SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-K

 [ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
 
                   For the fiscal year ended October 31, 1998
                                             ----------------

 [   ]  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.)

                  3 Westchester Plaza, 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 January  31,  1999 was
5,428,621 shares.

The  aggregate  market  value  of the  Common  Stock of the  registrant  held by
non-affiliates as of January 31, 1999 was $812,124.

* 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 January 31, 1999.

Documents incorporated by reference

None.
<PAGE>
                               V BAND CORPORATION
                             FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998


                                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 7A.      Quantitative and Qualitative Disclosures About Market Risk 

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  (together  with  its  subsidiaries,  the  "Company"),  was
incorporated in New York in 1977 and commenced  business  operations in 1980. It
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 primarily 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 is derived from the sale and servicing
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 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 and network operations.

Beginning in 1994, the Company 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 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 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  growth  in the  Asian  financial
marketplace.

During 1995,  the Company  executed an agreement with the Chicago Board of Trade
(CBOT) 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 (CBOT) exchange phone system employs
the same advanced  technology base used in the Company's Broad Band DN switching
architecture and Power Deck product line. The Company provided full installation
services,   including  project   management  and  cabling  for  the  9,000  line
communication system. The project was completed in January 1998.

In 1996, the Company  executed an agreement for a major expansion and relocation
of the Chicago Board of Trade's financial  trading floor.  This contract,  which
augmented the agreement  mentioned  above,  was valued in excess of $2.5 million
and was completed in 1997.

During  1997,  the  Company  completed  major  system  installations  in several
non-traditional,  emerging  financial centers including Oslo, Norway and Moscow.
In 1997, 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 600 custom-designed  exchange
floor telephones (with up to 8 handsets each) and various peripheral  equipment.
This transaction, valued at over $4.9 million, was completed in 1997.

In January 1998, the Company  established a plan to restructure  its operations.
The plan included  consolidation  of office space in New York and London and the
centralization  of the  administrative  functions of the Company's United States
service  operation  into  its New  York  operation.  In  addition,  the  Company
reassigned  several  marketing and  administrative  staff to field sales support
functions as a further effort to enhance revenues. As a result of this plan, the
Company  reduced the number of its employees  from the October 31, 1997 level of
186 to 110 as of October 31, 1998.

In July 1998,  the Company  restructured  the  operations of its United  Kingdom
subsidiary,  V Band PLC.  An  agreement  with  Siemens  Corporation  allowed the
Company to outsource V Band PLC's  service  dispatch  and spare parts  inventory
functions,  further  reducing  operating costs while  improving  overall service
levels and parts availability for V Band PLC's base of customers.  The number of
field service  personnel was held  constant.  For the fiscal years ended October
31,  1998 and  1997,  V Band PLC had sales of $5.3 and  $7.1,  respectively.  At
October 31, 1998, V Band PLC had 27 employees.
<PAGE>
In October 1998, the Company  signed a joint sales and marketing  agreement with
FORE Systems,  Inc., a leading supplier of high bandwidth multimedia  networking
solutions.  The  agreement  calls  for the two  firms  to work  together  on the
development  and  support  of  specific  vertical  markets  for  instant  access
voice/data  networks and ATM-based  solutions  that enable  multimedia  LANs. In
addition,  FORE Systems and V Band have agreed to work collectively in the areas
of  compatibility  testing,  customer  field trial,  demonstrations  and ongoing
technical support.

Also in October 1998, the Company  announced a strategic  partnership  agreement
with Bosch Telecom,  Europe's  fourth largest  telecommunications  manufacturer.
Through this agreement, V Band PLC has become the exclusive source for sales and
service of both Bosch's and V Band's  product line for financial  services firms
in the  United  Kingdom.  In  addition,  the two  companies  will  be  combining
technical  resources to begin  exploring  additional  joint solutions for voice,
video and data as applied to the financial industry.  The Company anticipates to
receive  revenues from sales of Bosch  communications  systems and  accompanying
service contract agreements in the first quarter of fiscal year 1999.

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.  In 1997,  the Company  consolidated  the operations of its Licom
subsidiary into the operations of its core business in Elmsford, NY.

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  "BroadBand  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, the latest  generation  of its
distributed  digital  switching  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
<PAGE>
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 was installed  successfully at
the Chicago Board of Trade.  The eXchange Phone employs the  technology  base of
the  Power  Deck  product  line  and  provides  state-of-the-art  communications
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 member firms.

In 1995,  the Company  developed  the APL (Audio  Processing  Line) card,  which
increases the capacity of telephone  lines that can be handled by each BroadBand
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
increase the capacity and use of card space in 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  advanced  intercom  features for its digital  trading  consoles and a
speakerphone for its Power Deck trading console.

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.

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
customer locations during 1996.

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 PassPort Network Management Platform is a sophisticated  UNIX-based suite of
tools that control and maintain large systems in a cost-effective  manner.  True
multi-tasking and simultaneous multi-user operations allow large system managers
to effectively  administer distributed trading systems across existing corporate
LANs and WANs.

The Company's F.A.S.T.  service enables service  technicians to troubleshoot and
perform moves,  adds and changes (MACs)  remotely  through phone lines,  thereby
increasing system performance and serviceability.

In 1996, a second generation  digital exchange floor phone product was developed
that  enables the use of up to eight  handsets per phone.  The Company  believes
that its  products are well  positioned  to compete for business in the exchange
floor marketplace.
<PAGE>
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  advanced  digital  signal  processing and
features that help 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.

In 1997,  the Company  redesigned  and enhanced the physical  attributes  of its
Power Deck and DXi voice trading  consoles to increase  their visual appeal with
end users. This redesign involved new faceplates, rounded streamlined edging and
an all-new  color  scheme.  In  addition,  the Company  developed a  full-duplex
version of the Clarity speaker system and added numerous  software  enhancements
to the feature set of its line of digital trading consoles.

In 1998, numerous software  enhancements were introduced for the Company's Broad
Band DN line of products.  In  addition,  the Company  finalized  and deployed a
full-duplex  "open  microphone"  version of the  Clarity  Speaker  System.  This
development  allows hands-free  monitoring of up to 24 lines  simultaneously and
offers various communications features and options.

Through  Licom's  product  ProMX,   the  Company   supplies  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 Elmsford,  New York,
continues to market, test, ship and support the ProMX product line.

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.

During the years ended October 31, 1998,  1997 and 1996,  the  Company's  annual
research and development  expenditures were $1.7 million,  $3.6 million and $3.1
million or 9%, 12% and 9% 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.
<PAGE>
The Company  currently  maintains  direct sales and service  centers in New York
City, Boston,  Chicago, San Francisco 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 approximately 25 authorized V Band distributors worldwide,
with new digital systems placed in emerging financial centers 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  (including
sales through its vendor,  AT&T Solutions)  represented 15%, 6% and 10% of sales
in 1998,  1997 and 1996,  respectively.  Sales to the Chicago Board of Trade and
its general  contractor  represented  8%, 10% and 21% of sales in 1998, 1997 and
1996,  respectively.  During  1998  and 1997  sales  to The New York  Mercantile
Exchange accounted for 1% and 16% of the Company's sales.

Equipment sales,  excluding  Licom's ProMX,  consisting of new systems installed
and modifications to existing systems, in all markets, were $10.9 million, $24.4
million and $25.3 million,  representing 58%, 79% and 77% of the Company's sales
in 1998, 1997 and 1996,  respectively.  Licom sales represented 9%, 3% and 7% of
the Company's sales in 1998, 1997 and 1996,  respectively.  Service sales, which
consists of  maintenance  contract  sales,  support,  service and  miscellaneous
repairs  accounted  for 33%, 18% and 16%, of sales  during 1998,  1997 and 1996,
respectively.  The  Company's  Licom  subsidiary  operates  from  the  Company's
Elmsford, NY facility.

The  Company's  foreign sales for 1998,  1997 and 1996 were $7.7 million,  $11.4
million  and  $9.7  million,  or  42%,  37%  and  29%,  respectively,  of  total
consolidated sales. For further information  regarding foreign sales, see Note 9
-- Notes to Consolidated Financial Statements.

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,  21%, 8% and 20% of the Company's  sales for 1998,  1997
and 1996, 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. The Elmsford facility houses the Company's
purchasing,  production control,  final assembly,  quality control,  testing and
repair operations.
<PAGE>
The Company  primarily  utilizes two 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 that
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.

While the Company believes that reduced equipment production volume has strained
its relationships with many of its subcontractors and suppliers, the Company did
not  experience any  significant  delays in the delivery of material from either
subcontractors  or  suppliers in 1998.  Due to the overall  decline in equipment
revenue in 1998 and management's  efforts to reduce the Company's  investment in
inventory,  the Company substantially reduced new purchases and also rescheduled
deliveries of goods previously ordered from its subcontractors and suppliers. To
achieve more favorable  economies of scale,  an increasing  number of components
are currently sourced from single suppliers.  There is, therefore,  no assurance
that,  in the  event of a  supply  shortage,  such  components  will be  readily
available in the quality and quantity  necessary to meet the Company's needs. In
1997,  the  Company  experienced  several  delays in the  delivery  of  product,
primarily  related to the  production  of Licom  products.  In  accordance  with
industry  practice,  the  Company  seeks to  maintain  inventory  in  quantities
sufficient  to ship  products  within  four to eight weeks of receipt of orders.
This requires the Company to maintain a significant investment in inventory.

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
Company's  products and the Company's  protection of its market position through
technological  development  has,  to  date,  been  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.
<PAGE>
Competition

The market for the Company's products is highly competitive and 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 and the United Kingdom
are IPC Information  Systems,  Inc. ("IPCI") and British Telecom NA. The Company
believes that these two markets, the United States and United Kingdom,  comprise
60%-65% of the global  market for the Company's  products.  The  competitors  in
markets  served  by  ProMX  products  are  primarily  RFL  Technologies,  Pulsar
Technologies, the Centronics Division of NORTEL and ASEA Brown Boveri.

The Company believes that its primary competitive advantages are the quality and
features of its products and its service and product support.  While the Company
is able to provide  these  advantages  to all  customers in the market places it
serves,  the  relatively  greater  size of the  Company's  competitors  has been
perceived to be a competitive disadvantage for the Company.

Backlog

As of October 31, 1998, 1997 and 1996, the Company's  backlog of purchase orders
that  management  believes to be firm was $4.3  million,  $3.8  million and $8.3
million,  respectively. The Company expects to deliver all products and services
from its October 31, 1998  backlog  during  fiscal 1999.  The Company  generally
delivers  large system  configured  products to  customers  within six to twelve
weeks of its receipt of firm orders.  Where the Company  makes  direct  end-user
installations,  smaller to mid-sized system  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.

Employees

As of October 31, 1998, the Company had 110 full-time employees, of whom 19 were
product  development  and  production  personnel,  69 were sales,  marketing and
service support personnel, and 22 were administrative  personnel.  This compares
to 186 at October 31, 1997 and 199 at October 31, 1996.  The decrease  from 1997
was primarily attributable to the Company's restructuring plan.

Many of the Company's  employees are highly skilled,  and the Company's  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.
<PAGE>
                          Private Securities Litigation
                        Reform Act Safe Harbor Statement

When used in this Annual  Report on Form 10-K and in other public  statements by
the Company and  Company  officers,  the words  "expect",  estimate",  project",
"intend"  and similar  expressions  are  intended to  identify  forward  looking
statements  regarding events and financial trends which may affect the Company's
future operating results and financial condition. Such statements are subject to
risks and  uncertainties  that could  cause the  Company's  actual  results  and
financial  condition to differ materially.  Such factors include,  among others:
(i) the intense  competition in the market places for the Company's products and
services;  (ii) the  sensitivity of the Company's  business to general  economic
conditions  and the economic  conditions of the  industries  which  purchase the
Company's  products  and  services;  (iii)  the  performance  of  the  Company's
suppliers and subcontractors;  (iv) changes in accounting principles,  policies,
or  guidelines;   and  (v)  other  economic,   competitive,   governmental   and
technological  factors affecting the Company's  operations,  markets,  products,
services, and prices.  Additional factors are described in this Annual Report on
Form 10-K and in the  Company's  other  reports  filed with the  Securities  and
Exchange Commission.  Readers are cautioned not to place undue reliance on these
forward  looking  statements,  which speak only as of the date made. The Company
undertakes no obligation to publicly release the result of any revision of these
forward  looking  statements to reflect events or  circumstances  after the date
they are made or to reflect the occurrence of unanticipated events.

Item 2.    Properties

The Company's executive offices,  engineering,  assembly, quality assurance, and
repair  business  operations are located at a 15,000 square foot leased facility
located at 3 Westchester Plaza, Elmsford, New York.

Leases for the Company's  domestic sales and service support  locations  include
approximately:  2,500  square feet  located in New York City;  1,300 square feet
located in Boston,  Massachusetts;  2,600 square feet in Chicago,  Illinois; and
983 square feet in San Francisco, California.

Licom's  headquarters  and  operations  were  relocated  in May of  1997  to the
corporate headquarters.

As part of a plan to reduce and  consolidate  its office space,  the Company has
subleased  its  former  8,900  square  foot sales  office in New York City,  has
relocated  its  executive  offices and  engineering  facilities to 3 Westchester
Plaza,  Elmsford,  New York,  and has signed a contract to assign the lease of a
former  20,000 square foot  production  facility  located 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.
<PAGE>
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
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 has been in  discussions
with TTSI and expects that a settlement of this  proceeding will be concluded in
the near  future  which  will not have a  material  impact  on the  consolidated
financial condition of the Company.

In June 1998, IEC  Electronics  Corp.  ("IEC  Electronics")  commenced an action
against the Company in New York State Supreme  Court,  Wayne  County,  asserting
claims for the  payment of  $299,914  for  products  delivered  to the  Company,
$186,385 for  inventory  having that value,  $12,404 for  materials and labor in
work in progress,  an unspecified amount for incidental expenses incurred in the
storage,  transportation  and sale of  inventory  and work in  progress,  and an
unspecified  amount for the costs and  disbursements of the action.  The Company
has  filed  an  answer  denying   liability  for  the  claims  and  asserting  a
counterclaim against IEC Electronics in an amount in excess of $500,000.

The  Company  is a party to other  legal  proceedings  commenced  against  it by
suppliers  and  former  employees.  The  Company  believes  that  none of  these
proceedings will have a material impact on the consolidated  financial condition
of the Company.

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, 1998.



<PAGE>
                                     Part II

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

The Company's  Common Stock is listed for quotation in the National  Association
of Securities  Dealers OTC Bulletin Board under the symbol "VBAN". The following
table shows the high and low closing bid prices for the  Company's  Common Stock
during  each of the fiscal  quarters  identified  below.  These bid prices  were
obtained from IDD Information  Services.  The quotations represent prices in the
over-the-counter  market between dealers in securities and do not include retail
markup, markdown, or commissions.

Fiscal 1998                                          High                Low
-----------                                          ----                ---

Fourth Quarter                                      $ .41              $ .13
Third Quarter                                       $ .38              $ .11
Second Quarter                                      $ .88              $ .25
First Quarter                                      $ 1.75              $ .63

Fiscal 1997                                          High                Low
-----------                                          ----                ---

Fourth Quarter                                     $ 2.44             $ 1.50
Third Quarter                                      $ 2.44             $ 1.38
Second Quarter                                     $ 2.00             $ 1.25
First Quarter                                      $ 2.50             $ 1.25

As of January 31, 1999,  there were  approximately  500 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.

Under the terms of the Credit  Agreement  dated as of May 28, 1997,  between the
Company and National Bank of Canada,  New York Branch, the Company is restricted
from  declaring  or paying  dividends if an event of default has occurred and is
continuing thereunder.



<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,

                                             1998          1997           1996          1995         1994
                                           --------      --------      --------     --------      --------
                                                         (in 000's, except per share data)
<S>                                        <C>           <C>           <C>          <C>           <C>     
Sales ................................     $ 18,573      $ 31,081      $ 32,886     $ 29,351      $ 31,078

Income (loss) before cumulative effect
    of accounting change .............       (4,369)       (8,512)           27      (11,594)          627

Cumulative effect of accounting change           --            --            --           --         1,242
                                           --------      --------      --------     --------      --------
Net income (loss) per basic and
diluted common share .................     $ (4,369)     $ (8,512)     $     27     $(11,594)     $  1,869
                                           ========      ========      ========     ========      ========

Per share data:
    Income (loss) before cumulative
        effect of accounting change ..     $   (.81)     $  (1.58)     $    .01     $  (2.18)     $    .12
    Cumulative effect of accounting
        change .......................           --            --            --           --           .23  
                                           --------      --------      --------     --------      --------
    Net income (loss) ................     $   (.81)     $  (1.58)     $    .01     $  (2.18)     $    .35
                                           ========      ========      ========     ========      ========

Weighted average number of basic and
    diluted common shares outstanding         5,423         5,372         5,323        5,322         5,311

Cash dividends per common share ......     $    .00      $    .00      $    .00     $    .00      $    .00

Working capital ......................     $  1,395      $  5,151      $ 10,619     $  9,622      $ 18,935

Total assets .........................     $  8,807      $ 14,552      $ 22,042     $ 21,212      $ 36,027

Shareholders' equity .................     $  1,920      $  6,097      $ 14,488     $ 14,398      $ 26,039

</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,
                                                  ------------------------------
                                                   1998       1997        1996
                                                  ------      -----      ------
<S>                                               <C>        <C>         <C>   
Sales
    Equipment ..............................        66.8 %     81.8%       84.2 %
    Service ................................        33.2       18.2        15.8
                                                  ------      -----      ------
Total sales ................................       100.0      100.0       100.0
Cost of sales
    Equipment(*) ...........................        73.8       59.2        69.0
    Service(*) .............................        67.8       76.7        62.2
                                                  ------      -----      ------
Total cost of sales ........................        68.6       74.3        59.7
                                                  ------      -----      ------
Gross Profit ...............................        31.4       25.7        40.3
Selling, general and administrative expenses        44.6       39.2        31.0
Research and development expenses ..........         9.2       11.5         9.5
                                                  ------      -----      ------
Operating loss .............................       (22.4)     (25.0)       (0.1)
                                                  ======      =====      ======
Net income (loss) ..........................       (23.5)%    (27.4)%       .01%
                                                  ======      =====      ======
</TABLE>

*  Presented as a percentage of the related sales categories.

Sales

Sales for the year ended October 31, 1998 were $18.6  million,  a $12.5 million,
or 40% decrease from sales for 1997. The decline in 1998 sales was primarily due
to a decrease in large exchange  floor  installations  and a general  decline in
demand for the Company's products.  Equipment sales, which include new equipment
installations  plus moves,  adds, and changes for customers'  existing  systems,
decreased by 51% from $25.4  million in 1997 to $12.4  million in 1998.  Of this
$13.0  million  decrease,  $7.0 million was  attributable  to a decline in large
exchange floor  installations and $6.0 million was attributable to a decrease in
the sale of the Company's other products.
<PAGE>
Sales in 1998 to non-financial  customers (i.e.,  communication  control centers
for utilities, and government agencies, etc.) accounted for $4.0 million, or 21%
of sales, a $1.5 million  increase from 1997  non-financial  customer sales. The
increase was  attributable to a $0.7 million  increase in sales of the Company's
Licom products and several  specific  sales of the Company's  product in diverse
applications in 1998.

Sales for the year ended October 31, 1997 were $31.1 million, a $1.8 million, or
5% decrease from sales for 1996.  The decline in 1997 sales was primarily due to
a decrease in sales of the Company's Licom  subsidiary and was partially  offset
by an increase in the Company's  service sales.  Equipment sales,  which include
new  equipment  installations  plus moves,  adds,  and  changes  for  customers'
existing systems, decreased by 8% from $27.7 million in 1996 to $25.4 million in
1997. Of this $2.3 million decrease,  $1.5 million was attributable to a decline
in the sales of Licom's  products and $.8 million was attributable to a decrease
in the sale of the  Company's  other  products.  The  decline in the sale of the
Company's  Licom  products was primarily due to a decline in the number of units
sold resulting from increased competition in the market for Licom's products and
the Company's emphasis on the sale of its other products.

Sales in 1997 to non-financial  customers (i.e.,  communication  control centers
for  utilities and  government  agencies)  accounted for $2.5 million,  or 8% of
sales,  a $3.5 million  decrease from 1996  non-financial  customer  sales.  The
decrease  was  related  primarily  to several  specific  sales of the  Company's
product in diverse applications in 1996.

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  primarily  transacts sales in pounds sterling or US dollars.
Those sales transacted in pound sterling were not materially impacted by foreign
exchange rate fluctuations during 1998 or 1997.

Direct sales were $16.4  million,  or 88% of total sales in 1998, as compared to
$24.9  million  and  $28.4  million,  or 80% and 86% of sales in 1997 and  1996,
respectively.

Gross Profit Margins

Gross  profit  margins  for  1998 and 1997  were 31% and 26%  respectively.  The
equipment  gross profit  margin was 31% in 1998 as compared to 26% in 1997.  The
increase  in  equipment  gross  profit  margins  in  1998  was  attributable  to
modifications to existing systems and Licom new systems installed representing a
higher  percentage of total equipment sales. In general,  both of these types of
sales  generate  higher  gross  profit  margins  than new  installations  of the
Company's  core  products.  The service gross profit margin  increased to 32% in
1998 from 23% in 1997. This was primarily attributable to efficiencies gained as
a result  of the  January  1998  restructuring,  and new  maintenance  contracts
entered into 1998.

Gross  profit  margins  for  1997 and 1996  were 26% and 40%  respectively.  The
equipment  gross profit  margin was 26% in 1997 as compared to 41% in 1996.  The
decrease in equipment gross profit margins for 1997 was  attributable to special
fourth quarter 1997 expense adjustments,  including an $.8 million write-down of
certain  field and supplier  inventory  and a $.5 million  increase in inventory
reserves  related to components for older product lines. In addition,  the gross
profit margin was unfavorably  impacted by large customer  contracts,  for which
<PAGE>
the Company obtained lower gross profit margins, large manufacturing  variances,
due to a lower volume of purchases during the year,  service  variances,  due to
large  contracts where the Company  incurred  additional  warranty costs,  and a
decrease in gross  profit  margins  from the  Company's  Licom  business  due to
increased  production costs. The service gross profit margin decreased to 23% in
1997 from 38% in 1996. This was primarily attributable to increased costs in the
Company's  service  operations  and an  increase  in the  amount of  technicians
providing warranty services related to several large contracts.

Operating Expenses

Total operating expenses for 1998 decreased to $10.0 million, representing a 37%
decrease  from $15.8  million for 1997.  Operating  expenses as a percentage  of
sales were 54% in 1998 as  compared  to 51% in 1997.  The  selling,  general and
administrative  expenses  increase as a percentage  of sales to 45% in 1998 from
39% in 1997 was attributable to a $1.0 million restructuring charge in 1998.

Total  operating  expenses for 1997 increased to $15.8 million,  representing an
18% increase from $13.3 million for 1996.  Operating expenses as a percentage of
sales were 51% in 1997 as  compared  to 40% in 1996.  The  selling,  general and
administrative  expenses  increased as a percentage of sales to 39% in 1997 from
31% in 1996.

Selling,  general and  administrative  costs for 1998  decreased $3.9 million to
$8.3  million,  or 32%,  from $12.2  million in 1997.  The  decrease in selling,
general  and  administrative   expenses  was  primarily   attributable  to  cost
reductions  initiated  in the January  1998  restructuring  program and the 1997
write-off of the remaining  value of the goodwill of $2.3 million related to the
Company's London operation.

Selling, general and administrative costs for 1997 increased $2 million to $12.2
million,  or 20%, from $10.2 million in 1996.  The increase in selling,  general
and administrative expense was primarily attributable to the Company writing off
the  remaining  value of the goodwill of $2.3 million  related to the  Company's
London operation.

Research  and  development  expenses  for 1998 of $1.7  million  decreased  $1.9
million, or 52% from $3.6 million in 1997. Research and development  expenses as
a percentage  of sales  decreased to 9% in 1998 as compared to 11% in 1997.  The
decrease is primarily due to the  maturation of the  Company's  current  product
line and the suspension of development of a new generation product line.

Research  and  development  expenses  for  1997 of $3.6  million  increased  $.5
million, or 15%, from $3.1 million in 1996. Research and development expenses as
a percentage  of sales  increased to 11% in 1997 as compared to 9% in 1996.  The
increase was primarily due to prototype  and  development  expenses for specific
customer contracts.

Other Income and Expense

Interest  expense was $195,000 for 1998 and $80,000 in 1997, which was primarily
due to the debt incurred related to the credit facility  obtained by the Company
in May 1997. No interest expense was reported in 1996.
<PAGE>
Provision for Income Taxes

The Company  accounts for income taxes in accordance with 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.  During 1996,  the
Company  reduced the  deferred  tax asset and  valuation  allowance by $208,000.
During  1997,  the  Company  increased  the  deferred  tax asset  and  valuation
allowance by $3,105,000  and $3,805,000  respectively.  During 1998, the Company
increased both the deferred tax asset and valuation allowance by $2,786,000. The
total  valuation  allowance  as of October 31, 1998 of  $11,409,000  reduces the
deferred tax asset to zero. The Company's 1998, 1997, and 1996 tax provisions of
$0,  $700,000,  and $5,000,  reflect  effective tax rates of 0%, (9)%,  and 16%,
respectively.

Net Income (Loss) Per Basic and Diluted Common Share

For 1998,  the Company  recorded a net loss of $4.4 million or ($.81) per share,
as compared to a net loss of $8.5 million or ($1.58) per share in 1997. The loss
was primarily  attributable  to reduction in the overall sales level,  partially
offset by a reduction in operating expenses.

For 1997, the Company  recorded a net loss of $8.5 million or ($1.58) per share,
as  compared  to net income of  $27,000 or $.01 per share in 1996.  The loss was
primarily  attributable  to the  write-off of goodwill  related to the Company's
London  operation,   the  write-down  of  spare  and  prototype  inventory,  the
write-down of the Company's deferred tax asset, and a reduction in the Company's
gross profit margin.

Liquidity and Capital Resources

The Company's  cash at October 31, 1998  increased $.6 million,  to $.9 million,
compared to the $.3 million  balance  reported  at October  31,  1997.  Accounts
receivable  decreased $5.3 million, to $2.8 million in 1998 from $8.1 million in
1997 primarily due to retainage due on a large  customer  contract as of October
31,  1997,  increased  collection  efforts,  and a decline in the demand for the
Company's  products.  Short-term  debt decreased $1.5 million,  and  inventories
decreased $.5 million.

The  Company's  cash at October 31, 1997  declined $2 million,  to $.3  million,
compared  to the  balances  reported at October 31,  1996.  Accounts  receivable
increased  $1.4  million,  to $8.1  million  in 1997 from $6.7  million  in 1996
primarily  due to retainage  due on a large  customer  contract.  Other  current
liabilities (excluding short-term debt) decreased $2.1 million. Offsetting these
items,  short-term  debt  increased  $2.9 million and inventory  decreased  $3.1
million.

The  Company's  working  capital was $1.4 million as of October 31, 1998, a $3.8
million  decrease  from $5.2  million as of October 31, 1997.  The  reduction in
working  capital as of October 31,  1998 was  primarily  attributable  to losses
incurred by the Company.

The  Company's  working  capital was $5.2 million as of October 31, 1997, a $5.4
million  decrease  from $10.6  million as of October 31, 1996.  The reduction in
working  capital  as of  October  31,  1997 was  primarily  attributable  to the
increase  in  short-term  debt  and  decreases  in  inventory  and cash and cash
equivalents.  Working  capital was $10.6  million as of October 31,  1996,  a $1
million increase from $9.6 million as of October 31, 1995.
<PAGE>
The  Company's  losses  for 1998 and 1997 have had a  substantial  impact on its
working capital and liquidity. On May 28, 1997 the Company entered into a Credit
Agreement (the "Credit Agreement") with National Bank of Canada, New York Branch
(the "Bank") which expires on May 28, 2000. The Credit  Agreement  provides a $2
million credit facility to V Band Corporation  secured by  substantially  all of
the assets of the  Company  and its  domestic  subsidiaries.  As a result of the
Company's  results of  operations  in the past,  the Bank amended the  financial
covenants of the Credit  Agreement.  The amended  financial  covenants  require,
among other things, an improvement in the Company's results of operations during
the second fiscal  quarter of 1999 and a return to  profitability  commencing in
the third fiscal quarter of 1999. There is no assurance that the Company will be
able to satisfy these requirements.

The Company  has no  significant  commitments  for  capital  expenditures  as of
October 31, 1998.

Year 2000

The Company utilizes software and related  technologies  throughout its business
that may be affected by the date change in the year 2000. Systems  modifications
or replacement  are underway which are expected to make all computer  systems at
the Company compliant with the year 2000 requirement.  A committee consisting of
key employees from the engineering,  IT, production,  and finance and management
functions established procedures for testing all Company products,  software and
vendors for year 2000 compliance.  To date, major product lines have been tested
and found to be year 2000 compatible.  Vendors have been formally  contacted and
asked to certify that year 2000 issues will not interfere with delivery of goods
or  services.  A  contingency  plan will be  finalized  after the results of all
testing and vendor responses are received.  The Company's  financial software is
supported by an independent firm which licenses its products and services to the
Company.  Although  the  vendor  has  certified  that  its  applications  are in
compliance with the year 2000 requirements, full testing coupled with a visit to
the vendor's  facility  are planned  during the second  quarter of 1999.  In the
event major problems are  discovered,  the Company expects that new software can
be installed and tested during the year.

All applicable  testing for year 2000  compliance is scheduled for completion by
June 30, 1999,  which the Company believes will leave sufficient time to resolve
any problems that might be discovered.  As most costs are  associated  with time
spent by employees or vendors, the Company expects to incur less than $50,000 of
costs for year 2000 compliance issues.

Although  there can be no assurance that the Company,  its vendors,  third party
providers  of goods and  services  (utilities,  telecommunications  etc.) or the
Company's customers will not discover year 2000 compliance problems, the Company
is currently  unaware of any that would have an adverse affect on its operations
and  financial  conditions.  Failure by the Company to identify  and correct any
year 2000 issues on a timely  basis  could  result in lost  revenues,  increased
operating  expenditures,  loss of  customers  coupled  with  related  litigation
expenses and a business interruption, any of which could have a material adverse
effect on the Company's financial condition.

A contingency plan will be finalized after the results of all testing and vendor
responses are received.
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Although  the  Company  currently  invoices  its  customers  in US dollars or UK
pounds,  exchange rates for these and other local  currencies in countries where
the  Company  may  operate in the future may  fluctuate  in  relation  to the US
dollar.  Such fluctuations may have an adverse effect on the Company's  earnings
or assets when local  currencies are exchanged for US Dollars.  Any weakening of
the value of such local  currency  against the US dollar  could  result in lower
revenues  and earnings for the  Company.  To date,  gains and losses  related to
foreign currency  transactions  and foreign  currency  translation have not been
material for the Company.  Included in the Company's  consolidated balance sheet
at October 31, 1998 are net assets of the Company's United Kingdom subsidiary of
$730,000.



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)                            57      Chief Executive Officer, Director
Thomas Hughes                                 39      President, Chief Operating Officer
Marc Teichman                                 57      Vice President - HR and Administration
Nicholas Nestora                              48      Vice President - Sales and Operations
Luke P. La Valle, Jr. (2)(3)                  56      Director
Thomas H. Lenagh (2)                          74      Director
Brian S. North (1)                            47      Director
Robert O. Riiska                              37      Chief Financial Officer
A. Eugene Sapp, Jr. (1)                       62      Director
J. Stephen Vanderwoude (2)(3)                 55      Chairman, Director
</TABLE>

(1)  Member of stock option committee.
(2)  Member of audit committee.
(3)  Member of compensation committee.


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 served as  Chairman of the Company  from April 1985 to June 1998,
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 President and Chief Operating Officer of the Company
in May 1997. He has been the Chief  Operating  Officer of the company since 1995
and was its 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.

Robert O. Riiska was appointed Chief  Financial  Officer in May 1998. Mr. Riiska
is employed by Morris-Anderson & Associates,  Ltd., a management consulting firm
retained by the Company in April 1998.

Marc Teichman was appointed Vice President of HR and Administration in May 1998.
Mr. Teichman joined V Band in August 1996 as Director of Human Resources.  Prior
to joining V Band,  Mr.  Teichman was Vice  President  and Senior  Consultant at
Guidelines  Management  Consultants.  Prior to his employment at Guidelines,  he
served as Vice  President  of Human  Resources  for Cunard  Line and The Chas P.
Young Company,  a financial  printer.  Mr.  Teichman also held various  director
level human resource positions with Hilt AG and The Hertz Corporation, where his
last position was as Director of Personnel for Hertz Rent-A-Car.
<PAGE>
Nicholas Nestora was appointed Vice President, Sales and Operations of V Band in
May 1998. Previously,  Mr. Nestora served the Company as Vice President of Field
Operations  from 1997 to 1998.  Prior to  joining  V Band,  he was  Director  of
Operations at BT (British Telecom) North America, from 1989 to 1997.

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  is an  attorney  with  the law firm of  Buchanan  Ingersoll  Professional
Corporation in  Philadelphia.  From 1995 to 1997 he practiced law with White and
Williams.  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.

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.,  Computer Products,  Inc. of Boca Raton, Florida, and CMS,
Inc. of Tampa, Florida.

J. Stephen  Vanderwoude has served as Director of the Company since May 1994 and
as Chairman  since June 1998. 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 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 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, 1998,  1997 and 1996  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 1998 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, (3)                    1998    $200,000    $        -          $     -                -       $       100  
Chief Executive                        1997     200,000             -                -                -             1,627
Officer and Director                   1996     200,000             -                -                -             2,000
                                                                     
Thomas Hughes, (4)                     1998     150,000             -            6,000                -             1,500
President-                             1997     150,000             -            4,000           30,000             1,570
Chief Operating Officer                1996     150,000         2,000                -           90,000             1,500

Nicholas Nestora                       1998     132,000             -            6,000           40,000             1,320 
Vice President-
Sales and Operations
</TABLE>
-----------------
(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. Feil waived the receipt of $143,000 of his  compensation  during fiscal
     year 1998.
(4)  Mr. Hughes is a party to an agreement  with the Company which  entitles him
     to receive  approximately one year's  compensation should there be a change
     of control of the Company  during the term of his  employment or within six
     months thereafter.
<PAGE>
STOCK OPTIONS

The  following  tables  summarize  option  grants  during the fiscal  year ended
October 31, 1998 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, 1998.  The Company does
not maintain any pension plans or any supplementary pension award plans.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1998
                                                                                                    Potential Realizable Value
                                                                                                    at Assumed Annual Rates of
                                                                                                    Stock Price Appreciation
                                                  Individual Grants                                      for Option Term
                        -----------------------------------------------------------------------------------------------------
                                              Percentage of                                                               
                            Number of         Total Options                                                               
                            Securities         Granted to                                                                 
                            Underlying        Employees in        Exercise Price      Expiration                             
  Name                  Options Granted      Fiscal Year          (per share)           Date             5%              10% 
  ----                  ---------------      -----------          -----------           ----            -------        ------
 <S>                          <C>                 <C>               <C>    <C>           <C>            <C>            <C>   
Marc Teichman                40,000               8.6%              $.25 - .50           2008           $ 1,212        $4,822
Nicholas Nestora             40,000               8.6%              $.25 - .50           2008           $   808        $3,572
</TABLE>


Aggregate Option Exercises in Fiscal 1998 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     Exercisable    Unexercisable     Exercisable     Unexercisable
----                      --------      --------     -----------    -------------     -----------     -------------
<S>                          <C>           <C>         <C>                <C>               <C>             <C>
Thomas Hughes                -             -           130,567            15,000            -                -   
Marc Teichman                -             -                 -            40,000            -                -
Nicholas Nestora             -             -                 -            40,000            -                -
</TABLE>
 
During the year ended October 31, 1998,  the Company  reduced the exercise price
of 145,567 of the above options to $.50 per share from original  prices  ranging
from $1.44 to $4.75 per share.
<PAGE>
COMPENSATION OF DIRECTORS

Each outside director of the Company is entitled to receive 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.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. La Valle, 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.
<PAGE>
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 January 31, 1999.
<TABLE>
<CAPTION>
                                                                    Number of Shares              Percentage of
                                                                   Beneficially Owned                  Class
                                                                   ------------------                  -----
<S>                                                                       <C>                          <C>  
Thomas E. Feil                                                            1,430,472 (1)                26.4%
3 Westchester Plaza, Elmsford, NY  10523

Thomas Hughes                                                               130,567 (2)                  *
3 Westchester Plaza, Elmsford, NY  10523

Luke P. La Valle, Jr.                                                        12,000 (2)                  *
50 Broad Street, Suite 1609, New York, NY  10004

Thomas H. Lenagh                                                             10,000 (2)                  *
6 Greenwich Office Park, Greenwich, CT 06831

Brian S. North                                                               25,000 (2)                  *
1400 Eleven Penn Center, Philadelphia, PA  19103

A. Eugene Sapp, Jr.                                                           8,000 (2)                  *
2101 West Clinton Ave., Huntsville, AL  35807

J. Stephen Vanderwoude                                                        8,000 (2)                  *
2316 Young Road, Southern Pines, NC  28388

All directors and executive officers as a group (10 persons)              1,624,039 (1)                29.9%
</TABLE>
------------------- 
* -  less than 1%

(1) Excludes 80,000 shares held in an irrevocable trust for Mr. Feil's daughter,
over which Mr. Feil holds no voting or investment power.

(2) Includes  shares that may be acquired  upon  exercise of options,  which are
currently exercisable or are exercisable within 60 days, as follows: Mr. Hughes,
130,567  shares;  Mr. LaValle,  12,000 shares;  Mr. Lenagh,  10,000 shares;  Mr.
North, 25,000 shares; Mr. Sapp, 8,000 shares; Mr. Vanderwoude, 8,000 shares; and
all directors and executive officers as a group, 193,567 shares.


Item 13.     Certain Relationships and Related Transactions

During the year ended  October  31,  1998,  the Chief  Executive  Officer of the
Company  waived  $143,000 of his  compensation.  The Company has  recorded  such
amount as compensation expense and a capital contribution.
<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, 1998 and 1997              
Consolidated  Statements of Operations for the Years Ended October       
    31, 1998, 1997 and 1996
Consolidated  Statements  of  Shareholders'  Equity  for the Years       
    Ended October 31, 1998, 1997 and 1996
Consolidated  Statements of Cash Flows for the Years Ended October       
    31, 1998, 1997 and 1996
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. (3)
                            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)
<PAGE>
                            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)
                            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)
                            10.15  Agreement  dated  May 28,  1997  between  the
                                   Company and National Bank of Canada, New York
                                   Branch. (11)
                            10.16  Agreement  dated  June 4,  1998  between  the
                                   Company and National Bank of Canada, New York
                                   Branch. (12)
                            10.17  Fifth  Amendment  dated  March 26,  1998 to a
                                   lease  dated  April  22,  1988   between  the
                                   Company  and  Taxter  Park   Associates,   as
                                   successor  in  interest to URBCO,  Inc.,  for
                                   premises at 565 Taxter  Road,  Elmsford,  New
                                   York. (13)
                            16     Letter   regarding   change   in   certifying
                                   accountant (3)
                            21     Subsidiaries
                            23.1   Consent of Deloitte & Touche LLP
                            27     Financial Data Schedules
<PAGE>
                              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 Quarterly Report on Form
                   10-Q for the period  ended July 31,  1997,  and  incorporated
                   herein by reference.
              12.  Filed as an exhibit to the Company's Quarterly Report on Form
                   10-Q for the period  ended July 31,  1998,  and  incorporated
                   herein by reference.
              13.  Filed as an exhibit to the  Company's  Annual  Report on Form
                   10-K for the year ended  October 31, 1998,  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:  March 12, 1999          By:  /s/Robert O. Riiska
                                     ------------------- 
                                     Robert O. Riiska, 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 Robert O. Riiska 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.


Signature                                 Title                        Date
---------                                 -----                        ----
/s/ Thomas E. Feil          Chief Executive Officer and Director  March 12, 1999
------------------          (Principal Executive Officer)
Thomas E. Feil                           


/s/ Thomas Hughes           President and
-----------------           Chief Operating Officer               March 12, 1999
Thomas Hughes


/s/ Robert O. Riiska
---------------------       Chief Financial Officer (Principal    March 12, 1999
Robert O. Riiska            Financial and Accounting Officer)


/s/ Luke P. La Valle, Jr.   Director                              March 12, 1999
-------------------------  
Luke P. La Valle, Jr.


/s/ Thomas H. Lenagh        Director                              March 12, 1999
--------------------  
Thomas H. Lenagh


/s/ Brian S. North          Director                              March 12, 1999
-------------------  
Brian S. North


/s/ A. Eugene Sapp, Jr.     Director                              March 12, 1999
-----------------------   
A. Eugene Sapp, Jr.


/s/ J. Stephen Vanderwoude  Director                              March 12, 1999
--------------------------    
J. Stephen Vanderwoude

<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, 1998 and 1997, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the three years in the period ended  October 31,  1998.  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, 1998 and 1997,  and the results of their  operations and their
cash flows for each of the three years in the period  ended  October 31, 1998 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.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial  statements,  the Company has incurred  recurring losses
from  operations.  The Company's  operations  are  dependent  upon the continued
availability  of funding  under its bank  credit  agreement.  These  items raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans  concerning  these matters are also described in Note 1. The
accompanying  consolidated  financial  statements do not include any adjustments
that might result from the outcome of these uncertainties.






/s/DELOITTE & TOUCHE  LLP
-------------------------
DELOITTE & TOUCHE  LLP

Stamford, Connecticut
March 2, 1999
<PAGE>
<TABLE>
<CAPTION>
                               V BAND CORPORATION AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                                    OCTOBER 31, 1998 AND 1997
                                  (in 000's, except share data)


                                                                           1998          1997
                                                                        --------       --------

<S>                                                                     <C>            <C>  
      ASSETS
Current Assets:
Cash .............................................................      $    915       $    336
Accounts receivable, less allowance for doubtful
      accounts of $289 in 1998 and $498 in 1997 ..................         2,813          8,079
Inventories, net .................................................         4,241          4,733
Prepaid expenses and other current assets ........................           313            458
                                                                        --------       --------
                         Total current assets ....................         8,282         13,606
                                                                        --------       --------

Fixed Assets:
Furniture, fixtures, equipment and leasehold improvements ........         7,811          9,539
Less: Accumulated depreciation and amortization ..................        (7,444)        (8,786)
                                                                        --------       --------
                         Total fixed assets ......................           367            753
                                                                        --------       --------

Other Assets .....................................................           158            193
                                                                        --------       --------

      TOTAL ASSETS ...............................................      $  8,807       $ 14,552
                                                                        ========       ========

      LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt ..................................................      $  1,425       $  2,943
Accounts payable .................................................         2,434          2,557
Accrued wages ....................................................           842            894
Customer deposits ................................................         1,389            959
Other accrued expenses ...........................................           797          1,102
                                                                        --------       --------

                         Total  current liabilities ..............         6,887          8,455
                                                                        --------       --------

Commitments and Contingencies (Note 6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               V BAND CORPORATION AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                                    OCTOBER 31, 1998 AND 1997
                                  (in 000's, except share data)


                                                                           1998          1997
                                                                        --------       --------

<S>                                                                     <C>            <C>  
Shareholders' Equity:
Common stock, $.01 par value; authorized 20,000,000 shares;
      issued 7,147,943 shares in 1998 and 7,131,913 shares in 1997            71             71
Capital in excess of par value ...................................        20,016         19,872
Deficit ................... ......................................        (6,639)        (2,270)
Cumulative translation adjustment ................................           240            192
                                                                        --------       --------

                                                                          13,688         17,865

Less  -  Treasury stock, at cost; 1,719,322 shares................       (11,768)       (11,768)
                                                                        --------       --------
                                                                        
                         Total shareholders' equity...............         1,920          6,097
                                                                        --------       --------

      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................      $  8,807      $  14,552
                                                                        ========      ========= 

</TABLE>
                           See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                              V BAND CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                      FOR THE YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
                               (in 000's, except per share data)



                                                           1998          1997          1996
                                                         --------      --------      --------
<S>                                                      <C>           <C>           <C>     
Sales
       Equipment ...................................     $ 12,415      $ 25,413      $ 27,703
       Service .....................................        6,158         5,668         5,183
                                                         --------      --------      --------
            Total sales ............................       18,573        31,081        32,886
                                                         --------      --------      --------

Cost of Sales
       Equipment ...................................        8,566        18,748        16,404
       Service .....................................        4,172         4,350         3,224
                                                         --------      --------      --------
            Total cost of sales ....................       12,738        23,098        19,628
                                                         --------      --------      --------

            Gross profit ...........................        5,835         7,983        13,258
                                                         --------      --------      --------

Operating Expenses
       Selling, general and administrative .........        8,287        12,188        10,189
       Research and development ....................        1,708         3,573         3,118
                                                         --------      --------      --------
            Total operating expenses ...............        9,995        15,761        13,307
                                                         --------      --------      --------

            Operating  loss ........................       (4,160)       (7,778)          (49)

Interest Expense ...................................         (195)          (80)
Other Income (Expense) .............................          (14)           46            81
                                                         --------      --------      --------
            Income (loss) before income taxes ......       (4,369)       (7,812)           32

Provision for Income Taxes .........................          700             5
                                                         --------      --------      --------

            Net income (loss) ......................     $ (4,369)     $ (8,512)     $     27
                                                         ========      ========      ========

Net income (loss) per basic and diluted common share     $   (.81)     $  (1.58)     $    .01
                                                         ========      ========      ========

Weighted average number of basic and diluted
    common shares outstanding ......................        5,423         5,372         5,323
                                                         ========      ========      ========
</TABLE>
     See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
                                         V BAND CORPORATION AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 FOR THE YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
                                                      (in 000's)


                                                                   Capital in     Retained     Cumulative
                                                       Common     Excess of Par   Earnings    Translation   Treasury
                                                        Stock         Value       (Deficit)    Adjustment     Stock
                                                      --------      --------     --------      --------     --------
<S>                                                   <C>           <C>          <C>           <C>          <C>      
Balance, November 1, 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)

Proceeds from employee
   stock purchase plan ..........................            1            96
Net loss ........................................                                  (8,512)
Translation adjustment ..........................           24
                                                      --------      --------     --------      --------     --------

Balance, October 31, 1997 .......................           71        19,872       (2,270)          192      (11,768)

Proceeds from employee
   stock purchase plan ..........................                          1
Waiver of Chief Executive Officer's compensation                         143
Net loss ........................................                                  (4,369)
Translation adjustment ..........................                                                    48
                                                      --------      --------     --------      --------     --------

Balance, October 31, 1998 .......................     $     71      $ 20,016     $ (6,639)     $    240     $(11,768)
                                                      ========      ========     ========      ========     ========

</TABLE>

                 See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
                                         V BAND CORPORATION AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997 and 1996
                                                      (in 000's)

                                                                                 1998           1997           1996
                                                                               --------       --------       --------
<S>                                                                           <C>            <C>            <C>     
Cash Flows from Operating Activities
    Net income (loss) ..................................................      $ (4,369)      $ (8,512)      $     27
    Adjustments to reconcile net income (loss) to net
       cash provided by (used in) operating activities:
       Depreciation ....................................................           443            566            742
       Amortization and write-off of other assets ......................            49          2,598            458
       Provision  (benefit) for doubtful accounts ......................           142            117            (53)
       Provision for inventory reserves ................................           334            473
       Deferred income taxes ...........................................                          700
       Waiver of Chief Executive  Officer's  compensation ..............           143
     Changes in assets
       and liabilities:
           Accounts receivable .........................................         5,124         (1,459)        (1,901)
           Inventories .................................................           158          2,592           (202)
           Prepaid expenses and other current assets ...................           145            222           (250)
           Other assets ................................................           (14)            74             (9)
           Accounts payable and other current liabilities ..............           (49)        (2,043)           740
           Foreign currency translation adjustment .....................            48             24             63
                                                                               --------       --------       --------
               Net cash provided by (used in) operating activities .....         2,154         (4,648)          (385)
                                                                              --------       --------       --------

Cash Flows from Investing Activities
    Sales of marketable securities .....................................                                         187
    Capital expenditures ...............................................           (57)          (209)          (284)
                                                                              --------       --------       --------
               Net cash used in investing activities ...................           (57)          (209)           (97)
                                                                              --------       --------       --------

Cash Flows from Financing Activities
    Debt issuance costs ................................................                         (105)
    Proceeds from employee stock purchase plan .........................             1             97
    Proceeds from short-term debt ......................................        17,321          9,007
    Payments of short-term debt ........................................       (18,840)        (6,064)
                                                                              --------       --------       --------
               Net cash provided by (used in) financing activities .....        (1,518)         2,935           --
                                                                               --------       --------      --------
Net increase (decrease) in cash ........................................           579         (1,922)          (482)
                                                                                                            --------
Cash at beginning of year ..............................................           336          2,258          2,740
                                                                              --------       --------       --------
Cash at end of year ....................................................      $    915       $    336       $  2,258
                                                                              ========       ========       ========
Supplementary Disclosures
    Income taxes paid ..................................................      $   --         $    384       $     65
                                                                              ========       ========       ========
    Interest paid ......................................................      $    195       $     61       $   --
                                                                              ========       ========       ========
</TABLE>
                 See notes to consolidated financial statements
<PAGE>
                       V BAND CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:  The Company and basis of presentation

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.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  The  Company's  ability to
continue as a going concern is uncertain based on the matters  discussed  below.
The consolidated financial statements do not include any adjustments relating to
the  recoverability  and  classification of assets or the amounts of liabilities
that might be  necessary  should the  Company be unable to  continue  as a going
concern.  The Company's  continuation  as a going concern is dependent  upon the
Company's ability to return to profitablity and to maintain  compliance with its
amended bank covenants.

The Company has incurred  recurring losses from  operations.  As a result of the
Company's results of operations, the bank amended the financial covenants of the
Credit Agreement (see Note 5).The amended  financial  covenants  require,  among
other things,  an improvement in the Company's  results of operations during the
second fiscal  quarter of 1999 and a return to  profitability  commencing in the
third fiscal  quarter of 1999.  The Company's  operations are dependent upon the
continued  availability  of funding  under the Credit  Agreement.  The continued
availability of funding under the Credit  Agreement is dependent,  in turn, upon
the Company's  ability to satisfy the amended  financial  covenants set forth in
the Credit Agreement and upon the ability of the Company to generate  sufficient
revenue to support such  funding.  The Company is presently  seeking  additional
sales  orders in order to improve  the  results of its  operations.  There is no
assurance that the Company will be able to improve the results of its operations
to satisfy the amended financial covenants.

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.

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.
<PAGE>
Revenue recognition

Equipment  revenue,  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.

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

During 1998, the Company adopted Statement of Financial Accounting Standards No.
128 ("SFAS 128"),  "Earnings Per Share".  SFAS 128 replaces the  presentation of
primary  earnings per share with a presentation  of basic earnings per share. It
also requires dual  presentation of basic and diluted  earnings per share on the
face of the statement of operations.  Diluted  earnings per share is computed by
dividing net income by the weighted average number of common shares  outstanding
and dilutive common equivalent shares (common stock options) outstanding.

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.

Impact of recently issued accounting standards

In June 1997,  the  Financial  Accounting  Standards  Board (the "FASB")  issued
Statement  No.  130,  Reporting  Comprehensive  Income and  Statement  No.  131,
Disclosure about Segments of an Enterprise and Related Information.  The Company
is in the process of  evaluating  the new  statements,  which are  effective for
Fiscal 1999. The adoption of these statements is not expected to have a material
effect on the Company's consolidated financial statements.

Disclosure about Fair Value of Financial Instruments

The carrying value of the Company's credit  facilities  approximates  fair value
and is  estimated  based on the  quoted  market  prices  for the same or similar
issues or on the  current  rates  offered  to the  Company  for debt of the same
remaining maturities.
<PAGE>
Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit risk  consist  principally  of trade  receivables.  The Company  performs
ongoing credit evaluations of its customers'  financial conditions and generally
does not require collateral.

Impairment of Long-Lived Assets

Impairment  losses are recorded on  long-lived  assets used in  operations  when
indicators of impairment are present and the anticipated  undiscounted operating
cash flows generated by these assets are less than the assets' carrying value.

Note 3:  Inventories

Inventories are as follows, at October 31:
<TABLE>
<CAPTION>
                                                   1998                 1997
                                               -----------          -----------
<S>                                            <C>                  <C>        
Finished goods .......................         $ 3,812,000          $ 3,374,000
Parts and components .................           3,339,000            3,935,000
                                               -----------          -----------
                                                 7,151,000            7,309,000
Less:  Inventory reserves ............          (2,910,000)          (2,576,000)
                                               -----------          -----------

                                               $ 4,241,000          $ 4,733,000
                                               ===========          ===========
</TABLE>

Note 4: Other assets

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 was being amortized over a ten-year
period.  During the year ended  October 31, 1997,  the Company  decided that the
future  operations of the MDS business  could not support the carrying  value of
the  goodwill  and  therefore  wrote-off  the  remaining  net book value of $2.3
million to selling, general and administrative expense.

Note 5:  Short-term Debt

In May 1997, the Company  entered into a Credit  Agreement with National Bank of
Canada (the "Credit Agreement"), which expires in May 2000. The Credit Agreement
provided a revolving loan and letter of credit facility of up to $4 million. The
Company's  obligations  under the  Credit  Agreement  are  secured by a security
interest  in  all  of  the  assets  of  V  Band  Corporation  and  its  domestic
subsidiaries. Under the terms of the Credit Agreement, the Company is restricted
from paying  dividends  if an event of default has  occurred  and is  continuing
thereunder.  Due to the Company's  results of operations  for 1997,  the Company
<PAGE>
failed to satisfy the financial  covenants set forth in the Credit Facility.  On
February  9,  1998,  National  Bank of Canada  waived the  Company's  failure to
satisfy those covenants at October 31, 1997 and amended the covenants for fiscal
year 1998. In addition,  the interest  rate on the  outstanding  borrowings  was
modified  to prime  plus 2 percent  effective  February  1,  1998.  The  amended
financial  covenants were not satisfied for the  three-month  period ended April
30, 1998. On June 4, 1998,  National Bank of Canada waived the Company's failure
to satisfy  those  covenants at April 30, 1998 and amended the covenants for the
remainder  of fiscal year 1998.  The  Company  satisfied  the amended  financial
covenants for the three-month  periods ended July 31, 1998 and October 31, 1998,
but was in violation of a  non-financial  covenant as of October 31, 1998. As of
October 31, 1998, the balance  outstanding was $1,425,000 and the prime rate was
8%. On February  18,  1999,  National  Bank of Canada  waived the  non-financial
covenant  default,  amended the  financial  covenants  for all  periods  through
expiration,  and reduced the revolving loan and letter of credit  facility to $2
million.

Note 6:  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,  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
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 has been in  discussions
with TTSI and believes that a settlement of this proceeding will be concluded in
the near future  pursuant to which both the claim and the  counterclaim  will be
dismissed  and will not have a  material  impact on the  consolidated  financial
condition of the Company.

In June 1998, IEC  Electronics  Corp.  ("IEC  Electronics")  commenced an action
against the Company in New York State Supreme  Court,  Wayne  County,  asserting
claims for the  payment of  $500,000  for  products  delivered  to the  Company,
inventory,  and an  unspecified  amount for incidental  expenses and costs.  The
Company has filed an answer  denying  liability  for the claims and  asserting a
counterclaim against IEC Electronics in an amount in excess of $500,000.

The  Company  is a party to other  legal  proceedings  commenced  against  it by
suppliers  and  former  employees.  The  Company  believes  that  none of  these
proceedings will have a material impact on the consolidated  financial condition
of the Company.
<PAGE>
(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.  Future minimum annual
rental  payments  under  these  leases  for the years  ended  October  31 are as
follows:


            1999                        $743,000   
            2000                         527,000   
            2001                         448,000   
            2002                         224,000   
            2003                          99,000   
         Thereafter                      165,000   
                                                
The Company has  subleased  one facility and has signed a contract to assign the
lease of another  facility.  Future minimum  payments of $1,300,000  relating to
these facilities are included in the table above.  The Company  anticipates that
the respective sublessee and assignee will actually make such payments.

Rent expense for the years ended 1998, 1997, and 1996 was $606,000, $956,000 and
$1,007,000, respectively.

(c) Employment arrangements
In December 1998, the Company  entered into  employment  agreements with certain
officers and employees  that provide for  compensation  and other  benefits upon
change of control of the Company.  The aggregate  compensation  to be paid under
these  agreements  is  $365,000,  and  such  future  compensation  has not  been
reflected in the accompanying consolidated financial statements. Agreements with
aggregate compensation totaling $215,000 have an expiration date of December 31,
1999,  while an agreement with  compensation to be paid of $150,000 is in effect
during the term of the officer's employment and six months thereafter.

During the year ended  October  31,  1998,  the Chief  Executive  Officer of the
Company  waived  $143,000 of his  compensation.  The Company has  recorded  such
amount as compensation expense and a capital contribution.

(d) Accounts payable

During the year ended October 31, 1998,  the Company  entered into  arrangements
with several  vendors  whereby each vendor agreed that the Company could satisfy
all or a portion of its existing accounts payable balance by remitting  periodic
payments  generally  throughout fiscal year 1999.  Certain of these arrangements
contain provisions for the payment of interest.

Note 7:  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.  During the year ended  October  31,  1998,  the  Company
reduced the exercise  price of 145,567  options to $.50 per share from  original
prices ranging from $1.44 to $4.75 per share.  Such repricing has been reflected
below.
<PAGE>
The following is a summary of stock option  transactions  for the three years in
the period ended October 31, 1998:
 
                                                Shares           Exercise Prices
                                                ------           ---------------
 Shares under option - November 1, 1995 .....  687,194      $   .50  to   $ 6.88
    Options granted ........................   358,700          .50  to     2.63
    Options cancelled ......................  (169,637)        1.88  to     6.88
                                              --------                     
Shares under option - October 31, 1996 .....   876,257          .50  to     6.00
    Options granted ........................   180,000          .50  to     1.75
    Options cancelled ......................  (117,506)        1.44  to     5.00
                                              --------                     
Shares under option - October 31, 1997 .....   938,751          .50  to     6.00
      Options granted ......................   462,933          .25  to      .75
      Options cancelled ....................                    .25  to     6.00
                                              (407,316)
                                              --------
Shares under option -October 31, 1998 ......   994,368          .25  to     6.00
                                              ========
Options exercisable at:
      October 31, 1997 .....................   648,151      $   .50  to   $ 6.00
                                              ========
      October 31, 1998 .....................   663,435          .25  to     6.00
                                              ========
 

The following table summarizes  information  about stock options  outstanding at
October 31, 1998:
<TABLE>
<CAPTION>
                                               Options Granted                       Options Exercisable
                                 -------------------------------------------     ---------------------------
                                                    Weighted     Weighted                        Weighted
    Year         Range of             Number        Average       Average            Number       Average
     of          Exercise          Outstanding     Remaining     Exercise         Exercisable    Exercise
   Grant          Prices            10/31/98      Life (Years)     Price           10/31/98        Price
-----------------------------    -------------------------------------------     ---------------------------

<S>           <C>                    <C>             <C>         <C>                 <C>            <C>        
    1989      $5.75 - $5.75            20,000          .92       $ 5.75               20,000        $ 5.75     
    1990         .50 - 4.00            31,202         1.74         3.12               31,202          3.12     
    1991         .50 - 3.88            70,633         2.70         3.50               70,633          3.50     
    1992         .50 - 6.00            79,350         3.71         4.75               79,350          4.75     
    1993       3.88 - 5.50             10,000         4.53         4.08               10,000          4.08     
    1994         .50 - 5.13            81,234         5.18         4.45               81,234          4.45     
    1995         .50 - 5.00            71,666         6.35         2.74               71,666          2.74     
    1996         .50 - 2.63           239,850         7.39         1.44              239,850          1.44     
    1997         .50 - 1.75            86,500         8.43         1.16               59,500          1.27     
    1998        .25 - .75             303,933         9.37          .47                    -          -        
                                      =======         ====        =====              =======         =====     
                                      994,368         6.87       $ 2.04              663,435        $ 2.80     
                                      =======         ====       ======              =======        ======     
                                                                                    
</TABLE>
<PAGE>
All stock options become exercisable upon a change of control, as defined.

The estimated fair value of options granted during 1998, 1997, and 1996 was $.33
per share,  $1.75 per  share,  and $1.88 per share,  respectively.  The  Company
applies Accounting  Principles Board Opinion No. 25 and related  interpretations
in accounting for its stock option and purchase plans. No compensation  cost has
been  recognized  for the Company's  fixed stock option plans and stock purchase
plan.  Had  compensation  costs for the  Company's  stock option plans and stock
purchase plan been determined based on the fair value, at the option grant dates
for awards,  in  accordance  with the  accounting  provisions  of  Statement  of
Financial  Accounting Standards No. 123 ("SFAS 123") "Accounting for Stock-Based
Compensation",  the  Company's net income (loss) and net income (loss) per share
for the years ended  October 31, 1998,  1997 and 1996 would have been reduced to
the pro forma amounts indicated in the following table:

Net income (loss) applicable to common shareholders:  

                                              1998           1997         1996
                                           --------       --------      ------
         As reported                       $ (4,369)      $ (8,512)     $   27
         Pro forma                           (4,520)        (8,655)       (317)

Net income (loss) per common share and common share equivalent

         As reported                       $   (.81)      $  (1.58)     $  .01
         Pro forma                             (.83)         (1.60)       (.06)



The fair value of options  granted under the Company's  fixed stock option plans
during  1998  was  estimated  on the  dates  of grant  using  the  Black-Scholes
options-pricing  model with the  following  weighted-average  assumptions  used:
dividend  yield of zero,  expected  volatility of  approximately  49%, risk free
interest rate of  approximately  5.5%, and expected lives of option grants of 10
years.  Pro forma  compensation  cost related to shares purchased under the 1995
Incentive Stock Option Plan is measured based on the discount from market value.
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future pro forma effects.

Note 8:  Income taxes
The Company  accounts for income taxes in accordance with 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 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  carryforwards
are expected to be available to reduce taxable income.

As  of  October  31,  1998,   the  Company  had  available  net  operating  loss
carryforwards for tax return purposes of approximately $18,322,000 that begin to
expire in 2011.
<PAGE>
The income tax provision (benefit) consists of the following:

                                                1997                 1996
                                              ---------            --------
Current
    Federal .............................                         $
    State and local .....................                             5,000 
                                                                  --------- 
                                                                      5,000    
Deferred                                                          --------- 
    Federal .............................     $ 658,000           
    State and local .....................        42,000
                                              ---------
                                                700,000
                                              ---------          
                                              $ 700,000            $  5,000
                                              =========            ========

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>

                                                 1998            1997             1996
                                            -----------      -----------      -----------
<S>                                         <C>              <C>              <C>        

U.S. statutory rate applied to pretax
    income (loss) .....................     $(1,478,000)     $(2,657,000)     $    11,000
Dividends received deduction and
    tax-exempt interest
Goodwill amortization .................                          350,000          127,000
State and local taxes, net of federal
    tax benefit .......................                         (385,000)           3,000
Increase (decrease) in valuation
    allowance .........................       1,438,000        3,359,000         (208,000)
Reversal of current liability for taxes
Other, net ............................          40,000           33,000           72,000
                                            -----------      -----------      -----------
                                            $      --        $   700,000      $     5,000
                                            ===========      ===========      ===========

</TABLE>
<PAGE>
The net deferred  income tax asset at October 31, 1998 and 1997  consists of the
following:
<TABLE>
<CAPTION>


Deferred tax assets(liabilities)                           1998              1997
--------------------------------                       ------------      ------------
<S>                                                   <C>               <C>         
Depreciation ....................................     $    354,000      $    280,000
Amortization ....................................          712,000           624,000
Inventory reserves ..............................        2,266,000         2,237,000
Accrued expenses ................................          114,000           190,000
Bad debt reserve ................................           82,000           169,000
State and local taxes, net of federal tax benefit             --           1,282,000
Net operating loss carry forwards ...............        7,881,000         3,841,000
                                                      ------------      ------------
                                                        11,409,000         8,623,000
Valuation allowance .............................      (11,409,000)       (8,623,000)
                                                      ------------      ------------
                                                      $          -      $          -
                                                      ============      ============
</TABLE>
Note 9:  Segment information

(a) Significant customers

Morgan  Guaranty  Trust  Company  of New York and  affiliates  (including  sales
through  its  vendor,  AT&T  Solutions)  accounted  for  15%,  6% and 10% of the
Company's  sales in 1998,  1997 and 1996,  respectively.  During 1998,  1997 and
1996,  the Chicago Board of Trade and its general  contractor  accounted for 8%,
10% and 21%,  respectively,  of the Company's  sales.  During 1997, The New York
Mercantile Exchange accounted for 16% of the Company's sales.

(b) Foreign sales

In 1998, 1997 and 1996, foreign sales represent 41%, 37% and 29%,  respectively,
of consolidated sales and include the following geographical areas:
<TABLE>
<CAPTION>
                                                1998                 1997                 1996
                                            -----------          -----------         ------------
<S>                                         <C>                  <C>                 <C>         
Pacific Rim                                 $ 1,500,000          $ 2,600,000         $  1,900,000
Europe (including UK)                         5,300,000            6,300,000            6,900,000
All others                                      900,000            2,500,000              900,000
                                            -----------          -----------         ------------
                                             
                                            $ 7,700,000         $ 11,400,000         $  9,700,000
                                            ===========         ============         ============
</TABLE>
<PAGE>
Note 10:  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 expired on February 19, 1999.

(b) Employee stock purchase plan

Under the Company's 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.  In
January  1999,  the Company  discontinued  the Purchase  Plan for periods  after
December 31, 1998.

Note 11:  Employee 401(K) Savings Plan

The  Company  has  a   tax-deferred   employee   401(k)  savings  plan  covering
substantially  all  employees.  Contributions  by the  Company  are  made at the
Company's  discretion.  Contributions  to the plan in 1998,  1997 and 1996  were
$39,000, $40,000 and $49,000, respectively.

Note 12:  Fourth quarter results

During the fourth  quarter of 1997 the Company  recorded the  following  expense
adjustments:

Inventory reserves and write-offs                                $ 1,300,000
Intangible asset write-off                                         2,300,000
Cost of goods sold                                                   800,000
Deferred tax asset valuation allowance                               700,000
Warranty reserves                                                    200,000
Severance and other                                                  200,000
Allowance for doubtful accounts                                      200,000

<PAGE>
<TABLE>
<CAPTION>
                                                                                                                      Schedule VIII
                                           V BAND CORPORATION AND SUBSIDIARIES
                                            VALUATION AND QUALIFYING ACCOUNTS
                                   FOR THE YEARS ENDED OCTOBER 31, 1998, 1997, AND 1996


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, 1998              $     498,000       $   142,000                        $    351,000 (a)         $        289,000
                                                                                                                                    
      October 31, 1997              $     381,000       $   117,000                                                 $        498,000
                                                                                                                                    
      October 31, 1996              $     456,000       $   (53,000)                       $     22,000 (a)         $        381,000
                                                                                                                                    
Inventory reserve                                               
      October 31, 1998              $   2,576,000       $   334,000                                                 $      2,910,000
                                                                                                                                    
      October 31, 1997              $   2,103,000       $   473,000                                                 $      2,576,000
                                                                                                                                    
      October 31, 1996              $   2,144,000                                          $     41,000 (b)         $      2,103,000
                                                                                                                                    
Warranty reserve                                                                        
      October 31, 1998              $     273,000       $   247,000                        $    386,000 (c)         $        134,000
                                                                                                                                    
      October 31, 1997              $     343,000       $   589,000                        $    659,000 (c)         $        273,000
                                                                                                                                    
      October 31, 1996              $     415,000       $   289,000                        $    361,000 (c)         $        343,000
                                                                                                                                    
Reserve for Notes Receivable                         
      October 31, 1997              $     110,000                                          $    110,000 (d)                         
                                                                                                                                    
      October 31, 1996              $     110,000                                                                   $        110,000
                                                                                                                                    
Valuation allowance for deferred                                                                                                    
income tax asset                                        
      October 31, 1998              $   8,623,000                         $  2,786,000                              $     11,409,000
                                                                                                                                    
      October 31, 1997              $   4,818,000       $   700,000       $  3,105,000                              $      8,623,000
                                                                                                                                    
      October 31, 1996              $   5,026,000                                          $    208,000             $      4,818,000
</TABLE>                                                 
(a) Doubtful accounts written off, net of cash recovered.
(b) Consumption of obsolete or slow moving inventory,  which was reserved for in
    the prior year. 
(c) Warranty labor charges combined with actual cash payments.
(d) Note receivable written off, net of cash received.

                                      S -1