common  shares with a total market value of two times the  Purchase  Price.  The
Rights will expire on February 19, 1999, unless they become  exercisable  before
then, but may be redeemed by the Company for $.01 per Right.

(b) Employee stock purchase plan

Under the Company's  Employees 1986 Stock  Purchase Plan (the "Purchase  Plan"),
all eligible  employees may authorize  payroll  deductions of up to 10% of their
base  salary to  purchase  shares of the  Company's  Common  Stock at 85% of the
market price.  There are no charges or credits to income in connection  with the
Purchase Plan. The Company may terminate the Purchase Plan at any time.

Note 10:  Fourth quarter results

During the fourth  quarter of 1995, the Company  recorded the following  expense
adjustments:
<TABLE>
<CAPTION>
<S>                                                  <C>
Inventory reserves and write-offs                    $ 2,300,000
Intangible asset write-off                               900,000
Inventory charges                                        300,000
Warranty reserves                                        300,000
Deferred tax asset valuation                             600,000
Severance and other                                      800,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
    
                                                                                            Schedule VIII

                                    V BAND CORPORATION AND SUBSIDIARIES
                                     VALUATION AND QUALIFYING ACCOUNTS
                            FOR THE YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994

Column A                 Column B           Column C - Additions              Column D           Column E
--------                 --------           --------------------              --------           --------
                                           (1)              (2)
                         Balance at     Charged to       Charged to                             Balance at
                        Beginning of     costs and         other                                  End of
Description                Period        expenses         accounts           Deductions           Period
-----------                ------        --------         --------           ----------           ------
<S>                     <C>            <C>             <C>                 <C>                  <C>
Allowance for
doubtful accounts

October 31, 1996 ..     $  456,000     $  (53,000)     $                   $     22,000 (a)     $  381,000
October 31, 1995 ..        263,000        237,000                                44,000 (a)        456,000
October 31, 1994 ..        243,000        133,000            20,000 (b)         133,000 (a)        263,000

Inventory reserve

October 31, 1996 ..     $2,144,000     $               $                   $     41,000 (c)     $2,103,000
October 31, 1995 ..      1,938,000        206,000                                                2,144,000
October 31, 1994 ..        830,000        456,000           652,000 (b)                          1,938,000

Warranty reserve

October 31, 1996 ..     $  415,000     $  289,000      $                   $    361,000 (d)     $  343,000
October 31, 1995 ..        189,000        607,000                               381,000 (d)        415,000
October 31, 1994 ..        300,000        202,000                               313,000 (d)        189,000

Reserve for Notes
Receivable

October 31, 1996 ..     $  110,000     $               $                   $                    $  110,000
October 31, 1995 ..        110,000                                                                 110,000
October 31, 1994 ..        110,000                                                                 110,000

Valuation allowance
for deferred income
tax asset

October 31, 1996 ..     $5,026,000     $               $                   $    208,000         $4,818,000
October 31, 1995 ..        150,000        551,000         4,325,000 (e)                          5,026,000
October 31, 1994 ..              0        150,000                                                  150,000


(a) Doubtful accounts written off, net of cash recovered.
(b) Reserve balances acquired in connection with the acquisition of Mercury
dealing Systems at July 28, 1994.
(c) Consumption of obsolete or slow moving inventory, which was reserved for in
the prior year.
(d) Warranty labor charges combined with actual cash payments.
(e) Additional valuation allowance appliable to deferred tax asset.
    
</TABLE>