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 (Fee Required)
         

              For the fiscal year ended           October 31, 1995
                                                  ----------------

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----    EXCHANGE ACT OF 1934 (No Fee Required)
         

            For the transition period from             to            

                         Commission file number 0-13284

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


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


                    565 Taxter Road, Elmsford, New York 10523
              ----------------------------------------------------
              (Address and zip code of principal executive office)

                                 (914) 789-5000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


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

                                      None

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

                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of class)
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  Yes [ X ]   No [   ]

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

The number of shares of Common Stock  outstanding,  as of December 31, 1995, was
5,323,170 shares.

The  aggregate  market  value  of the  Common  Stock of the  registrant  held by
non-affiliates, as of December 31, 1995, was $6,153,947*.

* The  Company  has  assumed  that all of the  outstanding  shares  were held by
non-affiliates  except  for the  shares  beneficially  owned by any  officer  or
director of the Company who owns 1% or more of the Company's  outstanding common
stock and persons  known by the Company  beneficially  to own 10% or more of the
Company's  outstanding  common stock.  The market value was based on the closing
price of these shares on December 31, 1995.

Documents incorporated by reference
-----------------------------------
None.
<PAGE>
                               V BAND CORPORATION
                             FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995


                                TABLE OF CONTENTS


                                     PART I

Item 1.   Business

Item 2.   Properties

Item 3.   Legal Proceedings

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


                                     PART II

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

Item 6.   Selected Financial Data

Item 7.   Management's Discussion and Analysis of Financial Condition and
            Results of Operations

Item 8.   Financial Statements and Supplementary Data

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


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

Item 11.  Executive Compensation

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Item 13.  Certain Relationships and Related Transactions


                                     PART IV

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

Item 1.       Business

General

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

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

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  and   transportation,   and  emergency   service
organizations.

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.  The acquisitions of certain assets of
Windmill  Communications,  Inc.  ("WCI")  and  Advantage  Communications,  Inc.,
("ACI") in the United States,  provided the Company with a service  presence and
increased  its sales  strengths  in the New York City and  Boston  markets.  The
acquisitions of Mercury Dealing Systems ("MDS"),  formerly known as TR Financial
Communications  plc, and certain assets of ACT Computer  Support,  Ltd., both in
the United Kingdom,  increased the Company's  sales and service  presence in the
London market.  These  acquisitions  advanced the Company's  strategy to enhance
market  share  through the direct sale and full service of its  products,  which
includes project management, maintenance and other services in the United States
and United Kingdom. The Company utilizes a network of international distributors
to provide sales and service support in other global markets.  In addition,  the
Company further  expanded its direct sales and service  activities in the United
States by opening offices in Atlanta, Chicago and San Francisco.

The MDS  operation,  which was  acquired in July 1994 and carries on business in
the  United  Kingdom  under the name of V Band PLC,  performs  assembly,  sales,
installation  and  maintenance  services.  For the fiscal year ended October 31,
1995, V Band PLC had sales of approximately $8.1 million. At October 31, 1995, V
Band  PLC had 52  employees.  See  Note 4 --  Notes  to  Consolidated  Financial
Statements for management's  pro forma financial  estimates of the impact of the
MDS  acquisition on the Company's  statements of operations,  if the acquisition
had occurred on November 1, 1992.

During fiscal 1995, the Company  executed an agreement with the Chicago Board of
Trade for the sale and  installation  of a major  trading  floor  communications
system  that  includes   approximately  1,700  custom-designed   exchange  floor
telephones  and  various  peripheral   equipment  in  transactions   valued,  in
aggregate,  at over $9 million.  The exchange  phones  employ the same  advanced
technology  base used in the  Company's  Power  Deck  product.  The  Company  is
providing full installation  services,  including project management and cabling
for the 9,000 line communication system. Construction of the trading floor began
in the  Company's  second  fiscal  quarter of 1995 and the first group of phones
were  installed  and  activated  in July 1995.  The  project is  expected  to be
completed by the end of fiscal 1996.  The Company  recognizes  revenue from this
contract under the percentage-of-completion method.

On October 11, 1995 the Company  announced  that it had engaged the  services of
the New York investment  banking firm of Benedetto,  Gartland & Greene,  Inc. to
assist the Company in the  exploration  of various  strategic  alternatives  for
maximizing shareholder value.

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 and flexibility,  while reducing repair cost
and space requirements.

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

In  1993,  the  Company   introduced  Power  Deck,  a  highly  advanced  digital
communications  workstation  for the  financial  community.  The Power Deck user
interface  is fully  compatible  with the  Company's  Broad  Band 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  Broad Band DN which is the latest  generation
distributed  digital  switch.  Broad Band DN is built on a high-speed  computing
platform  allowing  direct  connection  to the digital  facilities of the public
network and providing  digital  connectivity to the desktop.  The system's basic
architecture  allows for software  feature  enhancements and reduces the risk of
future obsolescence.  The administration  software empowers the user with system
control and configuration capability, allows diagnostic reporting, and eases the
ability to perform  moves,  adds,  and  changes  from a personal  computer.  The
Company's  digital  trading  consoles give the users access to all system lines,
paperless  button  labeling and fully  programmable  loudspeaker  monitoring  of
multiple lines simultaneously.

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

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

GSM allows firms to take advantage of advanced communications architectures such
as ATM. The GSM, which employs a one gigabit switch for information  throughput,
can support a trading floor with over 2,400 user consoles and delivers access to
over 16,000 lines without system blocking.

The WAN ONE  product  enables  remote  trading  floor  communication  systems to
operate as if they were located  together.  For  example,  traders in London can
have instant,  local access to lines in New York,  Canada, or virtually anywhere
in the world.  The Company believes WAN ONE is the foundation for remote trading
and advanced network services of the next generation.

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

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

Through  Licom's  product  ProMX,  the  Company is a leading  supplier  of fiber
optic-based  multiplexers  to the  electric  power  industry.  The  ProMX  is an
integrated,  modular  multiplexing  unit  designed to carry  "mission  critical"
communications and operate in circumstances and physical  environments for which
conventional  equipment is not usually  designed to withstand.  ProMX interfaces
with protective relays, supervisory control and data acquisition (SCADA), voice,
data and  telemetry.  The ProMX units,  or nodes,  communicate  with fiber optic
networks at data transmission rates of 1.544 million bits per second (T1), 2.048
million bits per second (E1) or 51.84 million bits per second (SONET OC1). ProMX
nodes,  common in  transmission  substations,  are often  located  together with
console  systems  equipment  in the  command  center.  Licom,  based in Herndon,
Virginia, continues to develop, market, test, ship and support the ProMX product
line,  which is manufactured by a contract  manufacturer.  In 1995, sales to the
electric power industry were 11% of the Company's sales.

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 1995, the Company  developed and  implemented the second phase of the WAN
ONE product, which enables traders at remote sites, globally, to share telephone
lines and line  status  as if they were in the same  location.  In  addition,  a
remote system administration  function was developed which allows modifications,
or moves,  adds and changes  (MAC's),  to be performed  from a remote  location.
Combined  with  the  Company's  F.A.S.T.  remote  system  servicing  and WAN ONE
capabilities, the Company can provide service and enhancements to the customer's
system from remote locations.

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

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

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

The Company continues to develop hardware and software enhancements to its ProMX
product line such as the  development  of an interface for  Synchronous  Optical
Network  (SONET),  an  international   standard  for  very  high  speed  digital
communications.

During the years ended October 31, 1995,  1994 and 1993,  the  Company's  annual
research and development  expenditures were $3.9 million,  $3.3 million and $3.3
million or 13%, 11% and 13% of sales, respectively.

Sales, Service and Distribution

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

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

The Company  utilizes 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. Licom uses direct sales,  service,  project management
and  maintenance  in  the  United  States  and  Canada,   and  uses  independent
distributors for international sales.

Sales to Morgan  Guaranty Trust Company of New York and  affiliates  represented
14%,  14% and 5% of sales in 1995,  1994 and 1993,  respectively.  In  addition,
sales to the Chicago  Board of Trade  represented  13% of sales in 1995.  During
1993, there was no customer that represented 10% or more 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 $20.5 million, $23.0
million and $21.2 million,  representing 69%, 74% and 82% of the Company's sales
in 1995, 1994 and 1993, respectively.  Licom sales represented 11%, 13%, and 10%
of the Company's  sales in 1995,  1994 and 1993,  respectively.  Service  sales,
which consist of maintenance contract sales, support,  service and miscellaneous
repairs  accounted  for 20%,  13%, and 8% of sales  during 1995,  1994 and 1993,
respectively.

The Company's  foreign sales for 1995,  1994 and 1993 were $10.5  million,  $8.7
million  and  $7.3  million,  or  36%,  27%  and  28%,  respectively,  of  total
consolidated sales. For further information  regarding foreign sales, see Note 8
-- 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,  13%, 16% and 16% of the Company's  sales for 1995, 1994
and 1993, 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
facility  in  Yonkers,  New York,  for which  the  lease had  expired.  This new
facility houses the Company's  purchasing,  production control,  final assembly,
quality  control and testing  operations.  The lease for the  Elmsford  facility
expires in 2001, with an option to extend to 2003.

The Company  currently uses three outside  subcontractors to manufacture most of
its custom-fabricated, printed circuit boards.  The Company provides the product
designs,  engineering, bill of materials  and testing  procedures  to ensure the
suppliers meet the Company's quality and reliability standards. The Company will
be able to  further  reduce  its  product  cost  due to the  economies  of scale
afforded by the outside contractors in the purchase of components, after current
inventories are consumed.

The  Company's  Licom  subsidiary  performs  final  assembly  of  sub-assemblies
received  from one of the  Company's  outside  contractors,  tests and ships the
product at its headquarters in Herndon,  Virginia.  Licom relocated its facility
during 1995 to a nearby location,  which provides better utilization.  The lease
for this facility expires in 2000 with an option to extend for five years.

The  Company's  United  Kingdom  manufacturing  operation,  consisting  of final
assembly  product and addition of local  content and testing,  is located at its
facility in Beckton,  England,  approximately 20 miles southeast of London.  The
lease for this facility expires in 2005.

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

Patents

In 1994,  the Company was  granted a U.S.  patent  relating to the design of the
Power Deck  console  systems.  In 1993,  the Company  was granted a U.S.  patent
relating  to the design of the VIAX DN console  systems.  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,  derived  primarily from the Company's
ability to keep secret its  proprietary  information  and knowledge.  The unique
design  features of the Company's  products may be  susceptible  to discovery by
third  persons who have access to such  products.  Technological  changes in the
telephone  terminal  equipment  industry  occur  rapidly  and  new  patents  are
constantly  being issued for products sold in the industry.  No assurance can be
made that claims  will not be brought  against  the  Company  alleging  that the
Company's products,  or aspects thereof,  infringe on competitors'  patents. The
Company has no such claims pending. The Company seeks to protect its proprietary
rights to computer  software through  copyright,  non-disclosure  agreements and
software licenses.

Distributor Support and Warranty Policy

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

Competition

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

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

Backlog

As of October 31, 1995, 1994 and 1993, the Company's  backlog of purchase orders
that management  believes to be firm was $10.5 million,  $2.8 million,  and $5.1
million,  respectively.  The Company  expects to deliver all  products  from its
October 31, 1995 backlog  during  fiscal 1996.  The Company  generally  delivers
large system  configured  products to customers within six to eight weeks of its
receipt of firm orders.  Where the Company makes direct end-user  installations,
deliveries  generally  occur four to eight  weeks from  receipt of firm  orders.
Management  does  not  believe  that  the  Company's  backlog  is  a  meaningful
indication of future sales.

Employees

As of October 31, 1995, the Company had 241 full-time employees, of whom 48 were
product  development  personnel,  66 were production  personnel,  84 were sales,
marketing and service support  personnel and 43 were  administrative  personnel.
This  compares to 288 at October 31, 1994.  The decrease from 1994 was primarily
attributable  to a  restructuring  of the  Company's  manufacturing  operations.
Subsequent to year-end, the Company further reduced its personnel to 216, with a
restructuring of production and administrative personnel.

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


Item 2.       Properties

The Company's  executive  offices and  engineering  facilities of  approximately
22,800 square feet, located at 565 Taxter Road, Elmsford,  New York, are subject
to a lease expiring in February 1999, with an option to further extend the lease
until February 2003. The Company, during 1995, relocated its production facility
from its 67,000 square foot facility in Yonkers,  New York, and currently leases
approximately 15,000 square feet at Three Westchester Plaza, Elmsford, New York,
where it conducts its assembly and quality  assurance  operations,  subject to a
lease expiring in 2001, with an option to renew into 2003.

During 1995, the Company  relocated its Licom  headquarters to a nearby facility
in Herndon,  Virginia.  The new facility consists of approximately  8,600 square
feet of office and production  space with a lease expiring in June 2000, with an
option to renew for five years.

The Company  leases office and  production  space related to its United  Kingdom
operation.  The Company has  exercised an option to  terminate  the sales office
lease of  approximately  1,700 square feet located in London  effective May 1996
and is  currently  pursuing  alternative  locations to lease office space in the
same area in London.  The production  facility and  administrative  offices with
approximately  20,000 square feet located  within 20 miles  southeast of London,
are subject to a lease expiring in 2005.

Leases  for  the  domestic   sales  and  service   support   locations   include
approximately: 5,900 and 2,500 square feet located in New York City, expiring in
April 1997 and July 1999,  respectively;  1,300  square feet  located in Boston,
Massachusetts,  expiring  in April  1996;  and,  1,800  square  feet in Chicago,
Illinois,  expiring  in  November  1996.  Subsequent  to the fiscal year end the
company  extended  its  lease  for  1,800  square  feet of  office  space in San
Francisco, California, for one year to expire in December 1996;

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


Item 3.       Legal Proceedings

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

There are no other material pending legal proceedings as of December 31, 1995.


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, 1995.
<PAGE>
                                     Part II

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

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

Fiscal 1995                      High       Low
-----------                     ------    ------
Fourth Quarter                  $ 2.75    $ 1.88
Third Quarter                   $ 3.50    $ 1.88
Second Quarter                  $ 3.25    $ 1.88
First Quarter                   $ 5.25    $ 2.75

Fiscal 1994                      High       Low
-----------                     ------    ------
Fourth Quarter                  $ 5.63    $ 3.88
Third Quarter                   $ 4.75    $ 3.63
Second Quarter                  $ 6.25    $ 4.13
First Quarter                   $ 5.88    $ 4.38

As of December 31, 1995, there were  approximately  600 holders of record of the
Company's Common Stock.

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

The selected  financial data presented  below have been derived from the audited
financial statements of the Company, and should be read in connection with those
statements, which are included herein.
<TABLE>
<CAPTION>
                                                    For the Year Ended October 31,
                             ------------------------------------------------------------------------------
                               1995             1994             1993            1992                1991
                             --------         --------         --------         --------           --------
                                                   (in 000's, except per share data)
<S>                          <C>              <C>              <C>              <C>                <C>     
Sales ...............        $ 29,351         $ 31,078         $ 25,741         $ 28,888           $ 24,155
Income (loss)
  before cumulative
  effect of
  accounting change .         (11,594)             627           (1,134)             248              1,253(1)
Cumulative effect
  of accounting
  change ............            --              1,242             --               --                 --
                             --------         --------         --------         --------           --------
Net income (loss) ...        $(11,594)        $  1,869         $ (1,134)        $    248           $  1,253(1)
                             ========         ========         ========         ========           ========   

Per share data:
  Income (loss)
    before
    cumulative
    effect of
    accounting change        $  (2.18)        $    .12         $   (.21)        $    .04           $    .19(1)
  Cumulative effect
    of accounting
    change ..........            --                .23             --               --                 --
                             --------         --------         --------         --------           --------
  Income (loss) per
    share ...........        $  (2.18)        $    .35         $   (.21)        $    .04           $    .19(1)
                             ========         ========         ========         ========           ========

Weighted average
  number of shares
  of common stock
  and common stock
  equivalents .......           5,322            5,311            5,285            6,069              6,640
Cash dividends per
  common share ......        $    .00         $    .00         $    .00         $    .00           $    .00
Working capital .....        $  9,622         $ 18,935         $ 19,684         $ 19,931           $ 27,008
Total assets ........        $ 21,212         $ 36,027         $ 30,639         $ 29,944           $ 39,708
Shareholders' equity         $ 14,398         $ 26,039         $ 23,963         $ 25,273           $ 33,540
</TABLE>

(1)  Includes the net effect of settling a claim made by the Company against its
     United Kingdom distributor,  Mercury Dealing Systems, of approximately $2.0
     million, or $.17 per share.
<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,
                                                   -----------------------------
                                                    1995        1994       1993
                                                    -----       -----      -----
<S>                                                 <C>         <C>        <C>  
Sales
  Equipment .................................        80.4%       86.7%      92.3%
  Service ...................................        19.6        13.3        7.7
                                                    -----       -----      -----
Total sales .................................       100.0       100.0      100.0

Cost of sales
  Equipment(*) ..............................        88.8        55.4       59.3
  Service(*) ................................        48.1        71.6       44.0
                                                    -----       -----      -----
Total cost of sales .........................        80.8        57.5       58.1
                                                    -----       -----      -----
Gross Profit ................................        19.2        42.5       41.9
Selling, general and
  administrative expenses ...................        44.6        30.7       35.4
Research and development expenses ...........        13.4        10.7       12.7
                                                    -----       -----      -----
Operating income (loss) .....................       (38.8)        1.1       (6.2)
                                                    =====       =====      =====
Income (loss) before cumulative
  effect of accounting change ...............       (39.5)        2.0       (4.4)
Cumulative effect of accounting change ......          --         4.0         --
                                                    -----       -----      -----
Net income (loss) ...........................       (39.5)%       6.0%      (4.4)%
                                                    =====       =====      =====
</TABLE>
* Presented as a percentage of the related sales categories.


Sales

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

Sales in 1995 to non-financial customers (i.e.,  government agencies,  airlines,
public  utilities)  accounted for $3.7 million,  or 13% of sales, a $1.1 million
decrease  from 1994  non-financial  customer  sales.  The  decrease  was related
primarily  to lower sales of specially  enhanced  E9-1-1  products  made under a
contract with a division of AT&T which expired in 1994.

Sales for the year ended October 31, 1994 were $31.1 million,  a $5.4 million or
a 21%  increase  over sales for 1993.  The  increase  in sales was  attributable
primarily to the  introduction  of the Company's  latest user interface  product
named Power Deck, of $2.6 million.  In addition,  service sales increase of $2.1
million,  from $2.0  million in 1993 to $4.1 million in 1994,  was  attributable
primarily  to the sales and service  operations  acquired in 1994.  Furthermore,
sales for  Licom's  ProMX  product  increased  $.6  million,  or 18%, in 1994 as
compared to 1993.

Sales in 1994 to non-financial customers (i.e.,  government agencies,  airlines,
public  utilities)  accounted for $4.8 million,  or 15% of sales,  a $.8 million
increase  from 1993  non-financial  customer  sales.  The  increase  was related
primarily to increased business in the power utilities industry, offset by lower
E9-1-1 product sales.

Since the Company sells product to its foreign  customers  and  distributors  in
U.S. dollars,  it is unaffected by currency  translations.  The Company's United
Kingdom operations transacts sales in pounds sterling or US dollars. Those sales
transacted in pounds sterling were not materially  impacted by foreign  exchange
rate  fluctuations  during  1995 or 1994.  The Company  has,  from time to time,
hedged foreign currency transactions when deemed necessary.

Reflecting the transformation of the Company's  distribution channels from third
party distributors to a direct sales and service network,  $24.1 million, or 82%
of total  sales were  direct in 1995,  as  compared  to $21.5  million and $13.5
million, or 70% and 53% of sales in 1994 and 1993, respectively.

Gross Profit Margins

Gross  profit  margins  were 19% in 1995 as compared  to 42% in 1994.  Equipment
gross profit  margins were 12% in 1995, as compared to 45% in 1994. The decrease
in equipment gross profit margins was attributable primarily to three factors --
$3.8 million of special  fourth quarter  expense  adjustments,  a  manufacturing
restructuring program initiated by the Company, and competitive  discounting for
the Company's product.

The Company  recorded  several special fourth quarter 1995 expense  adjustments,
including a $2.3 million increase in inventory reserves related to older product
lines, a $.9 million  write-off of an intangible  asset related to a license for
product technology no longer used, a $.3 million of inventory charges, and a $.3
million increase in warranty reserves.  Additionally,  the Company  restructured
its production operations during the year from an internal manufacturing process
to one which relies to a  significant  extent on  out-sourcing  of the Company's
sub-assemblies.   This  transition  process  yielded   significant   unfavorable
manufacturing variances during the year. Also, the Company found it necessary to
offer larger discounts for its products in order to meet competitive challenges.

Service gross profit margins increased to 52%, in 1995 from 28% in 1994. Service
sales  increased  39%  over  1994  levels  as  the  Company  transformed  from a
distributor  based network to that of a direct sales and service network,  while
the service  cost of sales  decreased  6%, due to economies of scales and better
efficiencies brought about by a larger customer base.

Gross  profit  margins  were 42% in both 1994 and 1993.  Equipment  gross profit
margins  improved  to 45%, in 1994,  from 41%, in 1993,  as a result of a higher
sales volume of the  Company's  Power Deck and VIAX DN product  which  typically
earn higher gross margins, combined with the effect of direct sales resulting in
higher gross margins and success of cost containment  efforts in  manufacturing.
Service  gross  profit  margins  declined  to 28%, in 1994 from 56% in 1993 as a
result of a lower percentage of high-margin  repair service sales,  coupled with
costs related to the integration of the Company's newly transformed direct sales
and service network developed largely through acquisitions.

Operating Expenses

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

Total operating expenses for 1994 increased to $12.8 million,  representing a 3%
increase from $12.4 million for 1993.  Operating  expenses as a percent of sales
were 41% in 1994 as compared to 48% in 1993. Selling, general and administrative
expenses  decreased as a percentage  of sales from 35% in 1993 to 31% in 1994 as
the  equipment and service  sales,  derived from the business  acquisitions  and
product  introductions,  increased 21%, while the related fixed  operating costs
increased 13%.  Although research and development costs were consistent with the
1993 level of $3.3 million,  the sales increase of 21% from 1993 to 1994 brought
research and  development  expenses  down to 11% of sales in 1994 as compared to
13% of sales in 1993.

Selling,  general and  administrative  costs for 1995  increased $3.6 million to
$13.1 million, or 38%, from $9.5 million in 1994. Of the increase,  $2.4 million
was attributable to the full year impact of the Company's  London,  New York and
Boston sales and service  center  operations  which were  acquired  during 1994.
Additionally, the Company exercised its right to terminate its current lease for
67,000 square feet of manufacturing space in Yonkers, New York,  relocating to a
15,000 square foot production and assembly  facility in Elmsford,  New York. The
Company  recorded a $.4 million  non-recurring  restructuring  charge related to
expenses to be incurred  and assets to be disposed of during the  transition  of
the  manufacturing  facility  to the new  location.  Additionally,  the  Company
further   restructured  its   manufacturing,   engineering  and   administrative
departments,  resulting in a severance accrual and other  miscellaneous costs at
year-end of $.8 million.

Selling,  general and administrative costs for 1994 increased 5% to $9.5 million
from  $9.1  million  in  1993.  In  1994,  the  level of  selling,  general  and
administrative  costs was  positively  affected by a reversal  of the  remaining
relocation  reserve of $.4 million,  originally  established in 1990,  which was
attributable  to the  renegotiation  of the  lease  at the  Company's  executive
offices.  Additionally,  in 1993 the Company recorded a non-recurring  executive
severance  charge of $.5  million  and an increase in reserves of $.2 million on
potentially  uncollectible  accounts and notes receivable.  When excluding these
aforementioned non-recurring items, selling, general and administrative expenses
increased in 1994 by $1.5  million,  or 13%, over 1993,  which was  attributable
primarily  to  increased  expenses  as a result  of the  newly-acquired  service
operations in Boston and New York and  manufacturing  and service  operations in
the United Kingdom.

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

Research and development  expenses for 1994, $3.3 million,  remained at the 1993
levels. Research and development expenses as a percent of sales decreased to 11%
in 1994,  as compared to 13% in 1993.  This  decrease was a result of developing
the final stages of the Power Deck in 1993, while sales for that product did not
occur until 1994. Additionally, service sales, which increased from $2.0 million
in 1993 to $4.1  million  in  1994,  do not  require  significant  research  and
development related expenditures.

Other Income and Expense

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

Net investment  income for 1994 was $.4 million,  a decrease of $.2 million from
1993.  The decrease  was  attributable  primarily to the decrease in  marketable
securities,   of  which  $4.4  million  was  used  for  the  Company's  business
acquisitions.

Provision for Income Taxes

Effective   November  1,  1993,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 109 ("SFAS 109"),  "Accounting for Income Taxes." Under
SFAS 109, the deferred tax provision is determined  under the liability  method.
Under this method, deferred tax assets and liabilities are recognized,  based on
differences between the financial statement carrying amount and the tax basis of
assets and liabilities  using presently enacted tax rates. The cumulative effect
of the  adoption of SFAS 109 as of November 1, 1993,  was  $1,242,000,  net of a
valuation allowance of $150,000.  There was no change in the valuation allowance
during 1994.  During 1995 the Company recorded an additional  deferred tax asset
of $4,325,000 and also recorded an additional valuation allowance of $4,876,000.
The total valuation  allowance as of October 31, 1995 of $5,026,000  reduces the
deferred tax asset to the amount that  management  believes  will  ultimately be
realized.  During  1995,  the  Company  reversed  $250,000  of prior  years' tax
accruals which are no longer  required.  The Company's  1995,  1994 and 1993 tax
provisions  of $301,000,  $150,000 and $50,000  reflect  effective  tax rates of
(3)%, 19%, and (5)%, respectively.

Net Income (Loss) Per Share

For 1995, the Company recorded a net loss of $11.6 million,  or $2.18 per share,
as  compared  to net  income  of $.6  million,  or $.12 per  share,  before  the
cumulative  effect in 1994 of the accounting  change for income taxes, and a net
loss of $1.1 million in 1993,  or $.21 per share.  Inclusive  of the  cumulative
effect of the accounting change, net income was $1.9 million, or $.35 per share,
in 1994.

Liquidity and Capital Resources

In order to meet its liquidity  demands during fiscal 1996, the Company may seek
to obtain a credit facility from a lending institution.  The Company has no debt
outstanding  and  believes  it will be able to obtain a credit  facility  which,
together  with other  resources,  would  provide  sufficient  liquidity  to meet
projected requirements.

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

The Company's  aggregate of cash, cash equivalents and marketable  securities at
October  31,  1994  declined  $6.4  million,  to $7.7  million,  compared to the
balances reported at October 31, 1993. This decline was largely  attributable to
the use of funds for business acquisitions made in 1994. In addition,  inventory
balances  increased to support the  introduction  of Power Deck and the multiple
inventory locations to support direct sales and maintenance customers.  Accounts
receivable  balances  increased  as a result of a  higher-than-normal  volume of
sales in the latter part of the fourth quarter  related to the  introduction  of
Power Deck. Cash levels were offset as a result of higher  accounts  payable due
to  increased  inventories  to meet sales  levels for the fourth  quarter  1994.
Customer  deposits  increased  during 1994 due to pre-payments  received against
future large sales orders.  Capital expenditures during 1994 were $.6 million as
compared to $.7 million in 1993.

The  Company's  working  capital was $9.6  million as of October 31, 1995 a $9.3
million decrease from $18.9 million as of October 31, 1994.  Working capital was
$18.9 million as of October 31, 1994, a $.8 million  decrease from $19.7 million
as of October 31, 1993.

The Company  has no  significant  commitments  for  capital  expenditures  as of
October 31, 1995.

The  Company's  cash  management  practice  is to  invest  mainly  in  medium to
high-grade  municipal  securities  and United States  Treasury and United States
Government Agency securities, with maturities ranging from 90 days to 3 years.


Item 8.  Financial Statements and Supplementary Data

The response to this item is incorporated by reference to pages F-1 through F-13
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)                  54      Chairman, Chief Executive Officer, Director
  John E. Petronzi                    47      Executive Vice President
  Thomas Hughes                       36      Chief Operating Officer
  Mark R. Hahn                        38      Vice President - Chief Financial Officer
  Sven R. Englund (4)                 42      Vice President - Engineering
  George J. Rogers (5)                42      Vice President
  Luke P. LaValle, Jr. (2)(3)         53      Director
  Thomas H. Lenagh (2)                71      Director
  Brian S. North (1)                  44      Director
  Joseph M. O'Donnell (1)(3)          49      Director
  A. Eugene Sapp, Jr.                 59      Director
  Paul B. Twomey (6)                  62      Director
  J. Stephen Vanderwoude (3)          52      Director
</TABLE>

(1)  Member of stock option committee.
(2)  Member of audit committee.
(3)  Member of compensation committee.
(4)  Resigned as an Officer effective November 17, 1995.
(5)  Resigned as an Officer effective November 3, 1995.
(6)  Resigned as a Director effective October 31, 1995.


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

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

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

John E.  Petronzi has served as Executive  Vice  President of the Company  since
January 1994.  Prior to joining the Company,  Mr.  Petronzi was Vice President -
Sales and Marketing for JWP Telecom,  Inc., from 1992. Prior to that he was Vice
President and General Manager for JWP Integrated  Communications  Services, from
1990. From 1982 through 1990, he held various positions with Centel  Corporation
subsidiaries, most recently as Regional Vice President for Centel Communications
Systems.

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

Luke P.  LaValle,  Jr. has served as a Director of the Company  since June 1992.
Since 1980,  Mr.  LaValle has been  President  and Chief  Investment  Officer of
American  Capital  Management,  Inc., a New York City based  management firm for
individuals,  trusts,  pension  and profit  sharing  accounts.  Prior to forming
American  Capital  Management,  Inc., Mr. LaValle 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.
Mr.  Lenagh is also a Director  for CML,  Inc.,  Gintel  Funds,  Adams  Express,
Clemente  Growth  Fund,  U.S.  Life Co., SCI Systems,  ICN  Biomedicals,  Irvine
Sensors Corporation, Franklin Quest and Styles on Videos.

Brian S. North has served as a Director of the Company since September 1988. Mr.
North has been a member of the law firm of White and Williams  since 1994.  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., an energy resources company.

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

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 the  President,  Chief
Operating  Officer and Director of the company since 1981.  Mr. Sapp also serves
as a Director of Irvine Sensors Corp., and CMS, Inc. of Tampa, Florida.

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

Each officer is elected by and serves at the pleasure of the Board of Directors.
Directors  are elected  annually by the  shareholders,  except when the Board of
Directors  may elect a director  to fill a vacancy on the Board.  The  executive
officers of the Company are elected annually by the Board of Directors.

The Board of Directors has three standing  committees:  Stock Option,  Executive
Compensation  and Audit  Committees.  The Stock Option  Committee  exercises the
responsibilities  of the Board in granting options under and  administering  the
Company's 1982  Incentive  Stock Option Plan and its 1984 Stock Option Plan. The
Executive  Compensation  Committee's principal functions are to recommend to the
Board of Directors the compensation  arrangements for the executive  officers of
the  Company.  The Audit  Committee's  principal  functions  are to review  with
internal financial staff and the Company's  independent  public accountant,  the
Company's   reporting  process  and  internal  controls  and  to  recommend  the
selection,  retention or termination of the independent public accountants.  The
Company has entered into  Indemnity  Agreements  with each of its  directors and
certain of its officers, pursuant to which the Company is obligated to reimburse
or pay certain  expenses  incurred by its directors and officers  arising out of
claims made against them in connection with their services to the Company.
<PAGE>
Item 11. Executive Compensation

SUMMARY COMPENSATION TABLE

The following  table sets forth  information  for each of the fiscal years ended
October 31, 1995,  1994 and 1993  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 1995 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,                     1995         $199,000         $   --          $--               --           $  1,528
Chairman, Chief Executive           1994          199,998             --           --               --               --
Officer and Director                1993          192,306             --           --               --               --

John E. Petronzi, (3)               1995          150,000           10,000         --             10,000             --
Executive Vice President            1994          130,989             --           --             45,000             --
                                    1993             --               --           --               --               --

Thomas Hughes, (4)                  1995          103,616            3,276         --             16,000            1,036
Chief Operating Officer             1994           88,858             --           --              6,000              889
                                    1993           79,404             --           --               --                794

George J. Rogers, (5)               1995          125,000            4,664         --             10,000            1,250
Vice President                      1994          123,076             --           --             25,000            2,003
                                    1993           99,824             --           --               --              1,696

Sven R. Englund, (6)                1995           97,999            3,276         --               --                980
Vice President                      1994           95,656             --           --              1,500              956
                                    1993           95,346             --           --               --                953
</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. Petronzi joined the Company in January 1994. Mr. Petronzi entered into an
   employment agreement whereby he is entitled to one year's compensation should
   he be terminated without cause. He was also provided a three-year loan in the
   amount of $30,000 with interest at 6% per annum.
4. Mr. Hughes  entered into an agreement with the Company in May 1995 whereby he
   is entitled to receive one year's  compensation  should  there be a change of
   control of the Company within one year from the date of the agreement.
5. Mr. Rogers served as Vice President and Chief Financial  Officer until August
   29, 1995. He resigned from the Company as a Vice President effective November
   3, 1995. He also served as a consultant to the Company  through  December 31,
   1995.
6. Mr. Englund resigned from the Company as a Vice President  effective November
   17, 1995.
<PAGE>
STOCK OPTIONS

The  following  tables  summarize  option  grants  during the fiscal  year ended
October 31, 1995 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, 1995.  The Company does
not maintain any pension plans or any supplementary pension award plans.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year

                                                                                             Potential Realizable value
                                                                                               at Assumed Annual Rates
                                                                                             of Stock Price Appreciation
                                                     Individual Grants                             for Option Term
                           ---------------------------------------------------------------------------------------------
                           Number of         Percentage of
                           Securities        Total Options
                           Underlying         Granted to
                            Options          Employees in       Exercise Price    Expiration
Name                        Granted           Fiscal Year         (Per share)        Date           5%             10%
----                      -----------        -------------      --------------    ----------      -------        -------
<S>                         <C>                  <C>             <C>              <C>             <C>            <C>    
  Thomas Hughes             16,000               21%             $2.00-$3.13         2005         $23,118        $59,782
  John E. Petronzi          10,000               13%                3.13          01/13/2005        7,436         30,351
  George J. Rogerss         10,000               13%                3.13          01/13/2005        7,436         30,351
</TABLE>

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-end Option value
<TABLE>
<CAPTION>
                                                                                       Value of Unexercised in-the
                                                        Number of Unexercised                Money Options at
                                                          Options at FY-End                       FY-End
                                                     --------------------------------------------------------------
                           Shares
                         Acquired on     Value
  Name                    Exercise      Realized     Excercisable   Unexercisable    Excercisable     Unexercisable
  ----                   -----------    --------     ------------   -------------    ------------     -------------
<S>                         <C>           <C>            <C>           <C>              <C>             <C>  
  Thomas E. Feil            --            $ --           25,000          --             $ --            $  --
  Thomas Hughes             --            $ --           11,567        14,000             --              3,750
  John E. Petronzi          --            $ --           25,000        35,000             --               --
</TABLE>
<PAGE>
COMPENSATION OF DIRECTORS

The Company pays each outside  director an annual  director's fee of $7,500 plus
$500 for each board  meeting  attended (up to a limit of six meetings per year),
plus  deferred  cash  compensation  payable  upon  termination  of  service as a
director  in an amount  equal to $2,000 for each year of service as a  director.
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. LaValle,  O'Donnell and Vanderwoude comprise the Compensation Committee.
Messrs. Feil, North and O'Donnell comprise the Stock Option Committee.  Mr. Feil
is an officer and employee of the Company,  but is not eligible to receive stock
options while serving on the 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 December 31, 1995.
<TABLE>
<CAPTION>
                                                                    Number of Shares                Percentage of
                                                                   Beneficially Owned                   Class
                                                                   ------------------               -------------
<S>                                                                     <C>                             <C>  
Thomas E. Feil                                                          1,461,472   (2)(4)              26.3%
565 Taxter Road, Elmsford, NY 10523

Sven R. Englumd                                                            17,054   (4)                   *
565 Taxter Road, Elmsford, NY 10523

Thomas Hughes                                                              14,567   (4)                   *
565 Taxter Road, Elmsford, NY 10523

Luke P. LaValle, Jr.                                                       16,000   (1)(4)                *
460 East 79th Street, New York, NY 10021

Thomas H. Lenagh                                                            9,000   (1)(4)                *
1 Brookside Drive, Westport, CT 06880

Brian S. North                                                             99,000   (1)(3)(4)           1.8%
213 Croft Ridge Drive, Broomall, PA 19008

Joseph M. O'Donnell                                                        16,000   (1)(4)                *
587 Shrub Oak Lane, Fairfield, CT 06430

John E. Petronzi                                                           40,000   (4)                   *
565 Taxter Road, Elmsford, NY 10523

George J. Rogers                                                           61,866   (4)                 1.1%
565 Taxter Road, Elmsford, NY 10523

A. Eugene Sapp, Jr.                                                         2,000   (1)                   *
528 Adams Street, Huntsville, AL 35801
 
Paul B. Twomey                                                             16,000   (1)(4)                *
Rt. # 1, Box 1028, Sly Brook Road, Soldier Pond, ME 04781
 
J. Stephen Vanderwoude                                                      4,000   (1)                   *
Box 1735, 2316 Youngs Road, Southern Pines, NC 28388

All directors and executive officers as a group (13 persons)            1,760,959   (4)                 31.7%
</TABLE>
--------------------
* - less than 1%
<PAGE>
(1) Excludes  options granted upon his election to serve as an outside  director
    at the last  annual  meeting  of  shareholders,  covering  2,000  additional
    shares, exercisable at and after the 1996 annual meeting of shareholders.

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

(3) Includes  80,000 shares held in an irrevocable  trust for which Mr. North is
    the trustee.  Mr. North has no economic interest in the trust.  However,  he
    holds investment and voting authority over such shares.

(4) Includes  shares that may be acquired  upon  exercise of options,  which are
    currently  excercisable or are excercisable within 60 days, as follows:  Mr.
    Feil, 25,000 shares; Mr. Englund,  16,400 shares; Mr. Hughes, 13,567 shares;
    Mr. Sapp, 2,000 shares; Mr. LaValle, 6,000 shares; Mr. Lenagh, 6,000 shares;
    Mr. North, 19,000 shares; Mr. O'Donnell,  16,000 shares; Mr. Twomey,  16,000
    shares;  Mr.  Petronzi,  40,000  shares;  Mr.  Rogers,  60,866  shares;  Mr.
    Vanderwoude,  2,000 shares;  and all  directors and executive  officers as a
    group, 226,833 shares.

Item 13. Certain Relationships and Related ransactions

None.
<PAGE>
                                     Part IV

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

         (a)  1.  Financial Statements:

           Description

Independent Auditors' Report - 1995 and 1994
Report of Independent Public Accountants - 1993
Consolidated Balance Sheets as of October 31, 1995 and 1994
Consolidated Statements of Operations for the Years Ended
  October 31, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the
  Years Ended  October  31,  1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
  October 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements



              2.  Financial Statement Schedule:

VIII     Valuation and Qualifying Accounts

All other  schedules not listed above have been omitted  because the information
has been otherwise supplied in the financial  statements or the notes thereto or
they are not applicable, or the amounts are insignificant or immaterial.

         (b)  Reports on Form 8-K:

              None

         (c)  Exhibits:

               3.1        Restated Certificate of Incorporation. (5)
               3.2        Amended By-Laws. (1)
               10.1       Lease dated April 22, 1988 between registrant and
                          URBCO, Inc. for premises at 565 Taxter Road, Elmsford,
                          New York. (2)
               10.2       Amended and Restated 1982 Incentive Stock Option Plan,
                          as amended. (7)
               10.3       1984 Stock  Option Plan adopted by Registrant on 
                          June 27, 1984, as amended. (7)
               10.4       1986 Employee Stock Purchase Plan, as adopted by
                          Registrant in December 1985, as amended. (7)
               10.5       Rights Agreement, dated as of February 20, 1989 
                          between the Company and Registrar & Transfer Company,
                          as rights agent. (4)
               10.6       Letter of Registrant to Thomas E. Feil dated
                          August 29, 1989. (1)
               10.7       Adoption of Non-Standardized Retirement Plan and Trust
                          (401-K) dated January 1, 1989, as amended. (5)
               10.8       Amendment dated October 14, 1991 to a lease dated
                          April 22, 1988 between the Company and URBCO, Inc.
                          for premises at 565 Taxter Road, Elmsford, 
                          New York. (7)
               10.9       Second Amendment dated February 20, 1992 to a lease
                          dated April 22, 1988 between the Company and 
                          URBCO, Inc. for premises at 565 Taxter Road, Elmsford,
                          New York. (7)
               10.10      Third Amendment dated May 28, 1993 to a lease dated
                          April 22, 1988 between the Company and URBCO, Inc.
                          for premises at 565 Taxter Road, Elmsford,
                          New York. (6)
               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)
               16         Letter regarding change in certifying accountant (3)
               21         Subsidiaries
               23.1       Consent of Deloitte & Touche LLP
               23.2       Consent of Arthur Andersen LLP

Footnotes to Exhibits

1. Filed as an exhibit to the Company's  Annual Report on Form 10-K for the year
   ended October 31, 1989, and incorporated herein by reference.
2. Filed as an exhibit to the Company's  Annual Report on Form 10-K for the year
   ended October 31, 1988, and incorporated herein by reference.
3. Filed as an exhibit to the Company's  Current  Report on Form 8-K filed March
   18, 1994, and incorporated herein by reference.
4. Filed as an exhibit to the Company's registration statement on Form 8-A filed
   February 22, 1989, and incorporated 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  Quarterly  Report on Form 10-K for the
   period ended October 31, 1994.
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.
<PAGE>
                                   SIGNATURES

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

                               V BAND CORPORATION

Dated: January 22, 1996        By: /s/ Mark R. Hahn
                                  ----------------------------------------------
                                  Mark R. Hahn, Chief Financial Officer
                                  (Principal Financial and Accounting Officer)

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears below
constitutes  and  appoints  each of Thomas E. Feil and Mark R. Hahn his true and
lawful   attorney-in-fact  and  agent,  with  full  power  of  substitution  and
resubstitution  for  him  and in his  name,  place  and  stead,  in any  and all
capacities,  to sign any or all  amendments  to this Annual Report on Form 10-K,
and to file  the  same,  with all  exhibits  thereto,  and  other  documents  in
connection therewith, with the Securities and Exchange Commission, granting unto
each of said  attorney-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
---------------------         Chairman, Chief                   January 25, 1996
Thomas E. Feil                Executive Officer
                              and Director
                              (Principal
                              Executive Officer)


/s/ Mark R. Hahn
---------------------         Chief Financial                   January 25, 1996
Mark R. Hahn                  Officer (Principal
                              Financial and
                              Accounting Officer)


/s/ Luke P. LaValle, Jr.      Director                          January 25, 1996
------------------------
Luke P. LaValle, Jr.


/s/ Thomas H. Lenagh
---------------------         Director                          January 25, 1996
Thomas H. Lenagh


/s/ Brian S. North
---------------------         Director                          January 25, 1996
Brian S. North


/s/ Joseph M. O'Donnell       Director                          January 25, 1996
-----------------------
Joseph M. O'Donnell


/s/ A. Eugene Sapp, Jr.       Director                          January 25, 1996
-----------------------
A. Eugene Sapp, Jr.


/s/ J. Stephen Vanderwoude    Director                          January 25, 1996
--------------------------
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, 1995 and 1994, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
the years then  ended.  Our audits  also  included  the 1995 and 1994  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 1995 and 1994 consolidated  financial  statements  present
fairly, in all material  respects,  the financial position of V Band Corporation
and  subsidiaries  as of October  31,  1995 and 1994,  and the  results of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting  principles.  Also, in our opinion,  such 1995 and
1994  financial  statement  schedule,  when  considered in relation to the basic
consolidated  financial  statements  taken as a whole,  presents  fairly  in all
material respects the information set forth therein.

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


DELOITTE & TOUCHE  LLP

Stamford, Connecticut
December 19, 1995
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To V Band Corporation:

We  have  audited  the  accompanying   consolidated  statements  of  operations,
shareholders'  equity,  and  cash  flows  of V  Band  Corporation  (a  New  York
Corporation)  and  subsidiaries  for the year  ended  October  31,  1993.  These
financial  statements and the schedule referred to below are the  responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements and schedule based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  results  of  operations  and cash flows of V Band
Corporation and  subsidiaries  for the year ended October 31, 1993 in conformity
with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a whole.  The  schedule  listed in the  index of  financial
statements  is  presented  for  purposes of complying  with the  Securities  and
Exchange  Commission's rules and is not part of the basic financial  statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic  financial  statements  and, in our opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.


ARTHUR ANDERSEN  LLP

New York, New York
December 16, 1993
<PAGE>
                       V BAND CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            OCTOBER 31, 1995 AND 1994
                          (in 000's, except share data)
<TABLE>
<CAPTION>
                                                                     1995             1994
                                                                   --------         --------
<S>                                                                <C>              <C>     
ASSETS
Current Assets
Cash and cash equivalents                                          $  2,740         $  3,122
Marketable securities, at cost (approximates market)                    187            4,603
Accounts receivable, less allowance for doubtful
accounts of $456 in 1995 and $263 in 1994                             4,783            7,669
Inventories. net                                                      7,596           11,773
Deferred tax asset                                                      700            1,251
Prepaid expenses and other current assets                               430              505
                                                                   --------         --------
          Total current assets                                       16,436           28,923
                                                                   --------         --------
Fixed Assets
Furniture, fixtures, equipment and leasehold improvements             9,392           10,019
Less: Accumulated depreciation and amortization                      (7,821)          (8,536)
                                                                   --------         --------
Total fixed assets                                                    1,571            1,483
                                                                   --------         --------
Other Assets                                                          3,205            5,621
                                                                   --------         --------
TOTAL ASSETS                                                       $ 21,212         $ 36,027
                                                                   ========         ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable                                                   $  1,538         $  3,600
Accrued wages                                                         1,097              872
Customer deposits                                                     1,846            2,842
Other accrued expenses                                                2,333            2,674
                                                                   --------         --------
Total current liabilities                                             6,814            9,988
                                                                   --------         --------
Commitments and Contingencies (see notes)
Shareholders' Equity
Common stock, $.01 par value; authorized 20,000,000 shares:
issued 7,042,492 in 1995 and 7,035,770 in 1994                           70               70
Capital in excess of par value                                       19,776           19,756
Retained earnings                                                     6,215           17,809
Cumulative translation adjustment                                       105              172
                                                                   --------         --------
                                                                     26,166           37,807
Less - Treasury stock, at cost; 1,719,322 shares                    (11,768)         (11,768)
                                                                   --------         --------
Total shareholders' equity                                           14,398           26,039
                                                                   --------         --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $ 21,212         $ 36,027
                                                                   ========         ========
</TABLE>
                 See notes to consolidated financial statements
<PAGE>
                       V BAND CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
                        (in 000's, except per share data)
<TABLE>
<CAPTION>
                                                         1995             1994            1993
                                                       --------         --------        --------
<S>                                                    <C>              <C>             <C>     
Sales
  Equipment                                            $ 23,591         $ 26,944        $ 23,770
  Service                                                 5,760            4,134           1,971
                                                       --------         --------        --------
      Total sales                                        29,351           31,078          25,741
                                                       --------         --------        --------
Cost of Sales
  Equipment                                              20,958           14,925          14,091
  Service                                                 2,770            2,959             867
                                                       --------         --------        --------
      Total cost of sales                                23,728           17,884          14,958
                                                       --------         --------        --------
Gross profit                                              5,623           13,194          10,783
                                                       --------         --------        --------
Operating Expenses
  Selling, general and administrative                    13,076            9,539           9,116
  Research and development                                3,935            3,308           3,278
                                                       --------         --------        --------
      Total operating expenses                           17,011           12,847          12.394
                                                       --------         --------        --------
      Operating income (loss)                           (11,388)             347          (1,611)

  Net investment income                                      73              427             666
  Other income (Expense)                                     22                3            (139)
                                                       --------         --------        --------
      Income (loss) before Income taxes and
        cumulative effect of accounting change          (11,293)             777          (1,084)
  Provision for Income Taxes                                301              150              50
                                                       --------         --------        --------
      Income (loss) before cumulative effect of
        accounting change                               (11,594)             627          (1,134)
  Cumulative Effect of Accounting Change                   --              1,242            --
                                                       --------         --------        --------
      Net Income (loss)                                $(11,594)        $  1,869        $ (1,134)
                                                       ========         ========        ======== 
Per share data
  Income (loss) before cumulative effect of
    accounting change                                  $  (2.18)        $    .12        $   (.21)
  Cumulative effect of accounting change                   --                .23            --
                                                       --------         --------        --------
  Net income (loss)                                    $  (2.18)        $    .35        $   (.21)
                                                       ========         ========        ======== 
Weighted average number of shares of common
  stock and comxnon stock equivalents                     5,322            5,311           5,285
                                                       ========         ========        ======== 
</TABLE>
                 See notes to consolidated financial statements
<PAGE>
                       V BAND CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE YEARS ENDED OCTOBER 31 1995, 1994 AND 1993
                                   {in 000's)
<TABLE>
<CAPTION>
                                                                Capital in
                                                                 Excess of                        Cumulative
                                                  Common           Par           Retained         Translation      Treasury
                                                  Stock           Value          Earnings         Adjustment        Stock
                                                 --------       ---------        --------         -----------      -------- 
<S>                                              <C>             <C>             <C>                 <C>           <C>      
Balance, November 1, 1992                        $     70        $ 19,462        $ 17,074            $  61         $(11,394)
Proceeds from the employee stock purchase
  plan                                               --                88            --               --               --
Stock options exercised                              --                86            --               --               --
Net loss                                             --              --            (1,134)            --               --
Purchase of treasury stock                           --              --              --               --               (374)
Translation adjustment                               --              --              --                 24             --
                                                 --------        --------        --------            -----         -------- 
Balance, October 31, 1993                              70          19,636          15,940               85          (11,768)

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

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

                 See notes to consolidated financial statements
<PAGE>
                       V BAND CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
                                   (in 000's)
<TABLE>
<CAPTION>
                                                               1995             1994             1993
                                                             --------         --------         -------- 
<S>                                                          <C>              <C>              <C>      
Cash Flows from Operating Activities
  Net Income (loss)                                          $(11,594)        $  1,869         $ (1,134)
  Adjustments to reconcile net income (loss) to net
    cash (used in) provided by operating activities:
      Cumulative effect of accounting change                     --             (1,242)            --
      Depreciation                                                731              836              885
      Amortization and write-off of other assets                1,967              707              613
      Provision for doubtful accounts                             237              133              266
      Provision for inventory reserves                          2,734              990              629
      Deferred Income taxes                                       551               (9)            --
      (Gain) loss on disposat of fixed assets                    (166)            --                107
      Changes in assets and liabilities (net of
        business acquisitions):
          Decrease (increase) in accounts receivable            2,649           (2,394)           2,104
          Decrease (increase) in inventories                    1,443           (3,046)          (3,401)
          Decrease in prepaid expenses and other
            current assets                                         75              333              156
          Decrease in other assets                                449             (952)              61
          (Decrease) Increase in accounts payable and
             accrued expenses                                  (3,174)           1,114            2,008
          Foreign currency translation adjustment                 (67)              87               24
                                                             --------         --------         -------- 
              Net cash (used in) provided by
                operating activities                           (4,165)          (1,574)           2,318
                                                             --------         --------         -------- 
Cash Flows from Investing Activities
  Purchase of marketable securities                            (3,530)          (5,642)         (16,894)
  Sale of marketable securities                                 7,946           12,150           16,684
  Proceeds from the sale of fixed assets                          257
  Capital expenditures                                           (910)            (570)            (717)
  Payments for business acquisitions                             --             (4,365)            --
                                                             --------         --------         -------- 
              Net cash provided by (used in)
                investing activities                            3,763            1,573             (927)
                                                             --------         --------         -------- 
</TABLE>
(Continued)
<PAGE>
                       V BAND CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
               FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
                                   (in 000's)
<TABLE>
<CAPTION>
                                                               1995             1994             1993
                                                             --------         --------         -------- 
<S>                                                          <C>              <C>              <C>      
Cash Flows from Financing Activities
  Proceeds from issuance of common stock                           20              120              174
  Purchase of treasury stock                                     --               --               (374)
                                                             --------         --------         -------- 
              Net cash provided by (used in)
                financing activities                               20              120             (200)
                                                             --------         --------         -------- 
Net (decrease) increase in cash and cash equivalents             (382)             119            1,191
Cash and Cash Equivalents, at beginning of year                 3,122            3,003            1,812
                                                             --------         --------         -------- 
Cash and Cash Equivalents at end of year                     $  2,740         $  3,122         $  3,003
                                                             ========         ========         ========
Supplementary Disclosures
Income taxes paid                                            $    215         $    146         $  4,700
                                                             ========         ========         ========

</TABLE>
                 See notes to consolidated financial statements

<PAGE>
                           V BAND CORPORATION AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:  The Company

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

Note 2:  Significant accounting policies

Consolidation

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

Inventories

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

Furniture, fixtures, equipment and leasehold improvements

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

Revenue recognition

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

Investment income

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

During 1995 and 1994,  deferred  income taxes were  provided  for the  temporary
differences  between the financial  reporting  basis and the income tax basis of
the Company's  assets and  liabilities in accordance with Statement of Financial
Accounting  Standards No. 109.  During 1993,  the provision for income taxes was
provided under Accounting Principles Board Opinion No. 11. See Note 7.

Income (loss) per share

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

Cash and cash equivalents

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

Foreign currency translation

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

Management estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues and  expenses  during the  reported  periods.
Actual results could differ from those estimates.
<PAGE>
Note 3:  Inventories

Inventories are as follows, at October 31:
<TABLE>
<CAPTION>
                                                  1995                 1994
                                              ------------         ------------
<S>                                           <C>                  <C>         
Finished goods                                $  6,270,000         $  5,920,000
Parts and components                             5,761,000            8,607,000
                                              ------------         ------------
                                                12,031,000           14,527,000
Less: Inventory reserves                        (4,435,000)          (2,754,000)
                                              ------------         ------------
                                              $  7,596,000         $ 11,773,000
                                              ============         ============
</TABLE>

Note 4: Other assets

The  Company  has  capitalized  software  costs of  $1,106,000  which  are being
amortized on a straight-line basis over a five year period.

In 1988, the Company entered into a license and  development  agreement with CXC
Corporation  ("CXC") to develop and commercialize  certain switching  technology
for  $2,031,000.  The CXC  license  was  being  amortized  over ten  years,  the
anticipated  useful life of the  technology.  In March 1990, the Company amended
the 1988 licensing  agreement with CXC. The terms of such amendment provide for,
among other things,  a prepaid royalty of $1,040,000,  which was capitalized and
was being  amortized  based on projected units of sales for both the VIAX DN and
Power Deck  products  that contain the  licensed  technology.  The  amortization
commenced upon shipment of the Company's first product unit in 1991.  During the
year ended October 31, 1995,  the Company  reconfigured  the components in their
products,  whereby the CXC technology acquired was no longer utilized.  As such,
the Company  wrote-off the remaining net book value of the CXC intangible assets
in the amount of $867,000.

In July 1994,  the Company  acquired all of the issued share  capital of Mercury
Dealing Systems ("MDS"), a subsidiary of Mercury Communications Limited. MDS had
been a distributor  of the Company's  products in the United Kingdom since 1987.
The  aggregate  purchase  price for the  share  capital  of MDS was  $4,634,000,
inclusive of liabilities  assumed.  The  acquisition was accounted for under the
purchase method, whereby the excess of the purchase price over the fair value of
the net assets acquired was  $3,389,000,  and is being amortized over a ten-year
period.
<PAGE>
If the MDS acquisition had occurred on November 1, 1992,  management  estimates,
on an unaudited pro forma consolidated basis, the following:
<TABLE>
<CAPTION>
                                                     1994              1993
                                                 ------------      ------------
<S>                                              <C>               <C>         
Sales                                            $ 37,200,000      $ 33,800,000
Net income (loss) before cumulative
  effect of accounting change                    $    300,000      $ (1,000,000)
Net income (loss)                                $  1,500,000      $ (1,000,000)
Per share data
Net income (loss) before cumulative
  effect of accounting change                    $        .06      $       (.18)

Net income (loss)                                $        .28      $       (.18)
</TABLE>

The following schedule reflects other assets at October 31:

<TABLE>
<CAPTION>
                                                     1995              1994
                                                 ------------      ------------
<S>                                              <C>               <C>         
MDS acquisition goodwill                         $  3,389,000      $  3,389,000

CXC development                                          --           2,031,000
CXC royalty                                              --           1,040,000
Software capitalization                             1,106,000         1,106,000
Other                                                 665,000           985,000
                                                 ------------      ------------
                                                    5,160,000         8,551,000
Less: Accumulated amortization                     (1,955,000)       (2,930,000)
                                                 ------------      ------------
                                                 $  3,205,000      $  5,621,000
                                                 ============      ============
</TABLE>

The Company  periodically  evaluates  the  recoverability  of goodwill and other
intangible assets by assessing whether the unamortized  intangible assets can be
recovered through cash flows.

Note 5:  Commitments and contingencies

(a) Litigation

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

The Company leases office and  production  space under leases  expiring  between
1996 and 2005. Certain of these lease agreements provide the option for renewals
and include  escalation's  based on  increases in certain  costs.  Based upon an
amendment to the Company's office lease agreement, executed in 1994, the Company
reversed a lease cancellation fee in the amount of $365,000 in 1994.

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

     1996          $1,028,000
     1997             897,000
     1998             833,000
     1999             555,000
     2000             329,000
  Thereafter          420,000

Rent expense for 1995, 1994, and 1993 was $1,152,000, $1,011,000 and $1,215,000,
respectively.

(c) Employment contracts

The Company has  employment  agreements  with certain  officers that provide for
compensation and other benefits upon termination without cause or upon change of
control of the Company.  The aggregate  compensation  to be paid under  existing
employment  agreements  is  $250,000  as of October  31,  1995,  and such future
compensation has not been reflected in the accompanying  consolidated  financial
statements.

The agreement  related to change of control has an expiration dates of May 1996.
The agreement related to the payment of severance upon termination without cause
has no expiration date.

Note 6:  Stock options

The Company has stock option plans that provide for the granting of options,  at
fair market value,  to certain key  employees  and  directors to acquire  common
stock of the Company.


<PAGE>

The following is a summary of stock option  transactions for the two years ended
October 31, 1995:
<TABLE>
<CAPTION>
                                                       Shares              Exercise Prices
                                                       ------              ---------------
<S>                                                    <C>                 <C>            
Shares under option -- November 1, 1993                590,095             $2.50 to $12.75
  Options granted                                      218,300              4.50 to   5.63
  Options exercised                                    (30,250)             2.50 to   4.00
  Options canceled                                     (26,117)             4.00 to  12.75
                                                      --------
Shares under option -- October 31, 1994                752,028              2.50 to   6.88
  Options granted                                       79,500              2.00 to   5.00
  Options canceled                                    (149,333)             2.13 to   6.88
                                                      --------
Shares under option -- October 31, 1995                682,195              2.00 to   6.88
                                                      ========
Options exercisable at:
  October 31, 1994                                     533,128              2.50 to   6.88
                                                      ========
  October 31, 1995                                     546,894              2.50 to   6.88
                                                      ========
Options available for grant at:
  October 31, 1994                                     173,683
                                                      ========
  October 31, 1995                                     245,516
                                                      ========
</TABLE>
Note 7:  Income taxes

Effective   November  1,  1993,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 109 ("SFAS 109"),  "Accounting for Income Taxes." Under
SFAS 109,  deferred income taxes reflect the tax consequences on future years of
differences  between the tax basis of assets and liabilities and their financial
reporting  amounts.  The  cumulative  effect of the  adoption of SFAS 109, as of
November 1, 1993, was to increase net income by  $1,242,000,  net of a valuation
allowance of $150,000.  There was no change in the  valuation  allowance  during
1994.  During 1995,  the Company  recorded an  additional  deferred tax asset of
$4,325,000  and also recorded an additional  valuation  allowance of $4,876,000.
The total valuation  allowance as of October 31, 1995 of $5,026,000  reduces the
deferred tax asset to the amount that  management  believes  will  ultimately be
realized.  Realization  of the deferred tax asset is dependent  upon  sufficient
future  taxable  income  during  the  period  that  temporary   differences  and
carryfowards  are expected to be available to reduce  taxable  income.  Prior to
November  1,  1993,  provisions  were  made  for  deferred  income  taxes  where
differences  existed between the time that transactions  affected taxable income
and the time that these  transactions  entered into the  determination of income
for financial statement purposes.

As  of  October  31,  1995,   the  Company  had  available  net  operating  loss
carryfowards for tax return purposes of approximately  $6,800,000 which begin to
expire in 2009.  During 1995 the Company  reversed  $250,000 of prior years' tax
accruals which are no longer required.
<PAGE>
The income tax provision (benefit) consisted of the following:

<TABLE>
<CAPTION>
                                        1995             1994            1993
                                     ---------        ---------        ---------
<S>                                  <C>                <C>            <C>      
Current
  Federal                            $(250,000)         101,000        $  50,000
  State and local
                                          --             58,000             --
                                     ---------        ---------        ---------
                                      (250,000)         159,000           50,000
                                     ---------        ---------        ---------
Deferred
  Federal                              520,000           (1,000)            --
  State and local                       31,000           (8,000)            --
                                     ---------        ---------        ---------
                                       551,000           (9,000)            --
                                     ---------        ---------        ---------
                                     $ 301,000        $ 150,000        $  50,000
                                     =========        =========        =========
</TABLE>
The  difference  between the recorded  income tax  provision  (benefit)  and the
income taxes computed by applying the statutory  Federal income tax rate was the
following:
<TABLE>
<CAPTION>
                                                  1995                1994                1993
                                               -----------         -----------         -----------
<S>                                            <C>                 <C>                 <C>         
U.S. statutory rate applied to pretax
  income (loss)                                $(3,840,000)        $   264,000         $  (369,000)

Dividends received deduction and
  tax-exempt interest                              (15,000)            (80,000)           (149,000)
Goodwill amortization                              127,000                --                  --
State and local taxes, net of
  federal tax benefit                             (641,000)             33,000                --
Increase in valuation allowance                  4,876,000                --                  --
Reversal of current liability for taxes           (250,000)            (85,000)               --   
Alternative minimum tax                               --                  --                50,000

Losses producing no current tax benefit               --                  --               504,000

Others, net                                         44,000              18,000              14,000
                                               -----------         -----------         -----------
                                               $   301,000         $   150,000         $    50,000
                                               ===========         ===========         ===========
</TABLE>
<PAGE>
The  components  of the deferred  income tax  provision  (benefit) for the years
ended October 31, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
                                                    1995               1994
                                                 -----------        -----------
<S>                                              <C>                <C>      
Net operating loss carryfowards                  $(2,241,000)       $      --
Bad debt reserve                                     (96,000)            13,700
Depreciation                                         (51,000)           (57,000)
Amortization                                          (7,000)           (55,000)
Inventory reserves                                  (807,000)          (184,000)
Accrued expenses                                    (464,000)           339,000
Capitalization of software                           (18,000)           (75,000)
  development costs
Tax credits                                             --               18,000
State taxes                                         (641,000)            (8,700)
                                                  (4,325,000)            (9,000)
Less: Valuation allowance                          4,876,000               --
                                                 -----------        -----------
                                                 $   551,000        $    (9,000)
                                                 ===========        ===========
</TABLE>
The net deferred income tax asset at October 31, 1995 and 1994, consisted of the
following:
<TABLE>
<CAPTION>
                                                        1995            1994
                                                    -----------     -----------
<S>                                                 <C>             <C>         
Deferred tax liabilities
------------------------
Capitalization of software development costs        $   (66,000)    $   (84,000)

Deferred tax assets
-------------------
Depreciation                                            268,000         216,000
Amortization                                             65,000          57,000
Inventory reserves                                    1,420,000         615,000
Accrued expenses                                        616,000         189,000
Bad debt reserve                                        203,000         106,000
State and local taxes, net of
  federal tax benefit                                   787,000         151,000
Net operating loss carry forwards                     2,336,000         135,000
Tax credits                                              97,000          16,000
                                                    -----------     -----------
                                                      5,726,000       1,401,000
Valuation allowance                                  (5,026,000)       (150,000)
                                                    -----------     -----------
                                                    $   700,000     $ 1,251,000
                                                    ===========     ===========
</TABLE>
Taxing authorities may periodically  challenge positions taken by the Company on
its tax returns.  On the basis of  information  presently  available,  it is the
opinion of management that any potential  assessments resulting from current tax
audits  will  not have a  material  impact  on the  financial  condition  of the
Company.
<PAGE>
Note 8:  Segment information

(a) Significant customers

Morgan  Guaranty Trust Company of New York and  affiliates  accounted for 14% of
the Company's  sales in 1995 and 1994.  During 1995,  the Chicago Board of Trade
accounted for 13% of the Company's  sales.  No customer  accounted for more than
10% of sales in 1993.

(b) Foreign sales

In 1995, 1994 and 1993, foreign sales represent 36%, 28% and 28%,  respectively,
of consolidated sales and include the following geographical areas:
<TABLE>
<CAPTION>
                                      1995             1994             1993
                                   -----------      -----------      -----------
<S>                                <C>              <C>              <C>        
Pacific Rim                        $ 1,900,000      $ 3,300,000      $ 3,500,000
Europe (including UK)                7,200,000        3,300,000        2,600,000
All others                           1,400,000        2,100,000        1,200,000
                                   -----------      -----------      -----------
                                   $10,500,000      $ 8,700,000      $ 7,300,000
                                   ===========      ===========      ===========
</TABLE>

Note 9:  Capital transactions

(a) Treasury stock

During the year ended October 31, 1993, the Company repurchased 82,600 shares of
its common stock at the market price in effect at the time of purchase. The cost
of these shares are reflected in treasury stock in the accompanying consolidated
balance sheets.

(b) Stock rights plan

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

(c) Employee stock purchase plan

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

During the fourth  quarter of 1995, the Company  recorded the following  expense
adjustments:

Inventory reserves             $ 2,300,000
Intangible asset write-off         900,000
Inventory charges                  300,000
Warranty reserves                  300,000
Deferred tax asset valuation       600,000
Severance and other                800,000