SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                            OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1997

                                       OR

                  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
                                  THE SECURITIES EXCHANGE ACT OF 1934

                          Commission File Number 1-8086

                        GENERAL DATACOMM INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                               06-0853856
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)

          Middlebury, Connecticut                      06762-1299
(Address of principal executive offices)               (Zip Code)

         Registrant's phone number, including area code: (203) 574-1118

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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:
                                                 Number of Shares Outstanding
        Title of Each Class                           at March 31, 1997
------------------------------------               -----------------------

Common Stock, $.10 par value                            19,004,818
Class B Stock, $.10 par value                            2,136,933


                 Total Number of Pages in This Document is 23.

<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
                                      INDEX 



                                                                      Page No.
                                                                      --------
Part I.  Financial Information
         Consolidated Balance Sheets -
         March 31, 1997 and September 30, 1996                              3
        
         Consolidated Statements of Operations
         and Accumulated Deficit - For the Three and
         Six Months Ended March 31, 1997 and 1996                           4

         Consolidated Statements of Cash Flows - For the
         Six Months Ended March 31, 1997 and 1996
         Notes to Consolidated Financial Statements                         5

         Management's Discussion and Analysis
         of Financial Condition and Results of Operations                   9


Part II.  Other Information

          Item 4. Submission of Matters to a Vote of Security-Holders       15

          Item 6.  Exhibits and Reports on Form 8-K                         15



                                      - 2 -

<PAGE>

                           PART I. FINANCIAL INFORMATION


                GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


                                                         March 31,     Sept 30,
In thousands except shares                                 1997          1996
------------------------------------------------------------------------------- 
ASSETS:                                                 (unaudited)
Current assets:
 Cash and cash equivalents                                $12,391     $26,264
 Accounts receivable, less allowance for doubtful
  receivables of $1,772 in March and $1,768 in September   34,157      39,828
 Inventories                                               45,372      44,588
 Deferred income taxes                                      3,552       4,457
 Other current assets                                       8,444       7,054
-------------------------------------------------------------------------------
Total current assets                                      103,916     122,191
===============================================================================
Property, plant and equipment, net                         49,010      48,838
Capitalized software development costs, net                23,500      23,393
Other assets                                               11,597      10,632
-------------------------------------------------------------------------------
                                                         $188,023    $205,054
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
 Current portion of long-term debt                         $6,880      $6,533
 Accounts payable, trade                                   17,189      14,917
 Accrued payroll and payroll-related costs                  5,845       6,592
 Deferred income                                            7,912       7,305
 Other current liabilities                                 18,881      19,211
-------------------------------------------------------------------------------
Total current liabilities                                  56,707      54,558
 ==============================================================================
Long-term debt, less current portion                       21,465      22,781
Deferred income taxes                                       4,143       4,962
Other liabilities                                             521         567
-------------------------------------------------------------------------------
Total liabilities                                          82,836      82,868
===============================================================================
Commitments and contingent liabilities                          -           -
Stockholders' equity:
 Preferred stock, par value $1.00 per share, 3,000,000
  shares authorized; issued and outstanding: 800,000 shares
  of 9% cumulative convertible exchangeable preferred
  stock with a $20 million liquidation preference             800         800
 Class B stock, par value $.10 per share, 35,000,000 
  shares authorized; issued and outstanding: 2,136,933
  in March and 2,137,443 in September                         214         214
 Common stock, par value $.10 per share, 35,000,000
  shares authorized; issued and outstanding: 19,424,747
  in March and 19,249,987 in September                      1,942       1,925
 Capital in excess of par value                           149,351     148,208
 Accumulated deficit                                      (41,615)    (23,323)
 Cumulative foreign currency translation adjustment        (2,396)     (2,510)
 Common stock held in treasury, at cost:
  419,929 shares in March and 422,429 shares in September  (3,109)     (3,128)
-------------------------------------------------------------------------------
Total stockholders' equity                                105,187     122,186
-------------------------------------------------------------------------------
                                                         $188,023    $205,054
===============================================================================

The accompanying notes are an integral part of these consolidated financial 
statements.


                                       -3-
                        
<PAGE>
                                           
               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND
                               ACCUMULATED DEFICIT
                                   (Unaudited)


                                        Three Months Ended    Six Months Ended
                                            March 31,              March 31,
In thousands, except per share data     1997        1996       1997       1996
-------------------------------------------------------------------------------
Revenues:
 Net product sales                     $40,018    $47,399    $88,238    $95,616
 Service revenue                         9,436      9,584     18,921     19,540
 Lease revenue                           1,317      2,187      2,655      3,813
-------------------------------------------------------------------------------
                                        50,771     59,170    109,814    118,969
-------------------------------------------------------------------------------
Costs and expenses:
 Cost of product sales                  18,892     22,001     42,009     44,919
 Amortization of capitalized
  software development costs             3,000      3,000      6,000      5,600
 Cost of services                        6,823      6,294     13,612     13,258
 Cost of lease revenue                     191        280        329        496
 Selling, general and administrative    21,687     21,642     43,136     43,087
 Research and product development       10,642      7,830     20,315     15,520
-------------------------------------------------------------------------------
                                        61,235     61,047    125,401    122,880
-------------------------------------------------------------------------------
Operating loss                         (10,464)    (1,877)  (15,587)     (3,911)
-------------------------------------------------------------------------------
Other income (expense):
 Interest                                 (499)      (450)     (838)       (887)
 Other, net                               (655)       971      (767)        851
-------------------------------------------------------------------------------
                                        (1,154)       521    (1,605)        (36)
-------------------------------------------------------------------------------
Loss before income taxes               (11,618)    (1,356)  (17,192)     (3,947)
Income tax provision                       100        300       200         600
-------------------------------------------------------------------------------
Net loss                              ($11,718)   ($1,656) ($17,392)    ($4,547)
===============================================================================
Loss per share                          ($0.58)    ($0.08)   ($0.87)     ($0.22)
===============================================================================
Weighted average number of common and
 common equivalent shares outstanding   21,056     20,676    21,021      20,586
===============================================================================
Accumulated deficit at beginning of 
  period                             ($29,447)    ($9,044) ($23,323)    ($6,153)
Net loss                              (11,718)     (1,656)  (17,392)     (4,547)
Payment of preferred stock dividends     (450)          -      (900)         -
-------------------------------------------------------------------------------
Accumulated deficit at end of period ($41,615)   ($10,700) ($41,615)   ($10,700)
===============================================================================

The accompanying notes are an integral part of these consolidated financial 
statements.

                                      - 4 -

<PAGE>

               GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                    Increase (Decrease) in Cash
                                                        and Cash Equivalents
                                                    ---------------------------
                                                            Six Months Ended
                                                                March 31,
 In thousands                                              1997           1996
 ------------------------------------------------------------------------------
 Cash flows from operating activities:
  Net (loss)                                           ($17,392)       ($4,547)
  Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
   Depreciation and amortization                         13,292         12,644
   Gain on sale of real estate                               --         (1,000)
   Decrease in accounts receivable                        5,022          1,833
   (Increase) in inventories                               (984)        (1,203)
   Increase in accounts payable
    and accrued expenses                                  1,400          6,653
   (Increase) in other net current assets                  (150)        (1,488)
   (Increase) in other net long-term assets              (1,733)          (915)
-------------------------------------------------------------------------------
Net cash provided by (used in) operating activities        (545)        11,977
-------------------------------------------------------------------------------
Cash flows from investing activities:
 Acquisition of property, plant, and equipment           (6,228)        (7,129)
 Capitalized software development costs                  (6,107)        (5,586)
 Proceeds from sale of real estate                            -          1,000
-------------------------------------------------------------------------------
Net cash used in investing activities                   (12,335)       (11,715)
-------------------------------------------------------------------------------
Cash flows from financing activities:
 Proceeds from notes and mortgages                        2,586            582
 Principal payments on notes and mortgages               (3,560)        (9,758)
 Proceeds from issuing common stock                       1,061          1,724
 Payment of preferred stock dividends                      (900)             -
-------------------------------------------------------------------------------
Net cash used in financing activities                      (813)        (7,452)
-------------------------------------------------------------------------------
Effect of exchange rates on cash                           (180)           (91)
-------------------------------------------------------------------------------
Net decrease in cash and cash equivalents               (13,873)        (7,281)
Cash and cash equivalents at beginning of period - (1)   26,264         18,443
-------------------------------------------------------------------------------
Cash and cash equivalents at end of period - (1)        $12,391        $11,162
===============================================================================
(1)  - The Corporation considers all highly liquid investments purchased with
 a maturity of three months or less to be cash equivalents.

The accompanying notes are an integral part of these consolidated financial
statements.

                                       -5-

<PAGE>


                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)




NOTE 1.     BASIS OF PRESENTATION

               In  the  opinion  of  management,   the  accompanying   unaudited
               consolidated   financial   statements   contain  all  adjustments
               necessary to fairly present the consolidated  financial  position
               of  General  DataComm  Industries,  Inc.  and  subsidiaries  (the
               "Corporation"   or   "Company")   as  of  March  31,  1997,   the
               consolidated  results of their  operations  for the three and six
               months  ended March 31,  1997 and 1996,  and their cash flows for
               the six months  ended March 31, 1997 and 1996.  Such  adjustments
               are   generally  of  a  normal   recurring   nature  and  include
               adjustments to certain accruals and asset reserves to appropriate
               levels.

               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  reporting
               periods  presented.   Actual  results  could  differ  from  those
               estimates.   The  markets   for  the   Company's   products   are
               characterized  by  intense   competition,   rapid   technological
               development and frequent new product introductions,  all of which
               could  impact  the  future  value  of  the  Company's  inventory,
               capitalized software and certain other assets.

               The consolidated  financial statements contained herein should be
               read in conjunction  with the consolidated  financial  statements
               and related notes thereto filed with Form 10-K for the year ended
               September 30, 1996.


NOTE 2.    INVENTORIES

           Inventories consist of (in thousands):
                                       March 31, 1997        September 30, 1996
                                       --------------        ------------------
              Raw materials             $18,794                    $16,627
              Work-in-process             5,657                      6,726
              Finished goods             20,921                     21,235
                                        -------                     -------
                Total                   $45,372                     $44,588
                                        =======                     =======


                                       -6-
<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



NOTE 3.  PROPERTY, PLANT AND EQUIPMENT
                  
Property, plant and equipment consists of (in thousands):

                                              March 31, 1997      Sept 30, 1996
                                              --------------      -------------
            Land                                 $ 1,772            $  1,764
            Buildings and improvements            29,497              29,050
            Test equipment, fixtures and
              field spares                        54,232              52,537
            Machinery and equipment               54,510              50,482
                                                 --------             -------
                                                 140,011             133,833
            Less:  accumulated depreciation
             and amortization                     91,001              84,995
                                                 --------            --------
                                                 $49,010            $ 48,838
                                                 ========            ========


NOTE 4.  CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Capitalized software development costs consist of (in thousands):

                                                March 31, 1997    Sept 30, 1996
                                                --------------    -------------

            Original Cost                        $36,381            $33,998
            Less:  accumulated amortization       12,881             10,605
                                                ---------          ---------
                                                 $23,500            $23,393
                                                =========          ========


NOTE 5. LONG-TERM DEBT
        
           Long-term debt consists of (in thousands):

                                               March 31, 1997     Sept 30, 1996
                                               --------------     -------------

           Notes payable                         $15,947            $16,421
           Mortgages payable                      12,042             12,359
           Capital lease obligations                 356                534
                                                 --------            -------
                                                  28,345             29,314
           Less:  current portion                  6,880              6,533
                                                 --------            -------
                                                 $21,465             $22,781
                                                 ========            =======

                                       -7-

<PAGE>

Long-Term Debt -- Continued

Revolving Credit Facility

The  Corporation  has  an  agreement  with  The  Bank  of  New  York  Commercial
Corporation  whereby  the  Corporation  has been  provided  a  revolving  credit
facility in the amount of $25 million,  subject to a borrowing base formula. The
facility, which matures in November 1998, provides for a sub-limit of $5 million
for  letters  of  credit.  Certain  assets of the  Corporation,  including  most
accounts  receivable and inventories,  are pledged as collateral.  The amount of
borrowing is predicated on satisfying a borrowing base formula related to levels
of certain  accounts  receivable  and  inventories.  The agreement also requires
conformity with various financial  covenants.  

No  borrowings  were  outstanding  as of March 31,  1997.  There were,  however,
$905,000 of letters of credit outstanding as of March 31, 1997.

NOTE 6.  FOREIGN CURRENCY TRANSLATION FOR MEXICAN OPERATIONS

As a result of high inflation in Mexico,  the Company was required to change its
method of  translating  the financial  statements  of its Mexican  subsidiary to
reflect  the  designation  of  the  U.S.  dollar  as  the  functional  currency.
Therefore,  effective January 1, 1997,  non-monetary  assets such as inventories
and property,  plant and equipment,  along with expenses  related  thereto,  are
being translated at historical rates of exchange, and adjustments resulting from
translation  are reflected in results of  operations.  Previously,  such amounts
were  stated at current  rates of  exchange  and  translation  adjustments  were
reported as a separate  component of  stockholders'  equity.  The impact of this
change was not  material to the  Company's  reported  financial  results for the
quarter ended March 31, 1997.

NOTE 7.  OTHER INCOME (EXPENSE)

Other  income  (expense)  for the  quarter and  six-months  ended March 31, 1997
includes  foreign  currency   exchange  losses  of  $(669,000)  and  $(709,000),
respectively.   The  exchange  losses  are   principally   attributable  to  the
strengthening  U.S.  dollar as compared to the French franc and German mark, and
its  impact on  liabilities  of our French  and  German  subsidiaries  which are
payable in U.S. dollars.  Such amounts compare to an exchange gain of $8,000 for
the quarter ended March 31, 1996 and an exchange loss of $(187,000)  for the six
month period ended March 31,  1996.  Separately,  other income for the three and
six months ended March 31, 1996  includes a $1.0 million gain from a real estate
transaction.


                                       -8-

<PAGE>

                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


General Summary Discussion

Total  revenues for the second  fiscal  quarter  ended March 31, 1997 were $50.8
million,  down $8.4  million,  or  14.2%,  from the same  quarter  one year ago.
Year-to-date  revenues  for the six months  ended  March 31,  1997 and 1996 were
$109.8  million and $119.0  million,  respectively,  down $9.2  million,  or 7.7
percent.

The net loss for the quarter ended March 31, 1997 amounted to $11.7 million,  as
compared to a net loss of $1.7 million for quarter ended March 31, 1996. The net
loss for the six months  ended March 31,  1997  amounted  to $17.4  million,  as
compared to a net loss of $4.5  million for the same  six-month  period one year
ago. The  increased  net losses (for the quarter and  year-to-date  periods) are
principally  attributable to reduced  revenue levels,  increases in research and
development  expense (up $2.8  million  and $4.8  million in the quarter and six
months ended March 31, 1997,  respectively,  as compared to the same periods one
year ago) and  increased  exchange  losses (up $522,000)  experienced  in fiscal
1997. In addition, prior year second quarter results include a $1.0 million gain
from the sale of real estate.

Regarding cash flow,  operating activities consumed $545,000 in cash for the six
months ended March 31, 1997.  After  investing and financing  activities,  total
cash consumption for the same period amounted to $13.9 million.  The Company had
on-hand  cash  balances of $12.4  million at March 31,  1997.  Furthermore,  the
Company has a $25 million  revolving loan  facility,  of which $19.7 million was
available at March 31, 1997 per borrowing base calculations.  No borrowings were
outstanding on this credit  facility at March 31, 1997.  Future  availability of
funds under the revolving  credit loan facility are dependent on the adequacy of
the available  borrowing base (principally  accounts  receivable and inventories
required to secure such  borrowings),  and compliance with financial  covenants,
including, among others, net income (or restricted net loss) performance.

The Company continues to invest heavily in research and development  activities
based on the belief that its ATM and Advanced Network Access ("Access") products
have the potential to deliver  substantially  higher  revenues,  and ultimately,
shareholder value, on a longer term basis.

Management   recognizes   the  need  to  improve   operational   performance  in
anticipation  that revenue  growth  opportunities  will take time to develop.  A
managed  cost  reduction  effort  has been  implemented  with the  objective  of
reducing the  Corporation's  breakeven point. It is important to note,  however,
that significant revenue growth will also be required to achieve  profitability.
The cost  reduction  efforts  include  restrictions  on hiring and reductions in
discretionary  and capital  spending.  Reallocation  of resource to  prioritized
projects is also under review to maximize the productivity of the  Corporation's
existing workforce. Separately, management recognizes a need to raise capital in
the near-term to effectively  support its cash requirements.  As a result, it is
actively pursuing  alternative  funding  sources,  such as the  sale of stock or
non-strategic assets.

                                       -9-

<PAGE>

Results of Operations

The following table sets forth selected consolidated  financial data stated as a
percentage of total revenues (unaudited):

                                          Three months ended  Six months ended
                                               March 31,          March 31,
                                             1997     1996     1997      1996
-------------------------------------------------------------------------------
Revenues:
     Net product sales                       78.8%     80.1%   80.4%     80.4%
     Service revenue                         18.6      16.2    17.2      16.4
     Leasing revenue                          2.6       3.7     2.4       3.2
-------------------------------------------------------------------------------
                                            100.0     100.0   100.0     100.0
-------------------------------------------------------------------------------
Costs and expenses:
     Cost of revenues                        51.0      48.3    50.9      49.3
     Amortization of capitalized software
       development costs                      5.9       5.1     5.5       4.7
     Selling, general and administrative     42.7      36.6    39.3      36.3
     Research and product development        21.0      13.2    18.5      13.0
-------------------------------------------------------------------------------
Operating (loss)                            (20.6)     (3.2)  (14.2)     (3.3)
-------------------------------------------------------------------------------
Net (loss)                                  (23.1)%    (2.8)% (15.8)%    (3.8)%
===============================================================================

Percentages for the quarter ended March 31, 1997 are affected by the low revenue
base. Noteworthy observations from the year-to-date numbers include: fiscal 1997
operating expenses, including research and development expenses, amount to 57.8%
of  revenue,  as  compared  to 49.3% for the six months  ended  March 31,  1996;
research  and  product  development  related  expenses,   including  capitalized
software  amortization,  amount to 24.0% and 17.8% of revenue  for the six month
periods ended March 31, 1997 and 1996, respectively,  an increase of 6.2 points,
or 34.8%. This increase reflects the Company's continued strategic investment in
its ATM and Access product development.

Revenues
--------

Quarter: Total revenues for the quarter ended March 31, 1997 were $50.8 million,
down $8.4 million, or 14.2%, from the same quarter last year.  Product,  service
and lease  revenues  were down $7.4  million,  $0.1  million  and $0.9  million,
respectively.  Two primary  factors  accounted for the product sales decline:  a
reduction in Asynchronous  Transfer Mode ("ATM") product shipments resulted in a
revenue  decline of $5.6  million as compared to the same  quarter one year ago,
and  shipments  of other  products to domestic  Telephone  Companies  ("Telcos")
declined  $2.3  million for the same period.  Total ATM product  line  shipments
amounted to $7.4 million and $13.0 million for the quarters ended March 31, 1997
and 1996,  respectively.  The  Corporation  attributes  the ATM product  revenue
reduction to longer sales cycle times required as a result of product complexity
and new  technologies  involved in ATM systems.  Individual  ATM orders are also
often  larger in size than  orders  for other  products,  and the timing of such
orders and shipments can generate large quarter-to-quarter  fluctuations. In the
domestic Telco area, mergers have disrupted ordering patterns for our equipment.
In addition,  increased  competition among Telcos and other service providers is
driving the Telcos to reduce costs and capital spending. The

                                      -10-
<PAGE>

Corporation  expects this business to recover.

From a product line perspective,  Access product revenues were down $2.4 million
(12.1%), Internetworking products achieved growth of $0.6 million (5.5%) and ATM
product sales were down $5.6 million (42.8%). Separately, the $870,000 reduction
in leasing revenue reflects the impact of a high level of leasing revenue in the
prior year second quarter,  attributable to lease renewals and sale of off-lease
inventory. Geographically, domestic and international revenues accounted for 53%
and 47% of consolidated  revenues,  respectively,  relatively unchanged from 52%
and 48%, respectively, for the same quarter one year ago.

Year-To-Date: Year-to-date total revenues amounted to $109.8 million as compared
to $119.0 million for the same six month period one year ago, down $9.2 million,
or 7.7%.  Product,  service  and lease  revenues  were down $7.4  million,  $0.6
million  and  $1.2  million,  respectively.  For the  reasons  described  above,
year-to-date  ATM product line  shipments,  which  amounted to $20.3 million and
$23.9  million for the six months  ended March 31, 1997 and 1996,  respectively,
declined $3.6 million, or 15.2%, and domestic Telco business (of other products)
declined $3.8 million year-over-year.  From a product line perspective,  Access,
Internetworking  and ATM product  revenues were down $3.3 million  (8.0%),  $0.5
million  (2.0%) and $3.6  million  (15.2%),  respectively.  The  Access  product
revenue reduction  occurred in the Telco sales channel.  The ATM product revenue
decline principally  occurred in the international  marketplace.  V.34 licensing
technology  revenues amounted to $2.4 million, up $0.9 million, or 63%, from the
prior year.  Regarding  service revenues,  a 7.3% rate of international  service
revenue  growth  for the first six months of this year  partially  offset a 9.3%
domestic service revenue decline.  This reflects growth in international product
support requirements and reduced domestic service support requirements resulting
from a declining domestic end-user business. Net consolidated service revenue is
down  $0.6  million,  or 3.2%.  The  leasing  revenue  discussion  above is also
applicable to year-to-date results.  Geographically,  domestic and international
revenues accounted for 52% and 48% of consolidated  revenues,  respectively,  as
compared to 54% and 46% for the same period one year ago.

Cost of Revenue and Gross Margin
--------------------------------

Quarter:  Gross margin as a percent of revenues  (excluding the  amortization of
capitalized  software  development  costs) were 49.0% and 51.7% for the quarters
ended  March 31,  1997 and 1996,  respectively.  Product  margins  were down 0.8
points overall; all three product lines contributed to the margin decline, which
resulted from the allocation of fixed manufacturing costs over a reduced revenue
base.  Service margins  declined 6.6 points as compared to the second quarter of
fiscal  1996,  reflecting  a reduction  in domestic  business  and growth in the
international  service  business,  which  relies more  heavily on use of outside
service  contracts and therefore  produce lower  margins.  Leasing  margins as a
percent  of  revenue  were also down compared  to one year ago due to the higher
lease revenue recorded in the prior year, as discussed earlier.

Year-To-Date: Year-to-date gross margins as a percent of revenues (excluding the
amortization of capitalized  software  development  costs) amounted to 49.1% and
51.0% for the six month periods ended March 31, 1997 and 1996,  respectively,  a
reduction  of 1.9 points.  This is the result of lower sales  volume  covering a
significant  fixed cost  component.  Year-to-date  service  and  leasing  margin
trends,  including  the causes  therefore,  are  consistent  with the  quarterly
discussion above.

Separately,  amortization of capitalized  software  development cost amounted to
$3.0 million in the quarters ended March 31, 1997 and 1996, and $6.0 million and
$5.6  million  in  the  six  month  periods  ended  March  31,  1997  and  1996,
respectively.

                                      -11-

<PAGE>

Selling, General and Administrative Expenses
--------------------------------------------

Due to cost containment efforts,  selling,  general and administrative  expenses
were  generally  unchanged at $21.7  million and $43.1 million for the three and
six month periods ended March 31, 1997,  respectively  ($21.6  million and $43.1
million for the corresponding periods one year ago).

Research and Product Development Costs
--------------------------------------

Quarter:  The  Company  continues  to invest  heavily in  research  and  product
development.  Research and product development spending, before consideration of
capitalized software development costs, increased to $13.7 million in the second
quarter of fiscal 1997, up $2.9 million or 27.1% from the $10.8 million spending
level in the  corresponding  quarter  one year ago.  This  spending  increase is
attributable to increased  headcount (up 41 persons),  increased  utilization of
outsourced product development  services and other support costs associated with
an increased level of ATM product development activity, including development of
our Strobos ATM product  line.  The  combination  of a spending  increase  and a
reduced  revenue base caused  research and  development  spending to increase to
27.1% of  revenue,  as  compared  to 18.3% in the  same  quarter  one year  ago.
Capitalized  software  development costs were $3.1 million for the second fiscal
quarter of 1997,  as compared to $3.0 million for the second  fiscal  quarter of
1996.

Year-To-Date:  Year-to-date  research and development  spending  follows similar
trends.  Spending for the six months  ended March 31, 1997 and 1996  amounted to
$26.4 million and $21.1 million,  respectively, an increase of $5.3 million, or
25.2%.  The causes of the spending  increase are consistent with those discussed
above. Capitalized software development costs for the six months ended March 31,
1997 were $6.1 million as compared to $5.6 million for the corresponding  period
of fiscal 1996.

The complexity of the ATM technology has and will continue to demand significant
research and product  development  investment.  To retain an  effective  pool of
available  engineering talent, the Corporation operates research and development
facilities  in  four  locations,   including  the  United  States   (Middlebury,
Connecticut and Boston, Massachusetts), Canada, and the United Kingdom.

Other Income and Expense
------------------------

Please  refer to Note 7 on page 8 for a detailed  discussion  of other income
and expense. 

Income Tax Provisions
---------------------

Tax provisions  recorded by the Corporation,  principally for foreign income and
domestic  state taxes,  amounted to $100,000 and $300,000 in the quarters  ended
March 31, 1997 and 1996,  respectively.  Year-to-date tax provisions amounted to
$200,000 and $600,000  for fiscal 1997 and 1996,  respectively.  As noted in the
Corporation's  Form 10-K  filed  for the year  ended  September  30,  1996,  the
Corporation has significant federal net operating loss carryforwards  available.
However,   based  on  the  Corporation's  past  financial  performance  and  the
uncertainty of ultimate realization of such carryforwards, no deferred tax asset
(or  related  deferred  tax  benefit)  has been  recorded  in the  Corporation's
financial statements.
                                      -12-

<PAGE>

Foreign Currency Risk
---------------------

Foreign currency fluctuations did not have a material impact on trends reflected
in the Corporation's  financial  statements.  No individual  foreign  subsidiary
operation represents a material percentage of consolidated revenue or net worth.
However, if international  subsidiary operations (i.e. Canada,  Germany,  France
and Mexico)  experience  strong revenue growth in the future,  the likelihood of
foreign currency  fluctuations  impacting trends reflected in the  Corporation's
financial statements could increase,  especially if the U.S. dollar continues to
strengthen against the respective currencies. Separately, subsidiaries have some
U.S. dollar denominated liabilities. The impact of foreign currency fluctuations
on such amounts are recorded as a component of "Other Income and Expense" in the
Corporation's statements of operations.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Corporation's  cash and cash equivalents  amounted to $12.4 million at March
31, 1997 as compared to $26.3 million at September 30, 1996. The Corporation has
in place a $25 million  revolving  credit  facility,  of which $19.7 million was
available per borrowing base calculations at March 31, 1997. No borrowings were
outstanding on this credit  facility at March 31, 1997. The future  availability
of funds  under  this loan  facility  depends  on (and may be  restricted  by) a
borrowing  base formula which is calculated as a percentage of certain  accounts
receivable  and  inventories,  as  well as  compliance  with  certain  financial
covenants, including restrictions on the magnitude of net loss levels. Bank debt
was reduced by $1.0 million during the six months ended March 31, 1997, to $28.3
million at March 31, 1997, as compared to $29.3 million at September 30, 1996.

The Company believes, based on its future forecasts, that the combination of its
existing cash balances and available  funds under its revolving  credit facility
will be adequate to support the Corporation's  immediate cash  requirements.  In
addition,  the  Corporation  considers  its ability to offer for sale its common
stock,  preferred  stock,  warrants  and/or other  assets as viable  alternative
sources of financing, some form of which will be required to satisfy future cash
requirements.

Operating
---------
During  the six  months  ended  March  31,  1997,  the  Corporation's  operating
activities  generated negative cash flow of $545,000,  as compared to a positive
cash flow of $12.0  million for the same period one year ago. The $12.5  million
difference is principally due to the larger net loss ($12.8 million).

Non-debt working capital,  excluding cash and cash  equivalents,  decreased $6.2
million  to $41.7  million at March 31,  1997 as  compared  to $47.9  million at
September  30, 1996.  The reduction is  principally  comprised of a $5.7 million
decrease in accounts receivable,  attributable to improved collection activities
(days sales  outstanding  were reduced to 61 days at March 31, 1997 from 66 days
at September  30, 1996) and a reduced level of product  shipments in the quarter
ended March 31, 1997.

                                      -13-

<PAGE>

Investing
---------
Net investments in property,  plant and equipment for the six months ended March
31,  1997  amounted  to  $6.2  million,  as  compared  to $7.1  million  for the
corresponding  six month  period  of fiscal  1996.  Separately,  investments  in
capitalized  software  amounted  to $6.1  million  and $5.6  million for the six
months ended March 31, 1997 and 1996,  respectively.  Total investments amounted
to $12.3  million and $12.7  million in the six months  ended March 31, 1997 and
1996,  respectively.  Cash consumption from prior year investments was partially
offset with $1.0 million in proceeds from the sale of real estate.

Financing
---------
Financing  activities  during the six-month period ended March 31, 1997 required
the use of $813,000 in cash, representing the net effect of $1.0 million in debt
reduction, payment of $900,000 in preferred stock dividends, and receipt of $1.1
million in cash proceeds  from the sale of stock through the Company's  Employee
Stock Purchase Plan and exercise of stock options.

The  Corporation  has  an  agreement  with  The  Bank  of  New  York  Commercial
Corporation  whereby  the  Corporation  has been  provided  a  revolving  credit
facility  in the amount of $25  million,  subject to a borrowing  base  formula,
$19.7 million of which was available per borrowing  base  calculations  at March
31, 1997. The facility, which matures in November 1998, provides for a sub-limit
of $5  million  for  letters  of  credit.  Certain  assets  of the  Corporation,
including most accounts  receivable and inventories,  are pledged as collateral.
The amount of borrowing is  predicated  on  satisfying a borrowing  base formula
related to levels of certain accounts receivable and inventories.  The agreement
also requires conformity with various financial covenants,  the most restrictive
of which  include  net  income (or  restricted  net loss)  performance,  minimum
tangible net worth  requirements,  and total  liabilities  to tangible net worth
ratio requirements.

No borrowings were outstanding  under this agreement as of March 31, 1997. There
were, however, $905,000 of letters of credit outstanding as of March 31, 1997.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
--------------------------------------------------------------------------------

Portions of the  foregoing  discussion  include  descriptions  of the  Company's
expectations regarding future trends affecting its business. The forward-looking
statements  made  in  this  document,  as  well  as  all  other  forward-looking
statements  or  information  provided by the Company or its  employees,  whether
written or oral,  are made in reliance  upon the safe harbor  provisions  of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements and
future  results  are  subject  to, and should be  considered  in light of risks,
uncertainties,  and other factors which may affect future results including, but
not limited to: competition, rapid changing technology, regulatory requirements,
and uncertainties of international trade.


                                      -14-

<PAGE>


                        GENERAL DATACOMM INDUSTRIES, INC.
                                AND SUBSIDIARIES


Part II.  Other Information

Item 4. Submission Of Matters to a Vote of Security-Holders
        On February 6, 1997, at the Annual Meeting of Stockholders of the 
        Corporation, the stockholders:

        Elected directors to the Corporation for a term of three (3) years:

                                                    Number of  votes cast:
                                                     For          Withheld
                                                  -----------     --------
                Mr. Lee M. Paschall               17,501,923      1,769,895
                Mr. John L. Segall                17,500,525      1,771,293

        Adopted an amendment to the 1991 Stock Option Plan, reserving
        an  additional  925,000  shares  of  the Corporation's Common Stock 
        for issuance thereunder:


                Number of votes cast for:         16,725,190
                Number of votes cast against:      2,424,997
                Number of votes abstained:           121,631


Item 6. Exhibits and Reports on Form 8-K

        (a) Index of Exhibits

            10.17  Amendment No. 5 to Third Amended and Restated Revolving
                   Credit and Security Agreement between General DataComm
                   Industries, Inc. et al. and the Bank Of New York Commercial
                   Corporation et al.

            11.    Calculation of Earnings Per Share for the three and six month
                   periods ended March 31, 1997 and 1996.


        (b) Reports on Form 8-K
        
                    No reports on Form 8-K were filed during the quarter for
                    which this report is filed.


                                      -15-

<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  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.


                                              GENERAL DATACOMM INDUSTRIES, INC.
                                                       (Registrant)


                                               /s/ William S. Lawrence
                                               -------------------------------
                                               William S. Lawrence
                                               Senior Vice President and 
                                               Principal Financial Officer


Dated:  May 15, 1997


                                      -16-